PROPOSAL 4 — APPROVAL OF THE AMENDED AND RESTATED
IDEAL POWER INC. 2013 EQUITY INCENTIVE PLAN
Our Board believes that the effective use of stock-based long-term incentive compensation is vital to our ability to achieve continued strong performance in the future by providing a direct link between the compensation of executives and key employees and long-term stockholder value creation. Accordingly, upon recommendation of our Compensation Committee, our Board is seeking stockholder approval of the Amended and Restated Ideal Power Inc. 2013 Equity Incentive Plan (as currently in effect, the “2013 Plan” and as amended and restated, the “A&R 2013 Plan”) to, among other things, increase the number of shares authorized for issuance under the 2013 Plan by 400,000 shares.
In order to continue to have an appropriate supply of shares for equity incentives to recruit, hire and retain the talent required to successfully execute our business plans, the Board believes that we will need the additional 400,000 new shares to be available under the 2013 Plan. As of March 31, 2023, and prior to the requested increase, there were 136,880 shares available for future grant under the 2013 Plan. As of the record date, the total number of shares of our common stock outstanding was 5,931,569 shares. Although the additional 400,000 new shares to be available under the A&R 2013 Plan will increase the potential dilution to stockholders, our Board believes our equity compensation plan is well-managed and represents dilution at or below norms for our industry. The Board also believes the burn rate under our equity compensation plan is below the industry average. Furthermore, the Board and the Compensation Committee believe that the potential dilution represented by our current outstanding equity compensation awards and the new shares to be authorized for issuance under the A&R 2013 Plan is reasonable.
If stockholders do not approve the A&R 2013 Plan, the amendment to the 2013 Plan to increase the number of shares will not become effective and any remaining shares available for issuance under the 2013 Plan will remain available for new grants until awards have been granted covering all the shares authorized for issuance under the 2013 Plan or it is terminated by the Board.
The principal features of the A&R 2013 Plan are summarized below. This summary does not contain all information about the A&R 2013 Plan. A copy of the complete text of the A&R 2013 Plan is included in Appendix A to this proxy statement, and the following description is qualified in its entirety by reference to the text of the A&R 2013 Plan.
Summary of the A&R 2013 Plan
The A&R 2013 Plan authorizes the Compensation Committee to award stock options, restricted stock units, performance stock units and other incentives payable in cash or in shares of our stock to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company.
Shares Available for Issuance
The number of shares available for grant and issuance under the 2013 Plan at March 31, 2023 was 136,880 shares. In the event that the number of outstanding shares of common stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then the (i) number of shares reserved for issuance under the A&R 2013 Plan, (ii) exercise prices of, and number of shares subject to, outstanding stock options and (iii) number of shares subject to other outstanding awards will, in each case, be proportionately adjusted.
The total number of shares reserved and available for grant and issuance pursuant to the A&R 2013 Plan includes shares that are subject to: (i) issuance upon exercise of a stock option but cease to be subject to such stock option for any reason other than exercise of such stock option; (ii) an award granted but forfeited or repurchased by the Company at the original issue price; and (iii) an award that otherwise terminates without shares being issued.
Eligibility
Awards may be made to any employee, officer or director of the Company or any parent or subsidiary of the Company as well as to certain consultants, independent contractors and advisors. As of April 14, 2023, eight employees, including two executive officers, and four non-employee directors were eligible to receive awards under the 2013 Plan.