 | JACK IN THE BOX INC. |
o Preliminary Proxy Statemento Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))þ Definitive Proxy Statemento Definitive Additional Materialso Soliciting Material Pursuant to §240.14a-12
| o | Preliminary Proxy Statement | |
| o | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| þ | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material Under Rule14a-12 |
Paying
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| JACK IN THE BOX INC. |
California, on February 17, 2006. In the following pages you will find information about the meeting as well as a Proxy Statement.
The matters expected to be acted upon at the meeting are described in detail in the attached Notice of Meeting and Proxy Statement.
| Sincerely, | |
 |
| Chairman of the Board |
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| Exhibit A — | A-1 | ||||
| Exhibit B — | B-1 | ||||
| Exhibit C — | C-1 | ||||
| Exhibit D — Audit Committee Charter | D-1 | ||||
| Exhibit E — Policy for Audit Committee Pre-Approval of Services | |||||
17, 2006
| 1. | To elect | |
| 2. | To approve | |
| 3. | To approve the Amended and Restated Performance Bonus Plan; | |
| 4. | To ratify the appointment of KPMG LLP (“KPMG”) as independent registered public | |
| To act upon such other matters as may properly come before the meeting, or any postponements or adjournments thereof. |
| By order of the Board of Directors | |
  | |
| Lawrence E. Schauf | |
| Secretary |
San Diego, CaliforniaJanuary 13, 20052006
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17, 2006
This Proxy Statement is furnished in connection with the solicitation of proxies.
2006.
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The ten
| Director | ||||||
| Name | Age | Position(s) with the Company | Since | |||
| Michael E. Alpert(4)(5) | 62 | Director | 1992 | |||
| Edward W. Gibbons(3)(4) | 68 | Director | 1985 | |||
| Anne B. Gust(2)(5) | 46 | Director | 2003 | |||
| Alice B. Hayes, Ph.D.(2)(5) | 67 | Director | 1999 | |||
| Murray H. Hutchison(1)(2) | 66 | Director | 1998 | |||
| Linda A. Lang | 46 | President, Chief Operating Officer and Director | 2003 | |||
| Michael W. Murphy(1)(2) | 47 | Director | 2002 | |||
| Robert J. Nugent(3) | 63 | Chairman of the Board and Chief Executive Officer | 1988 | |||
| L. Robert Payne(1)(3)(4) | 71 | Director | 1986 | |||
| David M. Tehle | 48 | Director | 2004 |
| Director | ||||||
| Name | Age | Position(s) with the Company | Since | |||
| Michael E. Alpert(4)(5) | 63 | Director | 1992 | |||
| Anne B. Gust(2)(5) | 47 | Director | 2003 | |||
| Alice B. Hayes, Ph.D.(2)(5) | 68 | Director | 1999 | |||
| Murray H. Hutchison(1)(2) | 67 | Director | 1998 | |||
| Linda A. Lang(3) | 47 | Chairman of the Board and Chief Executive Officer | 2003 | |||
| Michael W. Murphy(1)(3) | 48 | Director | 2002 | |||
| L. Robert Payne(3)(4) | 72 | Director | 1986 | |||
| David M. Tehle(1)(2) | 49 | Director | 2004 |
| (1) | Current Member of the Audit Committee. |
| (2) | Current Member of the Compensation Committee. |
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| (3) | Current Member of the Executive Committee. |
| (4) | Current Member of the Finance Committee. |
| (5) | Current Member of the Nominating and Governance Committee. |
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-timeMr. Gibbons. has been a director of the Company since October 1985. He has been the President of Gibbons & Co. Inc., an investment banking firm, for two years. Prior to his appointment to President of Gibbons & Company Inc., he was a general partner of the investment banking firm Gibbons, Goodwin, van Amerongen for more than five years. Mr. Gibbons serves as a director of Robert Half International, Inc.
Brobeck, Phleger & Harrison LLP.
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Mr. Paynehas been a director of the Company since August 1986 and is currently Chairman of the Finance Committee.1986. 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.
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The Board of Directors has approved changes to the Board Committees to be effective February 17, 2005. The Committees shall be as follows:
Committees of the Board of Directors
The Board has analyzed the independence of each director and determined that the following directors are independent under the New York Stock Exchange listing standards and the additional Independence Guidelines adopted by the Board, and have no material relationships with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company): Messrs. Alpert, Gibbons, Hutchison, Murphy, Payne and Tehle, and Ms. Gust and Dr. Hayes. Mr. Nugent and Ms. Lang areis not considered independent because they are officersshe is an officer of the Company. The Jack in the Box Inc. Director Independence Guidelines are attached hereto as Exhibit A.
Audit Committee | Finance Committee | |
| Michael W. Murphy (Chair) | Michael E. Alpert (Chair) | |
| Murray H. Hutchison | L. Robert Payne | |
| David M. Tehle | David M. Tehle | |
Compensation Committee | Executive Committee | |
| Alice B. Hayes (Chair) | Linda A. Lang (Chair) | |
| Anne B. Gust | L. Robert Payne | |
| Murray H. Hutchison | Michael W. Murphy | |
Nominating and Governance Committee | ||
| Anne B. Gust (Chair) | ||
| Michael E. Alpert | ||
| Alice B. Hayes | ||
The authority and responsibility of each committee is summarized below. A more detailed description of the functions of the Audit, Compensation, Nominating and Governance and Finance Committees is included in each committee charter as adopted by the Board of Directors. The charters can be found in the Corporate Governance section of the Company’s corporate website
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2006.
Audit Committee.As more fully described in its charter, the Audit Committee assists the Board of Directors in overseeing the integrity of the Company’s financial reports; the Company’s compliance with legal and regulatory requirements; the independent registered public accountant’s performance, qualifications and independence; and the performance of the Company’s internal auditors. The Audit Committee has sole authority to select, evaluate and when appropriate, to replace the Company’s independent registered public accountants.accountant. The Audit Committee meets each quarter with the Company’s independent registered public accountant KPMG LLP (“KPMG”), the Company’s Director of Internal Audit, and management, to review the Company’s annual and interim consolidated
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2005.
