Big 5 Sporting Goods Corporation
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 19, 2007
BIG 5 SPORTING GOODS CORPORATION
(Exact name of registrant as specified in charter)
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Delaware
(State or Other Jurisdiction
of Incorporation)
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000-49850
(Commission File Number)
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95-4388794
(IRS Employer
Identification No.) |
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2525 East El Segundo Boulevard,
El Segundo, California
(Address of principal executive offices)
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90245
(Zip Code) |
Registrants telephone number, including area code: (310) 536-0611
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2):
o Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (7 CFR 240.13e-4(c))
TABLE OF CONTENTS
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Item 5.02 |
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Departure of Directors or Certain Officers; election of directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers. |
On
June 19, 2007, the stockholders of Big 5 Sporting Goods
Corporation (the Company) approved the Companys
2007 Equity and Performance Incentive Plan (the Plan).
The Plan had previously been approved by the Companys Board of
Directors, subject to stockholder approval. The principal features of the Plan are summarized below. This
summary, however, is not intended to be a complete discussion of all
of the terms of the Plan. A copy of the Plan is attached as
Exhibit 10.1 to this report, along with a copy of the Form of
Option Grant Notice and Stock Option Agreement for use in connection with the Plan.
Shares Subject
to the Plan
Up to an aggregate of 2,399,250 shares of common stock of
the Company, plus any shares subject to awards granted under the
Companys previously existing stock option plans (the
Prior Plans) which are forfeited, expire or are cancelled after
April 24, 2007 (the effective date of the Plan), are
authorized for issuance under the Plan. The maximum aggregate
number of shares which may be subject to ISOs (as defined below)
will be 2,399,250 shares. Any shares that are subject to
awards of options or stock appreciation rights shall be counted
against this limit as one share for every one share granted,
regardless of the number of shares actually delivered pursuant
to the awards. Any shares that are subject to awards other than
options or stock appreciation rights (including shares delivered
on the settlement of dividend equivalents) shall be counted
against this limit as 2.5 shares for every one share
granted. The aggregate number of shares available under the Plan
and the number of shares subject to outstanding options will be
increased or decreased to reflect any changes in the outstanding
common stock of the Company by reason of any recapitalization,
spin-off, reorganization, reclassification, stock dividend,
stock split, reverse stock split, or similar transaction.
If any shares subject to an award under the Plan or to an award
under the Prior Plans are forfeited, expire or are cancelled
without issuance of such shares, the shares shall again be
available for awards under the Plan. Any shares that again
become available for grant shall be added back as one share if
such shares were subject to options or stock appreciation rights
granted under the Plan or options or stock appreciation rights
granted under the Prior Plans and as 2.5 shares if such
shares were subject to awards other than options or stock
appreciation rights granted under the Plan. Shares which are
received or withheld by the Company to satisfy tax liabilities
arising from the grant or exercise of an option or award, or as
a result of the use of shares to pay the option price, shall not
again be available to awards under the Plan.
Eligibility
and Participation
All employees (including officers), directors, and consultants
of the Company or any subsidiary are eligible for selection to
receive awards under the Plan, subject to the following
restrictions: (1) no ISO may be granted to any person who,
at the time of grant, is not an employee of the Company or any
subsidiary, and (2) no participant may be granted options
or stock appreciation rights during any fiscal year of the
Company with respect to more than 500,000 shares,
(3) no participant may be granted restricted stock,
performance awards
and/or other
stock unit awards that are denominated in shares in any fiscal
year of the Company with respect to more than
250,000 shares, and (4) the maximum dollar value
payable to any participant in any fiscal year of the Company
with respect to performance awards
and/or other
stock unit awards that are valued with reference to cash or
property other than shares is $2,000,000. The share limitations
set forth above are subject to adjustment in the event of a
reorganization, spin-off, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or similar
transaction during any fiscal year of the Company or portion
thereof. If an option or stock appreciation right expires or
terminates for any reason without having been exercised in full,
or if any award is cancelled, the unpurchased shares subject to
that expired or terminated option or stock appreciation right or
cancelled award continue to be counted against the maximum
number of shares for which options or stock appreciation rights
or other awards may be granted to a participant during a fiscal
year of the Company. Subject to such limitations, an individual
who has been granted an option or stock appreciation right or
other award may, if such individual is otherwise eligible, be
granted additional options or stock appreciation rights or other
awards as the Committee may determine.
