Director stock program
What is this form?
The Director Stock Program is a legal form that establishes a stock compensation plan for non-employee directors of a corporation. It provides options to acquire common stock and restricted stock to enhance the alignment of directors' interests with those of company shareholders. Unlike standard employment agreements, this program specifically addresses stock awards tailored for corporate directors, promoting retention and incentivizing their contributions to the company's success.
Main sections of this form
- Establishment of the program with eligibility criteria for non-employee directors.
- Granting of stock options, including terms for the number of shares and conditions for their exercise.
- Award of restricted stock, detailing share allocations and pricing.
- Provisions related to termination of service, including impacts on outstanding options and restricted stock.
- Definitions of crucial terms that govern the program's operation.
When to use this document
This form should be utilized when a corporation wishes to implement a stock compensation plan for its non-employee directors. It is particularly relevant during the initial establishment of the program, as well as when granting stock options or restricted stock awards during subsequent terms of directorship. Companies aiming to attract and retain qualified individuals for their board should consider using this form to formalize their compensation structure.
Who can use this document
- Corporations that have non-employee directors and seek to enhance their compensation packages.
- Corporate governance committees responsible for designing director remuneration strategies.
- Small to large companies looking to establish or amend existing director stock compensation plans.
Completing this form step by step
- Identify the type of stock award to be granted to directors (options or restricted stock).
- Specify the number of shares for each director based on their term duration.
- Calculate the fair market value for stock options to set the option price at the time of granting.
- Determine any restrictions on the stock awards and outline the circumstances under which they may lapse.
- Review the document with legal advisors to ensure compliance with corporate law.
Does this document require notarization?
This form does not typically require notarization to be legally valid. However, some jurisdictions or document types may still require it. US Legal Forms provides secure online notarization powered by Notarize, available 24/7 for added convenience.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Common mistakes
- Failing to clearly define the eligibility criteria for participation in the stock program.
- Overlooking required legal notices or approvals for granting stock options and restricted stocks.
- Not accounting for tax implications associated with stock awards for directors.
Why complete this form online
- Easy access to customizable templates that align with corporate needs.
- Ability to download and modify forms quickly for immediate use.
- Reliability of attorney-drafted content ensuring compliance and best practices in legal language.
Legal use & context
- The program is enforceable as a corporate governance document once properly adopted by the board and approved by shareholders.
- It is essential that the provisions comply with state and federal corporate laws to avoid disputes.
- Directorsâ rights under the program must be honored to ensure fiduciary duties are met.
Key takeaways
- The Director Stock Program is essential for establishing a fair stock compensation plan for non-employee directors.
- It outlines awards of stock options and restricted stock to incentivize directors effectively.
- Proper completion and adherence to this form can help in retaining valuable board members.
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FAQ
Options can be less risky for investors because they require less financial commitment than equities, and they can also be less risky due to their relative imperviousness to the potentially catastrophic effects of gap openings. Options are the most dependable form of hedge, and this also makes them safer than stocks.
The company paid for their meals, transportation and lodging, and they received compensation in the form of cash, stocks and retainers. Corporate board directors usually got paid for attending meetings, serving on committees and serving as committee chairs.
There can be huge financial benefits that come from employee stock options. Higher-level employees can often convert their options into six-figure and seven-figure profits.In some companies, key employees can receive options over many years, and even throughout their careers.
The size of the company makes a difference to how board members are paid. Small companies are more likely to offer stock options that pay off if the company hits it big. The $10 million to $50 million tier is where cash compensation starts to become common.
Q: Can a member of the board of directors receiving a stock option as compensation for board member service receive an incentive or statutory stock option (an ISO)? A: No. A board member who is just a board member, and not otherwise an employee of the company cannot receive an ISO. Only employees can receive ISOs.
Rather, when a startup first forms, the founders grant themselves Restricted Stock Awards (RSAs) instead of common stock options. Essentially the company sells them the stock at zero cost. In the 20th century founders were taking a real risk on salary, betting their mortgage and future.
If you have been given the opportunity to purchase stock options, you may want to take advantage of them if you can afford to do so. But you should not go into debt to purchase stock options.Some stock options are given as tax-free, and you will only pay a capital gains tax when you sell them.
You Could Make a Lot of Money with Stock Options (But There's No Guarantee) Think of a start-up company that gives you 100,000 company stock options with a strike price of $1 per share. At issue, they probably won't be worth much.If that happened, the value of the stock options would go from nothing to $9,900,000.
In a private company setting, after the founders have been issued fully vested or restricted stock under their stock purchase agreements, the employees, consultants, advisors and directors who are subsequently hired commonly receive equity compensation through stock options.