2005.
2005.
2005.
In
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Director Compensation.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:
| Annual Stock Option Grant for fiscal year 2004* | 10,000 | shares | ||||||||||||||||
| Annual Stock Option Grant for fiscal year 2005* | Annual Stock Option Grant for fiscal year 2005* | 6,300 | shares | |||||||||||||||
| Annual Retainer | Annual Retainer | $ | 25,000 | Annual Retainer | $ | 25,000 | ||||||||||||
| Board Attendance Fee (per in-person meeting) | Board Attendance Fee (per in-person meeting) | $ | 2,000 | Board Attendance Fee (per in-person meeting) | $ | 2,000 | ||||||||||||
| Committee Attendance Fee (per in-person meeting) | Committee Attendance Fee (per in-person meeting) | $ | 1,000 | Committee Attendance Fee (per in-person meeting) | $ | 1,000 | ||||||||||||
| Committee Attendance Fee (telephonic meeting) | Committee Attendance Fee (telephonic meeting) | $ | 500 | Committee Attendance Fee (telephonic meeting) | $ | 500 | ||||||||||||
| Annual Retainer for Committee Chair | Annual Retainer for Committee Chair | Annual Retainer for Committee Chair | ||||||||||||||||
| Audit | $ | 10,000 | Audit | $ | 10,000 | |||||||||||||
| Compensation | $ | 5,000 | Compensation | $ | 5,000 | |||||||||||||
| Nominating and Governance | $ | 5,000 | Executive | None | ||||||||||||||
| Executive | None | Finance | $ | 5,000 | ||||||||||||||
| Finance | $ | 5,000 | Nominating and Governance | $ | 5,000 | |||||||||||||
| Lead Director | $ | 10,000 | ||||||||||||||||
| * | Options were granted |
This deferred compensation is the Company’s unsecured obligation.
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| Nominating and Governance Committee of the Board of Directors c/o Office of the Corporate Secretary Jack in the Box Inc. 9330 Balboa Avenue San Diego, CA 92123 |
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| • | The appropriate size of the Board. | |
| • | The needs of the Company with respect to particular talents and experience. | |
| • | The knowledge, skills and experience of candidates in light of the knowledge, skills and experience already possessed by other members of the Board. | |
| • | Experience with accounting rules and practices, and executive compensation. | |
| • | Applicable regulatory and listing requirements, including independence requirements. | |
| • | The benefits of constructive working relationships among directors. | |
| • | The desire to balance the considerable benefit of continuity with the periodic injection of fresh perspective provided by new members. |
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These materials are also available in print to any stockholder upon request.
| • | Corporate Governance Principles and Practices | |
| • | ||
| • | Code of Conduct. In 1998, the Company adopted a Code of Ethics applicable to all Jack in the Box Inc. directors, officers and employees. The Company actively promotes ethical behavior by all 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 Code of Ethics, as well as procedures for the communication of any concerns. |
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| performing similar | ||
| • | Communications with the Board of Directors. Stockholders or others who wish to communicate any concern of any nature to the Board of Directors, any Committee of the Board, any individual director or group of directors, may write to the director in care of the Office of the Corporate Secretary, Jack in the Box Inc. 9330 Balboa Avenue, San Diego, CA 92123, or telephone 1-888-613-5225. |
The Lead Director is responsible for setting the agenda and presiding at the meetings.
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As of December 10, 2004, an aggregate of 734,174 shares of our Common Stock remained available for future grants under the 2004 Plan. The Board believes it important to the continued successprinciple features of the Company that we have available an adequate reserve of shares under the 2004Employee Stock Purchase Plan for use 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.
At the annual meeting, the stockholders will be asked to approve the amendment to the 2004 Plan in order to increase, by 2,000,000 shares, the number of shares that may be issued under the 2004 Plan. On December 28, 2004 the Compensation Committee approved, subject to stockholder approval, this amendment. In light of historical usage and expected future grants, we expect that the addition of these shares will be sufficient to provide a competitive equity incentive program for approximately three years.
We intend to register the 2,000,000 share increase on a Registration Statement on Form S-8 under the Securities Act of 1933 as soon as is practicable after receiving stockholder approval.
Summary of the 2004 Plan
The following summary of the 2004 Planbut is qualified in its entirety by reference to the specific languagefull text of the 2004Employee Stock Purchase Plan a copy of which is attached heretoset forth as Exhibit C.
General.B to this Proxy Statement.
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Authorized Shares.If the stockholders approve this proposal to authorize an additional 2,000,000100,000 shares for issuance under the 2004Plan.
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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 toin the number, kind and purchase price of 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 to administer the 2004 Plan, or, in the absence of such committee, by the Board of Directors. In the case of awards intended to qualifyavailable 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 of 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. In addition, the 2004 Plan forbids any restricted stock award to be granted, or subsequently amended to provide, for (1) any acceleration of vesting for any reason other than upon a Change in Control or after a participant’s death or disability, (2) vesting of one hundred percent (100%) of any such award prior to the passage of three years of service (unless the award will vest after satisfying specified performance measurements) and (3) for a performance period shorter than twelve (12) months. 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 of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of December 20, 2004, the Company had approximately 45,000 employees, including 13 executive officers, and eight non-management directors who would be eligiblepurchase 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 the option 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 thanOn December 1, 2005, the fair market value of a share of
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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 tenderpurchase 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.
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 mustare as follows.
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
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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.
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 and $100 per unit. 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 each fiscal year 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: 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 stockholder equity, return on capital, return on capital, return on net assets, economic value added, number of customers, market share, same store sales, return on investment, profit after tax and guest and/or 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
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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 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.
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.The 2004 Plan defines a “Change in Control” of the Company as any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the event, direct or indirect beneficial ownership of a majority of the total combined voting power of the voting securities of the Company, its successor or the corporation to which the assets of the Company were transferred: (i) a sale or exchange by the stockholders in a single or series of related 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, in which 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 any restricted stock award, restricted stock unit and performance award held by a participant whose service with the Company has not terminated prior to the Change in Control shall be accelerated effective as of 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
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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.
