Executive Employee Stock Incentive Plan
About this form
The Executive Employee Stock Incentive Plan is a legal document designed to provide additional income benefits to key executive employees. This plan aims to attract and retain high-caliber executives essential for the company's growth while incentivizing them to enhance the company's profitability. Unlike standard employment agreements, this form specifically outlines the details of stock incentives and contributions from the employer to a trust for the benefit of participating employees.
Key parts of this document
- Purpose and establishment details of the incentive plan.
- Definitions of key terms like "Beneficiary," "Participant," and "Employer Contributions."
- Eligibility criteria for participants in the plan.
- Details on employer contributions, including cash and stock options.
- Provisions related to vesting and payment of benefits.
- Administration of the plan by a committee appointed by the company's board of directors.
Situations where this form applies
This form is used when a company wishes to implement a stock incentive program for its executive employees. It is particularly relevant when an organization aims to bolster leadership retention, enhance employee motivation through ownership stakes, or align executive interests with shareholder goals. Companies should consider this plan during periods of growth, change, or when strategizing to enhance competitive advantages in attracting top talent.
Who needs this form
This form is intended for:
- Companies looking to establish an executive stock incentive plan.
- Human resources professionals and legal teams involved in employee compensation strategies.
- Executives and employees who are potential participants in the stock incentive plan.
Instructions for completing this form
- Identify the company and the date of establishment for the plan.
- Define key terms as outlined in the document and customize relevant fields.
- Specify the eligibility criteria for participating employees.
- Outline the employer contributions, including any cash and stock amounts.
- Assign a committee responsible for the plan's administration and decision-making.
- Ensure all parties sign the form to formalize its adoption.
Does this document require notarization?
In most cases, this form does not require notarization. However, some jurisdictions or signing circumstances might. US Legal Forms offers online notarization powered by Notarize, accessible 24/7 for a quick, remote process.
Common mistakes to avoid
- Failing to clearly define eligibility criteria for participants.
- Neglecting to specify the role and authority of the administering committee.
- Not including updated definitions or provisions to reflect changes in the law.
- Forgetting to have the form reviewed by legal counsel to ensure compliance.
Benefits of using this form online
- Convenient, immediate access to the form from anywhere.
- Editability allows for quick adjustments as company needs evolve.
- Reliable legal language drafted by licensed attorneys.
- Quick download ensures you have the form available when needed.
Legal use & context
- The plan must comply with federal and state laws regarding employee benefits and stock options.
- Participation in the plan does not guarantee employment or benefits unless specified.
- Defined contributions to the trust are vital for fulfilling the plan's obligations.
Form popularity
FAQ
Under US GAAP, stock based compensation (SBC) is recognized as a non-cash expense on the income statement. Specifically, SBC expense is an operating expense (just like wages) and is allocated to the relevant operating line items: SBC issued to direct labor is allocated to cost of goods sold.
Stock Based Compensation (also called Share-Based Compensation or Equity Compensation) is a way of paying employees, executives, and directors of a company with equity in the business.Shares issued to employees are usually subject to a vesting period before they are earned and can be sold.
Stock Options When shares go up in value, executives can make a fortune from options. But when share prices fall, investors lose out while executives are no worse off. Indeed, some companies let executives swap old option shares for new, lower-priced shares when the company's shares fall in value.
An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.
Under US GAAP, stock based compensation (SBC) is recognized as a non-cash expense on the income statement. Specifically, SBC expense is an operating expense (just like wages) and is allocated to the relevant operating line items: SBC issued to direct labor is allocated to cost of goods sold.
The price at which the options may be "exercised" is usually the price of the company's stock on the date the options are granted. If the company performs well, the stock price will increase over the exercise price, giving the options value and rewarding the executive for his role in the company's success.
Stock compensation should be recorded as an expense on the income statement. However, stock compensation expenses must also be included on the company's balance sheet and statement of cash flows.
A recipient of restricted stock is taxed at ordinary income tax rates, subject to tax withholding, on the value of the stock (less any amounts paid for the stock) at the time of vesting.Any dividends paid while the stock is unvested are taxed as compensation income subject to withholding.
An executive stock option is a contract that grants the right to buy a specified number of shares of the company's stock at a guaranteed "strike price" for a period of time, usually several years.
