Stock Options（E6002）

About Your Ownership in GitLab

At GitLab we strongly believe in employee ownership in our Company. We are in business to create value for our shareholders and we want our employees to benefit from that shared success.
In this document (only accessible to GitLab team-members and candidates), you can find some more details on the number of shares outstanding and the most recent valuations.
This guide is meant to help you understand the piece of GitLab that you’re going to own! Its goal is to be more straightforward than the full GitLab 2015 Equity Incentive Plan (the “2015 Equity Plan”) and your stock option agreement which you are advised to read, which both go into the full legal details. Please note, however, that while we hope that this guide is helpful to understanding the stock options and/or stock issued to you under the 2015 Equity Plan, the governing terms and conditions are contained in the 2015 Equity Plan and the related stock option agreement. You should consult an employment attorney and/or a tax advisor if you have any questions about navigating your stock options and before you make important decisions.
Three things must happen for your stock options to be meaningful:

1. You must vest the stock (we have a 1 year cliff and 3 years of vesting after that).
2. You must stay until we have a liquidation event (or the lock-up period passes in the event we go public), or you have the cash to exercise your stock after termination.
3. We must make the company worth more than the liquidation preference.

   Stock Options

   At GitLab, we give equity grants in the form of Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs). The difference in these two types of grants are, generally, as follows: ISOs are issued to US employees and carry a special form of tax treatment recognized by the US Internal Revenue Service (IRS). NSOs are granted to contractors and non-US employees. It’s called an option because you have the option to buy GitLab stock later, subject to vesting terms, at the exercise price provided at the time of grant. Solely for the purposes of example, if you are granted stock options with an exercise price of $1 per share of common stock today, and if GitLab grows later so its common stock is worth $20 per share, you will still be able to buy the common stock upon exercise of your option for $1 per share.
   The reason we give stock options instead of straight stock is that you do not need to spend any money to purchase the stock at the date of grant and can decide to purchase the stock later as your options vest. In addition, we do not provide straight stock grants since this may subject you to immediate tax liabilities. For example, if we granted you $10,000 worth of GitLab stock today, you would have to pay taxes on the value of the stock (potentially thousands of dollars) for this tax year. If we give you options for $10,000 worth of stock, you generally don’t have to pay any taxes until you exercise them (more on exercising later). Please read the Stock Option section of the Tax Team.

   Stock Option Grant Levels

   Standard Option Grants are broken out by level for each division. If you have any questions on what grant should be offered to a new hire, please reach out to the Compensation and Benefits team by email to compensation@gitlab.

Note: All stock option grants are subject to approval by the Board of Directors and no grants are final until such approval has been made. The Company reserves the right in its own determination to make any adjustments to stock option grants at its sole discretion including the decision not to make a grant at all.

Stock Splits

Companies from time to time undertake stock splits. A stock split has no economic impact on the stockholder. The split simply increases the number of shares by a certain amount and reduces the price by an equal, offsetting amount. For example, if a stockholder had 1,000 shares at $10.00 per share (total value $10,000), and the Company executed a 2 for 1 stock split, the shareholder would then have 2,000 shares at $5.00 (total value still $10,000). Nothing has changed. Public companies have historically split their stock to lower the stock price so that a broader set of investors could hold shares in the company. The theory being a lower price would make it easier for an individual investor to buy shares. Private companies perform stock splits to make themselves more comparable to other private companies. Companies that undertake IPOs typically go public in accepted trading ranges and then start trading from that point. So private companies will adjust their shares to be able to trade in those ranges at IPO. For further information, read this article.
Effective February 28, 2019 the GitLab Board of Directors approved a 4:1 stock split. All common stock, preferred stock and options were treated exactly the same in the split. The stock split will be reflected in Carta by the end of April. Why 4:1? We chose that ratio so that our shares will be comparable to other companies in our peer group, so that candidates considering coming to work at GitLab can make an informed choice on an “apples to apples” basis. We also took care to not split at too high of a ratio which could result in a reverse stock split prior to IPO and that is something we would like to avoid (but can’t guarantee in any scenario).

Exercising Your Options

“Exercising your options” means buying the stock guaranteed by your options. You pay the exercise price that was set when the options were first granted and you get stock certificates back. To give employees an opportunity to benefit from any existing tax incentives that may be available (including under the US and the Dutch tax laws) we have made the stock immediately exercisable. This means you can exercise your right to purchase the unvested shares under your option to start your holding period. However, the Company retains a repurchase right for the unvested shares if your employment or other services ends for any reason. An early exercise of unvested stock may have important tax implications and you should consult your tax advisor before making such decision.
Also, while the company has the right to repurchase the unvested shares upon your termination of services, the company is not obligated to do so. Accordingly you could lose some or all of the investment you made. Because we are a young company there are lots of risks, so be aware and informed of the risks. Please read this quora thread about most startups failing and this story of people paying more in tax for their stock than they get back.

Option Expiration

If you leave the company, you will generally have 90 days to exercise your option for any shares that are vested (as of the last day of service).
In addition, if not otherwise expired (through termination of your employment), your stock options expire 10 years after they were issued.

