FT Solutions, Inc. has had the opportunity to develop a new and exciting incentive compensation vehicle which we call the Option Equity Fund. This equity share plan is especially suited for companies that provide services to privately-held companies whose stock has a high probability of being publicly traded in the near future via an initial public offering (IPO). The plan, which can be designed to fit the sponsoring company’s particular situation, provides key employees with the opportunity to acquire a vested interest in a pool of stock options granted by their client companies. The options in the pool, or Fund, are negotiated as part of the fees for services rendered by the company sponsoring the Fund. Unlike the qualified profit sharing plan, management can limit participation to those employees who, for example, are directly responsible for revenue through client development. The scope and degree of participation, however, is strictly up to company management and any number of arrangements are possible.
Obviously, every privately held company with promising products and services is not going to become a future IPO star. Accordingly, these plans are best suited to companies whose typical client base is weighted in favor of promising IPO candidates, or companies that are likely acquisition targets, and are willing to grant stock options in exchange for, or in addition to, services for fees.
Development and on-going administration of a successful plan requires thorough knowledge of a company's overall objectives, participation requirements and client base. In addition to the need for allocation formulae that produce equitable results, the successful plan must also be subject to independent third-party asset valuation in order to retain participant confidence and enthusiasm for the program.
The Equity Fund is not your typical compensation or benefit plan. These are custom plans whose design and operation requires a combination of business valuation, benefit fund administration, income tax and incentive compensation plan expertise. This program is typical of many of our services in that it requires case basis design and execution and a familiarity with the new business environment in contrast to the traditional one-size-fits-all template.
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