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 with respect to 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 should 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 exercisepurchase price and the fair market value when shares of the Company’s stock are purchased under the Plan. An employee will generally have a capital gain or loss when he or she sells those shares onacquired under 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 mayPlan. This gain or loss will generally be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares 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 an indexed stock option, will be nonstatutory 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 onupon purchase and the determination date (as defined below). Ifamount he or she receives for the optionee is an employee, such ordinary income generally is subject to withholding of income and employment taxes.stock. 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 original exercise price upon the optionee’s termination of service) and are 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 exercise date be the determination date by filing an
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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 employment taxes. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to 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 salemust recognize upon a purchase 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.
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 Awards”). 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 and Indexed Stock Options”), 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.
New Plan Benefits
No awards will be granted under the 2004 Plan with respect to this share increase prior to approval by the stockholders of the Company of the amended 2004 Plan containing the share reserve increase. 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 possible to determine the benefits that might be received by participants under the 2004 Plan with respect to this share reserve increase.
Plan.
The
15
| (c) | ||||||||||||
| Number of securities | ||||||||||||
| (a) | (b) | remaining for future issuance | ||||||||||
| Number of securities to be | Weighted-average | under equity compensation | ||||||||||
| issued upon exercise of | exercise price of | plans (excluding securities | ||||||||||
| outstanding options | outstanding options | reflected in column (a)) | ||||||||||
| Equity compensation plans approved by security holders | 5,590,047 | $ | 21.80 | 823,274 | ||||||||
| (c) | ||||||||||||
| Number of securities | ||||||||||||
| (a) | (b) | remaining for future issuance | ||||||||||
| Number of securities to be | Weighted-average | under equity compensation | ||||||||||
| issued upon exercise of | exercise price of | plans (excluding securities | ||||||||||
| outstanding options | outstanding options | reflected in column (a)) | ||||||||||
| Equity compensation plans approved by security holders | 4,473,700 | $ | 23.56 | 2,263,128 | ||||||||
1612
13
14
D.
amended and PCAOB Auditing Standard No. 2, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.”
In reliance15
| Michael W. Murphy, Chair | |
| Murray H. Hutchison | |
1716
| 2004 | 2003 | 2005 | 2004 | |||||||||||||||
| Audit Fees(1) | Audit Fees(1) | $ | 589,500 | $ | 295,475 | Audit Fees(1) | $ | 1,219,155 | $ | 589,500 | ||||||||
| Audit Related Fees(2) | Audit Related Fees(2) | 127,125 | 81,800 | Audit Related Fees(2) | 67,096 | 127,125 | ||||||||||||
| Tax Fees(3) | Tax Fees(3) | 250,000 | 500 | Tax Fees(3) | 0 | 250,000 | ||||||||||||
| All Other Fees | All Other Fees | 0 | 0 | All Other Fees | 0 | 0 | ||||||||||||
| KPMG Total Fees | $ | 966,625 | $ | 377,775 | KPMG Total Fees | $ | 1,286,251 | $ | 966,625 | |||||||||
| (1) | Audit fees |
| (2) | These fees consist of assurance and services performed by KPMG that are reasonably related to the performance of the audit or review of the Company’s financial |
| (3) | Tax fees consist of aggregate fees billed for professional services rendered by KPMG for tax compliance, tax advice and tax planning. Tax fees |
1817
appointment.
1918
| Long-Term Compensation | Long-Term Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Compensation | Restricted | Securities | All Other | Annual Compensation | Restricted | Securities | All Other | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal | Stock | Underlying | Compensation | Fiscal | Stock | Underlying | Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Name and Principal Position(s) | Name and Principal Position(s) | Year | Salary($) | Bonus($) | Other($)(1) | Awards($)(2) | Options(#) | ($)(3) | Name and Principal Position(s) | Year | Salary($) | Bonus($) | Other($)(1) | Awards($)(2) | Options(#) | ($)(3) | ||||||||||||||||||||||||||||||||||||||||||
| Robert J. Nugent | Robert J. Nugent | 2004 | 806,077 | 1,194,000 | 26,667 | 0 | 250,000 | 61,262 | Robert J. Nugent | 2005 | 938,466 | 1,242,000 | 96,050 | 0 | 45,000 | 66,700 | ||||||||||||||||||||||||||||||||||||||||||
