This excerpt taken from the HBI 8-K filed Sep 5, 2006.
Certain Tax Consequences
•
There are no income tax consequences for us or the option holder upon the grant of either an incentive stock option or a nonqualified stock option.
•
When a nonqualified stock option is exercised, the option holder will recognize ordinary income equal to the excess of fair market value of all the shares of stock for which the
option is exercised on the date of exercise over the aggregate exercise price and we are entitled to a corresponding deduction.
•
When an incentive stock option is exercised, the option holder does not recognize income and we are not entitled to a deduction. In the event of a “disqualifying
disposition” by the option holder (i.e., the option holder does not hold the stock long enough to qualify under IRS rules), we are entitled to a deduction equal to the compensation income recognized by the option holder.
•
When an SAR is granted, there are no income tax consequences for us. When an SAR is exercised, we are entitled to a deduction equal to the compensation recognized by the
participant.
•
We are entitled to a deduction equal to the compensation recognized by a participant in connection with the vesting of restricted stock, or upon the participant’s earlier
election to include the restricted stock in income pursuant to Section 83(b) of the Code, as the case may be.
•
With respect to other awards granted under the Hanesbrands OIP, we will be entitled to a deduction equal to the compensation recognized by a participant upon the delivery of shares
or payment of cash in satisfaction of any award.
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