Administration
of the Plan
The Plan shall be administered by the Compensation Committee of
the Board of Directors (the Committee), consisting
of two or more directors of the Company who are
(a) non-employee directors within the meaning
of
Rule 16b-3
of the Exchange Act, and (b) outside directors
within the meaning of Section 162(m) of the Code (as
defined below) and (c) independent directors
under Nasdaq or other applicable stock exchange rules; except
that, so long as the Committee contains at least two such
directors that meet the above requirements, the Committee may
also include one additional director who does not meet those
criteria if he or she abstains or recuses himself or herself in
connection with voting on grants and awards to all Covered
Employees (as defined in the Plan) and to all officers of the
Company who are subject to Section 16 of the Exchange Act.
The Committee has extremely broad discretion and power in
interpreting and operating the Plan and in determining the
employees, directors and consultants who shall be participants,
and the terms of individual options, stock appreciation rights,
restricted stock, other stock unit awards, performance awards,
and dividend equivalents. To the extent permitted by applicable
law, the Committee may delegate to one or more directors or
officers the authority to grant awards to employees or officers
who are not directors, covered employees whose
compensation is subject to the limits of Section 162(m) of
the Code, or officers subject to the short-swing rules of
Section 16 of the Exchange Act. For a description of the
limitation on deductibility under Section 162(m) of the
Code for compensation paid to certain executive officers, see
Federal Income Tax Matters
$1,000,000 Limit on Deductible Compensation.
Types of
Awards
Awards under the Plan may consist of options, stock appreciation
rights, restricted stock, other stock unit awards, performance
awards, or dividend equivalents. The nature of each of such
types of awards is discussed below. Each award will be made by
an award agreement whose form and content shall be determined by
the Committee in its discretion, consistent with the provisions
of the Plan. The terms of award agreements for a particular type
of award need not be uniform.
Type of
Options
Two types of options may be granted under the Plan: options
intended to qualify as incentive stock options
(ISOs) under Section 422 of the Internal
Revenue Code of 1986, as amended (the Code), and
options not so qualified for favorable federal income tax
treatment (NSOs).
Stock
Appreciation Rights
The Committee, in its discretion, may also issue stock
appreciation rights to employees, consultants and directors of
the Company. A stock appreciation right is a right to receive a
payment based on the increase in the fair market value of a
share after the date of grant. The Committee may determine, in
its discretion, that a stock appreciation right will be paid out
in cash or in shares on its exercise. The number of shares that
may be issued on the exercise of a stock appreciation right
shall be determined by dividing: (a) the total number of
shares as to which the stock appreciation right is exercised,
multiplied by the amount by which the fair market value of one
share on the exercise date exceeds the fair market value of one
share on the date of grant of the stock appreciation right, by
(b) the fair market value of one share on the exercise
date; provided, however, that fractional shares shall not be
issued and in lieu thereof, a cash adjustment shall be paid. In
lieu of issuing shares on the exercise of a stock appreciation
right, the Committee may in its sole discretion elect to pay the
cash value of such shares. The Committee will not, however, take
any action regarding a stock appreciation right, or otherwise
under the Plan, that could subject a participant to a penalty
tax under Section 409A of the Code.
Restricted
Stock
The Committee, in its discretion, may also grant awards of
restricted stock to participants. Restricted stock shall be
shares granted or sold to a participant that are subject to
vesting restrictions based on continued employment or attainment
of performance goals. Restricted stock that vests solely upon
continued service of the grantee will not fully vest over a
period of less than three years, but vesting may occur ratably
over the vesting period.
