This excerpt taken from the FMSB DEF 14A filed Mar 17, 2005.
Stock Appreciation Rights. No income will be recognized by an optionee upon the grant of a stock appreciation right (SAR). Upon exercise of a SAR, however, the optionee will recognize ordinary income in an amount equal to the amount of any cash received plus the fair market value of any Shares received. The Company will generally be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income recognized by the optionee, provided the Company has satisfied its reporting obligations under the Code for any Shares issued to the optionee.
Notwithstanding the foregoing, in the event that Shares acquired pursuant to a SAR or a nonqualified stock option are subject to certain conditions of limited duration that create a substantial risk of forfeiture of such Shares by the optionee and any person to whom he or she may have transferred Shares, the optionee may not recognize ordinary income until the Shares are no longer subject to such restrictions (instead of recognizing income on the date of exercise). Under these circumstances, the optionee may avoid the deferral of income by filing an election under Code Section 83(b) to recognize income on the date of exercise.