Last printed 01/06/03 1:55 PM PROXY2003Final.rtf
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-12ss.240.14a-12
JACK IN THE BOX INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Paying of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
{LOGO} [LOGO]JACK IN THE BOX INC.
January 13, 20039, 2004
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Jack in the Box Inc. to be held at 2:00 p.m. on Friday, February 14, 2003,13, 2004, at
the Marriott Mission Valley, 8757 Rio San Diego Drive, San Diego, California.
We hope you will attend in person. If you plan to do so, please indicate in
the space provided on the enclosed proxy. Whether you plan to attend the meeting
or not, we encourage you to read this proxy statementProxy Statement and vote your shares.
Please sign, date and return the enclosed proxy as soon as possible in the
postage-paid envelope provided, or if indicated on your proxy card, vote by
telephone or Internet. This will ensure representation of your shares in the
event that you are unable to attend the meeting.
The matters expected to be acted upon at the meeting are described in
detail in the attached Notice of Meeting and Proxy Statement.
The Directors and Officers of the Company look forward to meeting with you.
Sincerely,
ROBERT J. NUGENT
---------------------
Robert J. Nugent
Chairman of the Board
TABLE OF CONTENTS
Page
----
Notice of Annual Meeting of Stockholders................................... 1
Solicitation of Proxies.................................................... 2
Voting Information......................................................... 2
Proposal One - Election of Directors....................................... 3
Nominees for Director.................................................... 3
Committees of the Board of Directors..................................... 5
Additional Information about the Board of Directors...................... 6
Corporate Governance..................................................... 6
Proposal Two - Approval of the Adoption of the 2004 Stock Incentive Plan... 7
Equity Compensation Table.................................................. 13
Report of the Audit Committee.............................................. 14
Proposal Three - Ratification of the Appointment of Independent Auditors... 15
Independent Auditor Fees and Services...................................... 15
Executive Compensation..................................................... 16
Summary Compensation Table............................................... 16
Stock Option Grants in Fiscal 2003....................................... 17
Option Exercises in Fiscal 2003 and Fiscal Year-End Values............... 17
Pension Plan Table....................................................... 17
Severance Arrangements................................................... 19
Compensation of Directors................................................ 19
Compensation Committee Interlocks and Insider Participation.............. 19
Report of the Compensation Committee on Executive Compensation............. 19
Performance Graph.......................................................... 22
Security Ownership of Certain Beneficial Owners and Management............. 23
Section 16(a) Beneficial Ownership Reporting Compliance.................... 24
Other Business............................................................. 24
Stockholder Proposals for 2005 Annual Meeting.............................. 25
Exhibit A - Audit Committee Charter........................................ A-1
Exhibit B - Policy for Audit Committee Pre-Approval of Services............ B-1
Exhibit C - 2004 Stock Incentive Plan...................................... C-1
JACK IN THE BOX INC.
9330 Balboa Avenue
San Diego, California 92123
-------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 14, 200313, 2004
The 20032004 Annual Meeting of Stockholders of Jack in the Box Inc. will be
held at 2:00 p.m. on Friday, February 14, 2003,13, 2004, at the Marriott Mission Valley,
8757 Rio San Diego Drive, San Diego, California.
The meeting will be held to vote upon the following proposals:
1. To elect nine directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected and qualified;
2. To approve the 2004 Stock Incentive Plan;
3. To ratify the appointment of KPMG LLP as independent accountants;auditors; and
3.4. To act upon such other matters as may properly come before the
meeting, or any postponements or adjournments thereof.
Only stockholders of record at the close of business on December 20,
200219, 2003
will be entitled to vote at the meeting.
By order of the Board of Directors
LAWRENCE E. SCHAUF
------------------
Lawrence E. Schauf
Secretary
San Diego, California
January 13, 20039, 2004
JACK IN THE BOX INC.
9330 Balboa Avenue
San Diego, California 92123
-------------------------------
PROXY STATEMENT
-------------------------------
ANNUAL MEETING OF STOCKHOLDERS
February 14, 200313, 2004
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies. The Board of Directors of Jack in the Box Inc., a Delaware corporation
(the "Company"), is soliciting proxies for use at the 20032004 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at 2:00 p.m. on
Friday, February 14, 2003,13, 2004, at the Marriott Mission Valley, 8757 Rio San Diego
Drive, San Diego, California, or any postponements or adjournments thereof. This
Proxy Statement, form of proxy, and the accompanying Annual Report to
Stockholders and Annual Report on Form 10-K were mailed to stockholders on or
about January 13, 2003.9, 2004.
The Company will pay for the cost of preparing, assembling and mailing the
Notice of Annual Meeting of Stockholders, Proxy Statement and form of proxy. We
have engaged D.F. King and& Co., Inc. ("D.F. King") to assist us in the
solicitation of proxies, for which the Company will pay a fee not to exceed
$5,000$5,500 plus out-of-pocket expenses. In addition to solicitation by mail, proxies
may be solicited personally, by telephone or other means by D.F. King, as well
as by directors, officers or employees of the Company, who will receive no
additional compensation for such services.
VOTING INFORMATION
We have fixed the close of business on December 20, 200219, 2003 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. On that date, there were 36,863,41536,306,431 shares of Jack in the Box
Inc. Common Stock, $.01 par value (the "Common Stock"), outstanding, excluding
treasury shares. Company treasury shares will not be voted. You are entitled to
one vote for each share you own on any matter that may be properly presented for
consideration and action by stockholders at the meeting.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote, is necessary for us to
have a quorum at the Annual Meeting. Abstentions and broker non-votes (i.e.,
shares held by brokers or nominees that the broker or nominee does not have
discretionary power to vote on a particular matter, and as to which instructions
have not been received from the beneficial owners or persons entitled to vote)
are counted for the purpose of determining whether a quorum is present at the meeting.present. If there
are insufficient votes to constitute a quorum at the time of the Annual Meeting,
we may adjourn the Annual Meeting to solicit additional proxies.
A director will be elected by a plurality of the votes present or
represented by proxy. A majority of the votes present or represented by proxy
will be required to approve the 2004 Stock Incentive Plan and to ratify the
appointment of KPMG LLP as independent accountantsauditors of the Company for the 20032004
fiscal year.
With regard to the election of directors, your vote may be cast in favor of
the proposed directors or withheld. Votes that are withheld will be excluded
entirely from the vote and will have no effect. Abstentions may be specified on
all proposals, other than the election of directors, and will be counted as
present for purposes of the item on which the abstention is voted. Therefore,
such abstentions will have the effect of a negative vote. Broker non-votes are
not counted for purposes of determining whether a proposal has been approved
and, therefore, have the effect of reducing the number of votes required to
achieve a majority of the votes cast for such proposal.
2
Your proxy will be voted as you direct, either in writing or by telephone
or Internet. If you give no direction, your proxy will be voted FOR management's
nominees for election as directors and FOR Proposal 2.Proposals 2 and 3. The enclosed proxy
gives discretionary authority as to any matters not specifically referred to
therein. See "Other Business". The telephone and Internet voting procedures,
available only if you are a stockholder of record, are designed to authenticate
your identity, to allow you to vote your shares and to confirm that your
instructions have been properly recorded. The enclosed proxy card sets forth
specific instructions that you must follow if you qualify to vote via telephone
or Internet and wish to do so. You may revoke your proxy at any time before it
is voted at the Annual Meeting by giving written notice of revocation to the
Secretary of the Company, by filing a duly executed written proxy bearing a
later date or, if you qualify, by a later proxy delivered using the telephone or
Internet voting procedures. Your proxy will not be voted if you are present at
the Annual Meeting and elect to vote in person.
PROPOSAL ONE - ELECTION OF DIRECTORS
The nine directors of the Company are elected annually and serve until the
next Annual Meeting and until their successors are elected and qualified. The
current nominees for election as directors are set forth below. Should any
nominee become unavailable to serve as a director, your proxy will be voted for
such other person as the Board of Directors of the Company (the "Board")
designates. To the best of our knowledge, all nominees are and will be available
to serve. Stockholders' nominations for election of a director may be made only
pursuant to the provisions of the Company's Bylaws, described below
under "Other
Business".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
---
Nominees for Director
The following table provides certain information about each of management's
nominees for director as of January 1, 2003:2004:
Position(s) Director
Name Age Position(s) with the Company Since
- ---------------------------------------------------------------- --- -------------------------------- ----------------------------------- ---------
Michael E. Alpert (4)(5)...... 60.......... 61 Director 1992
Jay W. Brown (3)(5)........... 57 Director 1997
Edward W. Gibbons (3)(4)(5)... 66.......... 67 Director 1985
Anne B. Gust.................. 44Gust (2)(5)............... 45 Director 2003
Alice B. Hayes, Ph.D. (2)(5).. 65...... 66 Director 1999
Murray H. Hutchison (1)(2).... 64....... 65 Director 1998
Linda A. Lang..................... 45 President, Chief Operating 2003
Officer and Director
Michael W. Murphy(1)Murphy (1)(2)....... 45.......... 46 Director 2002
Robert J. Nugent (3).......... 61.............. 62 Chairman of the Board and 1988
Chief 1998 Executive Officer and President
L. Robert Payne (1)(3)(4)........ 69......... 70 Director 1986
- --------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Executive Committee.
(4) Member of the Finance Committee.
(5) Member of the Nominating and Governance Committee.
2
The business experience, principal occupations and employment of the
nominees follows:
Mr. Alpert has been a director of the Company since August 1992.1992 and is
Chairman of the Nominating and Governance Committee. Mr. Alpert was a partner in
the San Diego office of the law firm of Gibson, Dunn & Crutcher LLP for more
than five years prior to his retirement in August 1992. He is currently Advisory
Counsel to Gibson, Dunn & Crutcher LLP.LLP, although he no longer provides services
to the firm. Gibson, Dunn & Crutcher LLP provides legal services to us from
time to time.
Mr. Brown has been a director of the Company since February 1997. He is
currently a principal with Westgate Group, LLC. From April 1995 to
September 1998, Mr. Brown was President and CEO of Protein Technologies
International, Inc., the world's leading supplier of soy-based proteins
to the food and paper processing industries. He was Chairman and CEO of
Continental Baking Company from October 1984 to July 1995 and President of Van
Camp Seafood Company from August 1983 to October 1984. From July 1981 through
July 1983, he served as Vice President of Marketing for Foodmaker Inc. Mr.
Brown is a director of Cardinal Brands, Inc.time-to-time.
3
Mr. Gibbons has been a director of the Company since October 1985 and has
been the President of Gibbons & Co. Inc., an investment banking firm, for one
year. Prior to his appointment to President of Gibbons & Company Inc., he was a
general partner of the investment banking firm Gibbons, Goodwin, van Amerongen an
investment-banking firm,
for more than five years. Mr. Gibbons is also a director of Robert Half
International, Inc. and Summer Winds Garden Centers, Inc.
Ms. Gust becamehas been a director of the Company effectivesince January, 1, 2003. She has
been Chief Administrative Officer of The Gap, Inc. since March 2000 and an
Executive Vice President since September 1998. Prior to her appointment to
Executive Vice President, she served as Senior Vice President, Legal and
Corporate Administration.
Dr. Hayes has been a director of the Company since September 1999. She has beenwas
the President of the University of San Diego since 1995.from 1995 to 2003, and is now
President Emerita. From 1989 to 1995, Dr. Hayes served as Executive Vice
President and Provost of Saint Louis University. Previously, she spent 27 years
at Loyola University of Chicago, where she served in various executive
positions. Dr. Hayes is also a director of the Pulitzer Publishing Company, Con
Agra, Independent
Colleges of Southern California, The San Diego Foundation and Loyola University of Chicago.
Mr. Hutchison has been a director of the Company since May 1998.1998 and is
Chairman of the Compensation Committee. He served 24 years as Chief Executive
Officer and Chairman of International Technology Corp., a large publicly traded
environmental engineering firm, until his retirement in 1996. Mr. Hutchison is
the Chairman of the Board of Research Design and the Huntington Hotel Corp. and
serves as a director of Cadiz Inc., Senior Resource Corp., The Olson Company and
Construction Bid Board.
Ms. Lang became a director of the Olson Company.Company effective November 7, 2003, when
she was also promoted to President and Chief Operating Officer. She was
Executive Vice President from July 2002 to November 2003, Senior Vice President,
Marketing from May 2001 to July 2002, Vice President and Regional Vice
President, Southern California Region from April 2000 to May 2001, Vice
President, Marketing from March 1999 to April 2000 and Vice President, Products,
Promotions and Consumer Research from February 1996 until March 1999. Ms. Lang
has 16 years of experience with the Company in various marketing, finance and
operations positions.
Mr. Murphy has been director of the Company since September 2002.2002 and is
Chairman of the Audit Committee. He has been President and CEO forof Sharp
HealthCare, San Diego's largest integrated health system, since April 1996.
Prior to his appointment to President and CEO, Mr. Murphy served as Senior Vice
President of Business Development and Legal Affairs. His career at Sharp began
in 1991 as Chief Financial Officer of Grossmont Hospital, before moving to
Sharp's system-wide role of Vice President of Financial Accounting and
Reporting.
Mr. Nugent has served asbeen Chairman of the Board since February 2001 and is
Chairman of the Executive Committee. He has been Chief Executive Officer since
April 1996. Mr. Nugent assumed the title of President effective January 1, 2003
until November 7, 2003 upon Mr. William's retirement
from the Company.Ms. Lang's promotion to President. He served aswas President
from April 1996 to February 2001 and Executive Vice President from February 1985
to April 1996. Mr. Nugent has 2324 years of experience with the Company in various
executive and operations positions.
Mr. Payne has been a director of the Company since August 1986.1986 and is
Chairman of the Finance Committee. He has been President and Chief Executive
Officer of Multi-Ventures, Inc. since February 1976. Multi-Ventures, Inc. is a
real estate development and investment company that is also the managing partner
of the San Diego Mission Valley Hilton and the Red Lion Hanalei Hotel. He was a
principal in the Company prior to its acquisition by its former parent, Ralston
Purina Company, in 1968. 3Mr. Payne is also a director of Sharp Rees-Stealy
Medical Center and director and Chairman of the Board of Sharp HealthCare.
4
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD
The following information is provided aboutCommittees of the Board of Directors
and
certainThe Board of its committees.Directors has five standing committees as follows:
Audit Committee. The Audit Committee directsassists the internal and external audit
activitiesBoard of Directors in
overseeing the integrity of the CompanyCompany's financial reports; the Company's
compliance with legal and regulatory requirements; the independent auditor's
performance, qualifications and independence; and the performance of the
Company's internal auditors. A detailed list of the Committee's functions is
included in its charter, which is attached to this Proxy Statement as deemed appropriate. AllExhibit A.
The Audit Committee meets each quarter with the Company's independent auditor
KPMG LLP ("KPMG"), the Company's Director of Internal Audit, and management, to
review the Company's interim consolidated financial results before the
publication of quarterly earnings press releases. The Audit Committee also meets
separately each quarter with each of KPMG, management and the Director of
Internal Audit. The Board of Directors has determined that all three members of
the Audit Committee are independent directors. Mr. Murphy became a membersatisfy the financial literacy requirements of the Audit Committee effective September 12, 2002 to replace Mr. Carter who
resigned fromNew York
Stock Exchange and that Michael W. Murphy qualifies as the Audit Committee effective November 6, 2002. In June 2000,
the Board of Directors adopted an Audit Committee Charter."audit committee
financial expert" as defined by Securities and Exchange Commission ("SEC")
rules. The full
text of the Audit Committee Charter was set forth in Exhibit A of our 2001
Proxy Statement. The Board amended and restated the Audit Committee Charter in
August 2002. The restated Audit Committee Charter is included as Exhibit
A to this proxy statement. The Audit Committee held four meetings in fiscal
2002.
The Compensation Committee reviews compensation policies and
recommends changes when appropriate. The Compensation Committee held six meetings in fiscal 2002,2003.
Compensation Committee. The Compensation Committee assists the Board in
discharging the Board's responsibilities relating to director, officer and
executive compensation. The Compensation Committee evaluates the performance of
the Chief Executive Officer; reviews and approves compensation for the Chief
Executive Officer and executive officers of the Company; approves the adoption
and amendment of incentive compensation and stock-related plans and the granting
of stock options and restricted stock awards; makes recommendations to the Board
regarding the compensation of directors; and reviews and makes recommendations
to the Board regarding long range plans for management development and executive
succession. The Compensation Committee is composed of four members, each of whom
is independent as defined under applicable requirements of the New York Stock
Exchange. The Compensation Committee held four meetings, including one
telephonic meeting. Mr. Murphy became
a member of the Compensation Committee effective September 12, 2002 to
replace Mr. Carter who resigned from the Compensation Committee effective
November 6, 2002.meeting, in fiscal 2003.
Finance Committee. The Finance Committee advisesassists the Board in advising and
consultsconsulting with management concerning financial matters of importance to the
general financial affairsCompany. Topics considered by this Committee include the Company's capital
structure, financing arrangements, stock repurchase programs, capital investment
policies, oversight of the Company. In fiscal 2002,Company's pension and 401(k) plans, and the financial
implications of major acquisitions and divestitures. The Finance Committee held
three meetings.five meetings in fiscal 2003.
Nominating and Governance Committee. The Nominating and Governance
Committee recommendsassists the Board in identifying and recommending to the Board
nominees
for election asqualified candidates to become directors, and will considerincluding considering nominees
properly submitted by stockholders (see "Other Business").; developing and
recommending to the Board a set of corporate governance guidelines; providing
oversight with respect to the evaluation of Board performance; and recommending
to the Board director nominees for each Board committee. The Nominating and
Governance Committee also administersis composed of three members, each of whom is independent
as defined under applicable requirements of the Company's Corporate Governance Principles
and Practices. In fiscal 2002, theNew York Stock Exchange. The
Nominating and Governance Committee held twoseven meetings, including onethree
telephonic meeting.
There were nomeetings, in fiscal 2003.
Executive Committee. The Executive Committee is composed of three
directors. The Committee is authorized to exercise all the powers of the Board
in the management of the business and affairs of the Company while the Board is
not in session. The Executive Committee met once during fiscal 2003 for the
purpose of performing administrative functions between regularly scheduled
meetings of the Executive Committee in fiscal 2002.Board.
5
Additional Information about the Board of Directors
A majority of the members of the Company's Board of Directors are
independent as defined under applicable requirements of the New York Stock
Exchange. In fiscal 2002,2003, the Board of Directors held sevenfive meetings including
one telephonic meeting.and acted
twice by unanimous written consent. Each current director attended more than 75%
of the aggregate number of the general meetings held and the meetings of
committees on which such director served. Mr. Murphy and Ms. Gust joined the
Board effective September 12, 2002 and January 1, 2003, respectively. Mr.
Williams retired fromAlthough the Company andhas no policy
with regard to Board members' attendance at its annual meetings, it is customary
for all Board members to attend. All but two Board members attended the
Board effective December 31, 2002
and Mr. Carter resigned his directorship effective February 14, 2003.Company's 2003 annual meeting of stockholders.
Directors who are also officers of the Company or its subsidiaries receive
no additional compensation for their services as directors. The independent
directors of the Company each receive compensation consisting of an $18,000
annual retainer, $2,000 for each Board meeting attended in person and $1,000 for
each committee meeting attended in excess of five. In addition, independent
directors serving as a committee Chair also receive $1,500 per fiscal year. All
directors are reimbursed for out-of-pocket and travel expenses. No additional
compensation is paid for written consent actions taken by the Board or
committees by written consent.committees. Under the Company's Deferred Compensation Plan for Non-Management
Directors, each independent director may defer any portion or all of such above
compensation. Amounts deferred under the plan's equity option are immediately
converted to stock equivalents at the then-current market price of the Company's
Common Stock and matched at a 25% rate by the Company. A director's stock
equivalent account is distributed in cash, based upon the ending number of stock
equivalents and the market value of the Company's Common Stock, at the
conclusion of the director's service as a member of the Board. All of the
independent directors have elected to defer all of their compensation pursuant
to this plan.
Pursuant to the Company's Non-Employee Director Stock Option Plan, as
amended (the "Director Plan"), each year each independent director also receives
a stock optionoptions to purchase a certain number of shares of the Company's Common
Stock based on the relationship of each director's compensation to the fair
market value of the stock, but limited to fewer than 10,000 shares in any fiscal
year. During fiscal 2002,2003, under the Director Plan, each independent director
received a stock optionoptions to purchase 6,0007,500 shares of the Company's Common Stock at
the fair market value on the date of grant.