| Chairman of the Board and | 2003 | 756,923 | 0 | 21,482 | 0 | 170,000 | 31,078 | Chairman of the Board and | 2004 | 806,077 | 1,194,000 | 26,667 | 0 | 250,000 | 61,262 | |||||||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2002 | 720,000 | 437,400 | 21,080 | 0 | 113,000 | 19,363 | Chief Executive Officer | 2003 | 756,923 | 0 | 21,482 | 0 | 170,000 | 31,078 | |||||||||||||||||||||||||||||||||||||||||||
| Linda A. Lang | 2004 | 498,077 | 675,000 | 13,777 | 1,012,200 | 167,000 | 36,452 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Linda A. Lang(4) | Linda A. Lang(4) | 2005 | 517,692 | 702,000 | 58,581 | 352,500 | 80,600 | 37,877 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| President, Chief Operating | 2003 | 400,000 | 0 | 12,091 | 1,152,250 | 40,900 | 19,090 | President, Chief Operating | 2004 | 498,077 | 675,000 | 13,777 | 1,012,200 | 167,000 | 36,452 | |||||||||||||||||||||||||||||||||||||||||||
| Officer and Director | 2002 | 311,546 | 192,000 | 12,385 | 0 | 20,000 | 11,336 | Officer and Director | 2003 | 400,000 | 0 | 12,091 | 1,152,250 | 40,900 | 19,090 | |||||||||||||||||||||||||||||||||||||||||||
| John F. Hoffner | 2004 | 423,269 | 501,600 | 17,686 | 0 | 116,000 | 29,006 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Executive Vice President and | 2003 | 397,539 | 0 | 12,092 | 1,152,250 | 40,900 | 18,786 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2002 | 381,923 | 184,320 | 101,298 | 0 | 45,000 | 12,696 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Paul L. Schultz | 2004 | 408,596 | 423,150 | 43,695 | 0 | 84,000 | 26,213 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Paul L. Schultz(5) | Paul L. Schultz(5) | 2005 | 431,308 | 522,000 | 56,061 | 531,711 | 68,700 | 29,885 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Executive Vice President, | 2003 | 387,000 | 0 | 12,919 | 0 | 35,000 | 17,791 | Executive Vice President, | 2004 | 408,596 | 423,150 | 43,695 | 0 | 84,000 | 26,213 | |||||||||||||||||||||||||||||||||||||||||||
| Operations and Franchising | 2002 | 372,308 | 161,680 | 12,510 | 0 | 27,000 | 14,824 | Operations and Franchising | 2003 | 387,000 | 0 | 12,919 | 0 | 35,000 | 17,791 | |||||||||||||||||||||||||||||||||||||||||||
| Lawrence E. Schauf | Lawrence E. Schauf | 2004 | 336,538 | 398,400 | 18,706 | 0 | 71,000 | 23,308 | Lawrence E. Schauf | 2005 | 340,846 | 410,400 | 75,254 | 0 | 25,300 | 23,824 | ||||||||||||||||||||||||||||||||||||||||||
| Executive Vice President | 2003 | 318,308 | 0 | 12,111 | 1,047,500 | 42,600 | 15,329 | Executive Vice President | 2004 | 336,538 | 398,400 | 18,706 | 0 | 71,000 | 23,308 | |||||||||||||||||||||||||||||||||||||||||||
| and Secretary | 2002 | 306,923 | 148,320 | 12,486 | 0 | 19,000 | 12,504 | and Secretary | 2003 | 318,308 | 0 | 12,111 | 1,047,500 | 42,600 | 15,329 | |||||||||||||||||||||||||||||||||||||||||||
| David M. Theno | David M. Theno | 2005 | 317,731 | 334,950 | 36,602 | 0 | 12,500 | 20,867 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Vice President, | 2004 | 312,308 | 323,400 | 12,231 | 0 | 15,000 | 15,598 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Quality and Logistics | 2003 | 295,731 | 0 | 12,090 | 586,600 | 50,000 | 7,026 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Other Annual Compensation consists of the following: |
| Financial | Supplemental | Reimbursed | Financial | Supplemental | ||||||||||||||||||||||||||||||||||||||||
| Fiscal | Car | Planning | Health | Supplemental | Moving | Fiscal | Car | Planning | Health | Supplemental | ||||||||||||||||||||||||||||||||||
| Year | Allowance($) | Services($) | Insurance($) | LTD($) | Expenses($) | Year | Allowance($) | Services($) | Insurance($) | LTD($) | ||||||||||||||||||||||||||||||||||
| Robert J. Nugent | 2004 | 12,231 | 4,000 | 10,436 | 0 | 0 | 2005 | 12,000 | 51,023 | 33,027 | 0 | |||||||||||||||||||||||||||||||||
| 2003 | 12,000 | 0 | 9,482 | 0 | 0 | 2004 | 12,231 | 4,000 | 10,436 | 0 | ||||||||||||||||||||||||||||||||||
| 2002 | 12,000 | 0 | 9,080 | 0 | 0 | 2003 | 12,000 | 0 | 9,482 | 0 | ||||||||||||||||||||||||||||||||||
| Linda A. Lang | 2004 | 12,231 | 1,546 | 0 | 0 | 0 | 2005 | 12,000 | 23,711 | 22,870 | 0 | |||||||||||||||||||||||||||||||||
| 2003 | 12,000 | 0 | 0 | 91 | 0 | 2004 | 12,231 | 1,546 | 0 | 0 | ||||||||||||||||||||||||||||||||||
| 2002 | 12,000 | 0 | 0 | 385 | 0 | 2003 | 12,000 | 0 | 0 | 91 | ||||||||||||||||||||||||||||||||||
| John F. Hoffner | 2004 | 12,231 | 5,455 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||
| 2003 | 12,000 | 0 | 0 | 92 | 0 | |||||||||||||||||||||||||||||||||||||||
| 2002 | 12,000 | 0 | 0 | 395 | 88,903 | |||||||||||||||||||||||||||||||||||||||
| Paul L. Schultz | 2004 | 12,231 | 5,091 | 26,373 | 0 | 0 | 2005 | 12,000 | 15,634 | 28,427 | 0 | |||||||||||||||||||||||||||||||||
| 2003 | 12,000 | 0 | 801 | 118 | 0 | 2004 | 12,231 | 5,091 | 26,373 | 0 | ||||||||||||||||||||||||||||||||||
| 2002 | 12,000 | 0 | 0 | 510 | 0 | 2003 | 12,000 | 0 | 801 | 118 | ||||||||||||||||||||||||||||||||||
