This excerpt taken from the PALM DEFA14A filed Aug 28, 2007.
Incentive Stock Options
1)
How does this Transaction affect incentive stock options?
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Most Palm employees hold nonqualified stock options (NQSOs) rather than incentive stock options (ISOs). Only former Handspring employees might continue to hold
incentive stock options as a remnant of the Handspring equity plans. The difference between ISOs and NQSOs is that ISOs can be exercised and the underlying shares held without causing a taxable event (other than possible alternative minimum tax)
until the underlying shares are eventually sold. NQSOs are taxable upon exercise regardless of whether the underlying shares are held or sold.
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ISOs will lose their ISO status as a result of the adjustments of options pursuant to the Purchase Agreement, which will occur upon the closing of the Transaction.
The ISOs will simply become NQSOs. This will not affect the treatment of shares held as result of the exercise of ISOs prior to the closing of the Transaction.
