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income the fair market value of the shares of stock on the date that the restrictions lapse as to those shares, less
any purchase price paid for such shares. The included amount will be taxed as ordinary income to the participant
and will be subject to withholding by the Company or its subsidiary (by payment in cash, withholding out of the
participant's award or withholding out of the participant's salary).
If the participant makes a timely 83(b) election, the participant will, at the time the award is received, include the
fair market value of the shares of stock on the date of receipt of the award (determined without regard to lapse
restrictions), less any purchase price paid for such shares in income as compensation. The income will be subject
to withholding by the Company or its subsidiary (by payment in cash, withholding out of the participant's salary
or withholding out of the participant's award). If the award is subsequently forfeited, the participant will not
receive any deduction for the amount previously taxed as ordinary income.
Restricted Stock Units
A participant will recognize income as compensation with respect to an award of restricted stock units at the time
that the restrictions lapse, provided the shares are issued on the date the restrictions lapse. The participant will
include in income the fair market value of the shares of stock on the date that the restrictions lapse as to those
shares, less any purchase price paid for such shares. The included amount will be taxed as ordinary income to the
participant and will be subject to withholding by the Company or its subsidiary (by payment in cash, withholding
out of the participant's award or withholding out of the participant's salary).
Stock Appreciation Rights
Assuming that a stock appreciation right ("SAR") is granted at an exercise price that is not less than the fair
market value of the underlying shares on the grant date, a participant will not recognize any taxable income at the
time a SAR is granted or when the SAR vests. However, upon exercise of a vested SAR, an amount equal to the
difference between the fair market value of the shares on the date of exercise and the participant's exercise price
will be included in income as compensation to the participant. The included amount will be taxed as ordinary
income to the participant and will be subject to withholding by the Company or its subsidiary (by payment in
cash, withholding out of the award or withholding out of the participant's salary). Upon resale of the shares
issued to the participant at the time of exercise, any subsequent appreciation or depreciation in the value of the
shares will be treated as capital gain or loss, taxable at a rate that depends upon the length of time the shares were
held by the participant.
Internal Revenue Code Section 409A
At the present time, the Company intends to grant equity awards to participants which are either outside the
scope of Section 409A of the U.S. Internal Revenue Code or are exempted from the application of Section 409A.
If an equity award is subject to Section 409A and the requirements of Section 409A are not met, participants may
suffer adverse tax consequences with respect to the equity award. Such consequences may include taxation at the
time of the vesting of the award, an additional 20 percent tax penalty on the non-compliant deferred income and
interest and penalties on any deferred income.
Tax Treatment of the Company
To the extent that the participant recognizes ordinary income and the Company properly reports such income to
the Internal Revenue Service (the "IRS"), the Company generally will be entitled to a deduction in connection
with the exercise of a NQSO or a SAR by a participant or upon the lapse of restrictions with respect to a
participant's restricted stock or restricted stock unit award. The Company will be entitled to a deduction in
connection with the disposition of ISO Shares only to the extent that the participant recognizes ordinary income
on a disqualifying disposition of the ISO Shares and provided that the Company properly reports such income to
the IRS.
ERISA
The Equity Plan is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974
and is not qualified under Section 401(a) of the Code.
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