What will be an ideal response?
Answer:
1. The option is granted for the acquisition of securities classified as liabilities, such as redeemable preferred stock.
2. The employee can sell back the acquired shares to the employer corporation at the exercise price within a reasonable amount of time.
3. The compensation is in the form of share appreciation rights (SAR) where the employee receives cash for the amount of the increase in share value over a pre-established price over a fixed period of time.