This excerpt taken from the BSX DEF 14A filed Apr 10, 2006.
Proposal 4: 2006 Global Employee Stock Ownership Plan
We offer eligible employees the opportunity to purchase common stock on a regular basis, through payroll deduction, under our existing Global Employee Stock Ownership Plan (GESOP). The purpose of the GESOP is to encourage ownership of common stock by employees of Boston Scientific and related corporations. The GESOP is intended to be an employee stock purchase plan within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the Code).
Due to increasing employee participation in the GESOP, we have almost exhausted the shares reserved for issuance under the current GESOP. In addition, the existing GESOP will expire by its terms in October 2007. Management has expressed its desire to continue to offer the GESOP to our employees resident in the United States as well to those employees resident outside of the United States (through the GESOPs International Program). The GESOP International Program provides for implementation of the plan in most international jurisdictions through the use of a fiduciary. Accordingly, our Board of Directors has approved a new GESOP and GESOP International Program (the 2006 GESOP) to be established with terms substantially similar to the existing GESOP and GESOP International Program, with 20 million shares available for issuance under the 2006 GESOP. We believe that continuing to offer employees an opportunity to purchase shares of our common stock helps to align employee and shareholder interests, and supports a corporate value of recognizing and rewarding excellence by sharing Company success with our employees who help us achieve that success. You will be asked to approve the 2006 GESOP at this Annual Meeting.
Set forth below is a summary of certain provisions of the GESOP and a brief and general description of the U.S. Federal income tax treatment applicable to the purchase of our common stock under the new GESOP. Applicable tax treatment for eligible employees outside the United States is generally subject to the laws, rules and regulations of the taxing authorities in local jurisdictions.
Term. The 2006 GESOP has a term of ten years commencing July 1, 2006. No opportunity to purchase the Companys common stock under the 2006 GESOP may be granted on or after July 1, 2016, but prior grants may extend beyond that date.
Administration. The 2006 GESOP will be administered by the Executive Compensation and Human Resources Committee of our Board of Directors (the Compensation Committee). The current members of the Compensation Committee are Warren B. Rudman, Chairman, Ursula M. Burns and Ray J. Groves, and after the closing of the Guidant merger, will include Kristina M. Johnson. The Compensation Committee has the authority and discretion, among other things, to interpret the 2006 GESOP, prescribe, amend and rescind rules and regulations relating to the 2006 GESOP, resolve disputes arising under the 2006 GESOP, determine which and when related corporations may participate in the 2006 GESOP, determine the terms under which shares of Company common stock may be purchased under the 2006 GESOP, and make all other determinations necessary or advisable for the administration of the 2006 GESOP. The Compensation Committee has delegated its authority, responsibility and discretion to administer the day-to-day operation of the 2006 GESOP to certain of our executive officers and employees.
Eligibility. Generally, employees who have properly completed a membership agreement and are customarily employed by and regularly scheduled to work for the Company, or those of its related corporations designated by the Compensation Committee, for more than twenty hours per week will be eligible to purchase Company common stock under the 2006 GESOP. No rights to purchase Company common stock will be granted to any employee, however, if, after the grant of the right to purchase Company common stock and all other grants under the 2006 GESOP and any other stock purchase plan of the Company or its related corporations, the employee would own common stock constituting five percent (5%) or more of the total voting power or value of the Companys common stock, or if that grant would result in the employees accruing rights in a calendar year to purchase more than $25,000 in value of
Company common stock under the 2006 GESOP and any other stock purchase plan of the Company or its related corporations. The Compensation Committee may establish additional limitations for accounting (or any other reasons) on the number of shares of Company common stock available for purchase by eligible employees from time to time or with respect to one or more Offering Periods (as described below).
