Outright Stock Grants

Key Provisions

• Employees are provided with stock at no cost.
• Grant takes two basic forms:
  • Stock appreciation grants entitle the recipient to receive payments that equal the appreciated value of the stock over a designated period of time.
  • Full value stock grants entitle the recipient to receive the total value of the worth of a share of stock.

Tax Impact on Employee

• Income tax rates at the fair market value of the acquired stock.
• Gains realized after grant are taxed as long-term capital gains. Tax Impact on Company

Advantages

• Serves as an added incentive to new employees and employees with exceptional performance.
• Allows program flexibility.
• Can be used to match stock purchases.

What does this mean for The COMPANY?

1. THE COMPANY can select the recipients of an outright stock grant.
2. Outright stock grants provide THE COMPANY with mechanism for recruiting qualified talent, and for retaining and rewarding its top performers.
3. THE COMPANY can claim a corresponding tax deduction.

   KEY PROVISIONS	TAX IMPACT ON EMPLOYEE	TAX IMPACT ON COMPANY	EARNINGS IMPACT	ADVANTAGES	DISADVANTAGES
   All or portion of grant awards paid in Company stock	Taxed at ordinary income tax rates based on the FMV of the stock at the time of the award	Company can claim a corresponding tax deduction	Requires an accrual to cover value of grant	Allows flexibility in plan design Company can select recipients Can be used to match stock purchases or in lieu of cash compensation Well-suited for recruiting, retaining and rewarding top performers	Results in dilution Retired and terminated employees will own part of the Company (unless covered by shareholder agreement)

 

To find out more on how Compensation Resources, Inc. can help your company with Outright Stock Grants, please contact us or call us directly to speak with our compensation consultants at 877-934-0505.