| Lawrence E. Schauf | 2004 | 12,231 | 5,455 | 1,020 | 0 | 0 | 2005 | 12,000 | 29,704 | 33,550 | 0 | |||||||||||||||||||||||||||||||||
| 2003 | 12,000 | 0 | 0 | 111 | 0 | 2004 | 12,231 | 5,455 | 1,020 | 0 | ||||||||||||||||||||||||||||||||||
| 2002 | 12,000 | 0 | 0 | 486 | 0 | 2003 | 12,000 | 0 | 0 | 111 | ||||||||||||||||||||||||||||||||||
| David M. Theno | 2005 | 12,000 | 1,732 | 22,870 | 0 | |||||||||||||||||||||||||||||||||||||||
| 2004 | 12,231 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||
| 2003 | 12,000 | 0 | 0 | 90 | ||||||||||||||||||||||||||||||||||||||||
| (2) | Represents the grant of restricted stock awards under which Ms. Lang was issued 10,000, 35,000 and 55,000 shares of |
19
| and |
20
| November 8, 2002, the date of grant. At October | |
| (3) | All other compensation |
| Deferred Compensation | Company Paid Term | Deferred Compensation | Company Paid Term | |||||||||||||||||||||||||||||||||||||||||||||
| Matching Contributions($) | Life Premiums($)(a) | Matching Contributions($) | �� | Life Premiums($)(a) | ||||||||||||||||||||||||||||||||||||||||||||
| 2004 | 2003 | 2002 | 2004 | 2003 | 2002 | 2005 | 2004 | 2003 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||
| Robert J. Nugent | 60,002 | 29,748 | 17,885 | 1,260 | 1,330 | 1,478 | 65,414 | 60,002 | 29,748 | 1,286 | 1,260 | 1,330 | ||||||||||||||||||||||||||||||||||||
| Linda A. Lang | 35,192 | 17,760 | 9,858 | 1,260 | 1,330 | 1,478 | 36,591 | 35,192 | 17,760 | 1,286 | 1,260 | 1,330 | ||||||||||||||||||||||||||||||||||||
| John F. Hoffner | 27,746 | 17,456 | 11,458 | 1,260 | 1,330 | 1,478 | ||||||||||||||||||||||||||||||||||||||||||
| Paul L. Schultz | 24,953 | 16,461 | 13,346 | 1,260 | 1,330 | 1,478 | 28,599 | 24,953 | 16,461 | 1,286 | 1,260 | 1,330 | ||||||||||||||||||||||||||||||||||||
| Lawrence E. Schauf | 22,048 | 13,999 | 11,026 | 1,260 | 1,330 | 1,478 | 22,538 | 22,048 | 13,999 | 1,286 | 1,260 | 1,330 | ||||||||||||||||||||||||||||||||||||
| David M. Theno | 19,581 | 14,338 | 5,696 | 1,286 | 1,260 | 1,330 | ||||||||||||||||||||||||||||||||||||||||||
| (a) | The Company has no interest in such insurance policies. |
| (4) | Effective upon her promotion to Chief Executive Officer at October 3, 2005, Ms. Lang’s salary for fiscal 2006 was increased to $700,000. |
| (5) | Effective upon his promotion to President and Chief Operating Officer at October 3, 2005, Mr. Schultz’s salary for fiscal 2006 was increased to $485,000. |
| Number of | Potential Realizable Value | Number of | Potential Realizable Value | |||||||||||||||||||||||||||||||||||||
| Securities | % of Total | at Assumed Annual Rates | Securities | % of Total | at Assumed Annual Rates | |||||||||||||||||||||||||||||||||||
| Underlying | Options/SARs | of Stock Price Appreciation | Underlying | Options/SARs | of Stock Price Appreciation | |||||||||||||||||||||||||||||||||||
| Options/SARs | Granted to | Exercise or | for Option Term($)(2) | Options/SARs | Granted to | Exercise or | for Option Term($)(2) | |||||||||||||||||||||||||||||||||
| Granted | Employees in | Base Price | Expiration | Granted | Employees in | Base Price | Expiration | |||||||||||||||||||||||||||||||||
| Name | (#)(1)(3) | Fiscal Year | ($/Share) | Date | 5% | 10% | (#)(1) | Fiscal Year | ($/Share) | Date | 5% | 10% | ||||||||||||||||||||||||||||
| Robert J. Nugent | 160,000 | 12.0 | % | 18.90 | 11/06/2013 | 1,901,777 | 4,819,477 | 45,000 | 14.3 | % | 35.11 | 11/12/2014 | 993,622 | 2,518,033 | ||||||||||||||||||||||||||
| 90,000 | 6.7 | % | 28.92 | 09/10/2014 | 1,636,887 | 4,148,193 | ||||||||||||||||||||||||||||||||||
| Linda A. Lang | 110,000 | 8.0 | % | 18.90 | 11/06/2013 | 1,307,472 | 3,313,391 | 80,600 | 25.6 | % | 35.25 | 09/16/2015 | 1,786,784 | 4,528,061 | ||||||||||||||||||||||||||
| 57,000 | 4.3 | % | 28.92 | 09/10/2014 | 1,036,695 | 2,627,188 | ||||||||||||||||||||||||||||||||||
| John F. Hoffner | 90,000 | 6.7 | % | 18.90 | 11/06/2013 | 1,069,750 | 2,710,956 | |||||||||||||||||||||||||||||||||
| 26,000 | 2.0 | % | 28.92 | 09/10/2014 | 472,878 | 1,198,367 | ||||||||||||||||||||||||||||||||||
| Paul L. Schultz | 59,000 | 4.4 | % | 18.90 | 11/06/2013 | 701,280 | 1,777,182 | 68,700 | 21.9 | % | 35.25 | 09/16/2015 | 1,522,978 | 3,859,526 | ||||||||||||||||||||||||||
| 25,000 | 1.9 | % | 28.92 | 09/10/2014 | 454,691 | 1,152,276 | ||||||||||||||||||||||||||||||||||
| Lawrence E. Schauf | 45,000 | 3.4 | % | 18.90 | 11/06/2013 | 534,875 | 1,355,478 | 25,300 | 8.1 | % | 35.25 | 09/16/2015 | 560,864 | 1,421,339 | ||||||||||||||||||||||||||
| 26,000 | 2.0 | % | 28.92 | 09/10/2014 | 472,878 | 1,198,367 | ||||||||||||||||||||||||||||||||||
| David M. Theno | 12,500 | 4.0 | % | 35.25 | 09/16/2015 | 277,107 | 702,243 | |||||||||||||||||||||||||||||||||
| (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. |
2120
| Number of Securities | Number of Securities | |||||||||||||||||||||||||||||||||||||||||||||||
| Underlying Unexercised | Value of Unexercised | Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||||||||||||||||||||||||
