Company: KG
Filing Date: 2025-03-10
Form Type: S-4
Source: 0001104659-25-021993
Chunk: 278

Company: Kestrel Group Ltd
Filing Date: 2025-03-10
Form: S-4
Chunk 278
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 amount.

Upon the exercise of an incentive stock option, a participant generally recognizes no immediate taxable income and income recognition is generally deferred until the participant sells the shares. However, the excess of the fair market value of the shares acquired upon exercise of an incentive stock option over the exercise price constitutes a tax preference item for purposes of computing the “alternative minimum tax” under the Code. If an incentive stock option is exercised no later than three months after the termination of the participant’s employment, and the participant does not dispose of the shares acquired pursuant to such exercise within two years from the date the option was granted or within one year after the date on which the shares acquired pursuant to the exercise are transferred to the participant, any gain or loss on the sale will be treated as long-term capital gain or loss. Bermuda NewCo is not eligible to receive any tax deduction with respect to the grant or exercise of incentive stock options, except that if the shares are not held for the full term of the holding period described above, then an amount equal to the lesser of: (i) the fair market value of the shares on the date of exercise minus the exercise price and (ii) the amount realized on disposition minus the exercise price, will be taxed to the participant as ordinary income and, the employing entity will generally be eligible to receive a deduction in the same amount.

A participant generally recognizes no taxable income and Bermuda NewCo is not eligible to receive a deduction when a SAR is granted. Generally, upon exercising a SAR, a participant will recognize ordinary income in an amount equal to sum of the cash and the fair market value of the shares received and Bermuda NewCo will be eligible to receive a corresponding deduction. Upon sale of any shares received upon exercise of a SAR, the participant will recognize short-term or long-term capital gain or loss, depending

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upon whether the shares have been held for more than one year. The amount of such gain or loss will be equal to the difference between the amount realized in connection with the sale of the shares and the participant’s tax basis in such shares.

Unless a participant makes a “Section 83(b) election” under the Code, there generally will be no U.S. federal income tax consequences to either the participant or Bermuda NewCo upon the grant of restricted shares that are subject to a substantial risk of forfeiture until the restrictions constituting a substantial risk of forfeiture lapse. At the time the substantial risk of forfeiture lapses, the participant generally will recognize taxable income equal