Offering Periods. The 2006 GESOP generally provides for six-month periods (Offering Periods), to be designated by the Compensation Committee, during which payroll deductions will be accumulated under the 2006 GESOP. Each Offering Period shall commence on the first business date (the Commencement Date) coincident with or next following the applicable entry date designated by the Compensation Committee as the beginning of an Offering Period (typically, the first business day of the first and third calendar quarters of a calendar year), and generally shall conclude on the last business day of the sixth calendar month ending after the Commencement Date.
On the first day of each Offering Period, subject to the terms of the 2006 GESOP, the Company will grant to each eligible employee who is then a participant in the 2006 GESOP an option to purchase on the last day of that Offering Period at the Option Price (as defined below) that number of shares of Company common stock reserved under the 2006 GESOP as the employees accumulated payroll deductions on the last day of the Offering Period will pay for at the Option Price. The Option Price for each Offering Period is equal to
· the lesser of (i) 85% of the fair market value per share of the Companys common stock on the first business day of the Offering Period, or (ii) 85% of the fair market value per share of the Companys common stock on the last business day of the Offering Period, if the common stock is acquired from the Company, or
· 85% of the actual purchase price per share of the Companys common stock if purchased on the New York Stock Exchange.
On April 5, 2006, the closing price of a share of the Companys common stock on the New York Stock Exchange was $21.69.
Options. Options granted under the 2006 GESOP are not transferable and, during the lifetime of the optionee, may not be exercised by anyone other than the optionee. All unexercised rights to purchase shares will terminate upon termination of employment of an optionee, and any accumulated payroll deductions of the optionee will be refunded in cash.
Amendments. The Board of Directors may terminate or amend the 2006 GESOP at any time; provided, however, that the Board of Directors may not, without approval by the stockholders of the Company in a manner satisfying the requirements of Section 423 of the Code, increase the maximum number of shares of Company common stock available for purchase under the 2006 GESOP. In addition, no termination or amendment of the 2006 GESOP may adversely affect the rights of an optionee in the reasonable discretion of the Compensation Committee with respect to any option held as of the date of such termination or amendment without the optionees consent.
Transfer Restrictions. Under the terms of the 2006 GESOP, shares of Company common stock purchased under the 2006 GESOP may not be assigned, transferred, pledged, or otherwise disposed of, except by will or under the laws of descent or distribution, until the date which is three months after the last day of the Offering Period in which they were purchased.
Federal Tax Treatment of Options under Stock Purchase GESOP. The 2006 GESOP is intended to qualify as an employee stock purchase plan as defined under Section 423 of the Code. Under the applicable Code provision, an employee subject to United States taxation will recognize no federal income tax upon either the grant or exercise of an option granted under the 2006 GESOP. If the employee subject to United States taxation sells or otherwise disposes of shares of common stock purchased under the 2006
GESOP within two years after the date the applicable option was granted, or within one year after the date such option was exercised, the employee will be taxed at ordinary income rates on an amount equal to the difference between the exercise price and the fair market value of the shares of common stock at the time the option was exercised and the Company will be entitled to a deduction of an equivalent amount. The difference between the amount received on the disposition of the shares and the employees tax basis in the shares, as adjusted to reflect the amount taxed as ordinary income, will be recognized as a capital gain or loss.
If an employee sells or disposes of shares more than two years after the applicable option was granted, and more than one year after the option was exercised, the employee will be taxed at ordinary income rates on the amount equal to the lesser of (i) the excess of the fair market value of the shares at the time of the disposition over the exercise price or (ii) fifteen percent (15%) of the fair market value of the shares at the time the option was granted, and the Company will not be entitled to a corresponding deduction. The difference between the amount realized on the disposition of the shares and the optionees tax basis in the shares (as adjusted by the amount of ordinary income recognized) will be recognized as a capital gain.
The affirmative vote of the holders of a majority of the shares of the Companys common stock present or represented at this meeting is required to adopt the 2006 GESOP.
A copy of the Boston Scientific Corporation 2006 Global Employee Stock Ownership Plan is attached to this Proxy Statement as Appendix A.