time, or any successor equity incentive plan adopted by NGM (the Plan), and will be documented on the applicable form of equity award agreement most recently approved for use by the Board (or a duly authorized committee thereof) for Eligible Directors. All stock options granted under the Director Compensation Policy will be nonstatutory stock options, with an exercise price per share equal to 100% of the Fair Market Value of the underlying Common Stock on the date of grant, and a term of ten years from the date of grant (subject to earlier termination in connection with a termination of Continuous Service or a Corporate Transaction as provided in the Plan). Upon a termination of Continuous Service other than for death, Disability or Cause, the post-termination exercise period of a stock option will be 12 months from the date of termination.
1. Initial Option Grant. On the date of the Eligible Directors initial election to the Board (or, if such date is not a market trading day, the first market trading day thereafter), the Eligible Director automatically, and without further action by the Board or Compensation Committee of the Board, will be granted a stock option to purchase shares of Common Stock having a Grant Date Value (defined below) of $500,000 (the Initial Option Grant). The Initial Option Grant will vest one-third after the first year, with the remaining shares vesting quarterly in years two and three following the grant date, such that the Initial Option Grant will be fully vested on the third anniversary of the date of grant, subject to the Eligible Directors Continuous Service on each applicable vesting date.
2. Annual Option Grant. On the date of each NGM annual stockholder meeting held after the effective date of the IPO (an Annual Meeting), each Eligible Director automatically, and without further action by the Board or Compensation Committee of the Board, will be granted a stock option to purchase shares of Common Stock having a Grant Date Value of $200,000 (the Annual Option Grant). The Annual Option Grant will vest in four approximately equal quarterly tranches, with the final tranche vesting on the earlier of (x) first anniversary of the date of grant, and (y) the day prior to the next Annual Meeting, subject to the Eligible Directors Continuous Service on each applicable vesting date.
3. Calculation of Grant Date Value. The Grant Date Value of an equity award granted under this Director Compensation Policy will be determined using the same method the Company uses to calculate the grant date fair value of stock based compensation for its financial statements (e.g., applying a Black-Scholes option pricing model in the case of stock options).
4. Treatment on a Change in Control. In the event of a Change in Control, any then-unvested equity award will fully vest (and become exercisable, in the case of an option) as of immediately prior to the effective time of such transaction, subject to the Eligible Directors Continuous Service on the effective date of such transaction. For clarity, such accelerated vesting will not accelerate the settlement of any equity award subject to a deferral election in accordance with Section 409A of the Internal Revenue Code.
5. Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust the number of shares provided above to be subject to any Initial Option Grant and Annual Option Grant made after the date of such Capitalization Adjustment.
Election to Receive Annual Cash Compensation in the Form of Stock Options
Following the IPO, each Eligible Director may elect in writing (an Annual Election) to receive his or her annual cash compensation in the form of a stock option (an Annual Election Option). Such Annual Election would apply to all annual cash compensation payable during the subsequent year of service, measured from the date of the Annual Meeting.
Except as provided below, any Annual Election must be submitted in January of each calendar year, or in the case of an individual who first becomes an Eligible Director in any calendar year, within 30 days following the date on which he or she first becomes an Eligible Director (and no later than 30 days prior to the date of the Annual Meeting). An Annual Election will be irrevocable once submitted. All Annual Elections must also be submitted during an open window period in accordance with the Companys then-effective Insider Trading and Trading Window Policy (or any other policy on trading in