Why is Concho Resources making the Offer?
Concho Resources believes that the Eligible Options were granted with an exercise price that was less than the fair market value per share of Concho Resources common stock underlying such options on their grant date (that is, they were granted at a “discount” to the then-current fair market value of the underlying stock), and therefore, such options are subject to adverse tax consequences under Section409A (“Section409A”) of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other interpretive guidance issued by the U.S. Internal Revenue Service (the “IRS”) thereunder. Section409A of the Code, which was generally effective as of January1, 2005, was added by the American Jobs Creation Act of 2004 (the “AJCA”) to address perceived abuses in deferred compensation by restricting election and distribution alternatives.