Other
Stock Unit Awards
The Committee, in its discretion, may grant other stock unit
awards, which are awards valued in whole or part by reference
to, or otherwise based on, shares. Other stock unit awards shall
be subject to such conditions and restrictions as may be
determined by the Committee, and may be payable in the form of
cash or shares. Stock unit awards that vest solely upon
continued service of the grantee will not fully vest over a
period of less than three years, but vesting may occur ratably
over the vesting period.
Performance
Awards and Code Section 162(m) Provisions
The Committee, in its discretion, may issue performance awards
to participants, the payment of which will be determined by the
achievement of performance goals over a performance period. Upon
the grant of a performance award, the Committee shall determine
the relevant performance goals and the performance period.
The performance goals shall be based on the attainment of
specified levels, or growth, of one or any combination of the
following factors, or an objective formula determined at the
time of the award that is based on modified or unmodified
calculations of one or any combination of the following factors:
net sales; pretax income before or after allocation of corporate
overhead and bonus; earnings per share; net income; division,
group or corporate financial goals; return on stockholders
equity; return on assets; attainment of strategic and
operational initiatives; appreciation in
and/or
maintenance of the price of the shares or any other
publicly-traded securities of the Company; market share; gross
profits; earnings before taxes; earnings before interest and
taxes; earnings before interest, taxes, depreciation and
amortization (EBITDA); an adjusted formula of EBITDA
determined by the Committee; economic value-added models;
comparisons with various stock market indices; reductions in
costs,
and/or
return on invested capital of the Company or any affiliate,
division or business unit of the Company for or within which the
participant is primarily employed. Such performance goals also
may be based solely by reference to the Companys
performance or the performance of an affiliate, division or
business unit of the Company, or based upon the relative
performance of other companies or upon comparisons of any of the
indicators of performance relative to other companies. Unless
the Committee determines otherwise when it sets the performance
goals for an award, objective adjustments shall be made to any
of the foregoing measures for items that will not properly
reflect the Companys financial performance for these
purposes, such as the write-off of debt issuance costs,
pre-opening and development costs, gain or loss from asset
dispositions, asset or other impairment charges, litigation
settlement costs, and other non-routine items that may occur
during the performance period. Also, unless the Committee
determines otherwise in setting the performance goals for an
award, such performance goals shall be applied by excluding the
impact of (a) restructurings, discontinued operations, and
charges for extraordinary items, (b) an event either not
directly related to the operations of the Company or not within
the reasonable control of the Companys management, or
(c) a change in accounting standards required or
recommended by generally accepted accounting principles.
The performance period shall be determined by the Committee, but
shall not be shorter than one year nor longer than five years.
Performance awards will generally be paid only after the end of
the relevant performance period, and may be paid in cash,
shares, other property, or any combination thereof, in the sole
discretion of the Committee at the time of payment.
The Compensation Committee may determine, in its discretion,
that performance awards granted to executive officers of the
Company whose compensation is subject to the deductibility limit
of Section 162(m) of the Code will qualify as
performance based compensation. The Compensation
Committee may likewise determine that the vesting of restricted
stock, and the vesting or payment of any other stock unit award,
granted to such an executive officer will be subject to the
achievement of the objective performance goals over a
performance period, and thus satisfy the requirements to be
performance based compensation.
In the case of any performance award, restricted stock, or other
stock unit award that is intended to constitute
performance based compensation, the performance
goals and other terms and conditions of the award will be set by
the Committee within the time prescribed by Section 162(m)
and the regulations thereunder. If the performance period is
12 months or longer, such performance goals must be set by
the Committee within the first 90 days of the performance
period.
The Committee may adjust downward, but not upward, the amount
payable to any executive officer of the Company under any award
that is intended to constitute performance based
compensation. The Committee may not waive the achievement of the
applicable performance goals, except in the case of death or
disability of the participant, or the occurrence of a change in
control of the Company.
Before the vesting, payment, settlement or lapsing of any
restrictions with respect to any award that is intended to
constitute performance based compensation, the
Committee shall certify in writing that the applicable
performance criteria have been achieved to the extent necessary
for such award to qualify as performance based
compensation within the meaning of Section 162(m) of the
Code.
