Equity Compensation 101
By Gary T. Moyer, April 11, 2000

NQSOs - Pros and Cons

• Advantages

• More flexible than ISOs
  • Can be granted to non-employees (e.g., directors and consultants)
  • No limit on term

• Can be granted at less than FMV

• NQSO values can be more than $100,000/year

• Employer gets wage deduction upon exercise by employee

• Disadvantages

• Employee is taxed (at ordinary income rates) on inherent gain upon exercise of the option

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