This excerpt taken from the PNRA DEF 14A filed Apr 13, 2007.
Description of the ESPP
The following is a brief summary of the ESPP and is qualified in its entirety by reference to the ESPP, a copy of which is attached as Exhibit A to this proxy statement.
The ESPP gives eligible employees the option to purchase Class A Common Stock through payroll deductions (which typically may not exceed 10% of an employees prior year compensation) at 85% of the fair market value of the Class A Common Stock at the time the option is exercised. The ESPP limits the number of shares that may be purchased to 20,000 shares per quarter. If option holders exercise options in any one year for a number of shares in excess of such maximum, then the number of shares to be purchased by such option holders is reduced ratably to bring the aggregate number of shares to be purchased down to the maximum. Any quarterly installment or portion thereof not exercised expires and may not be cumulated with subsequently exercised quarterly installments.
A participant may withdraw from the ESPP at any time and the entire amount credited to his or her payroll deduction account will be refunded. If a participant terminates employment, his or her participation in the ESPP ends automatically and the entire amount credited to his or her account will be refunded.
Generally, employees who are regularly scheduled to work twenty hours per week during the first ninety days of employment, except holders of 5% or more of the total combined voting power of all classes of the Companys capital stock, are eligible to participate in the ESPP. Such participation is on a purely voluntary basis. As of December 31, 2006, approximately 7,530 employees were eligible to participate in the ESPP. Because participation in the stock purchase plan is voluntary, we cannot determine the number of shares of common stock to be purchased in the future by non-executive employees as a group. However, during the last eight quarterly offering periods, we have issued an average of 7,000 shares per offering period under the ESPP. Executive officers may participate in the ESPP.
Plan Administration and Termination
The ESPP provides for administration by the Compensation and Stock Option Committee. The Compensation and Stock Option Committee may terminate the ESPP at any time and amend it in any respect, except that the Compensation and Stock Option Committee may not effect a change inconsistent with Section 423 of the Internal Revenue Code.
Federal Income Tax Consequences
The following generally summarizes the United States federal income tax consequences that will arise with respect to participation in the ESPP and with respect to the sale of shares of our common stock acquired under the ESPP. This summary 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.
Tax Consequences to Participants. A participant will not have income upon enrolling in the ESPP or upon purchasing stock at the end of an offering.
A participant may have both compensation income and capital gain income if the participant sells stock that was acquired under the ESPP at a profit (if sales proceeds exceed the purchase price). The amount of each type of income will depend on when the participant sells the stock. If the participant sells the stock more than two years after the commencement of the offering during which the stock was purchased and more than one year after the date that the participant purchased the stock, then the participant will have compensation income equal to the lesser of:
Any excess profit will be long-term capital gain.
If the participant sells the 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. If the participants profit exceeds the compensation income, then the excess profit will be a capital gain. If the participants profit is less than the compensation income, the participant will have a capital loss equal to the value of the stock on the day he or she purchased the stock less the sales proceeds. This capital gain or loss will be long-term if the participant has held the stock for more than one year, and otherwise will be short-term.
If the participant sells the stock at a loss (if sales proceeds are less than the purchase price), then the loss will be a capital loss. This capital loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.
Tax Consequences to the Company. There will be no tax consequences to us except that we will be entitled to a deduction when a participant has compensation income upon a disqualifying disposition. Any such deduction will be subject to the limitations of Section 162(m) of the Internal Revenue Code.
The Board of Directors Recommends that You Vote FOR the Approval of the Amendment to
Increase the Number of Shares Authorized for Issuance Under the 1992 Employee Stock Purchase
Plan from 700,000 to 825,000 and to Grant to our Board of Directors the Power to Designate
Subsidiaries whose Employees are Eligible to Participate in the Plan.