| Options/SARs Held at | In-the-Money Options/SARs | Options/SARs Held at | In-the-Money Options/SARs | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Fiscal Year-End | at Fiscal Year-End($)(1) | Shares | Fiscal Year-End | at Fiscal Year-End($)(1) | |||||||||||||||||||||||||||||||||||||||||||
| Acquired on | Value | Acquired on | Value | |||||||||||||||||||||||||||||||||||||||||||||
| Name | Exercise(#) | Realized($) | Exercisable | Unexercisable | Exercisable | Unexercisable | Exercise(#) | Realized($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||||||||||||||||||||
| Robert J. Nugent | 25,000 | 553,125 | 332,140 | 478,760 | 3,960,823 | 4,632,306 | 213,980 | 4,546,968 | 641,920 | 0 | 4,539,407 | 0 | ||||||||||||||||||||||||||||||||||||
| Linda A. Lang | 258 | 4,383 | 69,365 | 216,935 | 842,908 | 2,155,994 | 17,000 | 456,129 | 113,000 | 236,900 | 801,111 | 1,183,326 | ||||||||||||||||||||||||||||||||||||
| John F. Hoffner | 0 | 0 | 54,625 | 187,275 | 279,680 | 1,832,934 | ||||||||||||||||||||||||||||||||||||||||||
| Paul L. Schultz | 41,500 | 943,246 | 98,610 | 139,290 | 1,104,634 | 1,383,702 | 37,000 | 810,731 | 105,020 | 164,580 | 643,778 | 733,491 | ||||||||||||||||||||||||||||||||||||
| Lawrence E. Schauf | 0 | 0 | 86,490 | 128,110 | 769,556 | 1,235,812 | 102,290 | 1,551,948 | 25,300 | 112,310 | 68,193 | 638,059 | ||||||||||||||||||||||||||||||||||||
| David M. Theno | 31,800 | 590,951 | 49,850 | 84,050 | 242,071 | 584,391 | ||||||||||||||||||||||||||||||||||||||||||
| (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 October |
2221
| Estimated Annual Benefits Based on Years of Service | ||||||||||||
| Average Annual Earnings | 10 | 15 | 20 | |||||||||
| $ 100,000 | $ | 30,000 | $ | 45,000 | $ | 60,000 | ||||||
| 200,000 | 60,000 | 90,000 | 120,000 | |||||||||
| 300,000 | 90,000 | 135,000 | 180,000 | |||||||||
| 400,000 | 120,000 | 180,000 | 240,000 | |||||||||
| 500,000 | 150,000 | 225,000 | 300,000 | |||||||||
| 600,000 | 180,000 | 270,000 | 360,000 | |||||||||
| 800,000 | 240,000 | 360,000 | 480,000 | |||||||||
| 1,000,000 | 300,000 | 450,000 | 600,000 | |||||||||
| 1,200,000 | 360,000 | 540,000 | 720,000 | |||||||||
| 1,300,000 | 390,000 | 585,000 | 780,000 | |||||||||
At October 3, 2004,2, 2005, the number of years of service under the retirement plans for Messrs. Nugent, Hoffner, Schultz, and Schauf, Theno and Ms. Lang was 25, 3, 29, 826, 30, 9, 12 and 17,18, 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.
On November 17, 2004, Jack in the Box Inc. announced the upcoming retirement of Executive Vice President and Chief Financial Officer (“CFO”) John Hoffner. The Company also announced the decision to promote Jerry P. Rebel, effective January 24, 2005, to the position of Senior Vice President and Chief Financial Officer. Mr. Hoffner will continue to serve as CFO until January 23, 2005, and thereafter will continue to serve as Vice President of Financial Strategy until December 31, 2005. In connection with the retirement of Mr. Hoffner, he and Jack in the Box Inc. entered into a Retirement and Release Agreement (the “Retirement Agreement”) setting forth certain understandings associated with Mr. Hoffner’s retirement and the transition of the new Chief Financial Officer. The following description is a brief summary of material terms and conditions of the Retirement Agreement. Mr. Hoffner will continue to serve as CFO through January 23, 2005; thereafter he will continue to serve the Company during a transition period ending December 31, 2005. Mr. Hoffner is not eligible to receive benefits under the Company’s qualified pension plan or its Supplemental Executive Retirement Plan. During the transition period, Mr. Hoffner’s salary and benefits, including insurance coverage, will continue at approximately the same levels, and Mr. Hoffner will continue to be eligible for stock option vesting and restricted stock vesting through the transition period, which will result in the additional vesting of 56,225 option shares and 8,250 restricted shares. In addition, Mr. Hoffner will be eligible for a bonus at the end of the transition period of approximately $200,000. The Retirement Agreement contains additional customary and usual covenants and understandings.
23
22
2423
24
25
| • | Base salaries approximate market | |
| • | Target performance-based annual cash incentives approximate market median, and when coupled with base salaries provide targeted cash compensation approximating market | |
| • | Annual stock option grants and long-term restricted stock grants, as an incentive for future performance and executive stock ownership, are targeted at median competitive levels, and when combined with target cash compensation provide total compensation approximating market |
In fiscal 2005, as certified by the Committee, the Company’s performance achieved maximum levels established and maximum bonus amounts were paid.
25
26
20.
A greater
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 on their position with the Company.
