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This excerpt taken from the TSYS DEF 14A filed Apr 30, 2007. Federal Income
Tax Consequences
The following is a general summary of the current federal income
tax treatment of stock options, which may be granted under the
Plan, based upon the current provisions of the Internal Revenue
Code and regulations promulgated thereunder.
Incentive Stock Options: Incentive stock options
under the Plan are intended to meet the requirements of
Section 422 of the Code. No tax consequences result from
the grant of the option. If an option holder acquires stock upon
exercise, the option holder will not recognize income for
ordinary income tax purposes (although the difference between
the option exercise price and the fair market value of the stock
subject to the option may result in alternative minimum tax
liability to the option holder) and we will not be allowed a
deduction as a result
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of such exercise, provided that the following conditions are
met: (a) at all times during the period beginning with the
date of the granting of the option and ending on the day three
months before the date of such exercise, the option holder is
our employee or an employee of one of our subsidiaries; and
(b) the option holder makes no disposition of the stock
within two years from the date of the option grant nor within
one year after the transfer of the stock to the option holder.
The three-month period extends to one year in the event of
disability and is waived in the event of death of the employee.
If the option holder sells the stock after complying with these
conditions, any gain realized over the price paid for the stock
ordinarily will be treated as capital gain, and any loss will be
treated as capital loss, in the year of the sale.
If the option holder fails to comply with the employment
requirement, the tax consequences will be substantially the same
as for a nonqualified option, discussed below. If the option
holder fails to comply with the holding period requirements, the
option holder will recognize ordinary income in an amount equal
to the lesser of (i) the excess of the fair market value of
the stock on the date of the exercise of the option over the
exercise price or (ii) the excess of the amount realized
upon such disposition over the adjusted tax basis of the stock.
Any additional gain ordinarily will be recognized by the option
holder as capital gain, either long-term or short-term,
depending on the holding period of the shares. If the option
holder is treated as having received ordinary income because of
his or her failure to comply with either condition above, we
will be allowed an equivalent deduction in the same year.
Nonqualified Stock Options: No tax consequences
result from the grant of the option. An option holder who
exercises a nonqualified stock option with cash generally will
realize compensation taxable as ordinary income in an amount
equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise, and we will
be entitled to a deduction from income in the same amount in the
fiscal year in which the exercise occurred. We will withhold
taxes from any ordinary income recognized by the option holder
due to exercise. The option holder’s basis in these shares
will be the fair market value on the date income is realized,
and when the holder disposes of the shares he or she will
recognize capital gain or loss, either long-term or short-term,
depending on the holding period of the shares.
Disallowance of Deductions: The Code disallows
deductions by publicly held corporations with respect to
compensation in excess of $1,000,000 paid to the company’s
Chief Executive Officer and its four other most highly
compensated officers. However, compensation payable solely on
account of attainment of one or more performance goals is not
subject to this deduction limitation if certain statutory
requirements are satisfied. Under this exception, the deduction
limitation does not apply with respect to compensation otherwise
deductible on account of stock options and stock appreciation
rights granted at fair market value under a Plan that limits the
number of shares that may be issued to any individual and which
is approved by the Company’s stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
“FOR” THE APPROVAL OF THE FIFTH AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN.
This excerpt taken from the TSYS DEF 14A filed May 1, 2006. Federal Income
Tax Consequences
The following is a general summary of the current federal income
tax treatment of ESPP Options, which may be granted under the
Plan, based upon the current provisions of the Internal Revenue
Code and regulations promulgated thereunder, all of which are
subject to change.
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The Plan is intended to qualify as an “employee stock
purchase plan” under the provisions of Sections 421
and 423 of the Internal Revenue Code. Under these provisions, a
participant will not owe United States federal income taxes when
the ESPP Options are granted to the participant, nor when the
ESPP Options are exercised and shares are purchased for the
participant. As summarized below, a participant may owe United
States federal income taxes when he sells or otherwise disposes
of the shares.
Federal Income
Tax Consequences For Participants Upon Disposition of
Shares Purchased Under the Plan
The tax consequences to a participant depend on how long the
participant holds the shares before he sells or otherwise
disposes of them.
If a participant holds the shares acquired under an ESPP Option
for more than (a) two years measured from the first
day of the Option Period during which the shares were purchased
and (b) one year measured from the Exercise
Date (the date the shares were purchased for the participant),
then:
If the participant sells the shares after the holding periods
described above and the sale price is less than the purchase
price, then there is no ordinary income and the participant will
have a capital loss for the difference between the sale price
and the purchase price.
The same rules described above generally apply if the
participant dies at any time while owning the shares.
If the shares are sold or disposed of (including by way of gift)
before the expiration of the two-year holding period or
before the expiration of the one-year holding period
described above, then:
Even if the shares are sold for less than their fair market
value measured as of the Exercise Date, the same amount of
ordinary income is attributed to the participant and a capital
loss is recognized equal to the difference between the purchase
price and the fair market value of the shares on the Exercise
Date.
A disposition does not include: (i) a transfer into joint
ownership with right of survivorship if the participant remains
one of the joint owners, (ii) a pledge or a transfer by
bequest or inheritance, or (iii) an exchange of stock in a
tax-free reorganization.
Federal Income Tax Consequences for
TCS. There are no federal income tax
consequences for us by reason of the grant or exercise of ESPP
Options pursuant to the Plan. TCS is not entitled to a deduction
for amounts taxed as ordinary income to a participant, except to
the extent that ordinary
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income must be reported by a participant upon disposition of
shares before the expiration of the holding periods described
above. Participants are required to notify TCS of any
disposition of shares acquired under the Plan within two years
from the date of grant of the ESPP Options under which the
shares are purchased.
The above discussion does not cover all income or other tax
effects involved in an employee’s participation in the Plan
and employees should consult with their own tax advisor
regarding participation in the Plan.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
“FOR” THE APPROVAL OF THE AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN.
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