Csp Q18

Front 1

QBS 18: 1 of 8
Types of Stock Based Plans/Awards

Back 1

1) Stock options
a) Incentive Stock Options (ISO)
b) Nonqualifed stock option awards (NQSOs)
2) Employee Stock Purchase Plans (ESPPs)
3) Qualified retirement plans invested in employer securities (e.g. ESOP)
4) Bonus paid all or in part in the form of stock
5) Restricted stock
6) Stock appreciation rights (SARs)
7) Phantom stock

Front 2

QBS 18: 2 of 8
ISO Requirements

Back 2

1) Duration can not exceed 10 years
2) Option must be granted at least at fair value
3) Employee can't see stock within the later of 2 years from grant date or 1 year from purchase
4) Option is not transferable
5) Maximum value can't exceed $100,000

Front 3

QBS 18: 3 of 8
Characteristics of an ESPP

Back 3

1) Covers all full-time employees
2) Usually sold at a discount
3) May have a look-back feature
4) Money withheld from employee
5) High-paid employees may be restricted from participation

Front 4

QBS 18: 4 of 8
Characteristics on restricted stock

Back 4

1) Receive stock (i.e. strike price is $0)
2) Taxed when stock rights not subject to substantial risk of forfeiture
- However, can make an up-front tax election

Front 5

QBS 18: 5 of 8
Characteristics of stock appreciation rights (SARs)

Back 5

1) Account maintained for a select group of employees
2) Reflects appreciation in company stock
3) Value normally paid in cash when rights are final

Front 6

QBS 18: 6 of 8
Characteristics of phantom stock

Back 6

1) Similar to SAR, except reflects full value of stock
2) Value paid in cash at some point
3) No actual stock in account

Front 7

QBS 18: 7 of 8
Plan Provisions that Need to Be Considered When Designing a Stock Option Plan

Back 7

1) Vesting
2) Transferability of options
3) Effect of certain contingencies on options
4) Exercise of option, types allowed

Front 8

QBS 18: 8 of 8
Methods of increasing retention through executive compensation

Back 8

1) Redirection of cash bonuses to long-term deferred comp or restricted stock
a) Should base initial award value on objective formula to increase objectivity
2) Impose forfeiture features
a) Vesting based on service, corporate performance or both
b) Deferral of payment after non-compete period expires
c) Deposit of cash-based benefits into rabbi trusts