The Committee shall have the power to impose such other
restrictions on awards intended to constitute performance
based compensation as it may deem necessary or appropriate
to ensure that such awards satisfy all requirements to
constitute performance based compensation within the
meaning of Section 162(m), or which are not inconsistent
with such requirements.
Unless affirmative votes representing a majority of the votes
cast under applicable law or rules approve the continuation of
the performance based compensation provisions of the
Plan at the first duly constituted meeting of the stockholders
of the Company that occurs in the fifth year following the
effective date of the Plan, no awards other than stock options
or stock appreciation rights, or restricted stock that is not
intended to be performance based compensation, shall
be made following the date of such meeting to executive officers
of the Company whose compensation is subject to the deduction
limit of Section 162(m). Under currently applicable law or
rules, to be duly constituted, a majority of the shares of
capital stock outstanding and entitled to vote would have to be
present in person or by proxy at the meeting at which
stockholders vote to approve the continuation of the
performance based compensation provisions of the
Plan.
Dividend
Equivalents
The Committee, in its sole discretion, may determine that a
participant who receives an award will also be entitled to
receive, currently or on a deferred basis, cash, stock or other
property dividends, or cash payments in amounts equivalent to
stock or other property dividends on shares (dividend
equivalents) with respect to the number of shares covered
by the award. The Committee may also provide that such amounts
(if any) shall be deemed to have been reinvested in additional
shares or otherwise reinvested. In the event of a
recapitalization, reorganization, spin-off, reclassification,
stock dividend, stock split, reverse stock split or similar
transaction, the Committee may, in its discretion, make an
appropriate adjustment to dividend equivalents.
Option
and Other Award Price
The purchase price for shares covered by each option shall not
be less than 100% of the fair market value of such shares on the
date of grant, but if an ISO is granted to a more than 10%
shareholder of the Company or its subsidiaries (measured by
ownership of voting power), the purchase price of an ISO shall
not be less than 110% of the fair market value of such shares on
the date of grant. The base price for a stock appreciation right
shall not be less than 100% of the fair market value of shares
as of the date of grant. The Committee, in its discretion, may
determine the purchase price, if any, for restricted stock,
other stock unit awards, and performance awards.
Exercisability
of Options and Stock Appreciation Rights; Vesting of Restricted
Stock and Other Awards
The Committee shall determine when and under what conditions any
option or stock appreciation right shall become exercisable and
when restricted stock, other stock unit awards, and performance
awards shall become vested. However, the aggregate fair market
value of shares of common stock of the Company (determined at
the date of grant) for which ISOs (whenever granted) are
exercisable for the first time by a participant during any
calendar year shall not exceed $100,000; any options in excess
of this limit shall be treated as NSOs. The purchase price of
shares on the exercise of an option shall be paid in full at the
time of exercise in cash or by check payable to the order of the
Company, or, subject to the approval of the Committee and
subject to applicable law, by the delivery of shares of common
stock of the Company already owned by the participant, through a
brokers exercise involving the immediate sale
or pledge of shares with a value sufficient to pay the exercise
price, or by any other method permitted by applicable law. The
Committee shall determine, in its discretion, the form of any
payment for restricted stock, other stock unit awards, and
performance shares.
Duration
of Options and Stock Appreciation Rights
Each option or stock appreciation right shall expire on the date
specified by the Committee, but all options and stock
appreciation rights shall expire within 10 years of the
date of grant. ISOs granted to more than 10%
shareholders of the Company (measured by ownership of voting
power) shall expire within five years from the date of grant.
No
Repricing
The Committee has no authority to reprice any option, to reduce
the base price of any stock appreciation right, or cancel any
option in exchange for cash or another award when the fair
market value of shares is less than the options exercise
price per share.
