Note 12. Stock-based Compensation Plans
2020 Stock Incentive Plan
In January 2020, Legacy Hyzon
adopted the 2020 Stock Incentive Plan (the 2020 Plan) under which employees, directors, and consultants may be granted various forms of equity incentive compensation including incentive and
non-qualified options.
A total number of 16,250,000 reserved shares of common stock were reserved for awards
under the 2020 Plan. Shares of common stock issued under the Plan may be either authorized but unissued shares or reacquired common stock of Legacy Hyzon. Under the 2020 Plan, the exercise period of options is determined when granted, and options
expire no later than fifteen years from the date of grant, subject to terms and limitations relative to termination of service and ownership percentages of the voting power of all classes of Legacy Hyzons stock.
The 2020 Plan was terminated in connection with the Business Combination in July 2021, and Legacy Hyzon will not grant any additional awards under the 2020
Plan. Any ungranted shares under the 2020 plan expired. However, the 2020 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under it. At the closing of the Business Combination, the outstanding awards
under the 2020 Plan were converted at an Exchange Ratio of 1.772. Share and per share information below have been converted from historical disclosure based on the Exchange Ratio.
2021 Equity Incentive Plan
The 2021 Equity Incentive
Plan (the 2021 Plan) was approved by the Board of Directors on June 24, 2021, and subsequently approved by the stockholders on July 15, 2021. The 2021 Plan provides for the grant of stock options, stock appreciation rights,
restricted stock, RSU and performance awards to the Companys employees, directors, and consultants. The number of shares of the Companys common stock reserved for issuance under the 2021 Plan is 23,226,543 shares. In connection with the
Business Combination, 21,339,493 shares of Class A common stock subject to outstanding equity awards granted under the 2020 Plan are converted into equity awards under the 2021 Plan. The number of shares of common stock available for issuance under
the 2021 Plan will also include an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of (A) two and one-half percent of the shares outstanding on the
last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the Board of Directors.
Former CTO
Retirement Agreement
In September 2021, the Company and former Chief Technology Officer (former CTO) entered into a Letter Agreement
(the Agreement) concerning the former CTOs retirement and separation from Hyzon. Pursuant to the Agreement, for a period of 24 months commencing on September 18, 2021 (the Initial Consulting Period), he will serve
as a consultant to Hyzon. In exchange for services provided during the Initial Consulting Period, he will receive $20,000 per month. Subject to conditions of the Letter Agreement, the 1,772,000 stock options previously granted pursuant to his
employment agreement with the Company will continue to vest annually in equal installments on April 1, 2022 through April 1, 2025. He also will be entitled to receive 250,000 RSUs of Hyzon, half of which vested after his retirement date and half of
which will vest on or after the one-year anniversary of his retirement date. The service condition in the Agreement related to the vesting of these awards was determined to be non-substantive, and therefore, the Company recognized stock-based
compensation expense of $13.4 million immediately in September 2021. In addition, the Company recognized salary expense of $0.5 million related to his monthly consulting payments.
Stock-based Compensation Activities
During the three
months ended September 30, 2021, the Company did not grant any stock options. During the nine months ended September 30, 2021, the Company granted 134,672 stock options with a weighted average grant date fair value of $1.68 per share that
vest over five years. During the three months ended September 30, 2021, 221,500 options were exercised resulting in proceeds of $0.3 million, and 107,206 options were forfeited or replaced. During the nine months ended September 30,
2021, 354,409 options were exercised resulting in proceeds of $0.4 million, and 174,542 options were forfeited or replaced. There was no option activity in the three months ended September 30, 2020, or the period from inception (January
21, 2020) to September 30, 2020.
During the three months ended September 30, 2021, the Company granted 864,765 RSUs with a weighted average
grant date fair value of $8.04 per share. During the three months ended September 30, 2021, 450,643 RSUs were forfeited. During the nine months ended September 30, 2021, the Company granted 2,622,589 RSUs with a weighted average grant date
fair value of $4.44 per share. The RSUs granted during the three months and nine months ended September 30, 2021, vest over periods ranging from four to five years. The Company did not grant RSUs in the three months ended September 30,
2020, or the period from inception (January 21, 2020) to September 30, 2020.
As of September 30, 2021, there were 19,757,800 options with a
weighted average exercise price of $1.13, and 2,171,946 RSUs outstanding. There were no stock options or RSUs outstanding as of September 30, 2020.
The Company recognized stock-based compensation expense, inclusive of all employees, former CTOs awards, and earnout shares to other equity holders, of
$27.2 million and $28.1 million for the three and nine months ended September 30, 2021, respectively. As of September 30, 2020, the total remaining unrecognized compensation expense related to nonvested stock-based compensation
awards was $12.6 million, which is expected to be recognized over the remaining vesting period of the respective grants, through the third quarter of 2026.
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