Section 162(m)
2726
27
Mr. Nugent’s compensation iswere determined by the Compensation Committee in executive session without the presence of Company employees. The Committee’s actions were reviewed and discussed by the non-employee directors in executive session of the Board of Directors.
| Anne B. Gust | |
28
| 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |||||||||||||||||||||||||||||||||||||||||||
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||||||||||||||||||||||||||
| Jack in the Box Inc. | $ | 100 | $ | 86 | $ | 112 | $ | 91 | $ | 71 | $ | 127 | $ | 100 | $ | 131 | $ | 106 | $ | 83 | $ | 148 | $ | 140 | ||||||||||||||||||||||||
| S&P 500 Index | 100 | 113 | 83 | 66 | 82 | 94 | 100 | 73 | 58 | 73 | 83 | 93 | ||||||||||||||||||||||||||||||||||||
| Restaurant Peer Group(1) | 100 | 87 | 120 | 132 | 168 | 190 | ||||||||||||||||||||||||||||||||||||||||||
| Restaurant Peer Group (1) | 100 | 138 | 151 | 192 | 217 | 219 | ||||||||||||||||||||||||||||||||||||||||||
| (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. |
29
| Number of Shares | Number of Shares | |||||||||||||||
| of Common Stock | Percent of | of Common Stock | Percent of | |||||||||||||
| Name | Beneficially Owned(1) | Class(1) | Beneficially Owned(1) | Class(1) | ||||||||||||
| Fidelity Investments(2) | 5,521,708 | 14.0 | % | |||||||||||||
| Barclays Global Investors, N.A.(3) | 5,146,204 | 13.0 | % | |||||||||||||
| LSV Asset Management(4) | 2,085,950 | 5.3 | % | |||||||||||||
| Barclays Global Investors, N.A.(2) | 5,597,859 | 11.5 | % | |||||||||||||
| Fidelity Investments(3) | 3,765,788 | 7.7 | % | |||||||||||||
| Robert J. Nugent | 963,551 | 2.4 | % | 813,220 | 1.7 | % | ||||||||||
| Edward W. Gibbons | 260,836 | * | 217,136 | * | ||||||||||||
| Linda A. Lang | 188,750 | * | 257,325 | * | ||||||||||||
| Paul L. Schultz | 176,115 | * | 193,929 | * | ||||||||||||
| John F. Hoffner | 148,950 | * | ||||||||||||||
| David M. Theno | 105,050 | * | ||||||||||||||
| L. Robert Payne | 130,240 | * | 136,540 | * | ||||||||||||
| Lawrence E. Schauf | 124,840 | * | 110,860 | * | ||||||||||||
| Michael E. Alpert | 78,600 | * | 64,900 | * | ||||||||||||
| Murray H. Hutchison | 46,100 | * | 52,400 | * | ||||||||||||
| Alice B. Hayes | 38,100 | * | 44,400 | * | ||||||||||||
| Michael W. Murphy | 17,500 | * | 6,300 | * | ||||||||||||
| Anne B. Gust | 10,000 | * | 16,300 | * | ||||||||||||
| David M. Tehle | 0 | * | 7,800 | * | ||||||||||||
| All directors and executive officers as a group (20 persons) | 2,471,175 | 5.5 | % | |||||||||||||
| All directors and executive officers as a group (21 persons) | 2,283,961 | 4.7 | % | |||||||||||||
| * | 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, Schultz, |
| (2) | According to its Form 13F filing as of September 30, 2005, Barclays PLC, on behalf of certain of its direct and indirect subsidiaries, Barclays Global Investors, NA, Barclays Global Fund Advisors, and Palomino LTD, indirectly held and had investment discretion with respect to 5,597,859 shares. Barclays Global Investors, NA was the beneficial owner of 4,778,976 shares, of which it had sole voting power with respect to 4,637,088 shares and no voting power with |
30
| respect to 141,888 shares. Barclays Global Fund Advisors was the beneficial owner of 809,283 shares, of which it had sole voting power. Palomino LTD was the beneficial owner of 9,600 shares, of which it had sole voting power. | |
| (3) | According to it’s Form 13F filing as of September 30, |
30
| to | |
31
31
| Board of Directors (or specified | |
| c/o Corporate Secretary | |
| JACK IN THE BOX INC. | |
| 9330 Balboa Avenue | |
| San Diego, CA 92123 |
32
| a. | A director shall not be independent if he or she is a director, executive officer, partner or owner of 5% or greater interest in a company that either purchases from or makes sales to our company that total more than one percent of the consolidated gross revenues of such company for that fiscal year. |
| b. | A director shall not be independent if he or she is a director, executive officer, partner or owner of 5% or greater interest in a company from which our Company borrows an amount equal to or greater than one percent of the consolidated assets of either our Company or such other company. |
| c. | A director shall not be independent if he or she is a trustee, director or executive officer of a charitable organization that has received in that fiscal year, discretionary donations form our Company that total more than one percent of the organization’s latest publicly available national annual charitable receipts. |
A-1
| 2.1 “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the 1934 Act or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation. | |
| 2.2 “Board” means the Board of Directors of the Company. | |
| 2.3 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation. | |
| 2.4 “Committee” means the committee appointed by the Board to administer the Plan. As of the effective date of the Plan, the Plan shall be administered by the Compensation Committee of the Board. | |
| 2.5 “Common Stock” means the common stock of the Company. | |
| 2.6 “Company” means Jack in the Box Inc., a Delaware corporation, or any successor thereto. | |
| 2.7 “Compensation” means a Participant’s regular wages. The Committee, in its discretion, may (on a uniform and nondiscriminatory basis) establish a different definition of Compensation prior to an Enrollment Date for all options to be granted on such Enrollment Date. | |
| 2.8 “Eligible Employee” means every Employee of an Employer, except (a) any Employee who immediately after the grant of an option under the Plan, would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company (including stock attributed to such Employee pursuant to Section 424(d) of the Code), or (b) as provided in the following sentence. The Committee, in its discretion, from time to time may, prior to an Enrollment Date for all options to be granted on such Enrollment Date, determine (on a uniform and nondiscriminatory basis) that an Employee shall not be an Eligible Employee if he or she: (1) has not completed a minimum period of service since his or her last hire date, (2) customarily works less than a minimum number of hours per week, (3) customarily works less than a minimum number of months per calendar year, (4) has a particular job classification. | |
| 2.9 “Employee” means an active employee of an Employer, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan. |
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| 2.10 “Employer” or “Employers” means any one or all of the Company, and those Parents and Subsidiaries whose employees the Committee has designated as eligible to participate in the Plan. | |
| 2.11 “Enrollment Date” means such dates as may be determined by the Committee (in its discretion and on a uniform and nondiscriminatory basis) from time to time. | |
| 2.12 “Grant Date” means any date on which a Participant is granted an option under the Plan. | |
| 2.13 “Parent” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code. | |
| 2.14 “Participant” means an Eligible Employee who (a) has become a Participant in the Plan pursuant to Section 4.1 and (b) has not ceased to be a Participant pursuant to Section 8 or Section 9. | |
| 2.15 “Plan” means the Jack in the Box Inc. Employee Stock Purchase Plan, as set forth in this instrument and as hereafter amended from time to time. | |