Termination
of Employment
If a participant ceases to be employed by the Company or any of
its subsidiaries for any reason (including death or permanent
disability) other than termination for cause, the
participants options that were vested and exercisable
shall remain exercisable until the end of the original term or
for the period determined by the Committee in the individual
option agreement or otherwise, whichever expires earlier. After
a participants death, options may be exercised by the
person or persons to whom the participants rights pass by
will or the laws of descent and distribution. Unless the
Committee determines otherwise in its discretion, similar rules
shall apply to stock appreciation rights. The treatment of each
award of restricted stock, other stock unit award, or
performance award on the termination of employment, death, or
disability of the participant shall be determined by the
Committee in its discretion. If a participants employment
is terminated for cause, all of his awards may be immediately
terminated and canceled, in the Committees discretion.
Certain
Corporate Transactions
Upon the happening of a merger, reorganization or sale of
substantially all of the assets of the Company or other change
of control events specified in the Plan, the Committee, may, in
its sole discretion, do one or more of the following:
(i) shorten the period during which options and stock
appreciation rights are exercisable (provided they remain
exercisable for at least 30 days after the date notice of
such shortening is given to the participants);
(ii) accelerate in whole or in part any vesting schedule to
which an option, stock appreciation right, restricted stock,
other stock unit award or performance award is subject;
(iii) arrange to have the surviving or successor entity or
any parent entity thereof assume the restricted stock, other
stock unit awards, stock appreciation rights or options or grant
replacement options or stock appreciation rights with
appropriate adjustments in the option prices and adjustments in
the number and kind of securities issuable upon exercise;
(iv) cancel options upon payment to the participants in
cash of an amount that is the equivalent of the excess of the
fair market value of the common stock of the Company (at the
effective time of the merger, reorganization, sale or other
event) over the exercise price of the option to the extent the
options are vested and exercisable, and cancel stock
appreciation rights by paying the value thereof; or
(v) make any other modification or adjustment that the
Committee deems appropriate in its discretion. The Committee may
also provide for one or more of the foregoing alternatives in
any particular award agreement.
Rights as
a Stockholder
The recipient of an option or stock appreciation right will have
no rights as a stockholder with respect to shares of Company
common stock covered by an option or stock appreciation right
until the date such recipient becomes a holder of record of such
shares, unless the Committee, in its discretion, elects to grant
the participant dividend equivalent rights in connection with
such option or stock appreciation right. The recipient of
restricted stock or of an other stock unit award will generally
have all the rights of a shareholder with respect to the shares
of common stock of the Company issued pursuant to such award,
including the right to vote such shares, but the Committee may
determine that any dividends and distributions with respect to
such shares will be subject to the same vesting restrictions, if
any, as the underlying shares.
Assignability
of Options, Stock Appreciation Rights and Other Awards
An ISO granted under the Plan shall, by its terms, be
non-transferable by the participant, either voluntarily or by
operation of law, other than by will or the laws of descent and
distribution, and shall be exercisable during the
participants lifetime only by him or her. Any award issued
under the Plan other than an ISO shall be nontransferable
by the participant, either voluntarily or by operation of law,
other than by will or the laws of descent and distribution, or,
with the consent of the Committee, during the participants
lifetime by gift to one or more members of the
participants immediate family or to a trust for their
benefit.
Duration,
Termination and Amendment of the Plan
The Plan became effective on April 24, 2007, subject to the approval of the
Plan by the stockholders of the Company (which occurred on
June 19, 2007). The Plan shall continue in effect for
10 years following the April 24, 2007 effective date. The Board of Directors, however, may
suspend or terminate the Plan at any time. However, unless
affirmative votes representing a majority of the votes cast
under applicable law or rules approve the continuation of the
performance based compensation provisions of the
Plan at the first duly constituted meeting of the stockholders
of the Company that occurs in the fifth year following the
effective date of the Plan, no awards other than options or
stock appreciation rights, or restricted stock that is not
intended to constitute performance based
compensation, shall be made following the date of such meeting
to executive officers of the Company whose compensation is
subject to the deduction limit of Section 162(m). Under
currently applicable rules, to be duly constituted, a majority
of the shares of capital stock outstanding and entitled to vote
would have to be present in person or by proxy at the meeting at
which stockholders vote to approve the continuation of the
performance based compensation provisions of the
Plan. The suspension or termination of the Plan will generally
not affect the validity of any option, stock appreciation right,
restricted stock, other stock unit award, performance award or
dividend equivalent outstanding on the date of termination.
