All or nearly all of the participants will be employed by the company at a nominal salary of $1.00 a year. In lieu of proper salary they are to receive stock options.
The first stockholders' meeting will adopt a qualified stock option plan covering all the participants who are employed by the company when it begins operations. There should be agreement in principle on this plan, including the quantities involved, before the corporation is organized. Here is a suggested outline:
150,000 (?) shares of the stock of this company (equal to 1.5 times the original issue of stock excluding warrants) are set aside for the company stock option plan, with options to be issued in equal quantities at the end of 6, 12, and 18 months after the company begins operation.
Each of the initial employees of the corporation will make a commitment to perform a specific amount of work per week for the corporation and will, having performed that work diligently, be entitled to options in proportion to that commitment. Smaller allocations, not necessarily in proportion to work performed, may be given to those who have not fully met the commitment.
In each distribution 60-75% of the options will be allocated according to work committed and performed, as described above. The remaining options will be awarded as bonuses for exceptional performance. The percentage allocated to bonuses need not be the same in all three distributions.
The Board of Directors will appoint a three-member Compensation Committee to determine the distribution of options. The Committee's plan will be submitted for approval of the Board, which may submit it to the stockholders. The resolution of the Board of Directors will set an option price which will be 100% to 110% of the current fair market value of the stock. Options will be valid for five years from the time of issuance, but will in any case expire upon termination of employment.
Editor: John Walker