4
PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT ACCOUNTANTSCorporate Governance
The Board of Directors is committed to ethical business practices and
believes that strong corporate governance is important to ensure that the
Company is managed for the long-term benefit of its stockholders. The Company
regularly monitors developments in the area of corporate governance and has
implemented a number of best practices, including the following:
Corporate Governance Principles and Practices. The Company adopted
Corporate Governance Principles and Practices in 1998, which are regularly
reviewed by the Nominating and Governance Committee.
Code of Ethics. In 1998 the Company adopted a Code of Ethics applicable to
all directors, officers and employees. The Company employs a full-time Director
of Ethics, and has conducted more than 300 ethics training sessions for all
levels of employees and officers. The Company also provides significant vendors
with its Ethics Code of Conduct, as well as procedures for the communication of
any concerns.
Procedures for the Receipt, Retention and Handling of Complaints. Since
1998 the Company has maintained procedures for the confidential, anonymous
submission by employees of any complaints or concerns about the Company,
including complaints regarding accounting, internal accounting controls or
auditing matters.
Stock Ownership Guidelines. The Board has established ownership guidelines
for senior officers as described in the Report of the Compensation Committee.
Meetings of Non-Management Directors. The non-management directors of the
Company meet separately on a regular basis.
6
Independence. In addition to meeting currently applicable New York Stock
Exchange standards of independence, the Board has determined that the
non-management directors, who comprise a majority of the Board, are independent
under the new standards of independence of the New York Stock Exchange.
Additional information regarding Board Committees appears in the section of
this Proxy titled "Committees of the Board of Directors". Stockholders may
access the Company's Corporate Governance Principles and Practices, the current
charters for the Audit, Compensation, and Nominating and Governance Committees,
the Company's Code of Ethics and information regarding its procedures for
reporting complaints or concerns about the Company in the Investors - Corporate
Governance section of the Company's website at www.jackinthebox.com.
PROPOSAL TWO - APPROVAL OF THE ADOPTION OF THE
2004 STOCK INCENTIVE PLAN
At the Annual Meeting, the stockholders will be asked to approve the Jack
in the Box 2004 Stock Incentive Plan (the "2004 Plan"). The Board of Directors
adopted the 2004 Plan on November 7, 2003, subject to its approval by
stockholders.
The Board of Directors believes that the Company must offer a competitive
equity incentive program if it is to continue to successfully attract and retain
the best possible candidates for positions of responsibility within the Company.
The Board of Directors expects that the 2004 Plan will be an important factor in
attracting, retaining and rewarding the high caliber employees, consultants and
directors essential to our success and in motivating these individuals to strive
to enhance our growth and profitability. The proposed 2004 Plan is intended to
ensure that the Company will continue to have available a reasonable number of
shares to meet these goals.
The 2004 Plan is also designed to preserve the Company's ability to deduct
in full for federal income tax purposes the compensation recognized by its
executive officers in connection with certain awards granted under the 2004
Plan. Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally denies a corporate tax deduction for annual compensation
exceeding $1 million paid to the chief executive officer, or to any of the four
other most highly compensated officers of a publicly held company. However,
certain types of compensation, including performance-based compensation, are
generally excluded from this deductibility limit. To enable compensation in
connection with stock options, certain restricted stock grants, performance
shares and performance units awarded under the 2004 Plan to qualify as
"performance-based" within the meaning of Section 162(m), the 2004 Plan limits
the sizes of such awards as further described below. While the Company believes
that compensation in connection with such awards under the 2004 Plan generally
will be deductible by the Company for federal income tax purposes, under certain
circumstances, such as a change in control of the Company, compensation paid in
settlement of performance share and performance unit awards may not qualify as
"performance-based." By approving the 2004 Plan, the stockholders will be
approving, among other things, eligibility requirements for participation in the
2004 Plan, financial performance measures upon which specific performance goals
applicable to certain awards would be based, limits on the numbers of shares or
level of compensation that could be made subject to certain awards, and the
other material terms of the awards described below.
Summary of the 2004 Plan
The following summary of the 2004 Plan is qualified in its entirety by the
specific language of the 2004 Plan, a copy of which is available to any
stockholder upon written request.
General. The purpose of the 2004 Plan is to advance the interests of the
Company by providing an incentive program that will enable the Company to
attract and retain employees, consultants and directors upon whose judgment,
interest and efforts the Company's success is dependent, and to provide them
with an equity interest in the success of the Company in order to motivate
superior performance. These incentives are provided through the grant of stock
options (including indexed options), stock appreciation rights, restricted stock
purchase rights, restricted stock bonuses, restricted stock units, performance
shares and performance units.
7
Authorized Shares. A maximum of one million two hundred fifty thousand
(1,250,000) of the authorized but unissued or reacquired shares of our Common
Stock may be issued under the 2004 Plan. However, no more than two hundred fifty
thousand (250,000) shares of this 2004 Plan reserve may be issued upon the
exercise or settlement of any restricted stock purchase rights, restricted stock
bonuses, restricted stock units, performance shares and performance units. If
any award expires, lapses or otherwise terminates for any reason without having
been exercised or settled in full, or if shares subject to forfeiture or
repurchase are forfeited or repurchased by the Company, any such shares that are
reacquired or subject to such a terminated award will again become available for
issuance under the 2004 Plan. Upon any stock dividend, stock split, reverse
stock split, recapitalization or similar change in our capital structure,
appropriate adjustments will be made to the shares subject to the 2004 Plan, to
the award grant limitations and to all outstanding awards.
Administration. The 2004 Plan will be administered by the compensation or
other committee of the Board of Directors duly appointed KPMG LLPto administer the 2004
Plan, or, in the absence of such committee, by the Board of Directors. In the
case of awards intended to qualify for the performance-based compensation
exemption under Section 162(m) of the Code, administration must be by a
compensation committee comprised solely of two or more "outside directors"
within the meaning of Section 162(m). (For purposes of this summary, the term
"Committee" will refer to either such duly appointed committee or the Board of
Directors.) Subject to the provisions of the 2004 Plan, the Committee determines
in its discretion the persons to whom and the times at which awards are granted,
the types and sizes of such awards, and all of their terms and conditions. The
Committee may, subject to certain limitations on the exercise its discretion
required by Section 162(m), amend, cancel, renew, or grant a new award in
substitution for, any award, waive any restrictions or conditions applicable to
any award, and accelerate, continue, extend or defer the vesting of any award.
However, the 2004 Plan forbids, without stockholder approval, the repricing of
any outstanding stock option and/or stock appreciation right. The 2004 Plan
provides, subject to certain limitations, for indemnification by the Company of
any director, officer or employee against all reasonable expenses, including
attorneys' fees, incurred in connection with any legal action arising from such
person's action or failure to act in administering the 2004 Plan. The Committee
will interpret the 2004 Plan and awards granted thereunder, and all
determinations of the Committee will be final and binding on all persons having
an interest in the 2004 Plan or any award.
Eligibility. Awards may be granted to employees, directors and consultants
of the Company or any present or future parent or subsidiary corporations of the
Company. Incentive stock options may be granted only to employees who, as independent accountantsof the
time of grant, are employees of the Company or any parent or subsidiary
corporation of the Company. As of September 28, 2003, the Company had
approximately 45,730 employees, including 15 executive officers, and nine
directors who would be eligible under the 2004 Plan.
Stock Options. Each option granted under the 2004 Plan must be evidenced by
a written agreement between the Company and the optionee specifying the number
of shares subject to audit the consolidated financial statementsoption and the other terms and conditions of the
option, consistent with the requirements of the 2004 Plan. The exercise price of
each option may not be less than the fair market value of a share of Common
Stock on the date of grant. However, any incentive stock option granted to a
person, who at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary corporation of the Company (a "Ten Percent Stockholder") must have
an exercise price equal to at least 110% of the fair market value of a share of
Common Stock on the date of grant. The exercise price of each indexed stock
option, and the terms and adjustments which may be made to such an option, will
be determined by the Committee in its sole discretion at the time of grant. On
December 19, 2003, the closing price of the Company's Common Stock on the New
York Stock Exchange was $20.88 per share. Subject to appropriate adjustment in
the event of any change in the capital structure of the Company, no employee may
be granted in any fiscal year of the Company options which in the aggregate are
for more than two hundred and fifty thousand (250,000) shares.
The 2004 Plan provides that the option exercise price may be paid in cash,
by check, or in cash equivalent, by the assignment of the proceeds of a sale
with respect to some or all of the shares being acquired upon the exercise of
the option, to the extent legally permitted, by tender of shares of Common Stock
owned by the optionee having a fair market value not less than the exercise
price, by such other lawful consideration as approved by the Committee, or by
any combination of these. Nevertheless, the Committee may restrict the forms of
payment permitted in connection with any option grant. No option may be
exercised unless the optionee has made adequate provision for federal, state,
local and foreign taxes, if any, relating to the exercise of the option,
including, if permitted or required by the Company, through the optionee's
surrender of a portion of the option shares to the Company.
8
Options will become vested and exercisable at such times or upon such
events and subject to such terms, conditions, performance criteria or
restrictions as specified by the Committee. The maximum term of any option
granted under the 2004 Plan is ten years, provided that an incentive stock
option granted to a Ten Percent Stockholder must have a term not exceeding five
years. The Committee will specify in each written option agreement, and solely
in its discretion, the period of post-termination exercise applicable to each
option.
Stock options are nontransferable by the optionee, other than by will or by
the laws of descent and distribution, and are exercisable during the optionee's
lifetime only by the optionee. However, a nonstatutory stock option may be
assigned or transferred to the extent permitted by the Committee and set forth
in the option agreement.
Stock Appreciation Rights. Each stock appreciation right granted under the
2004 Plan must be evidenced by a written agreement between the Company and the
participant specifying the number of shares subject to the award and the other
terms and conditions of the award, consistent with the requirements of the 2004
Plan.
A stock appreciation right gives a participant the right to receive the
appreciation in the fair market value of Company Common Stock between the date
of grant of the award and the date of its exercise. The Company may pay the
appreciation either in cash or in shares of Common Stock. The Committee may
grant stock appreciation rights under the 2004 Plan in tandem with a related
stock option or as a freestanding award. A tandem stock appreciation right is
exercisable only at the time and to the same extent that the related option is
exercisable, and its exercise causes the related option to be canceled.
Freestanding stock appreciation rights vest and become exercisable at the times
and on the terms established by the Committee. The maximum term of any stock
appreciation right granted under the 2004 Plan is ten years. Subject to
appropriate adjustment in the event of any change in the capital structure of
the Company, no employee may be granted in any fiscal year of the Company stock
appreciation rights which in the aggregate are for more than two hundred and
fifty thousand (250,000) shares.
Stock appreciation rights are nontransferable by the participant, other
than by will or by the laws of descent and distribution, and are exercisable
during the participant's lifetime only by the participant.
Restricted Stock Awards. The Committee may grant restricted stock awards
under the 2004 Plan either in the form of a restricted stock purchase right,
giving a participant an immediate right to purchase Common Stock, or in the form
of a restricted stock bonus, for which the participant furnishes consideration
in the form of services to the Company. The Committee determines the purchase
price payable under restricted stock purchase awards, which may be less than the
then current fair market value of our Common Stock. Restricted stock awards may
be subject to vesting conditions based on such service or performance criteria
as the Committee specifies, and the shares acquired may not be transferred by
the participant until vested. Unless otherwise provided by the Committee, a
participant will forfeit any shares of restricted stock on which the
restrictions have not lapsed prior to the participant's termination of service.
Participants holding restricted stock will have the right to vote the shares and
to receive any dividends paid, except that dividends or other distributions paid
in shares will be subject to the same restrictions as the original award.
Subject to appropriate adjustment in the event of any change in the capital
structure of the Company, no employee may be granted in any fiscal year of the
Company more than one hundred thousand (100,000) shares of performance-based
restricted stock.
Restricted Stock Units. The Committee may grant restricted stock units
under the 2004 Plan which represent a right to receive shares of Common Stock at
a future date determined in accordance with the participant's award agreement.
No monetary payment is required for receipt of restricted stock units or the
shares issued in settlement of the award, the consideration for which is
furnished in the form of the participant's services to the Company. The
Committee may grant restricted stock unit awards subject to the attainment of
performance goals similar to those described below in connection with
performance shares and performance units, or may make the awards subject to
vesting conditions similar to those applicable to restricted stock awards.
Participants have no voting rights or rights to receive cash dividends with
respect to restricted stock unit awards until shares of Common Stock are issued
in settlement of such awards. However, the Committee may grant restricted stock
units that entitle their holders to receive dividend equivalents, which are
rights to receive additional restricted stock units for a number of shares whose
value is equal to any cash dividends we pay. Subject to appropriate adjustment
in the event of any change in the capital structure of the Company, no employee
may be granted in any fiscal year of the Company more than one hundred thousand
(100,000) restricted stock units on which the restrictions are based on
performance criteria.
9
Performance Awards. The Committee may grant performance awards subject to
such conditions and the attainment of such performance goals over such periods
as the Committee determines in writing and sets forth in a written agreement
between the Company and the participant. These awards may be designated as
performance shares or performance units. Performance shares and performance
units are unfunded bookkeeping entries generally having initial values,
respectively, equal to the fair market value determined on the grant date of a
share of Common Stock. Performance awards will specify a predetermined amount of
performance shares or performance units that may be earned by the participant to
the extent that one or more predetermined performance goals are attained within
a predetermined performance period. To the extent earned, performance awards may
be settled in cash, shares of Common Stock (including shares of restricted
stock) or any combination thereof. Subject to appropriate adjustment in the
event of any change in the capital structure of the Company, for theeach fiscal
year ending
September 28, 2003,of the Company contained in the applicable performance period, no employee
may be granted performance shares that could result in the employee receiving
more than one hundred thousand (100,000) shares of Common Stock or performance
units that could result in the employee receiving more than one million dollars
($1,000,000). A participant may receive only one performance award with respect
to any performance period.
Prior to the beginning of the applicable performance period or such later
date as permitted under Section 162(m) of the Code, the Committee will establish
one or more performance goals applicable to the award. Performance goals will be
based on the attainment of specified target levels with respect to one or more
measures of business or financial performance of the Company and each parent and
subsidiary corporation consolidated therewith for financial reporting purposes,
or such division or business unit of the Company as may be selected by the
Committee. The Committee, in its discretion, may base performance goals on one
or more of the following such measures: sales, revenue, gross margin, operating
margin, operating income, pre-tax profit, earnings before interest, taxes,
depreciation and/or amortization, net income, cash flow, expenses, stock price,
earnings per share, return on stockholders' equity, return on capital, return on
assets, economic value added, number of customers, market share, same store
sales, average restaurant margin, return on investment, profit after tax and
customer satisfaction. The target levels with respect to these performance
measures may be expressed on an absolute basis or relative to a standard
specified by the Committee. The degree of attainment of performance measures
will, according to criteria established by the Committee, be computed before the
effect of changes in accounting standards, restructuring charges and similar
unusual or extraordinary items occurring after the establishment of the
performance goals applicable to a performance award.
Following completion of the applicable performance period, the Committee
will certify in writing the extent to which the applicable performance goals
have been attained and the resulting value to be paid to the participant. The
Committee retains the discretion to eliminate or reduce, but not increase, the
amount that would otherwise be payable to the participant on the basis of the
performance goals attained. However, no such reduction may increase the amount
paid to any other participant. In its discretion, the Committee may provide for
the payment to a participant who is awarded performance shares of dividend
equivalents with respect to cash dividends paid on the Company's Common Stock.
Performance award payments may be made in lump sum or in installments. If any
payment is to be made on a deferred basis, the Committee may provide for the
payment of dividend equivalents or interest during the deferral period.
10
Unless otherwise provided by the Committee, if a participant's service
terminates due to the participant's death, disability or retirement prior to
completion of the applicable performance period, the final award value will be
determined at the end of the performance period on the basis of the performance
goals attained during the entire performance period but will be prorated for the
number of months of the participant's service during the performance period. If
a participant's service terminates prior to completion of the applicable
performance period for any other reason, the 2004 Plan provides that, unless
otherwise determined by the Committee, the performance award will be forfeited.
No performance award may be sold or transferred other than by will or the laws
of descent and distribution prior to the end of the applicable performance
period.
Change in Control. "Change of Control" is defined in the 2004 Plan. In
brief, a Change of Control is an event, which changes the ownership of a
majority of the voting securities of the Company. A Change of Control can occur
upon (i) a sale or exchange, in a single or series of transactions, of more than
50% of the Company's voting stock; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange or transfer of all or substantially
all of the assets of the Company; or (iv) a liquidation or dissolution of the
Company. If a Change in Control occurs, the surviving, continuing, successor or
purchasing corporation or parent corporation thereof may either assume all
outstanding awards or substitute new awards having an equivalent value.
In the event of a Change in Control and the outstanding stock options and
stock appreciation rights are not assumed or replaced, then all unexercisable,
unvested or unpaid portions of such outstanding awards will become immediately
exercisable, vested and payable in full immediately prior to the date of the
Change in Control.
In the event of a Change in Control, the lapsing of all vesting conditions
and restrictions on any shares subject to ratificationany restricted stock award, restricted
stock unit and performance award held by stockholders. KPMG LLPa participant whose service with the
Company has actednot terminated prior to the Change in Control shall be accelerated
effective as independent accountantsof the date of the Change in Control. For this purpose, the value
of outstanding performance awards will be determined and paid on the basis of
the greater of (i) the degree of attainment of the applicable performance goals
prior the date of the Change in Control or (ii) 100% of the pre-established
performance goal target.
Any award not assumed, replaced or exercised prior to the Change in Control
will terminate. The 2004 Plan authorizes the Committee, in its discretion, to
provide for different treatment of any award, as may be specified in such
award's written agreement, which may provide for acceleration of the vesting or
settlement of any award, or provide for longer periods of exercisability, upon a
Change in Control.
Termination or Amendment. The 2004 Plan will continue in effect until the
first to occur of (i) its termination by the Committee, (ii) the date on which
all shares available for issuance under the 2004 Plan have been issued and all
restrictions on such shares under the terms of the 2004 Plan and the agreements
evidencing awards granted under the 2004 Plan have lapsed, or (iii) the tenth
anniversary of the 2004 Plan's effective date. The Committee may terminate or
amend the 2004 Plan at any time, provided that no amendment may be made without
stockholder approval if the Committee deems such approval necessary for
compliance with any applicable tax or securities law or other regulatory
requirements, including the requirements of any stock exchange or market system
on which the Common Stock of the Company is then listed. No termination or
amendment may affect any outstanding award unless expressly provided by the
Committee, and, in any event, may not adversely affect an outstanding award,
without the consent of the participant, unless necessary to comply with any
applicable law, regulation or rule.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S.
federal income tax consequences of participation in the 2004 Plan and does not
attempt to describe all possible federal or other tax consequences of such
participation or tax consequences based on particular circumstances.
11
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as a result of the grant or exercise of an incentive
stock option qualifying under Section 422 of the Code. Optionees who neither
dispose of their shares within two years following the date the option was
granted, nor within one year following the exercise of the option, will normally
recognize a capital gain or loss equal to the difference, if any, between the
sale price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, the Company will not be entitled to
any deduction for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant, or within one year after the date of
exercise (a "disqualifying disposition"), the difference between the fair market
value of the shares on the determination date (see discussion under
"Nonstatutory Stock Options" below) and the option exercise price (not to exceed
the gain realized on the sale if the disposition is a transaction in which a
loss, if sustained, would be recognized) will be taxed as ordinary income at the
time of disposition. Any gain in excess of that amount will be a capital gain.
If a loss is recognized, there will be no ordinary income, and such loss will be
a capital loss. Any ordinary income recognized by the optionee upon the
disqualifying disposition of the shares generally will be deductible by the
Company for federal income tax purposes, except to the extent such deduction is
limited by applicable provisions of the Code.
