Employee Stock Option Plan FAQ

The grant is for a specified number of employee stock options. A stock option gives you the right to purchase stock at a predetermined price (the exercise price).

The number of stock options granted was based on your position and tenure at the time of the grant.

Carta is the app we use to manage the capitalization of the company. It tracks all funds received from investors and stock option grants made to employees. Employees that received a stock option grant were automatically issued a Carta account.

Vesting is a legal term that means you are earning a right to your grant over time. A vesting schedule tells you when you are entitled to what portion of the grant. All employee options are granted with a vesting period of four years. The one-year cliff means that 25% of your grant is vested after 12 months. The remaining 75% of your grant vests monthly from months 13 through 48.

If you leave within the first 12 months of the vesting schedule, your grant is canceled and the stock options are returned to the employee stock option pool.

From the date of your separation, you have 90 days to exercise the options that have vested. Any remaining options are returned to the employee stock option pool. If you decide not to exercise your vested options, those are returned to the employee stock option pool as well.

Yes, the grant expires 10 years after the grant date.

If you are receiving a grant for the first time, you should receive an email from Carta with the three documents shown below. If you are missing any of the three, please let Rick know. After the initial grant, the documents are available via your Carta account.

1. Simplifya Holdings Inc - A&R 2021 Stock Plan. This document establishes the employee stock option plan.
2. Simplifya Holdings Inc - Stock Option Award. This document grants you a number of options under the terms specified. Note this is the template - the version you received would have your name in it and show the number of options granted.
3. Simplifya Holdings Inc - Exercise Agreement. This document is what you would use to exercise your option to purchase stock.

You may exercise any options that have vested at any time by completing the exercise agreement and paying Simplifya the corresponding exercise payment.

The decision to exercise is a personal one and you may wish to seek the advice of a financial planner or tax advisor. However, because options lock in your right to purchase at a specific price, options are generally exercised when it’s clear the stock can be sold for a significant profit. Such would be the case if Simplifya is acquired for a premium - the higher the company valuation, the higher the price of a share of stock, the greater the profit to be made by option holders.

The decision to exercise is completely up to you.

Here's a somewhat complicated definition from Investopedia, but for our ESOP it is the price at which you may purchase shares. When the Simplifya ESOP was created, the exercise price was $0.30 per share. So if you have 1,000 options with an exercise price of $0.30, you can buy 1,000 shares for $300. Each round of option grants can have a different exercise price. You can confirm the exercise price of your options by logging into your Carta account.

There are no tax consequences on acceptance of the grant or as options vest. There could be tax consequences on exercise if there is a material difference between the exercise price and the fair market value at the time of exercise. There will be tax consequences on the sale of shares.

$62.5 million.

Company evaluations are done when a new fundraising round is opened or when there’s a merger or acquisition.

This is a tricky question because some of you are asking about the employee stock option plan while others are asking about the company. First, a total of 4,685,810 shares have been reserved for the employee stock option plan, meaning a total of 4,685,810 stock options could be granted to employees. You can see this number referenced in the plan a couple of times as the maximum - we are not currently at the maximum. This reserved pool ensures there will always be a sufficient number of shares available should you decide to exercise your options.

More broadly, there are a total of 30,209,252 shares outstanding today. Note this does not include the 4,685,810 shares mentioned above. It’s because those shares have not actually been purchased yet - nobody owns them - they’ve been set aside for employees with stock options. The 30-plus million shares outstanding were paid for and are owned by investors.

You should be more concerned with the share price. As stated above, the higher the company valuation, the higher the price of a share of stock, the greater the profit to be made by option holders. And technically, your share percentage is zero because you don’t own any shares until you exercise your options.

Investors are sometimes concerned with the percentage of the total shares they own because it represents control and can trigger things like a board position. For the average employee, however, the percentage is too small to mean anything. For example, let’s say you have 1,000 options and you exercise them to purchase 1,000 shares. The number of outstanding shares just went up to 30,210,252 and so your percentage is 1,000 ÷ 30,210,252 = 0.000033 or 0.0033%. Big whoop, right? The next question is what’s that 0.0033% worth, and the answer is that it depends on the share price.

Sure, but let’s be clear this is just an example. The numbers here are hypothetical and are not to be taken as any sort of guarantee or prediction. In round numbers, let’s say Simplifya is acquired at a valuation of $98 million and has 35 million shares outstanding at the time of acquisition. $98 million ÷ 35 million shares = $2.80 per share.

Let’s also say you have 1,000 options vested. You exercise your right to purchase stock at $0.30 per share, and now you have 1,000 shares of stock. If you choose to then sell your shares at $2.80, your net gain is $2.80 - $0.30 = $2.50 per share. And since you have 1,000 shares, it amounts to $2,500 before taxes.

In case it’s not obvious, employee stock options align the financial interests of employees with investors. Everybody wants to maximize the value of the company because we all benefit in proportion to our equity stakes. The difference is that we were granted our equity and we have jobs that allow us to contribute to the company’s valuation. As such, it’s a perk of working at Simplifya. On top of our compensation, benefits, and culture, we have this additional incentive to do our jobs well. We would have done that anyway, right? Right!