A dividend equivalent right entitles the recipient to receive credits equal to the cash or stock dividends or other distributions that would have been received on shares of stock had the shares been issued and outstanding on the dividend record date.
The dividend equivalents may be paid at the same time dividends are paid on actual shares to shareholders or may be paid upon vesting, exercise, settlement, or payment of an underlying award. To the extent that the right to receive dividend equivalents or the termination of the right to receive dividend equivalents is tied to the exercise of a stock option, this causes a stock option that is not otherwise subject to Section 409A of the Internal Revenue Code to become subject to Section 409A.