The District of Columbia Stock Option Plan is a comprehensive program that allows companies to grant various types of stock options and stock appreciation rights to their employees. This plan is designed to incentivize and reward employees by providing them with the opportunity to acquire company stock, aligning their interests with the company's success. The plan encompasses three types of stock options: Incentive Stock Options (SOS), Nonqualified Stock Options (SOS), and Stock Appreciation Rights (SARS). Each of these options offers different benefits and features to the employees participating in the plan. Incentive Stock Options (SOS) are a type of stock option that provides special tax advantages to employees. They are typically granted to key employees and are subject to certain rules outlined by the Internal Revenue Code. SOS allow employees to purchase company stock at a predetermined price, known as the exercise price or strike price, within a specified period of time. If the employee holds the SOS for at least two years after the grant date and one year after exercising them, any potential gains on the stock are taxed at the favorable capital gains tax rate upon sale. Nonqualified Stock Options (SOS) are another type of stock option that is not subject to the same tax advantages as SOS. SOS are granted to a broader group of employees, including consultants and non-executive employees. These options allow employees to purchase company stock at the exercise price, similar to SOS, but they do not have to meet specific holding periods to receive favorable tax treatment. Any gains from SOS are taxed as ordinary income in the year of exercise. Stock Appreciation Rights (SARS) offer employees the opportunity to benefit from the increase in the company's stock price without actually purchasing the stock. SARS are granted at a specific base price, and when exercised, the employee receives the appreciation in value as either cash or additional company stock. Unlike stock options, SARS do not require the employee to pay an exercise price upfront. The District of Columbia Stock Option Plan provides flexibility for companies to choose the types of stock options and stock appreciation rights that best suit their business needs. By offering these diverse options, companies can tailor their incentive programs to attract and retain top talent while aligning employee interests with the company's long-term success.