Staples 2014 Annual Report Download - page 36

APPROVE AN AMENDMENT TO THE 2012 EMPLOYEE STOCK PURCHASE PLAN (ITEM 2 ON THE PROXY CARD)
32 STAPLES Notice of Annual Meeting of Stockholders
Amendment or Termination
The plan administrator may at any time amend, suspend
or terminate the 2012 ESPP in any respect, unless the
amendment requires shareholder approval pursuant to Code
Section 423, other applicable laws or stock exchange rules.
If the plan administrator determines that the operation of the
2012 ESPP results in unfavorable accounting consequences,
the plan administrator may amend the terms of the 2012 ESPP
and any outstanding offerings without obtaining shareholder
approval or the participants’ consent. Similarly, the plan
administrator may amend an outstanding option or grant a
replacement option for an outstanding option under the 2012
ESPP to achieve the tax consequences for Staples or the
participants that were expected when the option was granted
or to take advantage of or comply with changes or clarifications
to applicable laws. If the 2012 ESPP is terminated, the plan
administrator may (1) terminate all outstanding offering periods
either immediately or upon completion of the purchase of
shares of common stock on the next exercise date, which may
be sooner than originally scheduled, or (2) allow the offering
periods to expire in accordance with their terms.
2012 ESPP BENEFITS
Each employee’s participation in the 2012 ESPP, as amended,
is purely voluntary. Future benefits under the 2012 ESPP are
not currently determinable, as they will depend on the actual
purchase price of our shares of common stock in future
offering periods, the fair market value of our common stock
on various future dates, the amount of contributions eligible
employees elect to make under the 2012 ESPP and similar
factors. Our named executive officers will be subject to the
same purchase limitations as all other participants.
Federal Income Tax Consequences
The following generally summarizes the United States federal
income tax consequences that will arise with respect to
participation in the 2012 ESPP and with respect to the sale
of common stock acquired under the 2012 ESPP, but it is
not a detailed or complete description of all U.S. federal tax
laws or regulations that may apply, and does not address any
local, state or foreign laws. Therefore, no one should rely
on this summary for individual tax compliance, planning
or decisions. Participants in the 2012 ESPP should
consult their own professional tax advisors concerning
tax aspects of rights under the 2012 ESPP. Nothing in
this proxy statement is written or intended to be used,
and cannot be used, for the purposes of avoiding
taxpayer penalties. The discussion below concerning
tax deductions that may become available to us under
U.S. federal tax law is not intended to imply that we
will necessarily obtain a tax benefit or asset from those
deductions. Taxation of equity-based payments in other
countries is complex, does not generally correspond
to U.S. federal tax laws, and is not covered by the
summary below. This summary assumes an option price
that is equal to 85% of the closing price of our common
stock on the last trading day of the purchase period. This
summary also assumes that the 423 Component complies
with Code Section 423 and is based on the tax laws in effect
as of the date of this proxy statement. Changes to these laws
could alter the tax consequences described below.
As described above, the 2012 ESPP has a 423 Component
and a Non-423 Component. The tax consequences for a U.S.
taxpayer will depend on whether he or she participates in the
423 Component or the Non-423 Component.
Tax Consequences to Participants in the 423 Component
Rights to purchase shares granted under the 423 Component
are intended to qualify for favorable federal income tax
treatment associated with rights granted under an employee
stock purchase plan which qualifies under the provisions of
Section 423(b) of the Code. Under these provisions, no income
will be taxable to a participant until the shares purchased
under the 2012 ESPP are sold or otherwise disposed of.
Accordingly, a participant will not have income upon enrolling
in the 2012 ESPP or upon purchasing stock at the end of a
purchase period.
A participant may have both compensation income and a
capital gain or loss upon the sale of common stock that was
acquired under the 2012 ESPP. The amount of each type
of gain or loss will depend on when the participant sells the
common stock.
If the participant sells the common stock more than two years
after the commencement of the offering period during which
the common stock was purchased and more than one year
after the date that the participant purchased the stock at a
profit (if the sales proceeds exceed the purchase price), then
the participant will have compensation income equal to the
lesser of:
• 15% of the value of the common stock on the first day of
the offering period; or
• the participant’s profit.
Any amount in excess of the amount that the participant
recognized as compensation income will be long-term capital
gain. If the participant sells the common stock at a loss (if sales
proceeds are less than the purchase price) after satisfying
these waiting periods, then the loss will be a long-term capital
loss.
If the participant sells the common stock prior to satisfying
these waiting periods, then he or she will have engaged in
a “disqualifying disposition.” Upon a disqualifying disposition,
the participant will have compensation income equal to the
value of the stock on the day he or she purchased the stock
less the purchase price. The participant also will have a
capital gain or loss equal to the difference between the sales