Exercise Window After Termination

Please note that until the post IPO lockup period has expired (or we are bought) company stock is not liquid. If your employment ends for whatever reason, you have a 90 day window to exercise your vested options, or lose them. During this window you would have to pay the exercise price and in some cases the tax on the gain in value of your stock options, which could be considerable. If the company stock is not liquid this money might be hard to come by. The 90 day window is an industry standard but there are good arguments against it. You may not purchase unvested shares after your service has ended.
At GitLab the stock options are intended to commit our team members to get us to a successful public listing of our stock. We want to motivate and reward our people for reaching that goal. Therefore we will consider exercise window extensions only on a case by case basis at our discretion. An example of a situation we’ll consider is a valued team member quitting because of personal circumstances. In most cases there will be no extension and you will either have to pay for shares and the taxes yourself, or lose the options, even when you are fully vested. And, of course, being a publicly listed company in 2020 is our public ambition, but neither the timing, nor whether it happens at all, is guaranteed.

Administration

Option grants are approved by the Board of Directors at regularly scheduled quarterly board meetings. After your grant has been approved by the Board you will receive a grant notice by email from Carta containing information relevant to the grant including the number of shares, exercise price, vesting period and other key terms. We use Carta to administer our stock option program.
You will receive the grant notice to your GitLab email address. Clicking through that email will enable you to set up a user account at Carta. You can find all of the terms and conditions of the stock program as well as your specific grant within the Carta system. You are safe to go ahead and click “Accept” for your grant, no payment or taxes will be incurred to you since you are not Exercising Your Options, you are simply confirming to GitLab that you accept the grant that was allocated to you.
As a helpful hint we suggest that you add a second, personal email address to your profile. This can be added by clicking on Profile and Security in the bottom left hand corner of the home screen after logging in to Carta.

How to Exercise Your Stock Options

There are two methods to exercise your shares:

1. Electronic (US Residents Only)
   • Log into your Carta account
   • Follow the directions to enable ACH payments from your bank
   • After ACH has been enabled select exercise option grants and follow the prompts
2. Manual (Non ACH and Non US Residents)
   • Log into your Carta account
   • Click on “View” (under the arrow on right side of the screen)
   • Click on “Form of Exercise Agreement”
   • Complete the form, sign, and return as PDF to the CFO
   • Send payment in US dollars by wire transfer. You will be provided the wire transfer info.

     Note for US residents: whichever method you choose, be sure to download the 83-b election form provided by Carta and file with the IRS within 30 days of exercise. Send a copy of the signed and dates election form to the CFO via email. The CFO will share this with the compensation@domain team, whom will file it in BambooHR.

You will most likely want to include the following letter when sending in the 83-b election to the IRS:

<<Date Filed>>
Department of the Treasury
<<Address provided from Carta 83-b instructions>>
To whom it may concern:
Please find enclosed two copies of the 83-b election in connection with my purchase of shares of GitLab Inc. common stock. Please return one copy stamped as received to my attention in the enclosed self addressed stamped envelope.
Yours Truly,
//signature

Exercise Prices and 409A Valuations

Generally, the exercise price for options granted under the 2015 Equity Plan will be at the fair market value of such common stock at the date of grant. In short, “fair market value” is the price that a reasonable person could be expected to pay for the common stock, but because GitLab is not “public” (listed on a large stock exchange), the Board is responsible for determining the fair market value. In order to assist the Board, the company retains outside advisors to undertake something called a “409A valuation”. In general, the lower a valuation for the shares the better for employees as there is more opportunity for gain. Additionally, a lower exercise price reduces the cash required to exercise the shares and establish a holding period which can have tax advantages in some countries. We describe those in this document but as always check with your financial or tax advisor before taking any action.

Transfer Restrictions on Common Stock

On January 31, 2019 the Board of Directors approved the amendment to the company’s bylaws regarding the transfer of shares of Common Stock. Effective as of that date, Stockholders will not be able transfer, sell, or assign any shares of Common Stock without the prior written consent of the Board. This restriction does not apply to the following permitted transfers:

• the transfer is a gift or pursuant to a domestic relations order, to the stockholder’s immediate family member;
• the transfer is executed pursuant to the stockholder’s will or the laws of intestate succession;
• the transfer by an entity stockholder is made to an affiliate of such entity stockholder;
• the transfer by an entity stockholder of all Common Shares is made to a single transferee in accordance with the terms of any bona fide merger, consolidation, or acquisition;
• the transfer is made for no consideration by a stockholder that is a partnership to such stockholder’s limited partners in accordance with the partnership interests of such limited partners;
• any repurchase or redemption of the Common Shares by the corporation (a) at or below cost, upon the occurrence of certain events, such as the termination of employment or services, or (b) at any price pursuant to the corporation’s exercise of a right of first refusal to repurchase such Common Shares; or
• in the event of a transfer or deemed-transfer that is approved, or in the event the restriction is waived, and the Common Shares of the transferring stockholder are subject to co-sale rights, any transfers by the persons and/or entities who are entitled to and have exercised the co-sale rights in conjunction with such approved transfer or deemed-transfer giving rise to the exercise of such co-sale right.