Read the article here.
Triton Emission Solutions appointed a new director and Chairman of the Board. His compensation included a stock option plan. The options were exercisable at $.50 per share.The stock option plan provided that: “The exercise price is subject to adjustment in the event that the Company subsequently issues any shares of its common stock or any options, warrants, convertible instruments or similar instruments at a purchase, exercise or conversion price less than $0.50 per share.”
This adjustment clause permits the exercise price of the options to be capped at $.50, but to be reduced should the share price fall. This acts as an incentive to the employee/executive to contribute to the profitability of the company (to enhance the share price). Without the adjustment clause, the ESOP would no longer act as an incentive for the employee to remain with the company, should the share price drop below the exercise price.
Take away:
- ESOP adjustment clauses maintain the effectiveness of the plan should share prices drop below the original exercise price.
– – –
This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.
Rajah Lehal: Rajah is the Founder and CEO of Clausehound.com. Rajah received his M.B.A. and J.D. degrees, from the University of Western Ontario Richard Ivey School of Business and the Faculty of Law respectively, during which time he was Co-President of Entrepreneurs@Ivey, a student-run entrepreneurship group and, as well, assisted Professor Richard McLaren with the launch of the Western Business Law Clinic. Rajah also received an Honours Philosophy degree from the University of Waterloo, where he also took a significant course load in Mathematics and Computer Science. Rajah worked for more than a decade in the information technology industry, including three years in software development and seven years as an Information Systems and Technology manager at both a major telecommunications company and at a financial services company. Rajah also received his legal training in the corporate law group at Stikeman Elliott LLP in Toronto, as well as internationally for the Technology Media and Telecom group in the Dubai office of Clyde & Co. Rajah is a Technology and Small Business Lawyer and is counsel for the Venture Law Practice Group at Cobalt Business Counsel, a corporate and securities law practice based in Toronto. Recently, Rajah has been interviewed for a Financial Post podcast and by the Globe and Mail for his work at Multiplicity, and has joined the Loan Review Committee Member for the CYBF Spin Master Innovation Fund and was asked to judge the Ivey IBK Business Plan Competition. Rajah is also on the board of directors of Sky’s the Limit charity that provides laptops to youths in need and is Canadian Responsible Leaders Chapter Head for the BMW Foundation. Rajah continues to be an active member in the start-up technology industry nationally and internationally.