10. Stock-Based Compensation
Old SES established its initial share incentive plan in 2013 (the “2013 Plan”), which was subsequently replaced with a new share incentive plan in 2018 (the “2018 Plan”). Under the terms of the 2013 Plan and 2018 Plan certain shares were reserved for the issuance of incentive stock options (“ISOs”) and non-statutory stock options (“NSOs”) to employees, officers, directors, consultants and advisors. On March 30, 2021, the Company amended the 2018 Plan with the SES Holdings Pte. Ltd. 2021 Share Incentive Plan (the “2021 Plan”) and increased the total shares reserved for future issuance by 486,975 shares. Upon approval of the 2021 Plan, any shares that, as of the date of stockholder approval, were reserved but not issued pursuant to any awards granted under the Company’s 2018 Plan were rolled into the 2021 Plan. In addition, any shares subject to stock options or similar awards granted under the 2018 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 2018 Plan that are forfeited or repurchased by the Company would be rolled into the 2021 Plan. The 2021 Plan provided for the discretionary grant of ISOs, NSOs, and restricted stock awards (“RSAs”).
In connection with the Business Combination, the 2021 Plan was terminated, the remaining unallocated share reserve under the 2021 Plan was cancelled and no new awards will be granted under the 2021 Plan. 20,748,976 options and 2,273,727 RSAs (as converted, due to retroactive application of reverse recapitalization) outstanding under the 2021 Plan at Closing were assumed by the Company under the SES AI Corporation 2021 Plan (defined below).
The options and RSAs assumed under the SES AI Corporation 2021 Plan (defined below) generally vest 25% upon completion of one year of service and 1/48 per month thereafter, however in certain instances options have been granted with immediate vesting. The assumed options generally expire 10 years from the date of grant.
SES AI Corporation 2021 Plan
In connection with the Business Combination, the Company adopted the SES AI Corporation 2021 Incentive Award Plan (the “SES AI Corporation 2021 Plan”) under which 36,862,002 shares of Class A Common Stock were initially reserved for issuance of ISOs, NSOs, stock appreciation rights, RSAs, restricted stock units, other stock-based awards, other cash-based awards, dividend equivalents, and performance compensation awards. In addition and subject to certain limitations, any shares subject to awards granted under the 2021 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 2021 Plan that are forfeited or repurchased by the Company shall roll into the SES AI Corporation 2021 Plan. The SES AI Corporation 2021 Plan allows for the maximum number of shares issuable to automatically increase on January 1st of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to two percent of the total number of shares of Class A Common Stock outstanding on December 31st of the preceding year.
As of March 31, 2022, the Company had 36,865,265 shares of Class A Common Stock reserved for future issuance of equity awards to employees, officers, directors, or consultants under the SES AI Corporation 2021 Plan.
Earn-Out Restricted Shares
In connection with Business Combination, 2,308,969 Earn-out Restricted Shares were issued to Old SES option holders and pre-Closing recipients of Old SES RSAs. The Earn-Out Restricted Shares are accounted for as a single tranche equity award issued to employees subject to time and share price vesting hurdle. The Earn-Out Restricted Shares shall vest on the date that the closing price of shares of Class A Common Stock is equal to or greater than $18.00 during the period beginning on the date that is one year following the Closing and ending on the date that is five years following the Closing. The Earn-Out Restricted Shares are also subject to forfeiture if a recipient’s service terminates prior to the vesting.
The estimated fair value of the Earn-Out Restricted Shares is determined using Monte Carlo simulation model and the effect of the market condition is reflected in the grant date fair value of the award. The aggregate grant date fair value of the Earn-Out Restricted Shares is $15.8 million. The grant date fair value of Earn-Out Restricted Shares is determined