stock option generally you will recognize ordinary compensation income in an
amount equal to the excess of the fair market value of the common stock acquired
through the exercise of the option (the "NSO Stock") on the exercise date over
the exercise price.
With respect to any NSO Stock, you will have a tax basis equal to the
exercise price plus any income recognized upon the exercise of the option. Upon
selling NSO Stock, you generally will recognize capital gain or loss in an
amount equal to the difference between the sale price of the NSO Stock and your
tax basis in the NSO Stock. This capital gain or loss will be a long-term
capital gain or loss if you held the NSO Stock for more than one year prior to
the date of the sale and will be a short-term capital gain or loss if you held
the NSO Stock for a shorter period.
Maximum Income Tax Rates On Capital Gain And Ordinary Income. Based on
current U.S. tax rates, long-term capital gain will be taxable at a maximum rate
of 20% (18% if certain requirements are satisfied, including the satisfaction of
a 5-year holding period). Short-term capital gain and ordinary income will be
taxable at a maximum rate of 39.6%. Phaseouts of personal exemptions and
reductions of allowable itemized deductions at higher levels of income may
result in slightly higher marginal tax rates. Ordinary compensation income will
also be subject to a medicare tax and, under certain circumstances, a social
U.S. Federal Income Tax Consequences To PFSweb. The offer, the
acceptance of the offer by you and the grant of the new options will have no tax
consequences to the Company. With respect to the exercise of nonstatutory
options, however, the Company generally will be entitled to a business-expense
deduction with respect to any ordinary compensation income recognized by the
exercising holder. Any such deduction will be subject to the limitations of
Section 162(m) of the Internal Revenue Code.
Withholding. The Company will have a withholding obligation with
respect to ordinary compensation income recognized with respect to the exercise
of a nonstatutory option. The Company will require you to make arrangements to
satisfy this withholding obligation.
We recommend that you consult your own tax advisor with respect to the
federal, state and local tax consequences of participating in the offer.
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
We may at any time and from time to time, extend the period of time
during which the offer is open by publicly announcing the extension and giving
oral or written notice of the extension to the option holders.
Prior to the expiration date to terminate or amend the offer we may
postpone canceling any eligible options if any of the conditions specified in
section 6 occur. In order to postpone, we must publicly announce the
postponement and give oral or written notice of the postponement to the option
holders. Our right to delay canceling eligible options is limited by Rule
13e-4(f)(5) promulgated under the Securities Exchange Act, which requires that
we must pay the