The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is treated as an adjustment
in computing the optionee's alternative minimum taxable income and may be
subject to an alternative minimum tax which is paid if such tax exceeds the
regular tax for the Company since 1986. A representativeyear. Special rules may apply with respect to certain
subsequent sales of the firmshares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options and Indexed Stock Options. Options not
designated or qualifying as incentive stock options, or as indexed stock
options, will be presentnonstatutory stock options having no special tax status. An
optionee generally recognizes no taxable income as the result of the grant of
such an option. Upon exercise of a nonstatutory stock option, the optionee
normally recognizes ordinary income in the amount of the difference between the
option exercise price and the fair market value of the shares on the
determination date (as defined below). If the optionee is an employee, such
ordinary income generally is subject to withholding of income and employment
taxes. The "determination date" is the date on which the option is exercised,
unless the shares are subject to a substantial risk of forfeiture (as in the
case where an optionee is permitted to exercise an unvested option and receive
unvested shares which, until they vest, are subject to the Company's right to
repurchase them at the Annual Meetingoriginal exercise price upon the optionee's termination
of service) and willare not transferable, in which case the determination date is
the earlier of (i) the date on which the shares become transferable or (ii) the
date on which the shares are no longer subject to a substantial risk of
forfeiture. If the determination date is after the exercise date, the optionee
may elect, pursuant to Section 83(b) of the Code, to have the opportunityexercise date be
the determination date by filing an election with the Internal Revenue Service
no later than 30 days after the date the option is exercised. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. No tax deduction is
available to makethe Company with respect to the grant of a statementnonstatutory stock
option or the sale of the stock acquired pursuant to such grant. The Company
generally will be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of a nonstatutory stock
option, except to the extent such deduction is limited by applicable provisions
of the Code.
Restricted Stock Awards. A participant acquiring restricted stock generally
will recognize ordinary income equal to the fair market value of the shares on
the "determination date" (as defined above under "Nonstatutory Stock Options").
If the participant is an employee, such ordinary income generally is subject to
withholding of income and respondemployment taxes. If the determination date is after
the date on which the participant acquires the shares, the participant may
elect, pursuant to questions from stockholders.Section 83(b) of the Code, to have the date of acquisition be
the determination date by filing an election with the Internal Revenue Service
no later than 30 days after the date the shares are acquired. Upon the sale of
shares acquired pursuant to a restricted stock award, any gain or loss, based on
the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. The Company generally
should be entitled to a deduction equal to the amount of ordinary income
recognized by the participant on the determination date, except to the extent
such deduction is limited by applicable provisions of the Code.
12
Performance and Restricted Stock Units Awards. A participant generally will
recognize no income upon the grant of a performance share, performance units or
restricted stock units award. Upon the settlement of such awards, participants
normally will recognize ordinary income in the year of receipt in an amount
equal to the cash received and the fair market value of any nonrestricted shares
received. If the participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. If the participant
receives shares of restricted stock, the participant generally will be taxed in
the same manner as described above (see discussion under "Restricted Stock").
Upon the sale of any shares received, any gain or loss, based on the difference
between the sale price and the fair market value on the "determination date" (as
defined above under "Nonstatutory Stock Options"), will be taxed as capital gain
or loss. The Company generally will be entitled to a deduction equal to the
amount of ordinary income recognized by the participant on the determination
date, except to the extent such deduction is limited by applicable provisions of
the Code.
New Plan Benefits
No awards will be granted under the 2004 Plan prior to its approval by the
stockholders of the Company. Awards under the 2004 Plan will be granted at the
discretion of the Committee, and, accordingly, are not yet determinable. In
addition, benefits under the 2004 Plan, will depend on a number of factors,
including the fair market value of the Company's Common Stock on future dates,
actual Company performance against performance goals established with respect to
performance awards and decisions made by the participants. Consequently, it is
not currently possible to determine the benefits that might be received by
participants under the 2004 Plan.
Director Recommendation
The Board believes that the proposed adoption of the 2004 Plan is in the
best interests of the Company and its stockholders for the reasons stated above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.APPROVAL OF THE ADOPTION OF THE 2004 PLAN.
---
EQUITY COMPENSATION TABLE
The following table summarizes the equity compensation plans under which
Company Common Stock may be issued as of September 28, 2003. All plans were
approved by stockholders of the Company.
(c)
Number of securities
remaining for future
(a) (b) issuance under equity
Number of securities to Weighted-average compensation plans
be issued upon exercise exercise price of (excluding securities
of outstanding options outstanding options reflected in column (a))
- ---------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by security holders............... 4,891,893 $21.10 1,107,500
13
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of the three directors named below, each of whom is an "independent
director,"director" as defined in the Listing Standardsapplicable listing standards of the New York Stock
Exchange. The duties of the Audit Committee operatesare summarized in this Proxy
Statement under a written"Committees of the Board of Directors" on page 5 and are more
fully described in the Audit Committee charter adopted by the Board andof
Directors. The Audit Committee reviews and assesses the adequacy of its charter
on an annual basis.each fiscal year. The Board most
recently amended and restated the Audit Committee'sCommittee revised its charter, which was then
approved by the Board of Directors, in September 2003. The revised charter is
includedattached to this Proxy Statement as Exhibit A on page A-1, in August 2002.A.
As more fully described in its charter, the purposeone of the Audit CommitteeCommittee's
primary responsibilities is to overseeassist the Board in its oversight of the
integrity of the Company's financial reporting, internal control
and audit functions on behalf of the Board.reports. Management is responsible for the
Company's accounting and financial reporting processes, internal controls and
the preparation and integrity of the Company's consolidated financial
statements, accounting
and financial reporting processes and internal controls.statements. KPMG, LLP, the Company's independent auditing firm, is responsible both
for performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and expressing an opinion on the conformity of those
audited consolidated financial statements with accounting principles generally
accepted in the United States of America. Jack in the Box Inc. has a full time
Internal Audit Department that reports to the Audit Committee and management,
and is responsible for reviewing and evaluating the Company's internal controls.
The membersfunction of the Audit Committee areis not professional accountants or
auditors and their functions are not intended to duplicate the activities of
management, andor the independent auditors. The Audit Committee servesinternal or external auditors, but to serve a Board-level
oversight role in which it provides advice, counsel, and direction to management
and the auditors, and oversees the Company's internal
compliance programs.auditors.
The Audit Committee has an annual agenda that includes reviewing the
Company's financial statements and internal controls. The Audit Committee
meets each quarter with KPMG LLP, the Company's Director of Internal Audit
and management to review the Company's interim financial results before
the publication of the Company's quarterly earnings press releases. The
Audit Committee will meet separately each quarter with KPMG LLP,
management and the Director of Internal Audit.
For fiscal year 2002, the Audit Committee and the Board had the
authority to select and evaluate the Company's independent auditors. The
Audit Committee recommended to the Board of Directors the selection of KPMG
LLP as the Company's independent auditors for fiscal year 2002. Pursuant to
the Company's new Audit Committee charter adopted in August 2002, the Audit
Committee now has sole authority and responsibility to select, evaluate and when
appropriate, to replace the Company's independent auditors. The Audit Committee
has appointed KPMG LLP as the Company's independent auditors for fiscal year 2003.2004
and has requested stockholder ratification of its appointment.
The Audit Committee has reviewed and discussed the Company's financial
statements for fiscal year 2002 with management and KPMG the
independent auditors.disclosures made in "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the audited consolidated financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 28, 2003. This review included a discussion with management and KPMG
regarding the quality of the Company's accounting principles, the reasonableness
of significant estimates and judgments, and the clarity and completeness of
disclosure of the Company's consolidated financial statements. Management
represented to the Audit Committee that the Company's consolidated financial
statements, on which KPMG issued an unqualified opinion, were prepared in
accordance with accounting principles generally accepted in the United States of
America, and the independent auditors
presentations includedAmerica. The Committee discussed with KPMG, the matters required to be discussed
by Statement on Auditing Standards No. 61, "Communication with Audit
Committees", as amended. In addition, the Audit Committee has discussed with KPMG LLP their
independence from the Company and its management, including the matters inreceived the written
disclosures and the letter from the independent auditorsKPMG required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," whichand discussed
with KPMG its independence from the AuditCompany.
The Committee has received.
5
Baseddiscussed with management and KPMG such other matters and
received such assurances from them as the Committee deemed appropriate.
In reliance on the review and discussions referred to above, and the report
of KPMG, the Audit Committee recommended to the Board of Directors, thatand the
Company'sBoard of Directors has approved, the inclusion of the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for the fiscal
year ended September 29, 2002.28, 2003 for filing with the SEC.
Michael W. Murphy, Chair
Murray H. Hutchison
L. Robert Payne
14
PROPOSAL THREE - RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT AUDITORS
The Audit Committee has appointed the firm of KPMG LLP as the Company's
independent auditor for fiscal year 2004. Although action by stockholders in
this matter is not required, the Audit Committee believes it is appropriate to
seek stockholder ratification of this appointment in light of the critical role
played by the independent auditors in maintaining the integrity of Company
financial controls and reporting.
KPMG has served as independent auditor for the Company since 1986. One or
more representatives of KPMG will be present at the Annual Meeting and will have
the opportunity to make a statement and to respond to appropriate questions from
stockholders. The following proposal will be presented at the Annual Meeting:
Action by the Audit Committee appointing KPMG as the Company's independent
auditor to conduct the annual audit of the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending October 3, 2004 is
hereby ratified, confirmed and approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
---
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS.
INDEPENDENT AUDITOR FEES AND SERVICES
The following table presents fees billed for professional services rendered
by KPMG for the fiscal years ending September 28, 2003 and September 29, 2002.
2003 2002
-------- --------
Audit Fees The aggregate(1)................................. $295,475 $206,000
Audit Related Fees (2)......................... 81,800 46,250
Tax Fees (3)................................... 500 250
All Other Fees................................. 0 0
-------- --------
KPMG Total Fees............................. $377,775 $252,500
======== ========
- -------------------------
(1) Audit fees represent fees billed by KPMG LLP for professional services
rendered for the audit of the Company's annual consolidated financial statements for the
fiscal year ended September 29, 2002
and for the reviews of the consolidated financial statements included in the
Company's FormsForm 10-Q filings for each fiscal year.
(2) These fees consist of assurance and services performed by KPMG that fiscal year were
$206,000.
Financial Information Systems Design and Implementation Fees
KPMG LLP did not perform any servicesare
reasonably related to the performance of the audit or review of the Company's
financial information
systems designstatements. This category includes: employee benefit and implementation.
All Other Fees
Thecompensation
plan audits; due diligence related to mergers and acquisitions; attestations by
KPMG that are not required by statute or regulation; and consulting on financial
accounting/reporting standards.
(3) Tax fees consist of aggregate fees billed by KPMG LLP for professional services
rendered other than those covered in the preceding two sections,by KPMG for the
fiscal year ended September 29, 2002 were $46,500.
Auditor Independence
Other fees include fees for the audits of the Company's benefit
plans, research and consultation regarding certain accounting
principlestax compliance, tax advice and tax related matters.planning.
Auditor Independence. The Audit Committee has considered whether the
provision of thesethe above noted services is compatible with maintaining the
principal accountant'sauditor's independence and has determined that the provision of such
services has not adversely affected the accountant'sauditor's independence.
6Policy on Audit Committee Pre-Approval. The Company and its Audit Committee
are committed to ensuring the independence of the independent auditor, both in
fact and in appearance. In this regard, the Audit Committee has established a
pre-approval policy in accordance with applicable Securities rules. The Audit
Committee's pre-approval policy is set forth in the Policy for the Audit
Committee Pre-Approval of Services, included as Exhibit B to this Proxy
Statement.
15
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation of
the Company's chief executive officer and the other four most highly compensated
executive officers of the Company for services in all capacities to the Company
and its subsidiaries during the fiscal years indicated. Bonus amounts were
earned during the year and paid shortly thereafter.
Long-Term Compensation
-----------------------------------
Restricted All Other
Annual Compensation Stock Securities Compen-
--------------------------------- Awards Underlying sation
Name and --------------------------------- Underlying sation Principal Position(s) Year Salary($) Bonus($) Other($)(1) ($)(2) Options(#) ($)(2)(3)
- -------------------------------- ------ ---------- --------- --------- ----------- ---------------------------------------------------------------------------------------------------------------------------
Robert J. Nugent................ 2002 720,000 437,400 21,080 113,000 19,3632003 756,923 0 21,482 0 170,000 31,078
Chairman of the Board and 2002 720,000 437,400 21,080 0 113,000 40,900
Chief Executive Officer 2001 677,539 174,225 22,850 0 59,600 27,342
Chief Executive Officer 2000 627,692 615,648 19,810 48,100 26,307
Kenneth R. Williams(3).......... 2002 511,539 272,950 12,510 47,000 19,862Linda A. Lang................... 2003 400,000 0 12,091 1,152,250 40,900 19,090
President, Chief Operating 2001 484,308 101,250 12,451 36,500 26,0442002 311,546 192,000 12,385 0 20,000 11,336
Officer and Director 2000 424,616 334,541 16,755 28,900 24,2152001 253,308 66,269 12,153 0 13,000 14,565
John F. Hoffner(4).............. 2003 397,539 0 12,092 1,152,250 40,900 18,786
Executive Vice President and 2002 381,923 184,320 101,298 0 45,000 12,696
Executive Vice President and 2001 36,058 0 51,385 40,000 865
Chief Financial Officer Linda A. Lang................... 2002 311,546 192,000 12,385 20,000 11,336
Executive Vice President, 2001 253,308 66,269 12,153 13,000 14,565
Marketing and Operations, 2000 227,308 134,165 12,231 10,300 10,955
Human Resources and
Resources and Information
Systems36,058 50,000 1,385 0 40,000 865
Paul L. Schultz................. 2003 387,000 0 12,919 0 35,000 17,791
Senior Vice President, 2002 372,308 161,680 12,510 0 27,000 14,824
Senior Vice President,Operations and Franchising 2001 354,692 72,540 12,216 0 22,900 18,970
Operations and Franchising 2000 332,615 228,351 35,739 18,400 18,269
- --------------------------
(1) Other annual compensation includes an annual car allowance for each person
of approximately $12,000. Mr. Nugent's other annual compensation also
included $9,080, $10,450 and $7,810 in 2002, 2001 and 2000,
respectively, for supplemental health insurance. Mr. Hoffner's other
annual compensation also included $88,903 for reimbursed moving
expenses in 2002 and a $50,000 sign-on bonus in 2001. Mr. Schultz's
other annual compensation also included $28,739 in 2000 for supplemental
health insurance.
(2) All other compensation represents the Company's matching contributions to
the Deferred Compensation Plan and approximately $1,400-$1,500 annually
for each person, for premiums on term life insurance paid by the Company
for the benefit of the named executive officer. The Company has no
interest in such insurance policies.
(3) Mr. Williams retired from the Company and the Board effective
December 31, 2002. He had served as President and Chief Operating
Officer since February 2001. He wasLawrence E. Schauf.............. 2003 318,308 0 12,111 1,047,500 42,600 15,329
Executive Vice President Marketing2002 306,923 148,320 12,486 0 19,000 12,504
and Operations from May 1996 to FebruarySecretary 2001 and Senior Vice President
from January 1993 to May 1996. Mr. Nugent assumed the title of
President effective January 1, 2003, upon Mr. William's retirement
from the Company.
(4) Mr. Hoffner joined the Company on August 27, 2001 as Executive Vice
President and Chief Financial Officer at an annual salary of $375,000.
297,231 60,600 30,464 0 24,300 17,086
7- -------------------------
(1) Other annual compensation includes an annual car allowance for each person
of approximately $12,000. Mr. Nugent's other annual compensation also
included $9,482, $9,080 and $10,450 in 2003, 2002 and 2001, respectively,
for supplemental health insurance. Mr. Hoffner's other annual compensation
also included $88,903 for reimbursed moving expenses in 2002. Mr. Schauf's
other annual compensation also included $20,328 in 2001 for reimbursed
moving expenses.
(2) Represents the grant of stock awards under which Ms. Lang, Mr. Hoffner and
Mr. Schauf were issued 55,000, 55,000 and 50,000 shares of common stock,
respectively, subject to continued employment. The value of the restricted
stock awards was determined by multiplying the total shares held by each
executive by the closing price on the date of grant, November 8, 2002,
which was $20.95. At September 28, 2003, the value of these restricted
stock awards was $938,850, $938,850 and $853,500, respectively, based on
the closing price of the Company's Common Stock on the last trading day
prior to the end of the Company's fiscal year ($17.07).
(3) All other compensation represents the Company's matching contributions to
the Deferred Compensation Plan and approximately $1,400 annually for each
person, for premiums on term life insurance paid by the Company for the
benefit of the named executive officer. The Company has no interest in such
insurance policies.
(4) Mr. Hoffner joined the Company on August 27, 2001 as Executive Vice
President and Chief Financial Officer at an annual salary of $375,000.
16
Stock Option Grants in Fiscal 20022003
Set forth below is information with respect to options granted to the named
executive officers in the Summary Compensation Table during the 2002
fiscal year.year 2003.
% of Total
Potential Realizable Value
Number of Options/SARs% of Total at Assumed Annual Rates of
Securities Granted to ExerciseOptions/SARs Stock Price Appreciation
Underlying EmployeesGranted to Exercise or Base for Option Term (2)
Options/SARs Employees in FiscalBase Price Expiration ---------------------------------------------------
Name Granted (#)(1) Fiscal Year ($/Share) Expiration Date 5% 10%
- --------------------------- ------------ ------------ --------- ---------- ---------- ---------------------------------------------------------------------------------------------------------------------------------
Robert J. Nugent........... 113,000 14.5% 25.00 12/01/2011 $1,795,118 $4,559,948
Kenneth R. Williams........ 47,000 6.0% 25.00 12/01/2011 746,641 1,896,615Nugent........ 170,000 20.6% 20.95 11/08/2012 $2,239,808 $5,676,114
Linda A. Lang........... 40,900 5.0% 20.95 11/08/2012 538,872 1,365,606
John F. Hoffner............ 12,000 1.5% 23.00Hoffner......... 40,900 5.0% 20.95 11/01/2011 175,442 445,691
33,000 4.2% 25.00 12/01/2011 524,238 1,331,666
Linda A. Lang.............. 20,000 2.6% 25.00 12/01/2011 317,720 807,07008/2012 538,872 1,365,606
Paul L. Schultz............ 27,000 3.5% 25.00 12/01/2011 428,922 1,089,545
- --------------------------
(1) Beginning one year from the date of grant, 20%Schultz......... 35,000 4.2% 20.95 11/08/2012 461,137 1,168,612
Lawrence E. Schauf...... 42,600 5.2% 20.95 11/08/2012 561,270 1,422,367
- -------------------------
(1) Beginning one year from the date of grant, 25% of the total number of
shares subject to the option will become exercisable annually.
(2) These amounts represent certain assumed rates of appreciation only, based
on SEC rules. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock, overall market conditions
and the option holder's continued employment through the vesting period.
The appreciation amounts reflected in this table may not necessarily be
achieved.
Option Exercises in Fiscal 20022003 and Fiscal Year-End Values
Set forth below is information with respect to options exercised by the
named executive officers in the Summary Compensation Table during the
2002 fiscal year
2003, and the number and value of unexercised stock options held by the named
executive officers at the end of the fiscal year.
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options/SARs Held In-the-Moneyat Money Options/SARs at
Shares at Fiscal Year-End at Fiscal Year-End(1)
Acquired on Value --------------------------- ------------------------------------------------------
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ----------- ---------- ----------- ------------- ----------- ----------------------------------------------------------------------------------------------------------------------------
Robert J. Nugent........... 42,000 $843,420 198,680 217,220 $1,441,926 $34,294
Kenneth R. Williams........ 20,000 356,983 129,280 110,820 1,054,284 21,763
John F. Hoffner............Nugent........ 0 $ 0 8,000 77,000 0261,860 324,040 $775,750 $ 0
Linda A. Lang.............. 10,340 264,143 36,778 41,880 227,514 6,397Lang........... 0 0 49,058 70,500 110,631 0
John F. Hoffner......... 0 0 25,000 100,900 0 0
Paul L. Schultz............Schultz......... 0 0 95,200 65,200 927,111 11,212
- --------------------------
(1) Based on the difference between the exercise price of the options and the
closing price of the Company's Common Stock on the last trading day prior
to the end of the Company's fiscal year ended September 29, 2002
($22.36).
114,980 80,420 556,930 0
Lawrence E. Schauf...... 0 0 59,380 84,220 0 0
8
- -------------------------
(1) Based on the difference between the exercise price of the options and the
closing price of the Company's Common Stock on the last trading day prior
to the end of the Company's fiscal year ended September 28, 2003 ($17.07).
