Share-Based and Unit-Based Compensation | 19. Share-Based and Unit-Based Compensation 2021 Incentive Plan The E2open Parent Holdings, Inc. 2021 Omnibus Incentive Plan (2021 Incentive Plan) became effective on the Closing Date with the approval of CCNB1ās shareholders and the board of directors. The 2021 Incentive Plan allows us to make equity and equity-based incentive awards to officers, employees, directors and consultants. There are 15,000,000 shares of Class A Common Stock reserved for issuance under the 2021 Incentive Plan which can be granted as stock options, restricted stock awards, restricted stock units, performance stock awards, cash awards and other equity-based awards. No award may vest earlier than the first anniversary of the date of grant, expect under limited conditions. The 2021 Incentive Plan replaced the 2015 Plan and 2015 Restricted Plan, as defined below. Our board of directors have approved the grant of options and RSUs under the 2021 Incentive Plan. Currently, all options are performance based and are measured based on obtaining an organic growth target over a one-year period with a quarter of the options vesting at the end of the performance period and the remaining options vesting equally over the following three years . Our executive officers and senior management have been granted these performance based options. Currently, we estimate that the performance target will be met at 100 %. The probability of meeting the performance target is remeasured each quarter and adjusted if needed. The RSUs are either performance based or time based. The performance based RSUs are measured based on obtaining an organic growth target over a one-year period with a quarter of the options vesting at the end of the performance period and the remaining options vesting equally over the following three years . Currently, we estimate that the performance target will be met at 100%. The probability of meeting the performance target is remeasured each quarter and adjusted if needed. The time based RSUs for executive officers, senior management and employees vest ratably over a three-year period while the time based RSUs for non-employee directors of our board of directors have a one-year vesting period. As of August 31, 2021 , there are 1,003,584 unvested performance based RSUs and 1,054,765 unvested time based RSUs. As of August 31, 2021 , there were 10,358,331 shares of Class A Common Stock available for grant under the 2021 Incentive Plan. Activity under the 2021 Incentive Plan related to options was as follows: Successor Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (in years) Balance, February 28, 2021 ā $ ā ā Granted 2,583 9.86 Balance, August 31, 2021 2,583 $ 9.86 9.5 As of August 31, 2021 , there was $ 5.1 million of unrecognized compensation cost related to unvested options. Activity under the 2021 Incentive Plan related to RSUs was as follows: Successor Number of Units Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Recognition Period (in years) Balance, February 28, 2021 ā $ ā ā Granted 2,105 12.84 Forfeited ( 47 ) 12.87 Balance, August 31, 2021 2,058 $ 12.84 3.1 As of August 31, 2021 , there was $ 24.0 million of unrecognized compensation cost related to unvested RSUs. The estimated grant-date fair values of the options granted during the six months ended August 31, 2021 were calculated using the Black-Scholes option-pricing valuation model, based on the following assumptions: Expected term (in years) 6.25 Expected equity price volatility 46.39 % - 46.65 % Risk-free interest rate 0.96 % - 1.12 % Expected dividend yield 0 % See Note 23, Subsequent Events for information related to additional RSU grants. Prior to the Business Combination, we had unit-based compensation plans that authorized (a) the discretionary granting of unit options and (b) the discretionary issuance of non-vested restricted units. Unit Options In 2015, E2open Holdings adopted the 2015 Unit Option Plan (2015 Plan). Under the 2015 Plan, E2open Holdings issued Series A unit options to certain employees eligible to participate in E2open Holdings unit option plan. The options issued under the 2015 Plan were subject to certain transfer restrictions and were initially deemed unvested. With respect to options issued to certain employees, options either vested 25 % in the first year, and quarterly thereafter over a four-year period (Time-Based Units) or based upon an exit event (Exit-Based Units). The vesting of both the Time-Based Units and Exit-Based Units were subject to the employeeās continued employment with the E2open Holdings. Fair value of the unit options was determined on the date of grant using a pricing model affected by E2open Holdingsā unit price, as well as by certain assumptions including E2open Holdingsā expected equity price volatility over the term of the awards, actual and projected employee option exercise behavior, risk-free interest rates and expected dividends. E2open Holdings did no t grant any new options during the periods from March 1, 2020 through February 3, 2021. E2open Holdings was authorized to issue 46.0 million unit options under the 2015 Plan. As of February 3, 2021, outstanding unit options were 19.9 million. Unit options available for grant were 2.7 million as of February 3, 2021; however, the 2015 Plan was terminated as part of the Business Combination. Activity under E2open Holdingsā unit option plan was as follows: Predecessor Number of Units Weighted Average Exercise Price Per Unit Weighted Average Term (in years) Balance, February 29, 2020 22,001 $ 1.51 1.9 Exercised ( 1,290 ) 1.45 Forfeited ( 287 ) 1.64 Balance, August 31, 2020 20,424 $ 1.51 1.4 As of February 3, 2021, there was $ 2.4 million of unrecognized compensation cost which was expected to be recognized over a weighted-average period of 1.1 year. The weighted-average contractual life of options outstanding was 6.7 years and the weighted-average contractual life of options exercisable was 6.4 years as of February 3, 2021. We did no t recognize any compensation expense for Exit-Based units for the three and six months ended August 31, 2020 as these awards were not probable of vesting during these time periods. On January 24, 2021, the board of managers accelerated the vesting of all unvested unit options outstanding under the 2015 Plan as of the completion of the Business Combination on February 4, 2021. Restricted Equity Plan In 2015, E2open Holdings established the 2015 Restricted Equity Plan (2015 Restricted Plan) that was adopted for certain officers eligible to participate in the 2015 Restricted Plan. The units issued under the 2015 Restricted Plan were subject to certain transfer restrictions and were initially deemed unvested. With respect to units issued to certain officers, Class B units either vested 25 % annually over a four-year period (Time-Based Units) or based upon an exit event (Exit-Based Units). The vesting of both the Time-Based Units and Exit-Based Units were subject to the employeeās continued employment with E2open Holdings. E2open Holdings authorized 32.0 million units under the 2015 Restricted Plan. As of February 3, 2021 and February 29, 2020, outstanding restricted units were 22.0 million. No restricted units were available for grant as of February 3, 2021. The 2015 Restricted Plan was terminated as part of the Business Combination. Activity under E2open Holdingsā 2015 Restricted Plan was as follows: Predecessor Number of Units Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Term (in years) Balance, February 29, 2020 8,955 $ 1.40 1.5 Released ( 1,929 ) 1.48 Balance, August 31, 2020 7,026 $ 1.38 0.8 The aggregate fair value of units vested during the three and six months ended August 31, 2020 was $ 1.4 million and $ 2.8 million, respectively. Unrecognized compensation expense related to the Class B units was $ 5.4 million as of the February 3, 2021, which was expected to be recognized over a weighted-average period of approximately one year . E2open Holdings did no t recognize any compensation expense for Exit-Based Units for the three and six months ended August 31, 2020. On January 24, 2021, the board of managers accelerated the vesting of all unvested unit options outstanding under the 2015 Restricted Plan as of the completion of the Business Combination on February 4, 2021. The table below sets forth the functional classification in the Condensed Consolidated Statements of Operations of our equity-based compensation expense: Successor Predecessor Successor Predecessor Three Months Ended Three Months Ended Six Months Ended Six Months Ended ($ in thousands) August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020 Cost of revenue $ 257 $ 115 $ 457 $ 225 Research and development 374 123 697 292 Sales and marketing 478 185 760 376 General and administrative 1,400 1,548 2,638 3,124 Total share-based and unit-based $ 2,509 $ 1,971 $ 4,552 $ 4,017 |