Plan Administration & Communication Flashcards

A company's ESPP has a 24-month offering period with 6-month purchase periods and a lookback provision. If the stock was $20 at offering start, $30 at first purchase date, and $25 at the end of the offering, at what price can participants buy shares?

Answer: $17.00 (85% of $20)

A lookback provision allows participants to purchase at 85% of the lower of the FMV at the start of the offering period ($20) or the purchase date price, so 85% × $20 = $17.00.

Which of the following best describes 'double-trigger' acceleration of equity awards in the context of a change in control?

Answer: Awards vest upon both the CIC event AND the executive's involuntary termination

Double-trigger acceleration requires two events to occur: first, the change in control, and second, the executive's qualifying termination (e.g., without cause or for good reason) within a specified period post-CIC.

What is the maximum aggregate fair market value of ISOs that can first become exercisable in any calendar year under IRC Section 422?

Answer: $100,000

IRC Section 422(d) limits the aggregate FMV (determined at grant) of ISOs that can first become exercisable in any calendar year to $100,000 per employee; amounts above this are treated as NQSOs.

Which of the following is a key difference between RSAs and RSUs from a participant perspective?

Answer: RSAs convey actual share ownership at grant; RSUs represent an unfunded promise to deliver shares

RSAs involve the actual issuance of shares at grant (subject to forfeiture restrictions), giving the holder immediate share ownership rights including voting and dividends, while RSUs are contractual promises to deliver shares upon vesting.

A plan administrator discovers that an award agreement contains an error in the stated vesting date that differs from the board approval. Which document governs?

Answer: The board resolution/approval, as it represents the authorized grant terms

The board resolution or Compensation Committee approval represents the authorized grant, and in cases of conflict with the award agreement, the authorizing document's intent governs; the agreement should be corrected.

An option holder who dies during the vesting period typically has options transferred to:

Answer: Their estate or beneficiaries per the plan terms

Upon death, unvested or vested unexercised options are generally transferred to the participant's estate or designated beneficiary, with plan terms dictating the exercise window available to them.

Under Regulation S-K Item 402, executive compensation disclosure in proxy statements must include equity award information for which group of individuals?

Answer: The CEO, CFO, and the three other most highly compensated executive officers (NEOs)

Reg S-K Item 402 requires detailed equity compensation disclosure for Named Executive Officers (NEOs), defined as the CEO, CFO, and the three other highest-compensated executive officers.