The Board of Directors may also amend the Plan at any time,
except that the Board will not amend the Plan in a way which
violates
Rule 16b-3
of the Exchange Act. The Board will not amend the Plan without
obtaining stockholder approval to (a) increase the number
of shares that may be the subject of awards under the Plan,
(b) expand the types of awards available under the Plan,
(c) materially expand the class of persons eligible to
participate in the Plan, (d) amend any provision
prohibiting the Committee from repricing options or taking
similar action, (e) increase the maximum permissible term
of any option, (f) amend the limits on grants of awards to
any participant during a
12-month
period, or (g) make any modification that requires
stockholder approval under applicable law. Furthermore, no
amendment of the Plan shall amend or impair any rights or
obligations under any award theretofore granted under the Plan
without the written consent of the holder of the affected award.
New Plan
Benefits
Awards to be received by participants in the Plan are not
determinable at this time because the Committee, in its
discretion, will determine the nature and performance criteria
for any award provided under the Plan at the time of grants.
Performance awards in particular are dependent upon a
combination of performance criteria, including net sales,
EBITDA, earnings per share, return on stockholders equity,
division, group or corporate financial goals, and other factors.
As a result, the grants that may be awarded under the Plan are
not determinable until the Committee assesses the criteria
relevant to each individual participant for the particular
performance period of the award. For similar reasons, the
Company cannot determine the awards that would have been granted
during the Companys 2006 fiscal year under the Plan if it
had been in place during that year.
Federal
Income Tax Matters
The following discussion of federal income tax consequences does
not purport to be a complete analysis of all of the potential
tax effects of the Plan. It is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to
change. No information is provided with respect to persons who
are not citizens or residents of the United States, or foreign,
state or local tax laws, or estate and gift tax considerations.
In addition, the tax
consequences to a particular participant may be affected by
matters not discussed above.
The Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) and
is not qualified under Section 401(a) of the Code.
Non-Qualified
Stock Options
Under current federal income tax law, the grant of an NSO has no
tax effect on the Company or the participant. If the shares of
common stock of the Company received on the exercise of an NSO
are not subject to restrictions on transfer or risk of
forfeiture, the exercise of the NSO will result in ordinary
income to the participant equal to the excess of the fair market
value of the shares at the time of exercise over the option
price. The participants tax basis in the shares will be
equal to the option price plus the amount of ordinary income
recognized upon the exercise of the option. Upon any subsequent
disposition of the shares, any gain or loss recognized by the
participant will be treated as capital gain or loss and will be
long-term capital gain or loss if the shares are held for more
than one year after exercise. At the time of recognition of
ordinary income by the participant upon exercise, the Company
will normally be allowed to take a deduction for federal income
tax purposes in an amount equal to such recognized ordinary
income.
If the shares received on the exercise of an NSO are subject to
restrictions on transfer or risk of forfeiture (e.g., a vesting
condition), different rules will apply, and the tax consequences
will depend on whether the participant makes an election under
Section 83(b) of the Code within 30 days after
exercise of the option. If the participant does not make a
Section 83(b) election, the participant will recognize
ordinary income when the shares vest in an amount equal to the
excess of the fair market value on the date of vesting over the
exercise price. In that case, the participants basis in
the shares will be the fair market value of the shares on the
date of vesting, and participants holding period will
begin on the date of vesting. Upon any later disposition of the
shares, any gain or loss that the participant recognizes will be
capital gain or loss, and will be long-term capital gain or loss
if the participant holds the shares more than one year after
vesting. The Company will be allowed a deduction for federal
income tax purposes when the shares vest equal to the amount of
ordinary income the participant recognizes.