Pension Plan Table
Retirement Plan. The Company maintains a retirement plan (the "Retirement
Plan"), which was adopted effective October 21, 1985, restated effective January
1, 2001 and amended June 7, 2002 and December 31, 2002. The Retirement Plan is a
defined benefit plan covering eligible employees employed in an administrative,
clerical, or restaurant hourly capacity who have completed one year of service
with at least 1,000 hours of service and reached age 21. The Retirement Plan
provides that a participant retiring at age 65 will receive an annual retirement
benefit equal in amount to one percent of Final Average Pay multiplied by
Benefit Service plus .4% of Final Average Pay in excess of Covered Compensation
multiplied by Benefit Service, subject to grandfathered minimum benefit accruals
under the previous plan as of December 31, 1998. The .4% portion of the
calculation is limited to a maximum of 35 years of service. The Employee
Retirement Income Security Act of 1974 ("ERISA") and various tax laws may cause
a reduction in the annual retirement benefit payable under the Retirement Plan.
(The preceding capitalized terms are defined in the Retirement Plan.)
17
Although normal retirement age is 65, benefits may begin as early as age 55
if participants meet the service requirements defined in the Retirement Plan.
Benefits payable are reduced for early commencement.
Supplemental Retirement Plan. In 1990, the Company established a
non-qualified supplemental retirement plan for selected executives, known as the
Supplemental Executive Retirement Plan, which was amended and restated effective
May 8, 2001. The plan provides for a percentage of replacement income based on
Service and Final Average Compensation (each as defined in the plan). The target
replacement income from all Company funded sources, based upon a maximum of 20
full years of service, is 60% of Final Average Compensation. For those
executives who have served fewer than 20 years, the target percentage of 60% is
reduced by applying a factor determined by dividing the number of years of
actual service by 20. The plan is unfunded and represents an unsecured claim
against the Company.
Easy$aver Plus Plan. In 1985, the Company adopted the Jack in the Box Inc.
Savings Investment Plan, currently named the Jack in the Box Inc. Easy$aver Plus
Plan (the "E$P"), which was amended and restated effective January 1, 2001.2001, and
amended June 7, 2002 and December 31, 2002. The E$P includes a cash-or-deferred
arrangement under Section 401(k) of the Internal Revenue Code. Eligible
employees who have completed at least one year of service with a minimum of
1,000 hours of work and who have reached age 21 qualify for the E$P.
Participants in the E$P may defer up to 12%30% of their pay on a pre-tax basis.basis,
subject to annual limits established by the Internal Revenue Service. In
addition, the Company contributes on a participant's behalf an amount equal to 50% of the first 4%
of compensation that is deferred by the participant.
Deferred Compensation Plan. Since 1989, all executive officers and certain
other members of management have been excluded from participation in the E$P. In
1990, the Company created for these individuals a non-qualified deferred
compensation plan known as the Capital Accumulation Plan for
Executives which was amended and restated effective June 1, 2001.Executive Deferred Compensation Plan.
Participants in the plan may defer up to 15% of base and up to 100% (less applicable
taxes) of bonus pay. The Company contributes on a participant's behalf 100% of
the first 3% of compensation that is deferred by the participant. Benefits
paid under this plan also include an interest component based on Moody's
Average Corporate Bond Yield Index. The plan is unfunded and participants'
accounts represent unsecured claims against the Company. Effective
December 31, 2002 this plan has been frozen to participant contributions and
replaced by the Executive Deferred Compensation Plan effective January 1,
2003. Under this new plan, which is unfunded, participants may defer up to 50% of base and up to 100% (less
applicable taxes) of bonus pay. The Company contributes on a participant's
behalf 100% of the first 3% of compensation that is deferred by the participant.
Benefits under this plan also include an earnings component based upon
theoretical investment options designated by the Administrative Committee and
selected by the participant. The plan is unfunded, and participants' accounts
represent unsecured claims against the Company.
Summary of Retirement and Other Deferred Benefits. The following table
shows estimated annual benefits payable to participants as a straight life
annuity. The benefits are derived from some or all of the following Company
funded sources: Retirement Plan, Company contributions to the E$P, Company
contributions to the Deferred Compensation Plan and Supplemental Retirement
Plan.
Estimated Annual Benefits Based on Years of Service
-----------------------------------------------------------------------------------------------------------
Average Annual Earnings 10 15 20
- -------------------------- ------------- ------------- ---------------------------------------------------------------------------------------------
$ 100,000.............100,000................. $ 30,000 $ 45,000 $ 60,000
200,000.............200,000................. 60,000 90,000 120,000
300,000.............300,000................. 90,000 135,000 180,000
400,000.............400,000................. 120,000 180,000 240,000
500,000.............500,000................. 150,000 225,000 300,000
600,000.............600,000................. 180,000 270,000 360,000
800,000.............800,000................. 240,000 360,000 480,000
1,000,000.............1,000,000................. 300,000 450,000 600,000
1,200,000.............1,200,000................. 360,000 540,000 720,000
1,300,000.............1,300,000................. 390,000 585,000 780,000
At September 29, 2002,28, 2003, the number of years of service under the retirement
plans for Messrs. Nugent, Williams, Hoffner, Schultz and Schultz,Schauf, and Ms. Lang was 23, 33, 1, 2724, 2,
28, 7 and 15, respectively;16, respectively, and the amount of eligible compensation for each of
these individuals approximates the amounts reflected as salary and bonus in the
Summary Compensation Table.
918
Severance Arrangements
We haveThe Company has entered into compensation and benefits assurance agreements
with certain of our senior executives, including Messrs. Nugent, Williams, Hoffner,
Schultz and Schultz,Schauf, and Ms. Lang, for the payment of certain compensation and
the provision for certain benefits in the event of termination of employment
following a change in control of the Company. The agreements with Messrs.
Nugent, WilliamsSchultz and SchultzSchauf had an initial term expiring on September 29, 1998,
and the agreements with Mr. Hoffner and Ms. Lang had an initial term expiring on
August 26, 2003 and July 2, 2004, respectively. These agreements are
automatically extended for additional two-year terms thereafter, unless a
minimum of six-months written notice is given to the contrary. If there is a
"change of control" (as defined in the agreements) during the term of any such
agreement, the executive will be entitled to receive the payments and benefits
specified in the event that employment is terminated within 24 months
thereafter: (i) involuntarily, without cause or (ii) voluntarily for "good
reason" (as defined in the agreements). Amounts payable under each agreement
include all amounts earned by the employee prior to the date of termination and
a multiple of the employee's annual base salary, bonus and the Company's
matching contributions to the Deferred Compensation Plan. In the case of Messrs.
Nugent, Williams, Hoffner, Schultz and Schultz,Schauf, and Ms. Lang, the applicable multiples are
2.5, 2.5, 1.5, 2.5 1.5 and 2.5, respectively. In addition, the agreements provide
for the continuation of health insurance benefits for a period of up to 18
months following termination and certain incidental benefits.
Compensation of Directors
The independent directors of the Company receive compensation for their
services as described in the section of this Proxy Statement captioned
"Additional Information about the Board of Directors".
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee, Anne B. Gust, Alice B. Hayes,
Murray H. Hutchison and Michael W. Murphy are outside directors and do not have
compensation committee interlocks.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee assists the Board in discharge of the Board's
responsibilities relating to compensation of the directors, officers and
executives of the Company. The Compensation Committee is comprised of the four
directors named below. The Board has determined that all members of the
Compensation Committee are (i) independent as defined under applicable
requirements of the New York Stock Exchange, (ii) non-employees within the
meaning of Rule 16b-3 of the Securities Exchange Act and (iii) "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code.
The Compensation Committee administers the Company's executive compensation
program and reviews the Company's succession planning and leadership development processes.
The Compensation Committee which is comprised entirely of outside, independent
directors, (i) reviews and approves salaries and other compensation
of executive officers and (ii) reviews and recommends to the Board for approval,
compensation strategies, plans and policies, including short and long-term
incentive compensation plans, and employee welfare benefit plans.
The Chief Executive Officer ("CEO") recommends, based on the Company's
performance evaluation policies and procedures, the compensation to be paid to
executive officers of the Company other than himself; final determination of the amount of
compensation rests with the Compensation Committee. The CEO does not participate
in discussions about his compensation matters or in the making of
recommendations about his compensation. The Compensation Committee reviews and
approves the compensation of the CEO according to established performance
evaluation guidelines.guidelines and competitive survey data. The Board of Directors
reviews the Compensation Committee's report to ensure that the CEO is providing
the best leadership for the Company. To assist it in making its determination,
the Compensation Committee regularly retains the services of third party
compensation consultants.
Compensation Philosophy
The objectives of the Company's executive compensation program are to (a)
attract, motivate and retain highly competent executives by providing total
compensation that is competitive with compensation at other comparably-sized, well-managed companies in general
industry and the restaurant industry, (b) provide incentives for achieving the
Company's short-term and long-term
financial goals, and (c) align the financial interests
of the Company's executives with those of its stockholders.
19
The Compensation Committee comparesreviews total compensation (base salary plus
annual bonus) with a selected groupto general industry and restaurant industry companies of peer companies consisting of companies withsimilar
financial and/or operational scope, which Jackmay not be identical to the Restaurant
Peer Group included in the Box Inc. competes to attract and retain talented
individuals.Performance Graph on page 22. The Company's programs
are designed to deliver (i) salary, incentive compensation, and benefits atthat
approximate the median comparison level of our competitive peer group and (ii) incentivethe market. Incentive compensation is
based upon the financial performance of the Company. Survey information is gathered and
assessedcompensation targets are reviewed by a third party compensation consulting firm,
Towers Perrin.
The Company's executive officer compensation program is comprised of base
salary, bonus opportunity, long-term incentive compensation and other benefits
such as health insurance.
10
Base Salary
It is the Company's objective to maintain base salaries that approximate
the median level of compensation paid to senior executives with comparable
qualifications, experience and responsibilities at other companies engaged in
the same or similar businesses.business. Salary ranges and individual salaries for
executives are reviewed annually. In approving individual salaries, the
Committee considers job responsibilities, individual performance, business
results, labor market conditions, the Company's budget guidelines and current
compensation as compared to market practice.
Annual Incentive
The Performance Bonus Plan provides for a bonus as a percent of base
salary which is dependent upon the Company's performance level achieved and
the job classification of the individual. The purpose of the Performance Bonus Plan is to encourage high levels of
performance and the loyalty of certain key employees, executives and officers of
the Company and its affiliates, by providing incentives, which are aligned with
Company performance. The Performance Bonus Plan provides for a bonus as a
percent of base salary, which is dependent upon the Company's performance bonuseslevel
achieved, and the job classification of the individual. No payout occurs unless
the Company achieves certain threshold performance objectives. Based on the
failure to achieve the thresholds set for fiscal 2003, no performance bonus
amounts were paid to the named executives for fiscal 2002 are2003 as reflected in the
Summary Compensation Table.
Long-Term Incentive 2002Plans
The 2002 Stock Incentive Plan (the "Plan""2002 Plan,"), approved by shareholdersstockholders
in February 2002, formshas formed the basis for the Company's long-term incentive
plan for officers and key management employees. The proposed 2004 Stock
Incentive Plan is intended to replace the 2002 Plan. The purpose of the Planthis plan is
to furnish an incentive to key employees, executives and officers of the
Company, its subsidiaries and affiliates to increase profits, promote retention,
and provide an opportunity to earn a bonusacquire equity in the Company based on theCompany
financial performance of the Company.performance. Additionally, during 2003 there will bea greater emphasis was placed
on stock ownership by the executive officers by awarding a portionthrough awards of restricted stock as
part of certain officers' annual incentive compensation in the form of restricted stock
units as part of the Company's long-term incentive program.compensation. The
restricted stock will not be distributed until retirement or termination from
the Company. Upon retirement or termination, the number of restricted stock
shares vested will be determined based on years of service of the individual as
of the date of such retirement or termination. Restricted stock will be subject
to forfeiture in the case of termination of employment under certain
circumstances. Awards will become vested, (eithereither partially or completely)completely, and
shares of common stock of the Company released from an escrow account maintained
by the Company only upon retirement or termination. The Compensation Committee
believes this program will further align the interests of thethese officers with
those of the stockholders and will also further encourage retention of these key personnel.their retention.
Stock Ownership Guidelines
In keeping with its belief that companies should align the financial
interests of executives to those of stockholders, the Board has established
stock ownership guidelines. Under these guidelines, the officers (Senior Vice
Presidents and above) are expected to own Jack in the Box Inc. common stock
valued at between one and five times their individual base salary amounts,
depending uponon their position in the Company.
20
Section 162(m)
Compensation decisions for executive officers are made with full
consideration of the Internal Revenue Code Section 162(m) implications. (SectionSection
162(m) limits the deductibility of compensation paid to certain executive
officers in excess of $1.0 million, but excludes "performance-
based""performance-based"
compensation from this limit.) The Company's Performance Bonus Plan and the 2002its Stock
Incentive PlanPlans are intended to qualify under Section 162(m).
2003 Stock Option Grants
During fiscal 2002,2003, options to purchase the following amounts of the
Company's common stock were granted to Messrs. Nugent, Williams, Hoffner, Schultz, and
Schultz,Schauf and Ms. Lang: 113,000, 47,000, 45,000, 27,000170,000; 40,900; 35,000; 42,600 and 20,00040,900 shares,
respectively. All options were granted at 100% of the market price of the
Company's common stock on the date of grant. Beginning one year from the date of
grant, 20%25% of the total number of shares subject to the option will become
exercisable annually. Options serve to directly align the interests of
executives, including the Chief Executive Officer,CEO, with yourstockholder interests, since such executives
will not realize a benefit unless and until the market price of the Company's
common stock increases.
11
2003 Restricted Stock Grants
During fiscal 2003, the following amounts of restricted stock were granted
to Messrs. Hoffner and Schauf, and Ms. Lang: 55,000, 50,000 and 55,000 shares of
common stock, respectively. The restricted stock is subject to continued
employment and vests upon termination, subject to certain requirements, or
retirement. In the event of a change of control of the Company, the restricted
stock is considered 100% vested.
CEO Compensation
Mr. Nugent became Chairman of the Board on February 23, 2001 and has been
Chief Executive Officer of the Company since April 1, 1996. His base salary as
of December 24, 2001,November 25, 2002, was increased approximately 5.7%4.5% over his previous base
salary in order to maintain his salary at approximately the mid-range of
competitive industrymarket practice. An annual cash incentive award is payable to Mr.
Nugent if the Company achieves or exceeds specified earnings and return on
investment goals. Mr. Nugent's bonus for fiscal 2002 represents approximately 60% of
the potential cash bonus payable underBased on the Company's Performance Bonus
Plan. Infinancial performance in fiscal 2002, approximately 37% of2003,
Mr. Nugent's compensation wasNugent received no incentive pay.
This report is submitted by the Compensation Committee of the Board of
Directors.compensation.
Murray H. Hutchison, Chair
Anne B. Gust
Alice B. Hayes
Michael W. Murphy
This report willis not be deemed to be incorporated by reference in any filing by
the Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
report by reference.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee, Alice B. Hayes, Murray H.
Hutchison and Michael W. Murphy are outside directors and do not have
compensation committee interlocks.21
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of the
Company's Common Stock at September 30th of each year to the yearly weighted
cumulative return of a Restaurant Peer Group Index and to the Standard & Poor's
("S&P") 500 Index for the same period. The comparison assumes $100 was invested
on September 30, 19971998 in the Company's Common Stock and in each of the
comparison groups, and assumes reinvestment of dividends. The Company paid no
dividends during these periods.
[A LINE GRAPH CHART WAS INCLUDED HEREIN WHICH GRAPHICALLY REFLECTED
THE FOLLOWING DATA]
1997================================================================================
1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- ----2003
================================================================================
Jack in the Box Inc...................Inc............ $100 $183 $233 $214 $249 $221$159 $137 $178 $145 $113
S&P 500 Index ......................................... 100 209 239 158 216 192128 145 106 84 105
Restaurant Peer Group (1)................... 100 190 189 178 207 21899 86 119 131 166
================================================================================
- ---------------------------------------------------
(1) The Restaurant Peer Group Index is comprised of the following companies:
Applebee's International, Inc.; Bob Evans Farms, Inc.; Brinker
International, Inc.; CBRL Group, Inc.; CKE Restaurants, Inc.; Luby's, Inc.;
Papa John's International, Inc.; Ruby Tuesday, Inc.; Ryan's Family
Steakhouse, Inc. and Sonic Corp.
1222
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 13, 2002,12, 2003, information with
respect to beneficial ownership of voting securities of the Company by (i) each
person who is known to us to be the beneficial owner of more than 5% of any
class of the Company's voting securities, (ii) each director and nominee for
director of the Company, (iii) each executive officer listed in the Summary
Compensation Table herein and (iv) all directors and executive officers of the
Company as a group. Each of the following stockholders has sole voting and
investment power with respect to shares beneficially owned by such stockholder,
except to the extent that authority is shared with spouses under applicable law,
or as otherwise noted.
Number of Shares
of Common Stock Percent of
Name Beneficially Owned(1) Class(1)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments (2)................. 5,864,116 15.8%
Franklin Resources, Inc..................... 5,401,500 14.9%
Barclays Global Investors, N.A. (3)............. 2,510,100 6.8%......... 2,583,431 7.1%
Robert J. Nugent......................... 747,591 2.0%Nugent............................ 853,271 2.3%
Edward W. Gibbons (4).................... 433,336....................... 440,836 1.2%
Kenneth R. Williams (5).................. 212,760 *
Paul L. Schultz.......................... 149,205Schultz............................. 177,735 *
Lawrence E. Schauf.......................... 137,730 *
Linda A. Lang............................ 100,438Lang............................... 122,943 *
L. Robert Payne.......................... 95,740 *
Paul T. Carter (6)....................... 86,050Payne............................. 120,240 *
John F. Hoffner.......................... 72,000Hoffner............................. 99,225 *
Michael E. Alpert........................ 71,100 *
Jay W. Brown............................. 58,600Alpert........................... 78,600 *
Murray H. Hutchison...................... 28,600Hutchison......................... 36,100 *
Alice B. Hayes........................... 20,600Hayes.............................. 28,100 *
Michael W. Murphy........................... 7,500 *
Anne B. Gust............................. 0 *
Michael W. Murphy........................Gust................................ 0 *
All directors and executive
officers as a group (21(22 persons)....................... 2,352,180 6.2%........... 2,441,693 6.5%
- -----------------------------------------------------
* Less than one percent
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such person
has the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above on a given date, any security which such person or
persons has the right to acquire within 60 days after such date is deemed
to be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Messrs. Nugent,
Gibbons, Williams, Schultz, Schauf, Payne,
Carter, Hoffner, Alpert, BrownHutchison and Hutchison,Murphy, and
Ms. Lang and Dr. Hayes have the right to acquire through the exercise of
stock options within 60 days of the above date, 242,820, 68,600, 151,760, 108,860,
68,600, 68,600, 17,000, 68,600, 48,600, 28,600, 45,438348,500, 76,100, 137,390,
82,730, 76,100, 44,225, 76,100, 36,100, 7,500, 67,943 and 18,600,26,100,
respectively, of the shares reflected above as beneficially owned. As a
group, all directors and executive officers have the right to acquire
through the exercise of stock options within 60 days of the above date
1,097,0381,222,279 of the shares reflected above as beneficially owned. In addition,
the shares reflected as beneficially owned by Mr.Messrs. Schauf and Hoffner,
and Ms. Lang include 50,000, 55,000 and 55,000 shares, eachrespectively, for
restricted stock awards
issued on November 8, 2002.awards. As a group, the shares reflected as beneficially
owned by all directors and executive officers include 217,600242,600 shares offor
restricted stock awards. Restricted stock shares may be voted by such
executive officers; however, the shares are not available for sale or other
disposition until the expiration of vesting restrictions upon retirement or
termination.
(2) FMR Corp., on behalf of certain of its direct and indirect subsidiaries,
Fidelity Management & Research Company, FMR Co., Inc. and Fidelity
Management Trust Company, (collectively "Fidelity"), indirectly held and had investment discretion
with respect to 5,864,1165,401,500 shares as of December 18, 2002.November 30, 2003. Fidelity
had sole voting discretion with respect to
246,946Management & Research Company and FMR Co., Inc. were the beneficial owners
of such5,298,900 shares and Fidelity Management Trust Company was the
beneficial owner of 102,600 shares. The address of Fidelity Management &
Research Company, FMR Co., Inc. and Fidelity Management Trust Company is 82
Devonshire Street, Boston, Massachusetts 02109.
