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Equity Award Center

Glossary

Agreement:
Also called a “grant agreement” or “award agreement.” The RSU or stock option agreement is a legal document that sets forth the terms and conditions that apply to your grant.

Capital gain:
Occurs when an investment is sold at a higher price than originally paid.

Capital gains tax:
Tax on profits from the sale of capital assets. You pay capital gains tax when you sell shares of stock at a price higher than the price of the stock on the day you acquired the shares. Long-term capital gains tax rates are generally lower than ordinary income tax rates.

Cash purchase and hold the shares:
A type of exercise method for options. You pay for all exercise costs with cash and hold the shares until you decide to sell them in the future.

Cashless exercise and sell for cash:
A type of exercise method for options. You exercise your options and simultaneously sell all shares. After you pay the exercise costs (i.e., the exercise price, commissions, and any applicable income tax withholding and transaction fees), net cash is deposited to your Schwab account.

Cashless exercise and sell to cover:
A type of exercise method for options. You exercise your options and simultaneously sell enough shares to cover the exercise price, commissions, and any applicable income tax withholding and transaction fees.

Constructive receipt:
A tax term mandating that a taxpayer is liable for income, which has not been physically received but has been credited to the taxpayer’s account or otherwise becomes available for him or her to draw upon in the future.

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