The Equity Incentive Plan (aka Stock Option Plan or Stock Plan) governs the issuance and administration of equity awards to employees and other service providers. In exchange for working for the Company, employees are given the opportunity to receive or purchase a certain amount of the Company’s stock at the fair market value of the stock on the date of grant. The employees can then sell the stock at some point in the future at hopefully a greater value than what they purchased or received it. Giving employees equity awards can act as an incentive to stay with the Company, increase the value of the Company and align the employee’s interests with those of other stockholders.
Glossary