1323
(3) According to its Schedule 13F-HRForm 13F filing as of September 30, 2002, Franklin
Advisors, Inc., a subsidiary of Franklin Resources, Inc.,2003, Barclays Global
Investors, N.A. exercised shared investment discretion andwith respect to
2,583,431 shares of which it had sole voting power with respect to
2,510,1002,405,142 shares and no voting power with respect to 178,289 shares. The
address of Franklin Resources, Inc.Barclays Global Investors, N.A. is One Franklin Parkway,45 Fremont Street, San
Mateo,Francisco, California 94403.94105.
(4) Includes 50,000 shares owned by Mr. Gibbons' wife.
(5) Mr. Williams retired from the Company and the Board effective December
31, 2002.
(6) Mr. Carter resigned from the Board effective February 14, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, each
executive officer, director and beneficial owner of more than 10% of the
Company's Common Stock is required to file certain forms with the Securities and
Exchange Commission ("SEC").Commission. A report of beneficial ownership of the Company's Common
Stock on Form 3 is due at the time such person becomes subject to the reporting
requirements and a report on Form 4 or Form 5 must be filed to reflect changes
thereafter. Based on written statements and copies of forms provided to us by
persons subject to the reporting requirements, we believe that all such reports
required to be filed by such persons during fiscal 20022003 were filed on a timely
basis.
OTHER BUSINESS
We are not aware of any other matters to come before the Annual Meeting. If
any matter not mentioned herein is properly brought before the Annual Meeting,
the persons named in the enclosed proxy will have discretionary authority to
vote all proxies with respect thereto in accordance with their best judgment.
Pursuant to the Company's Bylaws, in order for a stockholder to present
business at the Annual Meeting or to make nominations for election of a
director, such matters must be filed in writing with the Secretary of the
Company in a timely manner. To be timely, a stockholder's notice to present
business at the Annual Meeting must be delivered to the principal executive
offices of the Company not less than one hundred twenty (120) days in advance of
the first anniversary of the date that the Company's Proxy Statement was first
released to stockholders in connection with the previous year's annual meeting,
except if the date of the annual meeting is more than thirty (30) calendar days
earlier than the date contemplated at the time of the previous years' Proxy
Statement, notice must be received not later than the close of business on the
tenth (10th) day following the day on which the date of the annual meeting is
publicly announced. To be timely, a stockholder's notice to make nominations for
the election of a director must be delivered to the principal executive offices
of the Company not less than ninety (90) nor more than one hundred and twenty
(120) days prior to the meeting as originally scheduled; provided, however, that
in the event that less than 100 days' notice or prior public disclosure of the
date of the meeting is made to stockholders, notice by the stockholder must be
received not later than the close of business on the 10th day following the day
on which notice of the date of the Annual Meeting was mailed or public
disclosure was made. Such noticenotices shall set forth, as to the stockholder giving
notice, the stockholder's name and address as they appear on the Company's
books, and the class and number of shares of the Company which are beneficially
owned by such stockholder. Additionally, (i) with respect to a stockholder's
notice regarding a nominee for director, such notice shall set forth, as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors pursuant to the
Securities Exchange Act of 1934, as amended (including such person's written
consent to being named in the Proxy Statement as a nominee and to serving as a
director if elected); and (ii) with respect to a notice relating to a matter the
stockholder proposes to bring before the Annual Meeting, a brief description of
the business desired to be brought before the meeting and any material interest
of the stockholder in such business.
24
The Nominating and Governance Committee considers suggestions from many
sources, including stockholders, regarding possible candidates for director. In
order for stockholder suggestions regarding possible candidates for director to
be considered by the Nominating and Governance Committee, such information
should be provided to the Committee in writing at least one hundred twenty (120)
days prior to the date of the next scheduled annual meeting. Stockholders should
include in such communications the name and biographical data of the individual
who is the subject of the communication and the individual's relationship to the
stockholder. The Nominating and Governance Committee does not set specific
criteria for directors but believes the Company is well served when its
directors bring to the Board a variety of experience and backgrounds, evidence
leadership in their particular fields, demonstrate the ability to exercise sound
business judgment and have substantial experience in business and outside the
business community in, for example, the academic, public or scientific
communities. The Nominating and Governance Committee considers stockholder
nominees for director in the same manner as nominees for director from other
sources. During fiscal 2003, the Company paid approximately $400 to The
Alexander Group, an executive search firm, for its assistance in identifying
potential nominees for director.
Stockholders may send any recommendations for director nominees or other
communications to the Board of Directors or any individual director at the
following address. All communications received are reported to the Board or the
individual directors:
Board of Directors (or Nominating and Governance
Committee or name of individual director)
c/o Corporate Secretary
JACK IN THE BOX INC.
9330 Balboa Avenue
San Diego, CA 92123
STOCKHOLDER PROPOSALS FOR 20042005 ANNUAL MEETING
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's proxy solicitation materials to be distributed in
connection with the Company's Annual Meeting of Stockholders to be held in the
year 20042005 must set forth such proposal in writing and file it with the Secretary
of the Company on or before October 17, 2003.September 11, 2004. Any such proposals must comply
in all respects with the rules and regulations of the Securities and Exchange
Commission. 14
2002 ANNUAL REPORT AND FORM 10-K
A copy of the 2002 Annual Report to Stockholders accompanies this Proxy
Statement. The Company's Annual Report on Form 10-K for the year ended
September 29, 2002, as filed with the Securities and Exchange Commission,
contains detailed information concerning the Company and its operations which
is not included in the 2002 Annual Report. A COPY OF THE 2002 FORM 10-K WILL BE
FURNISHED TO YOU WITHOUT CHARGE UPON REQUEST IN WRITING TO: Jack in the Box
Inc., Treasury Department, 9330 Balboa Avenue, San Diego, California 92123-1516.
By order of the Board of Directors,
LAWRENCE E. SCHAUF
Lawrence E. Schauf
Secretary
15See "Other Business" above.
25
Exhibit A
JACK IN THE BOX INC.
AUDIT COMMITTEE CHARTER
Adopted July 16, 1999
Amended and Adopted June 6, 2000
Amended and Adopted August 3, 2001
Amended and Adopted August 2, 2002
Amended and Adopted September 11, 2003
A. AUTHORITY
The Board of Directors ("the Board") of Jack in the Box Inc., by resolution
dated November 1, 1985, established the Audit Committee.Committee (the "Committee").
B. PURPOSE
The Audit Committee is appointed by the Board to (a) assist the Board of
Directors in monitoring (1)fulfilling its
oversight responsibilities by reviewing and reporting to the Board on (i) the
integrity of the Corporation's financial statements, (2)reports, and (ii) the Corporation's compliance with
legal and regulatory requirements (3)requirements. The Committee will also review the
qualifications, independence and performance, and approve the terms of
engagement of the Corporation's independent auditor's qualifications and independence (4)auditor, review the performance of
the Corporation's internal audit function and external
auditors and (b) prepare the reportany reports required to be prepared byof
the Audit Committee under the rules of the Securities and Exchange CommissionCommission. ("SEC")
for inclusion in the Corporation's annual Proxy Statement.C. COMMITTEE MEMBERSHIP
The Committee will have a minimum of three members.
o1. All Committee members will meet the independence and experience
requirements of the New York Stock Exchange. In particular,Exchange and the ChairSEC. Each member of the
Audit
Committee will have accounting or relatedmust be able to read and understand fundamental financial
management expertise. A
summarystatements, including a balance sheet, income statement and cash flow
statement. In addition, at least one member should be an "audit committee
financial expert" as determined by the Board in accordance with the rules
of NYSE independence requirements is attached.
othe SEC.
2. No member of the Audit Committee may receive any compensation from the
Corporation other than (1)(i) director's fees (including fees for service as a
member of any Committee of the Board) and (2)(ii) a pension or other deferred
compensation for prior service that is not contingent on future service.
o3. No director may serve as a member of the Audit Committee if such director
simultaneously serves on the Audit Committeesaudit committees of more than two other public
companies unlesswithout prior disclosure to the Committee and the Board of Directors determinesand an
affirmative determination by the Board that such simultaneous service woulddoes
not impair the ability of such director to effectively serve on the
Audit
Committee.
o No director may serve asCommittee, which determination will be disclosed in the annual proxy
statement.
4. The members and the Chair or as a voting member of the Audit Committee if
such director is a beneficial owner of 20% or morewill be appointed by the Board
after considering the recommendations of the Corporation's
voting stock (orNominating and Governance
Committee and will serve until their successors are duly elected and
qualified or until their earlier resignation or removal. If a Chair is not
appointed by the Board, the members of the Committee may designate a general partner, controlling shareholder or officerChair
by majority vote of such beneficial owner) but such a director may serve as a non-voting member.
othe full Committee.
5. The Board will appoint Auditmay fill vacancies on the Committee members and a Chair after considering the
recommendations of the Nominating and Governance Committee.
o The Board may fill vacancies on the Committee.
o6. The Board may remove a Committee member from the membership of the Committee at any time with
or without cause.
A-1
D. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The AuditCorporation will provide appropriate funding, as determined by the
Committee, is grantedto permit the authorityCommittee to investigateperform its duties under this Charter, to
compensate its advisors and to compensate any activityregistered public accounting firm
engaged for the purpose of rendering or issuing an audit report or related work
or performing other audit, review or attest services for the Corporation andCorporation. The
Committee, at its subsidiaries, and all employees are
directed to cooperate as requested by members of the Audit Committee. The Audit
Committee may request any officer or employee of the Corporation or the
Corporation's internal counsel, outside counsel or independent auditor to
attend a Committee meeting. The Audit Committeediscretion, has the authority to retaininitiate special
investigations and hire special legal, accounting or other consultantsoutside advisors or
experts to assist the Committee, as it deems necessary to advise the Audit
Committee.fulfill its duties
under this Charter.
The outsideindependent auditors for the Corporation are accountable to the Board and
the Audit Committee as representatives ofand report directly to the shareholders.
Committee.
In carrying out its responsibilities, the Board of Directors
believes the policies and
procedures of the Audit Committee shallshould remain flexible, in order to best react to
changing conditions.
1. Oversight of the Independent Auditor
------------------------------------
The Audit Committee will:
o Select, retaina. Be directly and when appropriate, terminatesolely responsible for the Corporation'sappointment, termination,
compensation, retention and oversight of the independent auditors.
o Approveauditor,
including resolution of disagreements between management and the
independent auditor regarding financial reporting.
b. In advance of the engagement of the independent auditor, approve all
audit services, non-audit services, fees and other terms of allengagement
in accordance with SEC rules. The Committee may establish pre-approval
policies and procedures for audit engagements and all significant
non-audit engagementsservices provided that
such policies and procedures specify that the Committee will be
promptly informed as to each such service for which the independent
auditor is engaged pursuant to such policies and procedures.
c. Periodically review and discuss with the Corporation's independent auditors.
o Reviewauditor (i) the
annualmatters required to be discussed by Statement on Auditing Standards
No. 61, as amended, and (ii) any formal written statementstatements received
from the outsideindependent auditor, consistent with and in satisfaction of
Independence Standards Board Standard No. 1, as amended.
d. Annually obtain and review a report from the Corporation describing:independent auditor
describing (i) the auditor's internal quality control procedures;procedures, (ii)
any material issues raised by the most recent internal quality-controlquality control
review or peer review of the auditors, or by any inquiry or investigation by
governmental or professional authorities within the preceding five
years respecting one or more independent audits carried out by the
auditors,firm, and any steps taken to deal with any such issues;issues, and (to assess the auditors'
independence)(iii) all
relationships between the outside auditorsindependent auditor and the Corporation, including each non-audit service provided to the CorporationCorporation.
e. Annually review and the matters set forth in Independence Standards Board # 1.
o Reviewevaluate the qualifications, performance and
independence of the independent auditor, including a review and
evaluation of the lead partner of the independent auditor, team and report
to the audit firm itself.Board on the Committee's conclusions together with any
recommendations for action. In making this review, the Audit Committee will
take into account the assessmentsopinions of management and the Corporation's
internal auditors.
o Evaluateauditor.
f. Consider whether it is appropriatethere should be rotation of the audit firm, and
report to rotatethe Board on the Committee's conclusions. Consult with the
independent auditor to assure the rotation, every five years, of the
lead audit partner orhaving primary responsibility for the audit firm itself.
oand the
audit partner responsible for reviewing the audit.
g. Meet with the independent auditorsauditor and financial management of the
Corporation, prior to the audit, to review the scope of the proposed
audit for the current year, staffing of the audit and the audit
procedures to be utilized, and at the conclusion thereof,of the audit, review such audit
including any comments or recommendations of the independent auditors.
oauditor.
A-2
h. Review and discuss with the independent auditor any reports or communications (and
management's and/or the internal auditor's responses) required by or referred
to in SAS #61, including any problems or
difficulties the auditor may have encountered and any management letter provided byduring the auditor and the
Corporation's response to that letter. Such review should include:course of an
audit, including
(1) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to requested information, and any significant disagreements with
management.
(2) Any changes required in the planned scope of the audit.
(3) Any accounting adjustments proposed by the auditor but "passed"
(as immaterial or otherwise).
o(4) Any other material communication provided by the auditor to the
Corporation's management.
i. At its discretion, the Committee may review with the outside auditor both (a)(i)
communications between the audit team and the audit firm's national
office respecting any significant auditing or accounting issues
presented by the engagement and (b)(ii) the internal audit department
responsibilities, budget and staffing.
oj. Obtain assurance from the outside auditors assuranceauditor that the annual audit was
conducted in a manner consistent with Section 10A of the Securities
Exchange Act of 1934, as amended, which sets forth certain procedures
to be followed in any audit of financial statements required under the
Securities Exchange Act of 1934.
o Review with management and the independent auditors, the Corporation's annual
audited financial statements and quarterly financial statements, including
(a) the Corporation's disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operation" ("MD&A"), (b) major issues
regarding accounting principles and auditing standards and financial
statement presentation and (c) the independent auditor's judgment as to the
accuracy of financial information, adequacy of disclosures and quality of the
Corporation's accounting principles.
o Review ask. As needed, review an analysis prepared by management and/or the
independent auditor of significant financial reporting issues and
judgments made in connection with the preparation and presentation of
the Corporation's financial statements, including an analysis of the
effect of alternative GAAP methods on the Corporation's financial
statements and a description of any transactions as to which
management obtained Statement on Auditing Standards #50No. 50 letters.
ol. Set policies for the Corporation's hiring of employees or former
employees of the independent auditor who were engaged on the
Corporation's audit account.
2. Review of Financial Reporting Policies and Procedures
-----------------------------------------------------
The Committee will:
a. Review and discuss with management and the independent auditor, the
Corporation's annual audited financial statements and quarterly
financial statements, and any certification report, opinion or review
rendered by the independent auditor, including (i) the Corporation's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operation" ("MD&A"), (ii) major issues
regarding accounting principles, auditing standards and financial
statement presentation, (iii) the independent auditor's judgment as to
the accuracy of financial information, adequacy of disclosures and
quality of the Corporation's accounting principles. Recommend to the
Board whether the audited financial statements of the Corporation
should be included in the Corporation's annual report on form 10K.
b. Review and discuss with the independent auditor the critical
accounting policies and practices used by the Corporation, alternative
treatments of financial information within generally accepted
accounting principles that the independent auditor has discussed with
management, the ramification of the use of such alternative
disclosures and treatments and the treatment preferred by the
independent auditor.
c. Review with management and the independent auditorsauditor the Corporation's
earnings press releases as well as financial information and earnings
guidance provided to analysts and rating agencies.
oagencies, including any "pro
forma" or adjusted financial information.
A-3
d. Review with management and the independent auditor any correspondence
with regulators or governmental agencies and any employee complaints
or published reports whichthat raise material issues regarding the
Corporation's financial statements or accounting policies.
o Set policies for the Corporation's hiring of employees or former employeese. Review with management its assessment of the independent auditor who were engaged on the Corporation's account.
o Annually review with the independent auditors,effectiveness and
adequacy of the Corporation's internal auditors,controls and financial and accounting personnel the adequacy and
effectiveness of the accounting and financial controls of the Corporation,
and any special audit steps adopted in light of material control deficiencies,
and make or review any
recommendations for the improvement of such internal control procedurescontrols or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis will be given to the adequacy of such
internal controls to expose payments, transactions or procedures that
might be deemed illegal or otherwise improper.
of. Review the internal audit function of the Corporation including
theInternal Audit responsibilities, budget, staffing, independence of the
Internal Audit function, the ability of the functionInternal Audit to raise issues
to the appropriate level of authority, the proposed audit plans for
the coming year, and the coordination of such plans with the
independent auditors.auditor. The Committee should request copies or summaries
of the significant reports to management prepared by the internal
auditing department and management's responses. Review recommendations
and findings of the internal auditorsauditor to assure that appropriate
actions are taken by management.
og. Review the appointment and replacement of the senior internal auditing
executive.
oauditor.
h. Review with management and the independent auditor the effect of
regulatory and accounting initiatives as well as the impact of
off-balance sheet transactions or structures on the Corporation's
financial statements.
o Meet periodicallyresults and operations.
i. Review and approve significant changes to the Corporation's selection
or application of accounting principles and practices as suggested by
the independent auditor, internal auditor or management.
3. Risk Management, Related Party Transactions, Legal Compliance and Ethics
------------------------------------------------------------------------
The Committee will:
a. Discuss with management to review the Corporation's policies with respect to
risk assessment and risk management, the Corporation's major financial
risk exposures and the steps management has taken to monitor and
control such exposures.
o Review and approve significant changes to the Corporation's selection or
application of accounting principles and practices as suggested by the
independent auditor, internal auditor or management.
ob. Review with the Corporation's General Counsel (a)(i) legal matters that
may have a material impact on the financial statements or reflect upon
the Corporation's compliance policies, (b)(ii) any material reports or
inquiries received from regulators or governmental agencies, (c)(iii)
material pending legal proceedings involving the Corporation and (d)(iv)
other contingent liabilities.
oc. Conduct or authorize an appropriate review of any related party
transactions deemed significant by the Committee.
od. Review reports and disclosures of insider and affiliated party
transactions.
e. Review the Corporation's policies and procedures regarding compliance
with applicable laws and regulations and withregulations.
f. Periodically review the Corporation's Codeethics code or "Code of ConductConduct"
(as such Codecode is set forth in the booklet entitled "TRUST" and other
Corporation policies.)
o Receivepolicies). Provide for and review prompt disclosure to the
public of any change in, or waiver of, such ethics code.
g. Review the Corporation's procedures for (i) the receipt, retention and
treatment of complaints regarding accounting, internal accounting
controls or auditing matters, and (ii) the confidential, anonymous
submission by employees of the Corporation of concerns regarding
questionable accounting or auditing matters.
h. Review quarterly reports from the Corporation's ethics compliance
officer.
o Review reportsA-4
i. As requested by the Board, review and disclosuresinvestigate conduct alleged by
the Board to be in violation of insiderthe Ethics Code and affiliated party transactions.
oadopt as necessary
remedial, disciplinary or other measures with respect to such conduct.
j. Conduct or authorize an investigation of any matter brought to its
attention within the scope of its duties, with the power to retain
outside counsel for this purpose if, in its judgment, that is
appropriate. Report to the Board of Directors the results of its
investigation and make such recommendations, as it may deem
appropriate.
o The Audit Committee will reviewk. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
o The Audit Committee will annuallyl. Annually review its own performance.
The function of the Audit Committee is oversight. It is not the duty of the
Audit Committee to plan or conduct audits or to determine that the
Corporation's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is the
responsibility of management and the Independent Auditor. Nor is it the duty of
the Audit Committee to resolve disagreements, if any, between management and
the independent auditor or to assure compliance with laws and regulations and
the Corporation's Code of Conduct.E. COMMITTEE MEETINGS AND ACTION
o1. The majority of the members of the Audit Committee shallwill constitute a
quorum.
o2. The action of a majority of those present at a meeting at which a quorum is
present will be the act of the Committee.
o3. Any action required to be taken at a meeting of the Committee will
nonetheless be deemed the action of the Committee if all of the Committee
members executed, either before or after the action is taken, a written
consent and the consent is filed with the Corporate Secretary.
o4. The Chair will make regular reports to the Board.
o5. The Committee may form and delegate authority to subcommittees or to one or
more members of the Committee when appropriate.
o6. The Committee Secretary, (who will be the Corporate Secretary)or his designee, will give notice and keep minutes
of all Committee meetings.
o7. The Committee will meet as often as may be deemed necessary or appropriate
in its judgment, generally four times each year,but not less frequently than quarterly, either in person
or telephonically.
o8. The Committee will meet with the independent auditor and with management on
a quarterly basis to review the Corporation's financial statements and
financial reports.
