This excerpt taken from the MOLX DEF 14A filed Sep 23, 2005.
U.S. Tax Consequences When an Option/Award Is Acquired
NQSOs - Ordinary Tax. An exercise of any portion of a NQSO results in additional ordinary income for federal income tax purposes in the calendar year of exercise. The amount of additional ordinary income in any given year of exercise is equal to the aggregate fair market value on the date of exercise less the aggregate option price paid for the number of shares received. Molex is allowed a deduction equal to the amount recognized by the grantee as additional ordinary income.
Restricted Stock Award Shares - Ordinary Tax. The vesting of any portion of a restricted stock award results in the recognition of additional ordinary income for federal income tax purposes in the calendar year of vesting equal to the fair market value of the shares received on the date of vesting. The Company is allowed a deduction equal to the amount recognized by the grantee as additional ordinary income.
Distribution of Stock under the 1998 Plan may be subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of a share of Stock at the time the restricted stock award becomes vested.