On the other hand, if the participant makes a Section 83(b)
election, the participant will recognize ordinary income at the
time of exercise equal to the excess of the fair market value on
the date of exercise over the exercise price. The Company will
be allowed a deduction for federal income tax purposes on the
date of exercise equal to the amount of ordinary income he or
she recognizes. The participants basis in the shares will
generally begin on the date of exercise, and the
participants basis in the shares will generally be the
option price increased by the amount of ordinary income the
participant recognized at the time of exercise. Upon any later
disposition of the shares, any gain or loss that the participant
recognizes will be capital gain or loss, and will be long-term
capital gain or loss if the participant holds the shares more
than one year after exercise. However, if the participant later
forfeits the shares, the participant will recognize a capital
loss equal to excess (if any) of the option price over any
amount the participant receives from the Company on the
forfeiture. In other words, if a participant makes the
Section 83(b) election and thereby recognizes ordinary
income on the date of exercise, the participant will receive no
corresponding deduction or loss if the participant later
forfeits the shares for the amount of ordinary income the
participant recognized.
Incentive
Stock Options
The federal income tax consequences associated with ISOs are
generally more favorable to the participant and less favorable
to the Company than those associated with NSOs. Under current
federal income tax law, the grant of an ISO does not result in
income to the participant or in a deduction for the Company at
the time of the grant. Generally, the exercise of an ISO will
not result in income for the participant if the participant does
not dispose of the shares within two years after the date of
grant or within one year after the date of exercise. If these
requirements are met, the basis of the shares of common stock of
the Company upon a later disposition will be the option price,
any gain on the later disposition will be taxed to the
participant as long-term capital gain, and the Company will not
be entitled to a deduction. The excess of the market value on
the exercise date over the option price is an adjustment to
regular taxable income in determining alternative minimum
taxable income, which could cause the participant to be subject
to the alternative minimum tax, thereby in effect depriving the
participant of the tax benefits of ISO treatment. If the
participant disposes of the shares before the expiration of
either of the holding periods described above (a
Disqualifying Disposition), the participant will
have compensation taxable as ordinary income, and the Company
will normally be entitled to a deduction, equal to the lesser of
(a) the fair market value of the shares on the exercise
date minus the option price, or (b) the amount realized on
the disposition minus the option price. If the price realized in
any such Disqualifying Disposition of the shares exceeds the
fair market value of the shares on the exercise date, the excess
will be treated as long-term or short-term capital gain,
depending on the participants holding period for the
shares.
Stock
Appreciation Rights
A participant holding a stock appreciation right will recognize
ordinary income on the exercise of the stock appreciation right
equal to the amount of cash or the fair market value of the
shares he receives on the exercise. The Company will receive a
tax deduction in the same amount. Upon disposition of the shares
acquired, the participant will recognize the appreciation or
depreciation on the shares after the date of grant as either
short-term or long-term capital gain or loss, depending on how
long the shares have been held.
Other
Awards
The taxation of an award other than an option or a stock
appreciation right depends on whether or not it consists of
restricted stock (i.e., stock subject to a vesting restriction
based on continued employment or attainment of performance
goals). If an other stock unit award or a performance award does
not consist of restricted stock, and is not settled in
restricted stock, the participant will recognize ordinary income
on the receipt of cash or shares equal to the amount of cash, or
the excess of the fair market value of the shares over the
amount (if any) that the participant pays for the shares. The
Company will receive a tax deduction in the same amount. Upon
disposition of the shares acquired, the participant will
recognize the appreciation or depreciation on the shares after
the date of grant as either short-term or long-term capital gain
or loss, depending on how long the shares have been held.
In general, no taxable income will be recognized by a
participant at the time restricted stock is granted. Generally,
on the date the restricted stock becomes vested, the participant
will recognize ordinary income in an amount equal to the
difference between the fair market value of the shares on the
date the shares vest and the purchase price, and the Company
will receive a tax deduction for the same amount. Upon
disposition of the shares acquired, the participant will
recognize the appreciation or depreciation on the shares after
the date of vesting as either short-term or long-term capital
gain or loss, depending on how long the shares have been held.
Alternatively, a participant may elect to make an election under
Section 83(b) of the Code with respect to unvested shares.