9. The Committee will meet separately with management, the independent auditorsauditor
and Internal Auditor, at least quarterly.
oas appropriate.
10. The Committee Secretary will prepare a preliminary agenda. The Chair will
make the final decision regarding the agenda.
o11. The agenda and all materials to be reviewed at the meetings should be
received by the Committee members as far in advance of the meeting day as
practicable.
o12. The Committee Secretary should coordinate all mailings to the Committee
members, to the extent practicable.
o13. The Committee may perform any other activities consistent with this
Charter, the Corporation's Bylaws and governing law as the Board deems
necessary or appropriate.
A-5
Exhibit B
JACK IN THE BOX INC.
POLICY FOR AUDIT COMMITTEE PRE-APPROVAL OF SERVICES
Jack in the Box Inc. (the Company) and its Audit Committee are committed to
ensuring the independence of the Auditor, both in fact and in appearance.
Accordingly, all services to be provided by the independent auditors pursuant to
this policy must be as permitted by Section 10A of the Security Exchange Act of
1934.
The Audit Committee hereby pre-approves services to be rendered by the Company's
auditor as follows:
Audit Related Services
Subject to the limitations described below, the Audit Committee pre-approves the
following services that management may request to be performed by the
independent auditor that are an extension of normal audit work or enhance the
effectiveness of the auditors' procedures:
1) Audits of employee benefit plans
2) Audits of Jack in the Box Inc. legal entities
3) Consultation regarding the implementation of technical accounting standards
4) Due diligence assistance on acquisitions
5) Services related to the independent auditors' consent to the use of its
audit opinion in documents filed with the Securities Exchange Commission
Tax Compliance Services
Subject to the limitations described below, the Audit Committee pre-approves the
following tax compliance service that management may request to be performed by
the independent auditor that are an extension of normal audit work and are not
inconsistent with the attestation role of the auditor:
1) Review of federal, state or other income tax returns
2) Due diligence tax advice related to prospective acquisitions
3) Requests for rulings or technical advice from taxing authorities
4) Assistance in complying with proposed or existing tax regulations
Pre-Approval Limitations
The non-audit services detailed above shall only be pre-approved by the Audit
Committee subject to limitations as follows:
1) Each individual service shall not exceed $25,000.
2) All services, in the aggregate, shall not exceed $50,000 in any fiscal year
3) Each service shall be reported to the Audit Committee Chair prior to its
inception
4) All new services shall be reported to the entire Audit Committee at each of
its regular quarterly meetings
Other Services
For all services to be performed by the independent auditor that are not
specifically detailed above, an engagement letter confirming the scope and terms
of the work to be performed shall be submitted to the Audit Committee for
pre-approval. In the event that any modification of an engagement letter is
required, such modification must also be pre-approved.
B-1
Authorized Delegate
The Audit Committee delegates to its Chairperson the authority to pre-approve
proposed services as described above in excess of the fee limitations on a
case-by-case basis provided that the entire Committee is informed of the
services being performed at its next scheduled meeting.
Competitive Bidding Process
Nothing in this policy should be read to imply that the independent auditors
have a preferred supplier arrangement in respect to the services listed above.
Certain services, by their nature, may only be performed by the independent
auditor (i.e. issuing a consent or providing guidance on implementation of
GAAP). For all other services, it would generally be expected that any
significant engagements for services be subject to a competitive review process.
B-2
Exhibit C
JACK IN THE BOX INC.
2004 STOCK INCENTIVE PLAN
INDEX TO 2004 STOCK INCENTIVE PLAN
1. Establishment, Purpose and Term of Plan................................C-3
1.1 Establishment....................................................C-3
1.2 Purpose..........................................................C-3
1.3 Term of Plan.....................................................C-3
2. Definitions and Construction...........................................C-3
2.1 Definitions......................................................C-3
2.2 Construction.....................................................C-6
3. Administration.........................................................C-6
3.1 Administration by the Committee..................................C-6
3.2 Authority of Officers............................................C-6
3.3 Powers of the Committee..........................................C-6
3.4 Administration with Respect to Insiders..........................C-7
3.5 Committee Complying with Section 162(m)..........................C-7
3.6 No Repricing.....................................................C-7
3.7 Indemnification..................................................C-7
4. Shares Subject to Plan.................................................C-8
4.1 Maximum Number of Shares Issuable................................C-8
4.2 Adjustments for Changes in Capital Structure.....................C-8
5. Eligibility and Award Limitations......................................C-8
5.1 Persons Eligible for Incentive Stock Options.....................C-8
5.2 Persons Eligible for Other Awards................................C-9
5.3 Fair Market Value Limitation on Incentive Stock Options..........C-9
5.4 Award Limits.....................................................C-9
5.5 Performance Awards...............................................C-9
6. Terms and Conditions of Options........................................C-10
6.1 Exercise Price...................................................C-10
6.2 Exercisability and Term of Options...............................C-10
6.3 Payment of Exercise Price........................................C-10
6.4 Effect of Termination of Service.................................C-11
6.5 Transferability of Options.......................................C-11
7. Terms and Conditions of Stock Appreciation Rights......................C-11
7.1 Types of SARs Authorized.........................................C-11
7.2 Exercise Price...................................................C-11
7.3 Exercisability and Term of SARs..................................C-12
7.4 Exercise of SARs.................................................C-12
7.5 Deemed Exercise of SARs..........................................C-12
7.6 Effect of Termination of Service.................................C-12
7.7 Nontransferability of SARs.......................................C-12
C-1
8. Terms and Conditions of Restricted Stock Awards........................C-12
8.1 Purchase Price...................................................C-13
8.2 Purchase Period..................................................C-13
8.3 Payment of Purchase Price........................................C-13
8.4 Vesting and Restrictions on Transfer.............................C-13
8.5 Voting Rights; Dividends.........................................C-14
8.6 Effect of Termination of Service.................................C-14
8.7 Nontransferability of Restricted Stock Award Rights..............C-14
9. Terms and Conditions of Performance Awards.............................C-14
9.1 Initial Value of Performance Shares and Performance Units........C-14
9.2 Establishment of Performance Goals and Performance Period........C-14
9.3 Measurement of Performance Goals.................................C-14
9.4 Determination of Final Value of Performance Awards...............C-15
9.5 Dividend Equivalents.............................................C-16
9.6 Payment in Settlement of Performance Awards......................C-16
9.7 Restrictions Applicable to Payment in Shares.....................C-16
9.8 Effect of Termination of Service.................................C-16
9.9 Nontransferability of Performance Awards.........................C-16
10. Standard Forms of Award Agreement......................................C-16
10.1 Award Agreements.................................................C-16
10.2 Authority to Vary Terms..........................................C-16
11. Change in Control......................................................C-17
11.1 Definitions......................................................C-17
11.2 Effect of Change in Control on Options...........................C-17
11.3 Effect of Change in Control on SARs..............................C-17
11.4 Effect of Change in Control on Restricted Stock Awards...........C-18
11.5 Effect of Change in Control on Performance Awards................C-18
12. Compliance with Securities Law.........................................C-18
13. Tax Withholding........................................................C-18
13.1 Tax Withholding in General.......................................C-18
13.2 Withholding in Shares............................................C-19
14. Termination or Amendment of Plan.......................................C-19
15. Miscellaneous Provisions...............................................C-19
15.1 Provision of Information.........................................C-19
15.2 Rights as Employee, Consultant or Director.......................C-19
15.3 Rights as a Stockholder..........................................C-19
15.4 Beneficiary Designation..........................................C-19
15.5 Unfunded Benefit Obligation......................................C-20
C-2
JACK IN THE BOX INC.
2004 STOCK INCENTIVE PLAN
1. Establishment, Purpose and Term of Plan.
---------------------------------------
1.1 Establishment. Jack in the Box Inc., a Delaware corporation (the
"Company"), hereby establishes the Jack in the Box 2004 Stock Incentive Plan
(the "Plan") effective as of _________, 2004, the date of its approval by the
stockholders of the Company (the "Effective Date").
1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Indexed Options, Stock
Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses,
Restricted Stock Units, Performance Shares and Performance Units.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Awards
granted under the Plan have lapsed. However, all Awards shall be granted, if at
all, within ten (10) years from the Effective Date.
2. Definitions and Construction.
----------------------------
2.1 Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a) "Award" means any Option, Indexed Option, Stock Appreciation
Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock
Unit, Performance Share or Performance Unit granted under the Plan.
(b) "Award Agreement" means a written agreement between the Company
and a Participant setting forth the terms, conditions and restrictions of the
Award granted to the Participant. An Award Agreement may be an "Option
Agreement," an "Indexed Option Agreement," a "SAR Agreement," a "Restricted
Stock Purchase Agreement," a "Restricted Stock Bonus Agreement," a "Restricted
Stock Unit Agreement," a "Performance Share Agreement," or a "Performance Unit
Agreement."
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.
(e) "Committee" means the Compensation Committee or other committee
of the Board duly appointed to administer the Plan and having such powers as
shall be specified by the Board. If no committee of the Board has been appointed
to administer the Plan, the Board shall exercise all of the powers of the
Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.
(f) "Company" means Jack in the Box Inc., a Delaware corporation, or
any successor corporation thereto.
(g) "Consultant" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on registration on a Form S-8 Registration Statement under the
Securities Act.
C-3
(h) "Director" means a member of the Board or of the board of
directors of any other Participating Company.
(i) "Disability" means the inability of the Participant, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Participant's position with the Participating Company Group
because of the sickness or injury of the Participant.
(j) "Dividend Equivalent" means a credit, made at the discretion of
the Committee or as otherwise provided by the Plan, to the account of a
Participant in an amount equal to the cash dividends paid on one share of Stock
for each share of Stock represented by an Award of Restricted Stock Units or
Performance Shares held by such Participant.
(k) "Employee" means any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of a share
of Stock or other property as determined by the Committee, in its discretion, or
by the Company, in its discretion, if such determination is expressly allocated
to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Stock
shall be the closing price of a share of Stock (or the mean of the closing bid
and asked prices of a share of Stock if the Stock is so quoted instead) as
quoted on the New York Stock Exchange or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in The Wall Street Journal or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Committee, in its discretion.
(ii) If, on such date, the Stock is not listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be as determined by the Committee in good faith without regard to
any restriction other than a restriction which, by its terms, will never lapse.
(n) "Incentive Stock Option" means an Option intended to be (as set
forth in the Option Agreement) and which qualifies as an incentive stock option
within the meaning of Section 422(b) of the Code.
(o) "Indexed Option" means an Option with an exercise price which
either increases by a fixed percentage over time or changes by reference to a
published index, as determined by the Committee and set forth in the Option
Agreement.
(p) "Insider" means any person whose transactions in Stock are
subject to Section 16 of the Exchange Act.
(q) "Nonstatutory Stock Option" means an Option not intended to be
(as set forth in the Option Agreement) or which does not qualify as an Incentive
Stock Option.
(r) "Option" means a right to purchase Stock (subject to adjustment
as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An
Option may be either an Incentive Stock Option, a Nonstatutory Stock Option or
an Indexed Option.
C-4
(s) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(t) "Participant" means any eligible person who has been granted one
or more Awards.
(u) "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation.
(v) "Participating Company Group" means, at any point in time,
all corporations collectively which are then Participating Companies.
(w) "Performance Award" means an Award of Performance Shares or
Performance Units.
(x) "Performance Goal" means a performance goal established by the
Committee pursuant to Section 9.2.
(y) "Performance Period" means a period established by the Committee
pursuant to Section 9.2 at the end of which one or more Performance Goals are to
be measured.
(z) "Performance Share" means a bookkeeping entry r epresenting a
right granted to a Participant pursuant to the terms and conditions of Section 9
to receive a payment equal to the value of a Performance Share, as determined by
the Committee, based on performance.
(aa) "Performance Unit" means a bookkeeping entry representing a
right granted to a Participant pursuant to the terms and conditions of Section 9
to receive a payment equal to the value of a Performance Unit, as determined by
the Committee, based upon performance.
(bb) "Restricted Stock Award" means an Award of a Restricted Stock
Bonus, a Restricted Stock Purchase Right or a Restricted Stock Unit.
(cc) "Restricted Stock Bonus" means Stock granted to a Participant
pursuant to the terms and conditions of Section 8.
(dd) "Restricted Stock Purchase Right" means a right to purchase Stock
granted to a Participant pursuant to the terms and conditions of Section 8.
(ee) "Restricted Stock Unit" means a bookkeeping entry representing a
right granted to a Participant to receive in cash or Stock the Fair Market Value
of a share of Stock granted pursuant to the terms and conditions of Section 8.
(ff) "Restriction Period" means the period established in accordance
with Section 8.4 during which shares subject to a Restricted Stock Award are
subject to Vesting Conditions.
(gg) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as amended
from time to time, or any successor rule or regulation.
(hh) "Section 162(m)" means Section 162(m) of the Code.
(ii) "Securities Act" means the Securities Act of 1933, as amended.
(jj) "Service" means a Participant's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. A Participant's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is
no interruption or termination of the Participant's Service. Furthermore, a
Participant's Service with the Participating Company Group may be deemed, as
provided in the applicable Award Agreement, to have terminated if the
Participant takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the one hundred eighty-first (181st) day of such
leave any Incentive Stock Option held by such Participant shall cease to be
treated as an Incentive Stock Option and instead shall be treated thereafter as
a Nonstatutory Stock Option unless the Participant's right to return to Service
with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes
of determining vesting under the Participant's Award Agreement. A Participant's
Service shall be deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Participant performs Service
ceasing to be a Participating Company. Subject to the foregoing, the Company, in
its discretion, shall determine whether the Participant's Service has terminated
and the effective date of such termination.
C-5
(kk) "Stock" means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.2.
(ll) "SAR" or "Stock Appreciation Right" means a bookkeeping entry
representing, for each share of Stock subject to such SAR, a right granted to a
Participant pursuant to Section 7 of the Plan to receive payment of an amount
equal to the excess, if any, of the Fair Market Value of a share of Stock on the
date of exercise of the SAR over the exercise price.
(mm) "Subsidiary Corporation" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.
(nn) "Ten Percent Owner" means a Participant who, at the time an
Option isgranted to the Participant, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
(oo) "Vesting Conditions" means those conditions established in
accordance with Section 8.4 prior to the satisfaction of which shares subject to
a Restricted Stock Award remain subject to forfeiture or a repurchase option in
favor of the Company.
2.2 Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term "or" is
not intended to be exclusive, unless the context clearly requires otherwise.
3. Administration.
--------------
3.1 Administration by the Committee. The Plan shall be administered by the
Committee. All questions of interpretation of the Plan or of any Award shall be
determined by the Committee, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Award.
3.2 Authority of Officers. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 Powers of the Committee. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Committee shall have the
full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which,
Awards shall be granted and the number of shares of Stock or units to be subject
to each Award;
(b) to determine the type of Award granted and to designate Options
as Incentive Stock Options, Nonstatutory Stock Options or Indexed Options;
(c) to determine the Fair Market Value of shares of Stock or other
property;
(d) to determine the terms, conditions and restrictions applicable to
each Award (which need not be identical) and any shares acquired pursuant
thereto, including, without limitation, (i) the purchase price of any Stock,
(ii) the method of payment for shares purchased pursuant to any Award, (iii) the
method for satisfaction of any tax withholding obligation arising in connection
with Award, including by the withholding or delivery of shares of Stock, (iv)
the timing, terms and conditions of the exercisability or vesting of any Award
or any shares acquired pursuant thereto, (v) the Performance Goals applicable to
any Award and the extent to which such Performance Goals have been attained,
(vi) the time of the expiration of any Award, (vii) the effect of the
Participant's termination of Service on any of the foregoing, and (viii) all
other terms, conditions and restrictions applicable to any Award or shares
acquired pursuant thereto not inconsistent with the terms of the Plan;
C-6
(e) to determine whether an Award of Restricted Stock Units,
Performance Shares, Performance Units or Stock Appreciation Rights will be
settled in shares of Stock, cash, or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive
any restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or
vesting of any Award or any shares acquired pursuant thereto, including with
respect to the period following a Participant's termination of Service;
(i) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative versions of,
the Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy or custom
of, foreign jurisdictions whose citizens may be granted Awards;
(j) to authorize, in conjunction with any applicable Company
deferred compensation plan, that the receipt of cash or Stock subject to any
Award under this Plan, may be deferred under the terms and conditions of such
Company deferred compensation plan; and
(k) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award
as the Committee may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
3.4 Administration with Respect to Insiders. With respect to participation
by Insiders in the Plan, at any time that any class of equity security of the
Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall
be administered in compliance with the requirements, if any, of Rule 16b-3.
3.5 Committee Complying with Section 162(m). If the Company is a "publicly
held corporation" within the meaning of Section 162(m), the Board may establish
a Committee of "outside directors" within the meaning of Section 162(m) to
approve the grant of any Award which might reasonably be anticipated to result
in the payment of employee remuneration that would otherwise exceed the limit on
employee remuneration deductible for income tax purposes pursuant to Section
162(m).
3.6 No Repricing. Without the affirmative vote of holders of a majority of
the shares of Stock cast in person or by proxy at a meeting of the stockholders
of the Company at which a quorum representing a majority of all outstanding
shares of Stock is present or represented by proxy, the Board shall not approve
a program providing for either (a) the cancellation of outstanding Options
and/or SARs and the grant in substitution therefore of new Options and/or SARs
having a lower exercise price or (b) the amendment of outstanding Options and/or
SARs to reduce the exercise price thereof. This paragraph shall not be construed
to apply to "issuing or assuming a stock option in a transaction to which
section 424(a) applies," within the meaning of Section 424 of the Code.
3.7 Indemnification. In addition to such other rights of indemnification as
they may have as members of the Board or the Committee or as officers or
employees of the Participating Company Group, members of the Board or the
Committee and any officers or employees of the Participating Company Group to
whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
C-7
4. Shares Subject to Plan.
----------------------
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be issued
under the Plan shall be One Million Two Hundred Fifty Thousand (1,250,000). If
an outstanding Award for any reason expires or is terminated or canceled without
having been exercised or settled in full, or if shares of Stock acquired
pursuant to an Award subject to forfeiture or repurchase are forfeited or
repurchased by the Company at the Participant's purchase price, the shares of
Stock allocable to the terminated portion of such Award or such forfeited or
repurchased shares of Stock shall again be available for issuance under the
Plan. Shares of Stock shall not be deemed to have been issued pursuant to the
Plan (i) with respect to any portion of an Award that is settled in cash or (ii)
to the extent such shares are withheld and/or attested to in satisfaction of tax
withholding obligations pursuant to Section 13.2. Upon payment in shares of
Stock pursuant to the exercise of a SAR, the number of shares available for
issuance under the Plan shall be reduced only by the number of shares actually
issued in such payment. If the exercise price of an Option is paid by tender to
the Company, or attestation to the ownership, of shares of Stock owned by the
Participant, the number of shares available for issuance under the Plan shall be
reduced by the gross number of shares for which the Option is exercised.
4.2 Adjustments for Changes in Capital Structure. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Awards, in the ISO Share Limit set forth in
Section 4.1, and in the exercise price per share of any outstanding Options and
Restricted Stock Purchase Rights. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Awards are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 11.1) shares of another
corporation (the "New Shares"), the Committee may unilaterally amend the
outstanding Awards to provide that such Awards shall be for New Shares. In the
event of any such amendment, the number of shares subject to outstanding Awards
and the exercise price per share of outstanding Options and Restricted Stock
Purchase Rights shall be adjusted in a fair and equitable manner as determined
by the Committee, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 4.2 shall
be rounded down to the nearest whole number, and in no event may the exercise
price of any Option or Restricted Stock Purchase Right be decreased to an amount
less than the par value, if any, of the stock subject to such Award. The
adjustments determined by the Committee pursuant to this Section 4.2 shall be
final, binding and conclusive.
5. Eligibility and Award Limitations.
---------------------------------
5.1 Persons Eligible for Incentive Stock Options. Incentive Stock Options
may be granted only to Employees. For purposes of the foregoing sentence, the
term "Employees" shall include prospective Employees to whom Incentive Stock
Options are granted in connection with written offers of employment with the
Participating Company Group, provided that any such Incentive Stock Option shall
be deemed granted effective on the date such person commences Service as an
Employee, with an exercise price determined as of such date in accordance with
Section 6.1. Eligible persons may be granted more than one (1) Incentive Stock
Option.
