From the filing --- ISO vs NSO Novell options
(a) EXERCISING THE OPTION.
(I) NONQUALIFIED STOCK OPTION ("NSO"). If this Option does not qualify
as an ISO, the Optionee may incur regular federal income tax liability upon
exercise. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an employee or a former employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(ii) INCENTIVE STOCK OPTION ("ISO"). If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the fair market value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to alternative minimum tax in the year of exercise.
(b) DISPOSITION OF SHARES.
(I) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the fair market value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (I) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee. |
