DEF 14C: FiscalNote Holdings Amends Long-Term Incentive Plan to Increase Share Authorization

FiscalNote Holdings has amended its 2022 Long-Term Incentive Plan to increase the number of shares available for issuance and revise the annual evergreen provision.

Summary

• FiscalNote Holdings has amended its 2022 Long-Term Incentive Plan (LTIP) following approval by a majority of voting power held by certain stockholders.
• The amendment includes a one-time increase of 4,000,000 shares of Class A Common Stock authorized for issuance under the 2022 LTIP.
• The evergreen provision of the 2022 LTIP has been revised to increase the number of shares automatically added each January 1st to the lesser of 5% of the total outstanding Class A Common Stock on December 31st of the preceding year or 13,523,734 shares.
• The amendment was approved by stockholders holding approximately 0.7% of Class A common stock and 85.7% of Class B common stock, representing about 52.0% of the total voting power.
• The changes will become effective 20 calendar days after the information statement is mailed to stockholders, with the evergreen provision changes taking effect on January 1, 2025.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a planned amendment to the LTIP that has been approved by the required majority of stockholders. While there are potential risks associated with dilution, the overall tone is neutral to positive, focusing on the company's need to attract and retain talent.

Positives

• The amendment ensures the company can meet its compensatory needs by providing sufficient shares for equity awards.
• The LTIP includes responsible features such as no discounted stock options, no repricing of options without stockholder approval, and clawback provisions.
• The company has considered dilution to current stockholders when determining the number of additional shares to be authorized.
• The plan is designed to align the interests of employees, directors, and service providers with those of the company's stockholders.

Negatives

• The increase in authorized shares will lead to increased potential dilution for existing stockholders.
• The evergreen provision could result in a significant number of new shares being added to the plan each year.

Risks

• The increased share authorization could lead to further dilution of existing shareholders' equity.
• The company's burn rate, while averaging 7.8% over three years, could fluctuate and impact shareholder value.
• The company's stock price performance could affect the value of equity awards and the effectiveness of the incentive plan.

Future Outlook

The company intends to continue using equity compensation to attract and retain talent and align their interests with those of the stockholders. The LTIP will continue to be in effect for a term of 10 years from June 30, 2022, unless terminated earlier.

Management Comments

• The Board believes the 2022 LTIP has been effective in providing incentives.
• The Board and Compensation Committee carefully considered the potential dilution to current stockholders when determining the number of additional shares to be authorized.
• The Compensation Committee works with an independent compensation consultant to design an equity award program that balances dilution with business needs.

Industry Context

The use of long-term incentive plans is a common practice in the technology industry to attract and retain talent, particularly in competitive markets. The amendment to the LTIP reflects the company's need to continue to offer competitive compensation packages.

Comparison to Industry Standards

• The document does not provide specific details on comparable companies' equity compensation plans, making a direct comparison difficult.
• However, the document does mention using Mercer's Comptryx Survey (High Tech Firms) and publicly-disclosed compensation data of public peer companies for benchmarking executive compensation.
• The company's burn rate of 7.8% over three years is within the range of what is seen in the technology sector, but a more detailed comparison would require specific data on peer companies.
• The document does not provide specific details on the size of the share reserve or the annual increase of comparable companies, making a direct comparison difficult.

Stakeholder Impact

• Existing stockholders may experience dilution due to the increase in authorized shares.
• Employees and other service providers may benefit from the increased availability of equity awards.
• The company aims to align the interests of all stakeholders through the LTIP.

Next Steps

• The LTIP Amendment will become effective 20 calendar days after the mailing of the information statement.
• The revised evergreen provision will take effect on January 1, 2025.
• The company will continue to administer the 2022 LTIP as amended.

Key Dates

Keywords

Long-Term Incentive Plan, LTIP Amendment, equity compensation, stock options, restricted stock units, share dilution, evergreen provision, executive compensation, corporate governance