C-8
5.2 Persons Eligible for Other Awards. Awards other than Incentive Stock
Options may be granted only to Employees, Consultants and Directors. For
purposes of the foregoing sentence, "Employees," "Consultants" and "Directors"
shall include prospective Employees, prospective Consultants and prospective
Directors to whom Awards are granted in connection with written offers of an
employment or other service relationship with the Participating Company Group;
provided, however, that no Stock subject to any such Award shall vest, become
exercisable or be issued prior to the date on which such person commences
Service. Eligible persons may be granted more than one (1) Award.
5.3 Fair Market Value Limitation on Incentive Stock Options. To the extent
that options designated as Incentive Stock Options (granted under all stock
option plans of the Participating Company Group, including the Plan) become
exercisable by a Participant for the first time during any calendar year for
stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portions of such options which exceed such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Participant may designate which
portion of such Option the Participant is exercising. In the absence of such
designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Separate certificates representing
each such portion shall be issued upon the exercise of the Option.
5.4 Award Limits.
(a) Aggregate Limit on Restricted Stock Awards and Performance Awards.
Subject to adjustment as provided in Section 4.2, in no event shall more than
Two Hundred Fifty Thousand (250,000) shares of Stock in the aggregate be issued
under the Plan pursuant to the exercise or settlement of Restricted Stock Awards
and Performance Awards.
(b) Section 162(m) Award Limits. The following limits shall apply to
the grant of any Award if, at the time of grant, the Company is a "publicly held
corporation" within the meaning of Section 162(m).
(i) Options and SARs. Subject to adjustment as provided in Section
4.2, no Employee shall be granted within any fiscal year of the Company one or
more Options or Freestanding SARs (as defined in Section 7) which in the
aggregate are for more than Two Hundred and Fifty Thousand (250,000) shares of
Stock. An Option which is canceled (or a Freestanding SAR as to which the
exercise price is reduced to reflect a reduction in the Fair Market Value of the
Stock) in the same fiscal year of the Company in which it was granted shall
continue to be counted against such limit for such fiscal year.
(ii) Restricted Stock Awards. Subject to adjustment as provided in
Section 4.2, no Employee shall be granted within any fiscal year of the Company
one or more Restricted Stock Awards, subject to Vesting Conditions based on the
attainment of Performance Goals, for more than One Hundred Thousand (100,000)
shares of Stock.
5.5 Performance Awards. Subject to adjustment as provided in Section 4.2,
no Employee shall be granted (A) Performance Shares which could result in such
Employee receiving more than One Hundred Thousand (100,000) shares of Stock for
each full fiscal year of the Company contained in the Performance Period for
such Award, or (B) Performance Units which could result in such Employee
receiving more than One Million dollars ($1,000,000) for each full fiscal year
of the Company contained in the Performance Period for such Award. No
Participant may be granted more than one Performance Award for the same
Performance Period.
C-9
6. Terms and Conditions of Options.
-------------------------------
Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Committee shall from time
to time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
6.1 Exercise Price. The exercise price for each Option shall be established
in the discretion of the Committee; provided, however, that (a) the exercise
price per share shall be not less than the Fair Market Value of a share of Stock
on the effective date of grant of the Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option, and (c) in the case of an Indexed
Option, the Committee shall determine the exercise price of such Indexed Option
and the terms and conditions that affect, if any, any adjustments to the
exercise price of such Indexed Option. Notwithstanding the foregoing, an Option
may be granted with an exercise price lower than the minimum exercise price set
forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying under the provisions of Section 424(a)
of the Code.
6.2 Exercisability and Term of Options. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Option Agreement evidencing such Option;
provided, however, that (a) no Option shall be exercisable after the expiration
of ten (10) years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after
the expiration of five (5) years after the effective date of grant of such
Option, (c) no Option granted to a prospective Employee, prospective Consultant
or prospective Director may become exercisable prior to the date on which such
person commences Service. Subject to the foregoing, unless otherwise specified
by the Committee in the grant of an Option, any Option granted hereunder shall
terminate ten (10) years after the effective date of grant of the Option, unless
earlier terminated in accordance with its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided
below, payment of the exercise price for the number of shares of Stock being
purchased pursuant to any Option shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the assignment
to the Company of the proceeds of a sale with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iv) by such other consideration as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (v) by any combination thereof. The Committee may at any time
or from time to time grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, an Option may
not be exercised by tender to the Company, or attestation to the ownership, of
shares of Stock to the extent such tender or attestation would constitute a
violation of the provisions of any law, regulation or agreement restricting the
redemption of the Company's stock. Unless otherwise provided by the Committee,
an Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Participant for more than six (6) months (and not used for another Option
exercise by attestation during such period) or were not acquired, directly or
indirectly, from the Company.
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(ii) Cashless Exercise. The Company reserves, at any and all times,
the right, in the Company's sole and absolute discretion, to establish, decline
to approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise.
6.4 Effect of Termination of Service.
(a) Option Exercisability. An Option granted to a Participant shall
be exercisable after the Participant's termination of Service only during the
applicable time period determined in accordance with the Option's term as set
forth in the Option Agreement evidencing such Option (the "Option Expiration
Date").
(b) Extension if Exercise Prevented by Law. Notwithstanding the
foregoing other than termination of a Participant's Service for Cause, if the
exercise of an Option within the applicable time periods set forth in an Option
Agreement is prevented by the provisions of Section 12 below, the Option shall
remain exercisable until one (1) month (or such longer period of time as
determined by the Committee, in its discretion) after the date the Participant
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
(c) Extension if Participant Subject to Section 16(b).
Notwithstanding the foregoing other than termination of a Participant's Service
for Cause, if a sale within the applicable time periods set forth in an Option
Agreement of shares acquired upon the exercise of the Option would subject the
Participant to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Participant's termination of Service, or (iii) the Option Expiration
Date.
6.5 Transferability of Options. During the lifetime of the Participant, an
Option shall be exercisable only by the Participant or the Participant's
guardian or legal representative. No Option shall be assignable or transferable
by the Participant, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Option Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form
S-8 Registration Statement under the Securities Act.
7. Terms and Conditions of Stock Appreciation Rights.
-------------------------------------------------
SARs shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Committee shall from time to
time establish. No SAR or purported SAR shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing SARs may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:
7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any
portion of a related Option (a "Tandem SAR") or may be granted independently of
any Option (a "Freestanding SAR"). A Tandem SAR may be granted either
concurrently with the grant of the related Option or at any time thereafter
prior to the complete exercise, termination, expiration or cancellation of such
related Option.
7.2 Exercise Price. The exercise price for each SAR shall be established in
the discretion of the Committee; provided, however, that (a) the exercise price
per share subject to a Tandem SAR shall be the exercise price per share under
the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the SAR.
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7.3 Exercisability and Term of SARs.
(a) Tandem SARs. Tandem SARs shall be exercisable only at the time
and to the extent that the related Option is exercisable, subject to such
provisions as the Committee may specify where the Tandem SAR is granted with
respect to less than the full number of shares of Stock subject to the related
Option. The Committee may, in its discretion, provide in any Award Agreement
evidencing a Tandem SAR that such SAR may not be exercised without the advance
approval of the Company and, if such approval is not given, then the Option
shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR
shall terminate and cease to be exercisable no later than the date on which the
related Option expires or is terminated or canceled. Upon the exercise of a
Tandem SAR with respect to some or all of the shares subject to such SAR, the
related Option shall be canceled automatically as to the number of shares with
respect to which the Tandem SAR was exercised. Upon the exercise of an Option
related to a Tandem SAR as to some or all of the shares subject to such Option,
the related Tandem SAR shall be canceled automatically as to the number of
shares with respect to which the related Option was exercised.
(b) Freestanding SARs. Freestanding SARs shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such SAR; provided,
however, that no Freestanding SAR shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such SAR.
7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to
Section 7.5) of a SAR, the Participant (or the Participant's legal
representative or other person who acquired the right to exercise the SAR by
reason of the Participant's death) shall be entitled to receive payment of an
amount for each share with respect to which the SAR is exercised equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price. Payment of such amount shall be
made in cash, shares of Stock, or any combination thereof as determined by the
Committee. Unless otherwise provided in the Award Agreement evidencing such SAR,
payment shall be made in a lump sum as soon as practicable following the date of
exercise of the SAR. The Award Agreement evidencing any SAR may provide for
deferred payment in a lump sum or in installments. When payment is to be made in
shares of Stock, the number of shares to be issued shall be determined on the
basis of the Fair Market Value of a share of Stock on the date of exercise of
the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date
on which the Company receives notice of exercise from the Participant.
7.5 Deemed Exercise of SARs. If, on the date on which an SAR would
otherwise terminate or expire, the SAR by its terms remains exercisable
immediately prior to such termination or expiration and, if so exercised, would
result in a payment to the holder of such SAR, then any portion of such SAR
which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.
7.6 Effect of Termination of Service. An SAR shall be exercisable after a
Participant's termination of Service to such extent and during such period as
determined by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such SAR.
7.7 Nontransferability of SARs. SARs may not be assigned or transferred in
any manner except by will or the laws of descent and distribution, and, during
the lifetime of the Participant, shall be exercisable only by the Participant or
the Participant's guardian or legal representative.
8. Terms and Conditions of Restricted Stock Awards.
-----------------------------------------------
The Committee may from time to time grant Restricted Stock Awards upon such
conditions as the Committee shall determine, including, without limitation, upon
the attainment of one or more Performance Goals described in Section 8.3. If
either the grant of a Restricted Stock Award or the lapsing of the Restriction
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Period is to be contingent upon the attainment of one or more Performance Goals,
the Committee shall follow procedures substantially equivalent to those set
forth in Sections 8.2 through 8.4. Restricted Stock Awards may be in the form of
a Restricted Stock Bonus, which shall be evidenced by Restricted Stock Bonus
Agreement, a Restricted Stock Purchase Right, which shall be evidenced by
Restricted Stock Purchase Agreement or a Restricted Stock Unit, which shall be
evidenced by a Restricted Stock Unit Agreement. Each such Award Agreement shall
specify the number of shares of Stock subject to and the other terms, conditions
and restrictions of the Award, and shall be in such form as the Committee shall
establish from time to time. No Restricted Stock Award or purported Restricted
Stock Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Restricted Stock Award Agreements
may incorporate all or any of the terms of the Plan by reference and shall
comply, as applicable, with and be subject to the following terms and
conditions:
8.1 Purchase Price. The purchase price under each Restricted Stock Purchase
Right shall be established by the Committee. No monetary payment (other than
applicable tax withholding) shall be required as a condition of receiving a
Restricted Stock Bonus or Restricted Stock Unit, the consideration for which
shall be services actually rendered to a Participating Company or for its
benefit.
8.2 Purchase Period. A Restricted Stock Purchase Right shall be exercisable
within a period established by the Committee, which shall in no event exceed
thirty (30) days from the effective date of the grant of the Restricted Stock
Purchase Right; provided, however, that no Restricted Stock Purchase Right
granted to a prospective Employee, prospective Director or prospective
Consultant may become exercisable prior to the date on which such person
commences Service.
8.3 Payment of Purchase Price. Except as otherwise provided below, payment
of the purchase price for the number of shares of Stock being purchased pursuant
to any Restricted Stock Purchase Right shall be made (i) in cash, by check, or
cash equivalent, (ii) provided that the Participant is an Employee (unless
otherwise not prohibited by law, including, without limitation, any regulation
promulgated by the Board of Governors of the Federal Reserve System) and in the
Company's sole discretion at the time the Restricted Stock Purchase Right is
exercised, by delivery of the Participant's promissory note in a form approved
by the Company for the aggregate purchase price, provided that, if the Company
is incorporated in the State of Delaware, the Participant shall pay in cash that
portion of the aggregate purchase price not less than the par value of the
shares being acquired, (iii) by such other consideration as may be approved by
the Committee from time to time to the extent permitted by applicable law, or
(iv) by any combination thereof. Payment by means of the Participant's
promissory note shall be subject to the conditions described in Section
6.3(b)(iii). The Committee may at any time or from time to time grant Restricted
Stock Purchase Rights which do not permit all of the foregoing forms of
consideration to be used in payment of the purchase price or which otherwise
restrict one or more forms of consideration. Restricted Stock Bonuses and
Restricted Stock Units shall be issued in consideration for services actually
rendered to a Participating Company or for its benefit.
8.4 Vesting and Restrictions on Transfer. Shares issued pursuant to any
Restricted Stock Award may be made subject to vesting conditioned upon the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 8.3 (the "Vesting Conditions"), as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award. During
any period (the "Restriction Period") in which shares acquired pursuant to a
Restricted Stock Award remain subject to Vesting Conditions, such shares may not
be sold, exchanged, transferred, pledged, assigned or otherwise disposed of
other than pursuant to an Ownership Change Event, as defined in Section 11.1, or
as provided in Section 8.7. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.
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8.5 Voting Rights; Dividends. Except as provided in this Section and
Section 8.4, during the Restriction Period applicable to shares subject to a
Restricted Stock Purchase Right and a Restricted Stock Bonus held by a
Participant, the Participant shall have all of the rights of a stockholder of
the Company holding shares of Stock, including the right to vote such shares and
to receive all dividends and other distributions paid with respect to such
shares; provided, however, that if any such dividends or distributions are paid
in shares of Stock, such shares shall be subject to the same Vesting Conditions
as the shares subject to the Restricted Stock Purchase Right and Restricted
Stock Bonus with respect to which the dividends or distributions were paid. A
Participant who is awarded a Restricted Stock Unit shall possess no incidents of
ownership with respect to such a Restricted Stock Award; provided that the award
agreement may provide for payments in lieu of dividends to such Participant.
8.6 Effect of Termination of Service. The effect of the Participant's
termination of Service on any Restricted Stock Award shall be determined by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Restricted Stock Award.
8.7 Nontransferability of Restricted Stock Award Rights. Rights to acquire
shares of Stock pursuant to a Restricted Stock Award may not be assigned or
transferred in any manner except by will or the laws of descent and
distribution, and, during the lifetime of the Participant, shall be exercisable
only by the Participant.
9. Terms and Conditions of Performance Awards.
------------------------------------------
The Committee may from time to time grant Performance Awards upon such
conditions as the Committee shall determine. Performance Awards may be in the
form of either Performance Shares, which shall be evidenced by a Performance
Share Agreement, or Performance Units, which shall be evidenced by a Performance
Unit Agreement. Each such Award Agreement shall specify the number of
Performance Shares or Performance Units subject thereto, the method of computing
the value of each Performance Share or Performance Unit, the Performance Goals
and Performance Period applicable to the Award, and the other terms, conditions
and restrictions of the Award, and shall be in such form as the Committee shall
establish from time to time. No Performance Award or purported Performance Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Performance Share and Performance Unit
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:
9.1 Initial Value of Performance Shares and Performance Units. Unless
otherwise provided by the Committee in granting a Performance Award, each
Performance Share shall have an initial value equal to the Fair Market Value of
a share of Stock on the effective date of grant of the Performance Share, and
each Performance Unit shall have an initial value of one hundred dollars ($100).
The final value payable to the Participant in settlement of a Performance Award
will depend on the extent to which Performance Goals established by the
Committee are attained within the applicable Performance Period established by
the Committee.
9.2 Establishment of Performance Goals and Performance Period. The
Committee shall establish in writing the Performance Period applicable to each
Performance Award and one or more Performance Goals which, when measured at the
end of the Performance Period, shall determine the final value of the
Performance Award to be paid to the Participant. Unless otherwise permitted in
compliance with the requirements under Section 162(m) with respect to
"performance-based compensation," the Committee shall establish the Performance
Goals applicable to each Performance Award no later than the earlier of (a) the
date ninety (90) days after the commencement of the applicable Performance
Period or (b) the date on which 25% of the Performance Period has elapsed, and,
in any event, at a time when the outcome of the Performance Goals remains
substantially uncertain. Once established, the Performance Goals shall not be
changed during the Performance Period.
9.3 Measurement of Performance Goals. Performance Goals shall be
established by the Committee on the basis of targets to be attained
("Performance Targets") with respect one or more measures of business or
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financial performance (each, a "Performance Measure"). Performance Measures
shall have the same meanings as used in the Company's financial statements, or
if such terms are not used in the Company's financial statements, they shall
have the meaning applied pursuant to generally accepted accounting principles,
or as used generally in the Company's industry. Performance Targets may include
a minimum, maximum, target level and intermediate levels of performance, with
the final value of a Performance Award determined by the level attained during
the applicable Performance Period. A Performance Target may be stated as an
absolute value or as a value determined relative to a standard selected by the
Committee. Performance Measures shall be calculated with respect to the Company
and each Subsidiary Corporation consolidated therewith for financial reporting
purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a
Performance Award shall be calculated before the effect of changes in accounting
standards, restructuring charges and similar extraordinary items, determined
according to criteria established by the Committee, occurring after the
establishment of the Performance Goals applicable to a Performance Award.
Performance Measures may be one or more of the following, as determined by the
Committee:
(a) sales
(b) revenue
(c) gross margin
(d) operating margin
(e) operating income
(f) pre-tax profit
(g) earnings before interest, taxes, depreciation and/or amortization
(h) net income
(i) cash flow
(j) expenses
(k) stock price
(l) earnings per share
(m) return on stockholders' equity
(n) return on capital
(o) return on assets
(p) economic value added
(q) number of customers
(r) market share
(s) same store sales
(t) average restaurant margin
(u) return on investment
(v) profit after tax
(w) customer satisfaction
9.4 Determination of Final Value of Performance Awards. As soon as
practicable following the completion of the Performance Period applicable to a
Performance Award, the Committee shall certify in writing the extent to which
the applicable Performance Goals have been attained and the resulting final
value of the Award earned by the Participant and to be paid upon its settlement
in accordance with the terms of the Award Agreement. The Committee shall have no
discretion to increase the value of an Award payable upon its settlement in
excess of the amount called for by the terms of the Award Agreement on the basis
of the degree of attainment of the Performance Goals as certified by the
Committee. However, notwithstanding the attainment of any Performance Goal, if
permitted under a Participant's Award Agreement, the Committee shall have the
discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of a Performance Award that would
otherwise be paid upon its settlement. No such reduction may result in an
increase in the amount payable upon settlement of another Participant's
Performance Award. As soon as practicable following the Committee's
certification, the Company shall notify the Participant of the determination of
the Committee.
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9.5 Dividend Equivalents. In its discretion, the Committee may provide in
the Award Agreement evidencing any Performance Share Award that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of
cash dividends on Stock having a record date prior to the date on which the
Performance Shares are settled or forfeited. Dividend Equivalents may be paid
currently or may be accumulated and paid to the extent that Performance Shares
become nonforfeitable, as determined by the Committee. Settlement of Dividend
Equivalents may be made in cash, shares of Stock, or a combination thereof as
determined by the Committee, and may be paid on the same basis as settlement of
the related Performance Share as provided in Section 9.6. Dividend Equivalents
shall not be paid with respect to Performance Units.
9.6 Payment in Settlement of Performance Awards.Payment of the final value
of a Performance Award earned by a Participant as determined following the
completion of the applicable Performance Period pursuant to Sections 9.4 and 9.5
may be made in cash, shares of Stock, or a combination thereof as determined by
the Committee. If payment is made in shares of Stock, the number of such shares
shall be determined by dividing the final value of the Performance Award by the
Fair Market Value of a share of Stock on the settlement date. Payment may be
made in a lump sum or installments as prescribed by the Committee. If any
payment is to be made on a deferred basis, the Committee may, but shall not be
obligated to, provide for the payment during the deferral period of Dividend
Equivalents or a reasonable rate of interest within the meaning of Section
162(m).
9.7 Restrictions Applicable to Payment in Shares. Shares of Stock issued in
payment of any Performance Award may be fully vested and freely transferable
shares or may be shares of Stock subject to Vesting Conditions as provided in
Section 8.4. Any shares subject to Vesting Conditions shall be evidenced by an
appropriate Restricted Stock Bonus Agreement and shall be subject to the
provisions of Sections 8.4 through 8.7 above.
9.8 Effect of Termination of Service. The effect of the Participant's
termination of Service on any Performance Award shall be determined by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Performance Award.
