Stock-Based Compensation | 9. Stock-Based Compensation Stock-based compensation plan In 2008, the Company adopted its 2008 Stock Option/Stock Issuance Plan, and, in 2017, adopted the Zeta Global Holdings Corp. 2017 Incentive Plan (collectively, the “Plans”). The Plans permit the issuance of stock options, restricted stock and restricted stock units to employees, directors, and officers, consultants or advisors and non-employee five In the past, the Company has cancelled certain restricted stock and in lieu of such cancellation has issued restricted stock units to the holders of that restricted stock, with the same vesting conditions as restricted stock. Restricted Stock and Restricted Stock Units As noted above, the Company’s restricted stock and restricted stock units did not vest until the change of control. On March 24, 2021, the Company’s board of directors approved a modification in the vesting terms of its restricted stock and restricted stock unit awards. Pursuant to that approval, the existing restricted stock and restricted stock units were divided into three broad categories with different vesting conditions as follows: a) For the first category of holders, terms of the modification provide the holders an option to tender up to 20% of their outstanding awards to the Company in a buy-back one b) For the second category of holders, terms of the modification provide for vesting upon the effective date of the IPO as follows: (i) 25% of shares with an original grant date of less than five years prior to the IPO and (ii) 100% of shares with a grant date of five years or older. Post the IPO, additional vesting is deferred for one year. Thereafter the rema i c) For the third category of holders, terms of the modification provide for vesting to begin at the end of the first quarter following the one fifth The revised terms were communicated to the restricted stock and restricted stock unit holders. The above modification was accounted for under the guidance in ASC 718-20-35-3. improbable-to-improbable 718-20-55-118 The restricted stock or restricted stock units that are tendered by the holders in the buy-back The following is the activity of restricted stock and restricted stock units granted by the Company: Shares Weighted Average Non-vested 85,903,970 $ 2.80 Granted (1) 9,112,569 8.62 Vested (9,300,893 ) 11.04 Forfeited (2) (4,700,102 ) 9.46 Cancelled (3) (16,655,197 ) 3.60 Modified (68,986,297 ) 2.78 Modified and reissued 68,986,297 11.36 Non-vested , 2021 64,360,347 $ 10.94 (1) During the nine months ended September 30, 2021, the Company granted 8,824,045 restricted stock and 288,724 restricted stock units to its employees and board members, of which 1,660,677 restricted stock and 98,993 restricted stock units were granted prior to March 12, 2021 and will be governed by the vesting rules described in a), b) and c) above. Remaining shares that were granted on or after March 12, 2021 shall vest over a period of four years, with 25% vesting on the one-year (2) During the nine months ended September 30, 2021, the 4,682,178 restricted stock and 17,924 restricted stock units were forfeited. (3) During the nine months ended September 30, 2021, the Company also cancelled 16,655,197 shares of restricted stock granted to holders of series A redeemable convertible preferred shares (see Note 10 to the condensed unaudited consolidated financial statements below). Performance Stock Unit (“PSU”) Award On August 18, 2021, the Compensation Committee of the Board of Directors approved 1,500,000 PSU awards under the Company’s 2021 Incentive Award Plan. Upon achievement of the conditions described below, the PSUs could result in the issuance of up to 3,000,000 shares of Class A common stock. Each PSU represents the right to receive shares of Class A common stock as set forth in the PSU grant agreement or, at the option of the Company, an equivalent amount of cash. Participants have no right to the distribution of any shares or payment of any cash until the time (if ever) the PSUs are earned and have vested. Each PSU provides for the right to receive a dividend equivalent to the value of any ordinary cash dividends paid on substantially all the outstanding shares of Class A common stock if the PSUs are earned and vested. 20 Day VWAP of Class A common stock Below $10 $10.00 $12.50 $15.00 $18.50 $22.00 Percentage of target PSUs 0% 25% 50% 100% 150% 200% Upon being earned and subject to the participant’s continued service, PSUs will vest in three equal annual installments, with the first installment vesting on the date of determination for the applicable quarter for which such PSUs were earned, and the second and third installments vesting on the second and third anniversaries of such quarterly determination date, subject to accelerated vesting in connection with a change in control. In the event of Participant’s termination of service for any reason, all unvested PSUs will immediately and automatically be cancelled and forfeited, except, to the extent a Participant is terminated without cause or resigns for good reason, (i) any PSUs earned for any quarter prior to the date of termination will fully vest, and (ii) any PSUs earned in the quarter in which the termination date occurs will fully vest. The Company engaged a third-party valuation firm to determine the estimated fair value of the PSUs using the Monte Carlo simulation method, which was determined as $1.95 per PSU. During the three and nine months ended September 30, 2021, the Company recognized an expense of $86 related to target PSUs during such period. 2021 Employee Stock Purchase Plan (“ESPP”) In connection with its IPO, the Company adopted the 2021 Employee Stock Purchase Plan, or the 2021 ESPP. The Company expects that all of its employees will be eligible to participate (the “participants”) in the 2021 ESPP. The 2021 ESPP permits participants to purchase the Company’s Class A common stock through contributions up to a specified percentage of their eligible compensation. The maximum number of shares that may be purchased by a participant during any offering period are capped at 10,000. In addition, no employee will be permitted to accrue the right to purchase shares under the Section 423 component at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our Class A common stock as of the first day of the offering period). On July 28, 2021, the Compensation Committee of the Board of Directors approved the Company’s first offering period under the 2021 ESPP, which commenced on August 1, 2021 and will end on November 30, 2021. Following the end of the first offering period, the 2021 ESPP shall have consecutive offering periods of approximately six months in length commencing each year on December 1 and June 1 and ending on each May 31 and November 30 occurring six months later, as applicable. During the three months and nine months ended September 30, 2021, the Company recognized an expense of $180 at fair value of $2.16 per 2021 ESPP share, related to the enrollments under the first offering period that commenced on August 1, 2021. The fair value of the 2021 ESPP was determined, based on the Monte Carlo simulation method, by a third party valuation firm engaged by the Company. Unrecognized compensation expense The Company has $607,110 of unrecognized compensation expense related to its 64,360,347 unvested restricted stock and restricted stock units, 1,500,000 performance stock units and common stock to be issued under the ESPP. This unrecognized stock-based compensation will be recognized over a weighted average period of 1.37 years. |