Common use of Section 409A and Section 457A of the Code Clause in Contracts

Section 409A and Section 457A of the Code. Under Section 409A of the Code, an option granted with an exercise price that is determined by the U.S. Internal Revenue Service (the “IRS”) to be less than the Fair Market Value on the date of grant (a “discount option”) or that covers other than “service recipient stock” (as defined under Section 409A of the Code) may be considered “deferred compensation.” An Option that is a discount option or that covers other than service recipient stock may result in (i) income recognition by Holder prior to the exercise of the Option, (ii) an additional twenty percent (20%) Federal income tax, and (iii) potential penalty and interest charges. The Option may also result in additional state income, penalty and interest charges to Holder. Holder acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant or that the Shares covered by this Option will be classified as service recipient stock in a later examination. Holder agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant or covers other than service recipient stock, Holder shall be solely responsible for Holder’s costs related to such a determination. Further, Holder agrees that if the IRS determines that the Option is deferred compensation subject to, and within the meaning of, Section 457A of the Code, Holder shall be solely responsible for Holder’s costs related to such a determination.

Section 409A and Section 457A of the Code. Under Section 409A of 409Aof the Code, an option granted with an exercise price that is determined by the U.S. Internal Revenue Service (the “IRS”) to be less than the Fair Market Value on the date of grant (a “discount option”) or that covers other than “service recipient stock” (as defined under Section 409A of the Code) may be considered “deferred compensation.” An Option that is a discount option or that covers other than service recipient stock may result in (i) income recognition by Holder prior to the exercise of the Option, (ii) an additional twenty percent (20%) Federal income tax, and (iii) potential penalty and interest charges. The Option may also result in additional state income, penalty and interest charges to Holder. Holder acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant or that the Shares covered by this Option will be classified as service recipient stock in a later examination. Holder agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant or covers other than service recipient stock, Holder shall be solely responsible for Holder’s costs related to such a determination. Further, Holder agrees that if the IRS determines that the Option is deferred compensation subject to, and within the meaning of, Section 457A of the Code, Holder shall be solely responsible for Holder’s costs related to such a determination.