9.9 Nontransferability of Performance Awards. Performance Shares and
Performance Units may not be sold, exchanged, transferred, pledged, assigned, or
otherwise disposed of other than by will or by the laws of descent and
distribution until the completion of the applicable Performance Period. All
rights with respect to Performance Shares and Performance Units granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant.
10. Standard Forms of Award Agreement.
---------------------------------
10.1 Award Agreements. Each Award shall comply with and be subject to the
terms and conditions set forth in the appropriate form of Award Agreement
approved by the Committee concurrently with its adoption of the Plan and as
amended from time to time. Any Award Agreement may consist of an appropriate
form of Notice of Grant and a form of Agreement incorporated therein by
reference, or such other form or forms as the Committee may approve from time to
time.
10.2 Authority to Vary Terms. The Committee shall have the authority from
time to time to vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award or in connection
with the authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard form or
forms of Award Agreement are not inconsistent with the terms of the Plan.
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11. Change in Control.
-----------------
11.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to have occurred if
any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.
(b) A "Change in Control" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, a "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or, in the case of a Transaction
described in Section 8.1(a)(iii), the corporation or corporations to which the
assets of the Company were transferred (the "Transferee Corporation(s)"), as the
case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from
ownership of the voting stock of one or more corporations which, as a result of
the Transaction, own the Company or the Transferee Corporation(s), as the case
may be, either directly or through one or more subsidiary corporations. The
Committee shall have the right to determine whether multiple sales or exchanges
of the voting stock of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.
11.2 Effect of Change in Control on Options. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
other business entity or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), may, without the consent of the Participant, either
assume the Company's rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. In the event that the Acquiring Corporation
elects not to assume or substitute for outstanding Options in connection with a
Change in Control, the exercisability and vesting of each such outstanding
Option and any shares acquired upon the exercise thereof held by a Participant
whose Service has not terminated prior to such date shall be accelerated,
effective as of the date ten (10) days prior to the date of the Change in
Control. The exercise or vesting of any Option and any shares acquired upon the
exercise thereof that was permissible solely by reason of this Section 10.2 and
the provisions of such Option Agreement shall be conditioned upon the
consummation of the Change in Control. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration received pursuant to the Change
in Control with respect to such shares shall continue to be subject to all
applicable provisions of the Option Agreement evidencing such Option except as
otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
10.1(a)(i) constituting a Change in Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate unless the Committee otherwise provides in its discretion.
11.3 Effect of Change in Control on SARs. In the event of a Change in
Control, the Acquiring Corporation may, without the consent of any Participant,
either assume the Company's rights and obligations under outstanding SARs or
substitute for outstanding SARs substantially equivalent SARs for the Acquiring
Corporation's stock. In the event the Acquiring Corporation elects not to assume
or substitute for outstanding SARs in connection with a Change in Control, then
any unexercised and/or unvested portions of outstanding SARs shall be
immediately exercisable and vested in full as of the date thirty (30) days prior
to the date of the Change in Control. The exercise and/or vesting of any SAR
that was permissible solely by reason of this paragraph 11.3 shall be
conditioned upon the consummation of the Change in Control. Any SARs which are
not assumed by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the time of consummation of the Change in Control
shall terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control.
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11.4 Effect of Change in Control on Restricted Stock Awards. In the event
of a Change in Control, the lapsing of the Vesting Conditions applicable to the
shares subject to the Restricted Stock Award held by a Participant whose Service
has not terminated prior to such date shall be accelerated effective as of the
date of the Change in Control. Any acceleration of the lapsing of Vesting
Conditions that was permissible solely by reason of this Section 11.4 and the
provisions of such Award Agreement shall be conditioned upon the consummation of
the Change in Control.
11.5 Effect of Change in Control on Performance Awards. In the event of a
Change in Control, the Performance Award held by a Participant whose Service has
not terminated prior to such date (unless the Participant's Service terminated
by reason of the Participant's death or Disability) shall become payable
effective as of the date of the Change in Control. For this purpose, the final
value of the Performance Award shall be determined by the greater of (a) the
extent to which the applicable Performance Goals have been attained during the
Performance Period prior to the date of the Change in Control or (b) the
pre-established 100% level with respect to each Performance Target comprising
the applicable Performance Goals. Any acceleration of a Performance Award that
was permissible solely by reason of this Section 11.5 and the provisions of such
Award Agreement shall be conditioned upon the consummation of the Change in
Control.
12. Compliance with Securities Law.
------------------------------
The grant of Awards and the issuance of shares of Stock pursuant to any
Award shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities and the
requirements of any stock exchange or market system upon which the Stock may
then be listed. In addition, no Award may be exercised or shares issued pursuant
to an Award unless (a) a registration statement under the Securities Act shall
at the time of such exercise or issuance be in effect with respect to the shares
issuable pursuant to the Award or (b) in the opinion of legal counsel to the
Company, the shares issuable pursuant to the Award may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
the Securities Act. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
13. Tax Withholding.
---------------
13.1 Tax Withholding in General. The Company shall have the right to
require the Participant, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise of an Option, to make adequate
provision for the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to an Award
or the shares acquired pursuant thereto. The Company shall have no obligation to
deliver shares of Stock, to release shares of Stock from an escrow established
pursuant to an Award Agreement, or to make any payment in cash under the Plan
until the Participating Company Group's tax withholding obligations have been
satisfied by the Participant.
C-18
13.2 Withholding in Shares. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon
the exercise or settlement of an Award, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.
14. Termination or Amendment of Plan.
--------------------------------
The Committee may terminate or amend the Plan at any time. However, subject
to changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company's stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company's
stockholders under any applicable law, regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding Award unless expressly
provided by the Committee. In any event, no termination or amendment of the Plan
may adversely affect any then outstanding Award without the consent of the
Participant, unless such termination or amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock
Option or is necessary to comply with any applicable law, regulation or rule.
15. Miscellaneous Provisions.
------------------------
15.1 Provision of Information. Each Participant shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
15.2 Rights as Employee, Consultant or Director. No person, even though
eligible pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee, Consultant or Director, or interfere
with or limit in any way the right of a Participating Company to terminate the
Participant's Service at any time.
15.3 Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of a certificate for such shares (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 4.2 or another provision of the Plan.
15.4 Beneficiary Designation. Each Participant may file with the Company a
written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participant's
death before he or she receives any or all of such benefit. Each designation
will revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. If a
married Participant designates a beneficiary other than the Participant's
spouse, the effectiveness of such designation shall be subject to the consent of
the Participant's spouse. If a Participant dies without an effective designation
of a beneficiary who is living at the time of the Participant's death, the
Company will pay any remaining unpaid benefits to the Participant's legal
representative.
C-19
15.5 Unfunded Obligation. Any amounts payable to Participants pursuant to
the Plan shall be unfunded obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974. No
Participating Company shall be required to segregate any monies from its general
funds, or to create any trusts, or establish any special accounts with respect
to such obligations. The Company shall retain at all times beneficial ownership
of any investments, including trust investments, which the Company may make to
fulfill its payment obligations hereunder. Any investments or the creation or
maintenance of any trust or any Participant account shall not create or
constitute a trust or fiduciary relationship between the Committee or any
Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant's creditors in any
assets of any Participating Company. The Participants shall have no claim
against any Participating Company for any changes in the value of any assets
which may be invested or reinvested by the Company with respect to the Plan.
C-20
Proxy with telephone and Internet voting instructions - side one
- -------------------------------------------------------------------------------------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
JACK IN THE BOX INC.
FOR ANNUAL MEETING OF STOCKHOLDERS ON FEBRUARY 14, 200313, 2004 AT 2:00 P.M.
MARRIOTT MISSION VALLEY, 8757 RIO SAN DIEGO DRIVE, SAN DIEGO, CALIFORNIA.CALIFORNIA
The undersigned hereby appoints Robert J. Nugent, John F. Hoffner and
Lawrence E. Schauf and each of them, acting by a majority or by one of them
if only one is acting, as lawful proxies, with full power of substitution,
for and in the name of the undersigned, to vote on behalf of the
undersigned, with all the powers the undersigned would possess if
personally present at the Annual Meeting of Stockholders of Jack in the Box
Inc., a Delaware corporation, on February 14, 2003,13, 2004, or any postponements or
adjournments thereof. The above named proxies are instructed to vote all
the undersigned's shares of stock on the proposals set forth in the Notice
of Annual Meeting and Proxy Statement as specified on the other side
hereof and are authorized in their discretion to vote upon such other
business as may properly come before the meeting or any postponements or
adjournments thereof. This proxy when properly executed will be voted in
the manner directed herein by the undersigned stockholder. If no
direction is made, this proxy will be voted "FOR" all nominees listed and
"FOR" Proposal 2.Proposals 2 and 3. The Board of Directors recommends a vote FOR the
above proposals.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
/FOLD-----------------------------------------------------------------------------
/~FOLD AND DETACH HERE /HERE/~
JACK IN THE BOX INC.
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 14, 200313, 2004 AT 2:00 P.M.
MARRIOTT MISSION VALLEY
8757 RIO SAN DIEGO DRIVE
SAN DIEGO, CALIFORNIA
Proxy with telephone and Internet voting instructions - side two
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Please mark your |X|
all nominees listed and Proposal 2.Proposals 2 and 3. votes like this.this
- --------------------------------------------------------------------------------
WITHHOLD
FOR ALL ALL
1. Election of Directors |_| |_|
Nominees:Nominees
01 Michael E. Alpert 06 Murray H. HutchisonLinda A. Lang
02 JayEdward W. BrownGibbons 07 Michael W. Murphy
03 Edward W. GibbonsAnne B. Gust 08 Robert J. Nugent
04 AnneAlice B. GustHayes 09 L. Robert Payne
05 Alice B. HayesMurray H. Hutchison
(Instruction: To withhold authority to vote for
any individual nominee write that nominee's name
below.)
___________________________________________________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of the 2004 Stock Incentive Plan. |_| |_| |_|
FOR AGAINST ABSTAIN
3. Ratification of appointment of KPMG LLP as
FOR AGAINST ABSTAIN
independent accountants.auditors . |_| |_| |_|
3.4. In their discretion, the Proxies are
authorized to vote upon such other business
as may properly come before the meeting.meeting
includingwith respect to any adjournment thereof.
YES NO
I plan to attend the meeting. |_| |_|
*** IF YOU WISH TO VOTE BY TELEPHONE OR
INTERNET, PLEASE READ THE INSTRUCTIONS BELOW**BELOW ***
[NAME, ADDRESS & SHARE INFORMATION]
Signature(s)___________________________ x____________________________ Dated: ___________________________,2003_______________________, 2004
Stockholder(s), please sign above exactly as name appears hereon; in the case of
joint holders, all should sign. Fiduciaries should add their full title to their
signature. Corporations should sign in full corporate name by an authorized
officer. Partnerships should sign in partnership name by an authorized person.
- --------------------------------------------------------------------------------
/FOLD/~FOLD AND DETACH HERE/~
VOTE BY TELEPHONE OR INTERNET OR MAIL
24 HOURS A DAY - 7 DAYS A WEEK
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
You will be asked to enter the Control Number located in the box in the lower
right hand corner of this form.
TELEPHONE
Call Toll Free 1-800-435-6710 - ANYTIME
There is NO CHARGE to you for this call
- --------------------------------------------------------------------------------
Use any touch-tone phone to vote your proxy. Have your proxy card in hand when
you call. You will be prompted to enter your CONTROL NUMBER located in the box
below, and then follow the directions given.
- --------------------------------------------------------------------------------
INTERNET
http://www.eproxy.com/jbx
- --------------------------------------------------------------------------------
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your CONTROL NUMBER located in
the box below, to create and submit an electronic ballot.
- --------------------------------------------------------------------------------
MAIL
- --------------------------------------------------------------------------------
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope provided.
- --------------------------------------------------------------------------------
NOTE: If you vote by telephone or Internet, you do not need to mail back
your proxy.
THANK YOU FOR VOTING.
[Reserved for Control Number Box]
Proxy without telephone or Internet voting instructions - side one
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
JACK IN THE BOX INC.
FOR ANNUAL MEETING OF STOCKHOLDERS ON FEBRUARY 14, 200313, 2004 AT 2:00 P.M.
MARRIOTT MISSION VALLEY, 8757 RIO SAN DIEGO DRIVE,Rio San Diego Drive, SAN DIEGO, CALIFORNIA
The undersigned hereby appoints Robert J. Nugent, John F. Hoffner and
Lawrence E. Schauf and each of them, acting by a majority or by one of them
if only one is acting, as lawful proxies, with full power of substitution,
for and in the name of the undersigned, to vote on behalf of the
undersigned, with all the powers the undersigned would possess if
personally present at the Annual Meeting of Stockholders of Jack in the Box
Inc., a Delaware corporation, on February 14,
2003,13, 2004, or any postponements or
adjournments thereof. The above named proxies are instructed to vote all
the undersigned's shares of stock on the proposals set forth in the Notice
of Annual Meeting and Proxy Statement as specified on the other side
hereof and are authorized in their discretion to vote upon such other
business as may properly come before the meeting or any postponements or
adjournments thereof. This proxy when properly executed will be voted in
the manner directed herein by the undersigned stockholder. If no
direction is made, this proxy will be voted "FOR" all nominees listed and
"FOR" Proposal 2.Proposals 2 and 3. The Board of Directors recommends a vote FOR the
above proposals.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
/ -----------------------------------------------------------------------------
/~FOLD AND DETACH HERE /HERE/~
JACK IN THE BOX INC.
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 14, 200313, 2004 AT 2:00 P.M.
MARRIOTT MISSION VALLEY
8757 RIO SAN DIEGO DRIVE
SAN DIEGO, CALIFORNIA
Proxy without telephone andor Internet voting instructions - side two
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Please mark your |X|
all nominees listed and Proposal 2.Proposals 2 and 3. votes like this.this
- --------------------------------------------------------------------------------
WITHHOLD
FOR ALL ALL
1. Election of Directors |_| |_|
Nominees:Nominees
01 Michael E. Alpert 06 Murray H. HutchisonLinda A. Lang
02 JayEdward W. BrownGibbons 07 Michael W. Murphy
03 Edward W. GibbonsAnne B. Gust 08 Robert J. Nugent
04 AnneAlice B. GustHayes 09 L. Robert Payne
05 Alice B. HayesMurray H. Hutchison
(Instruction: To withhold authority to vote for
any individual nominee write that nominee's
name below.)
___________________________________________________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of the 2004 Stock Incentive Plan. |_| |_| |_|
FOR AGAINST ABSTAIN
3. Ratification of appointment of KPMG LLP as
FOR AGAINST ABSTAIN
independent accountants.auditors . |_| |_| |_|
3.4. In their discretion, the Proxies are
authorized to vote upon such other business
as may properly come before the meeting.meeting
includingwith respect to any adjournment thereof.
YES NO
I plan to attend the meeting. |_| |_|
[NAME, ADDRESS & SHARE INFORMATION]
Signature(s)___________________________ x_______________________________ Dated: ___________________________,2003____________________, 2004
Stockholder(s), please sign above exactly as name appears hereon; in the case of
joint holders, all should sign. Fiduciaries should add their full title to their
signature. Corporations should sign in full corporate name by an authorized
officer. Partnerships should sign in partnership name by an authorized person.
- --------------------------------------------------------------------------------
/ /~FOLD AND DETACH HERE /HERE/~
Proxy Easy $aver Plus Plan - side one
- --------------------------------------------------------------------------------
Please fold and detach at perforation before mailing
- --------------------------------------------------------------------------------
Please fill in box(es) as shown using black or blue ink or number 2 pencil.
PLEASE DO NOT USE FINE POINT PENS.
-------------------------------------------------------------------------------- --------------------------------------------------------------------------------
The Board of Directors of Jack in the Box Inc. recommends
a vote FOR all nominees listed and Proposal 2.
WITHHOLDProposals 2 and 3.
FOR ALL
EXCEPT
WITHHOLD (noted
FOR ALL ALL (noted at left)
1. Election of Directors |_| |_| |_|
Nominees:Nominees
01 Michael E. Alpert 06 Murray H. HutchisonLinda A. Lang
02 JayEdward W. BrownGibbons 07 Michael W. Murphy
03 Edward W. GibbonsAnne B. Gust 08 Robert J. Nugent
04 AnneAlice B. GustHayes 09 L. Robert Payne
05 Alice B. HayesMurray H. Hutchison
- -----------------------------------------------------------------------------------------
(Instruction: To withhold authority to vote for
any individual nominee mark the "FOR ALL EXCEPT"
box above and write that nominee's name above.)
FOR AGAINST ABSTAIN
2. Approval of the 2004 Stock Incentive Plan. |_| |_| |_|
FOR AGAINST ABSTAIN
3. Ratification of appointment of KPMG LLP FOR AGAINST ABSTAIN
as
independent accountants.auditors |_| |_| |_|
3.4. In their discretion, the Proxies are
authorized to vote upon such other business
as may properly come before the meeting.meeting
includingwith respect to any adjournment thereof.
Please note: If this Voting Instruction Form is signed, but no direction is
given on Proposal #1, Mellon Bank, N.A. will vote "FOR" all nominees
listed, or if no direction is given on ProposalProposals #2 and #3, Mellon Bank,
N.A. will vote "FOR" this
Proposal.these Proposals.
(Continued and to be dated and signed on the other side)
Proxy Easy $aver Plus Plan - side two
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE This voting instruction is
requested by Mellon Bank, N.A. in conjunction with a proxy
solicitation by the Board of Directors of Jack in the Box Inc.
Please read the enclosed Proxy Statement and the Annual Report to
Stockholders for more information.
CONFIDENTIAL VOTING INSTRUCTION FORM
To: Mellon Bank, N.A.
as Trustee of the Jack in the Box Inc. Easy$aver Plus Plan
Please fold and detach at perforation before mailing
- --------------------------------------------------------------------------------
The undersigned hereby instructs Mellon Bank, N.A., as Trustee of the
Jack in the Box Inc. Easy$aver Plus Plan, to vote in person or by proxy at the
Annual Meeting of the Stockholders of Jack in the Box Inc., to be held on
February 14,
2003,13, 2004, and at any postponements or adjournments thereof, all
shares of Common Stock of Jack in the Box Inc., for which the undersigned
shall be entitled to instruct, in the manner specified on the other side
hereof.
Mellon Bank, N.A. will vote the shares represented by this Voting Instruction
Form if it is properly completed, signed, and received by Mellon Bank, N.A.
before 5:00 p.m. EST on February 11, 200310, 2004 at P.O. Box 9116, Hingham, MA
02043. Please note that if this Voting Instruction Form is not properly
completed and signed, or it is not received by Mellon Bank, N.A., as
indicated above, Mellon Bank, N.A. will not vote any shares represented by
such Voting Instruction Form.
Mellon Bank, N.A. makes no recommendation regarding any voting instruction.
Any Voting Instruction Form, if properly completed, signed, and received by
Mellon Bank, N.A. in a timely manner will supersede any previously
received Voting Instruction Form. All voting instructions received by
Mellon Bank, N.A. will be kept confidential.
Dated:_____________________, 2003
_________________________________2004
---------------------------------
Signature
- --------------------------------------------------------------------------------
BALLOT JACK IN THE BOX INC. BALLOT
Annual Meeting of Stockholders, February 14, 200313, 2004
The undersigned votes_______________________________(______________)votes__________________________(______________) shares of stock,
with respect to the following:
1. Election of Directors: Michael E. Alpert, Jay W. Brown, Edward W. Gibbons, Anne B. Gust,
Alice B. Hayes, Murray H. Hutchison, Linda A. Lang, Michael W. Murphy,
Robert J. Nugent and L. Robert Payne.
|_| FOR all nominees listed.
|_| WITHHOLD AUTHORITY to vote for all nominees listed.
|_| FOR all nominees listed except_______________________________________except______________________________________
2. Approval of the 2004 Stock Incentive Plan |_| FOR |_| AGAINST |_| ABSTAIN
3. Ratification of appointment of KPMG LLP as independent accountants. |_| FOR |_| AGAINST |_| ABSTAIN
as independent auditors.
_________________________________________________________________________
Stockholder's signature (|_| check box if you are voting shares held in
Easy$aver Plus Plan)
INSTRUCTION: If ballot is cast by proxy, print stockholder name above or, if
multiple stockholders, print "Proxies Filed" above.
_________________________________________________________________________
Proxy signature (if ballot is cast by proxy)