Stock options granted under the Amended Plan which are not incentive stock options are “non-qualified options.” In general, no income results upon the grant of a nonqualified stock option. When a participant exercises a nonqualified stock option, the participant will generally realize ordinary income subject to withholding. Generally, such income will be realized at the time of exercise and in an amount equal to the excess, measured at the time of exercise, of the then fair market value of EIX common stock over the option price. We will generally be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the option holder, subject to certain withholding and reporting requirements.
Incentive Stock Options
In general, neither the grant nor the exercise of an incentive stock option granted under the Amended Plan will result in taxable income to the participant or a deduction to us. In general, if the participant does not dispose of stock received upon exercise of an incentive stock option within two years after the date the stock option is granted and within one year after the date of exercise, any later sale of such stock will result in a capital gain or loss (and we are not entitled to a corresponding deduction). If stock received upon the exercise of an incentive stock option is disposed of before these holding period requirements have been satisfied (“disqualifying disposition”), the participant will generally realize ordinary income at the time of such disqualifying disposition. The amount of such ordinary income will generally be equal to the difference between the fair market value of the EIX common stock on the date of exercise and the exercise price (or, if less, the difference between the amount realized on disposition of the stock and the exercise price). In the case of such a disqualifying disposition in which a loss (if sustained) would be recognized, then the amount of ordinary income will not exceed the excess of the amount realized on the sale over the adjusted basis of the stock (that is, in general, the price paid for the stock). We will generally be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the participant, subject to any necessary withholding and reporting requirements.
Certain participants exercising incentive stock options may become subject to the alternative minimum tax, under which the difference between (i) the fair market value of stock purchased under incentive stock options, determined on the date of exercise, and (ii) the exercise price, will be an item of tax preference in the year of exercise for purposes of the alternative minimum tax.
Stock Appreciation Rights.
Generally, the participant will not be subject to tax upon the grant of a stock appreciation right. However, upon the receipt of shares pursuant to the exercise of a stock appreciation right, the participant, generally, will recognize ordinary income in an amount equal to the fair market value of the shares received. The ordinary income recognized with respect to the receipt of shares upon exercise of stock appreciation rights will be subject to any necessary withholding and reporting requirements. Generally, we will not be entitled to a tax deduction upon the grant or termination of stock appreciation rights. However, we will, generally, be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the participant.
Restricted Stock Units.
Generally, the participant will not be subject to tax upon the grant of an award of RSUs but will recognize ordinary income in an amount equal to the fair market value of any shares received on the date of delivery of the underlying shares of common stock. We will generally be entitled to a corresponding tax deduction.
Restricted Stock and Share-Based Awards.
Generally, restricted stock and share-based awards are not taxable to a participant at the time of grant, but instead are included in ordinary income (at the then fair market value less any amount paid for the stock) when the restrictions lapse. A participant may elect to recognize income at the time of grant, in which case the fair market value of our common stock at the time of grant is included in ordinary income and there is no further income recognition when the restrictions lapse. We are generally entitled to a tax deduction in an amount equal to the ordinary income recognized by the participant.
Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code generally limits the federal income tax deduction for compensation paid to “covered employees” (in general, the CEO, the CFO, and the three other most highly-compensated executive officers for the year at issue and any person who was part of that group for any other year beginning after December 31, 2016) to $1,000,000. Thus, certain compensation attributable to awards may be nondeductible to us due to the application of Section 162(m) of the Internal Revenue Code.
Plan Benefits; Market Value of Securities
EIX has not approved any awards that are conditioned upon shareholder approval of this Item 4. The future grant of awards under the Amended Plan, and the nature of any such awards, are subject to the discretion of the Committee or, in the case of awards to non-employee directors, the EIX Board. The number, amount and type of awards to be received by or allocated in the future to eligible service providers cannot be determined at this time. However, each non-employee director who is elected or re-elected at the Annual Meeting (other than Ms. Granholm) will receive a grant of EIX Common Stock and/or deferred stock with an aggregate grant date value of $177,500. In addition, the Chair of the Board will receive a supplemental grant of EIX Common Stock and/or deferred stock with an aggregate grant date value of $92,500 upon being appointed or re-appointed. Ms. Granholm is expected to receive a grant of deferred stock units with an aggregate grant date value of $177,500 on April 1, 2025 (the effective date of her election to the Board).
The following table shows information, for the persons and groups identified below, regarding the distribution of shares of EIX common stock granted under the Plan since its inception through February 28, 2025 (the table does not show information for
