a. Design:
i. LTIPs and other cash incentives consist of the right of an individual to receive cash payments conditioned upon the satisfaction of time and performance vesting requirements. They may be granted in the amounts and subject to the terms and conditions that are determined by the company. Under the terms of an LTIP or cash incentive grant, certain individual, financial or other company-related goals and targets must be met in order (i) for the for the benefits payable the LTIP or cash incentive to become non-forfeitable and (ii) to determine the amount of the benefits to which the individual is entitled. The company sets performance goals which, depending on the extent to which they are met during the performance periods established by the company, will determine the amounts payable under the LTIPs or other cash incentives. The individuals will receive payment of the benefits at the end of the applicable performance period.
b. Federal Income Tax Implications:
i. Impact on the Individual:
1. Benefits underlying LTIPs and other cash incentives generally are included in the gross income of the individual at the time paid.
ii. Impact on the Company:
1. At the time the individual recognizes ordinary income upon the receipt of an award under an LTIP or other cash incentive, the company generally will be entitled to a federal income tax deduction in the amount of the ordinary income so recognized.