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This excerpt taken from the XIDE DEF 14A filed Jul 24, 2009. Tax
Consequences to Participants
Non-qualified Option Rights: In general,
(1) no income will be recognized by an optionee at the time
a non-qualified option right is granted, (2) at the time of
exercise of a non-qualified option right, ordinary income will
be recognized by the optionee in an amount equal to the
difference between the option price paid for the shares and the
fair market value of the shares, if unrestricted, on the date of
exercise, and (3) at the time of sale of shares acquired
pursuant to the exercise of a non-qualified option right,
appreciation (or depreciation) in value of the shares after the
date of exercise will be treated as either short-term or
long-term capital gain (or loss) depending on how long the
shares have been held.
Incentive Option Rights: No income generally
will be recognized by an optionee upon the grant or exercise of
an ISO. The exercise of an ISO, however, may result in
alternative minimum tax liability. If shares are issued to the
optionee pursuant to the exercise of an ISO, and if no
disqualifying disposition of such shares is made by such
optionee within two years after the date of grant or within one
year after the transfer of such shares to the optionee, then
upon sale of such shares, any amount realized in excess of the
option price will be taxed to the optionee as a long-term
capital gain and any loss sustained will be a long-term capital
loss. If shares acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary
income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of such shares at the
time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the
option price paid for such
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shares. Any further gain (or loss) realized by the participant
generally will be taxed as short-term or long-term capital gain
(or loss) depending on the holding period.
SARs: No income will be recognized by a
participant in connection with the grant of a tandem SAR or a
free-standing SAR. When the SAR is exercised, the participant
normally will be required to include as taxable ordinary income
in the year of exercise an amount equal to the amount of cash
received and the fair market value of any unrestricted common
shares received on the exercise.
Restricted Stock: The recipient of restricted
stock generally will be subject to tax at ordinary income rates
on the fair market value of the restricted stock (reduced by any
amount paid by the participant for such restricted stock) at
such time as the shares are no longer subject to forfeiture or
restrictions on transfer for purposes of Section 83 of the
Internal Revenue Code (the “Restrictions”). However, a
recipient who so elects under Section 83(b) of the Internal
Revenue Code within 30 days of the date of transfer of the
shares will have taxable ordinary income on the date of transfer
of the shares equal to the excess of the fair market value of
such shares (determined without regard to the Restrictions) over
the purchase price, if any, of such restricted stock. If a
Section 83(b) election has not been made, any dividends
received with respect to restricted stock that is subject to the
restrictions generally will be treated as compensation that is
taxable as ordinary income to the participant.
RSUs: No income generally will be recognized
upon the award of RSUs. The recipient of an award of RSUs
generally will be subject to tax at ordinary income rates on the
fair market value of unrestricted shares on the date that such
shares are transferred to the participant under the award
(reduced by any amount paid by the participant for such RSUs),
and the capital gains/ loss holding period for such shares will
also commence on such date.
Performance Shares and Performance Units: No
income generally will be recognized upon the grant of
performance shares or performance units. Upon payment in respect
of the earn-out of performance shares or performance units, the
recipient generally will be required to include as taxable
ordinary income in the year of receipt an amount equal to the
amount of cash received and the fair market value of any
unrestricted shares of Common Stock received.
Other Stock-Based Awards and Cash Awards: No
income generally will be recognized upon the grant of Other
Stock-Based Awards and cash awards. Upon payment of Other
Stock-Based Awards and cash awards, the recipient generally will
be required to include as taxable ordinary income in the year of
receipt an amount equal to the amount of cash received and the
fair market value of any unrestricted shares of Common Stock
received, as applicable.
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