If a participant makes a Section 83(b) election with the
Internal Revenue Service within 30 days from the date of
grant, the participant will recognize ordinary income in an
amount equal to the difference between the fair market value of
the shares on the date of grant and the purchase price, and the
Company will receive a tax deduction for the same amount. If the
participant makes a timely Section 83(b) election, the
participant will not recognize ordinary income when the shares
vest. Upon disposition of the shares acquired, the participant
will recognize the appreciation or depreciation on the shares
after the date of grant as either short-term or long-term
capital gain or loss, depending on how long the shares have been
held. If the participant forfeits unvested shares, the
participant will recognize a capital loss equal to the excess
(if any) of the purchase price over any amount the participant
receives from the Company on the forfeiture. Generally, if the
participant makes a Section 83(b) election, and thereby
recognizes ordinary income on the date of grant, the participant
will receive no corresponding deduction or loss for the amount
of ordinary income the participant recognized if the participant
later forfeits any unvested shares.
$1,000,000
Limit on Deductible Compensation
Section 162(m) of the Code provides that any
publicly-traded corporation will be denied a deduction for
compensation paid to certain executive officers to the extent
that the compensation exceeds $1,000,000 per officer
per year. However, the deduction limit does not apply to
performance based compensation, as defined in
Section 162(m). Compensation is performance based
compensation if (i) the compensation is payable on account
of the attainment of one or more performance goals;
(ii) the performance goals are established by a
compensation committee of the Board of Directors of directors
consisting of outside directors; (iii) the
material terms of the compensation and the performance goals are
disclosed to and approved by the stockholders in a separate
vote; and (iv) the compensation committee certifies that
the performance goals have been satisfied. The Company believes
that, if the stockholders approve the Plan, the stock options
and stock appreciation rights granted thereunder will satisfy
the requirements to be treated as performance based
compensation, and accordingly will not be subject to the
deduction limit of Section 162(m) of the Code. As discussed
above, the Committee may determine that restricted stock, other
stock unit awards, and performance awards granted to executive
officers whose compensation is subject to the deduction limit of
Section 162(m) will also qualify as performance based
compensation. Restricted stock whose vesting is based solely on
the completion by the recipient of a stated period of service
with the Company will not qualify as performance based
compensation.
Excess
Parachute Payments
Under Section 4999 of the Code, certain officers,
stockholders, or highly- compensated individuals
(Disqualified Individuals) will be subject to an
excise tax (in addition to federal income taxes) of 20% of the
amount of certain excess parachute payments which
they receive as a result of a change in control of the Company.
Furthermore, Section 280G of the Code prevents the Company
from taking a deduction for any excess parachute
payments. The cash out or acceleration of the vesting of
stock options, stock appreciation rights, restricted stock,
other stock unit awards or performance awards upon a change of
control may cause the holders of such stock options, stock
appreciation rights, restricted stock, other stock unit awards
and performance awards who are Disqualified Individuals to
recognize certain amounts as excess parachute
payments on which they must pay the 20% excise tax, and
for which the Company will be denied a tax deduction.
Special
Rules; Withholding of Taxes
Special tax rules may apply to a participant who is subject to
Section 16 of the Exchange Act. Other special tax rules
will apply if a participant exercises a stock option by
delivering shares of Company common stock which he or she
already owns, or through a brokers exercise.
The Company may take whatever steps the Committee deems
appropriate to comply with any applicable withholding tax
obligation in connection with the exercise of an option or stock
appreciation right or the grant or vesting of restricted stock,
other stock unit awards, or performance awards, including
requiring any participant to pay the amount of any applicable
withholding tax to the Company in cash. The Committee may, in
its discretion, authorize cashless withholding.
Item 9.01. Financial Statements and Exhibits.
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Exhibit No. |
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Description |
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10.1
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2007 Equity and Performance
Incentive Plan |
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10.2
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Form of Stock Option Grant Notice and Stock Option Agreement for use with the 2007
Equity and Performance Incentive Plan. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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BIG 5 SPORTING GOODS CORPORATION |
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(Registrant)
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Date:
June 25, 2007 |
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/s/ Steven G. Miller |
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Steven G. Miller |
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President and Chief Executive Officer |
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