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This excerpt taken from the ARB DEF 14A filed Apr 3, 2008. Incentive
Stock Options
A participant will not have income upon the grant of an
incentive stock option. Also, except as described below, a
participant will not have income upon exercise of an incentive
stock option if the participant has been employed by the Company
or its corporate parent or 50% or more-owned corporate
subsidiary at all times beginning with the option grant date and
ending three months before the date the participant exercises
the option. If the participant has not been so employed during
that time, then the participant will be taxed as described below
under “Non-statutory Stock Options.” The exercise of
an incentive stock option may subject the participant to the
alternative minimum tax.
A participant will have income upon the sale of the stock
acquired under an incentive stock option at a profit (if sales
proceeds exceed the exercise price). The type of income will
depend on when the participant sells the stock. If a participant
sells the stock more than two years after the option was granted
and more than one year after the option was exercised, then all
of the profit will be long-term capital gain. If a participant
sells the stock prior to satisfying these waiting periods, then
the participant will have engaged in a disqualifying disposition
and a portion of the profit will be ordinary income and a
portion may be capital gain. This capital gain will be long-term
if the participant has held the stock for more than one year and
otherwise will be short-term. If a participant sells the stock
at a loss (sales proceeds are less than the exercise price),
then the loss will be a capital loss. This capital loss will be
long-term if the participant held the stock for more than one
year and otherwise will be short-term.
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