Federal Income Tax Consequences under the JOI 2023 Director Plan
The following summary briefly describes certain material U.S. federal income tax consequences of rights under the JOI 2023 Director Plan, but is not a detailed or complete description of all U.S. federal tax laws or regulations that may apply, and does not address any local, state or other country laws.
Pursuant to the JOI 2023 Director Plan, Participants may be granted the following benefits: stock options, SARs, shares of Restricted Stock or Restricted Stock Units. The Company shall have the right, upon issuance of shares or payment of cash in respect of an Award, to reduce the number of shares or amount of cash, as the case may be, otherwise issuable or payable by the amount necessary to satisfy any federal, state or local withholding taxes or to take such other actions as may be necessary to satisfy any such withholding obligations.
Stock Options. Stock options granted under the JOI 2023 Director Plan are generally classified as nonstatutory stock options under the Internal Revenue Code, as amended (the “Code”). With respect to these stock option awards, (i) no income is realized by the Participant at the time the option is granted, (ii) generally, at exercise, ordinary income is realized by the Participant in an amount equal to the difference between the option price paid for the shares and the fair market value of the shares on the date of exercise, (iii) the Company will generally be entitled to a federal income tax deduction equal to the amount of ordinary income taxed to the Participant, (iv) prior to (or contemporaneous with) the exercise of an option, the Participant shall make an appropriate payment or other provision (which may include the withholding of shares of common stock) with respect to any withholding or similar tax requirement, and (iv) upon disposition of the common stock acquired by exercise of the stock option, appreciation (or depreciation) occurring after the date of exercise is treated as either short-term or long-term capital gain (or loss), depending on how long the shares have been held.
Stock Appreciation Rights. With respect to SARs, (i) in general, no income is realized by the participant at the time the SAR is granted, (ii) generally, at exercise, the Participant will be required to include as ordinary income an amount equal to the cash received and/or the fair market value of any shares of common stock received on the exercise, (iii) the Company will generally be entitled to a federal income tax deduction equal to the amount of ordinary income taxed to the Participant, and (iv) the Participant shall make an appropriate payment or other provision with respect to any withholding or similar tax requirement.
Restricted Stock Awards; Restricted Stock Units. With respect to Restricted Stock, (i) in general, no income is realized by the Participant at the time the Restricted Stock is granted and (ii) when the Restricted Stock becomes transferable or no longer subject to a substantial risk of forfeiture, the Participant will be subject to tax at ordinary income rates on the amount by which the fair market value of the Restricted Stock at such time exceeds the amount, if any, paid for the stock by the Participant. However, a Participant may elect under Code section 83(b) (which election must be made within 30 days after the date of receipt of the Restricted Stock) to be taxed differently. In such a case (i) ordinary income is realized by the Participant at the time the Restricted Stock is granted, in an amount equal to the amount by which the fair market value of such shares of Restricted Stock at grant exceeds the amount, if any, paid for the stock by the Participant and (ii) upon disposition of the shares, the Participant will recognize short-term or long-term capital gain (or loss), depending on how long the shares have been held, measured by the difference between the amount realized on the disposition and the basis of the Restricted Stock, which basis will equal the sum of the purchase price and the amount included in gross income under Code section 83(b).
With respect to a sale or exchange of the shares after the forfeiture period has expired, the holding period to determine whether the grantee has long-term or short-term capital gain or loss generally begins when the restrictions expire and the tax basis for such shares will generally be based on the fair market value of such shares on such date (except that a section 83(b) election will cause the holding period commencement and the tax basis to be determined as of the date of grant). The Company generally will be entitled to a deduction equal to the amount that is taxable as ordinary income to the Participant and the Participant shall make an appropriate payment or other provision with respect to any withholding or similar tax requirement when the amount is subject to ordinary income to the Participant.
With respect to Restricted Stock Units, (i) in general, no income is realized by the participant at the time the Restricted Stock Unit is granted, (ii) generally, upon the delivery of shares or cash pursuant to a Restricted Stock