| 2.16 “Purchase Date” means such dates as may be determined by the Committee (in its discretion and on a uniform and nondiscriminatory basis) from time to time prior to an Enrollment Date for the purchase of Shares under all options to be granted on such Enrollment Date. | |
| 2.17 “Shares” means shares of Common Stock. | |
| 2.18 “Subsidiary” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code. |
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| (a) unless the Committee determines otherwise on a uniform and nondiscriminatory basis, payment for Shares purchased under the option shall be made only through payroll withholding under Section 5.2; | |
| (b) purchase of Shares will be accomplished only in accordance with Section 7.1; | |
| (c) the price per Share will be determined as provided in Section 7.1; and | |
| (d) the option in all respects shall be subject to such other terms and conditions (applied on a uniform and nondiscriminatory basis), as the Committee shall determine from time to time in its discretion. |
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| JACK IN THE BOX INC. | ||
Date: | By: | |
| Name: | ||
| Title: | ||
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| A. | Purpose |
| B. | Effective Date |
| C. | Eligibility |
| 1. The employee must be an active employee of the Company or its affiliates, for six (6) or more consecutive full accounting periods during the fiscal year. | |
| 2. The employee must beclassifiedin a Director position or above | |
| 3. The employee must not be eligible to participate in any other | |
| 4. The employee must have a |
| D. | Administration |
| E. | Bonus Determination |
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| F. | Maximum Individual Bonus |
| G. | Award Distribution |
| H. | Less Than Full Year Participation |
| I. | Promotions |
| 1. If an employee is promoted into a position covered by this Plan during the fiscal year and is eligible to become a Participant, the Participant may receive a pro-rata award as provided in section H using the Participant’s annualized base salary on the last day of the fiscal year. | |
| 2. If a Participant is promoted to another position covered by this Plan during the fiscal year, any bonus award will be |
| J. | Demotions |
| 1. If a Participant is demoted during the fiscal year to a position not covered by this Plan, the Participant may receive a pro-rata award as provided in section H., using the Participant’s annualized base salary immediately prior to the effective date of the demotion. | |
| 3. If a Participant is demoted to another position covered by this Plan during the fiscal year, any bonus award will be pro-rated using the percentage applicable to each position level of the Participant during the fiscal year, using the Participant’s annualized base salary in effect for the last day worked in each position level. |
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| K. | Termination of a Participant |
| 1. In the event of termination during the fiscal year and the Participant is eligible to retire under a Company sponsored retirement plan, or due to death or total and permanent disability (as defined in the Company’s Long Term Disability Plan), the Committee will, for an otherwise qualified Participant who meets the requirements of Section C. 3 and 4, allot a pro-rata award as provided in section H. Determination of any award will be made at the conclusion of the fiscal year. | |
| 2. In all other cases, a Participant whose employment terminates voluntarily or involuntarily prior to the end of the fiscal year, will not be eligible to receive an award. If termination occurs after the end of the fiscal year, but before distribution of the cash |
| L. | Plan Revision |
| M. | Employment Duration/ Employment Relationship |
| N. | Section 162(m) Conditions; Bifurcation of Plan |
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| 1. All Committee members will meet the independence and experience requirements of the New York Stock Exchange and the SEC. Each member of the Committee must be able to read and understand fundamental financial statements, 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 the SEC. | |
| 2. No member of the Committee may receive any compensation from the Corporation other than (i) director’s fees (including fees for service as a member of any Committee of the Board) and (ii) a pension or other deferred compensation for prior service that is not contingent on future service. | |
| 3. No director may serve as a member of the Committee if such director simultaneously serves on the audit committees of more than two other public companies without prior disclosure to the Committee and the Board and an affirmative determination by the Board that such simultaneous service does not impair the ability of such director to effectively serve on the Committee, which determination will be disclosed in the annual proxy statement. | |
| 4. The members and the Chair of the Committee will be appointed by the Board after considering the recommendations of the Nominating 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 Chair by majority vote of the full Committee. | |
| 5. The Board may fill vacancies on the Committee after considering the recommendations of the Nominating and Governance Committee. | |
| 6. The Board may remove a Committee member from the Committee at any time with or without cause. |
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In carrying out its responsibilities, the Board believes the policies and procedures of the Committee should remain flexible, in order to best react to changing conditions.
will:
| a. Be directly and solely responsible for the appointment, termination, compensation, retention and oversight of the independent | |
| b. In advance of the engagement of the independent | |
| c. Periodically review and discuss with the independent | |
| d. Annually obtain and review a report from the independent | |
| e. Annually review and evaluate the qualifications, performance and independence of the independent | |
| f. Consider whether there should be rotation of the audit firm, and report to the Board on the Committee’s conclusions. Consult with the independent | |
| g. Meet with the independent |
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| not the responsibility of the Committee to plan or conduct audits or to determine that the Company’s financial statements present fairly the financial position, the results of operations, and the cash flows of the Company, in compliance with generally accepted accounting principles. This is the responsibility of management and the outside |
D-2
| expert or special assurance as to the Company’s financial statements or any professional certification as to the outside | |
| h. Review and discuss with the independent |
| (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 | |
| (4) Any other material communication provided by the |
| i. At its discretion, review with the outside | |
| j. Obtain assurance from the outside | |
| k. As needed, review an analysis prepared by management and/or the independent | |
| l. Set policies for the Corporation’s hiring of employees or former employees of the independent |
| a. Review and discuss with management and the independent | |
| b. Review and discuss with the independent |
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| c. Review with management and the independent | |
| d. Review with management and the independent |
D-3
| e. Review with management its assessment of the effectiveness and adequacy of the Corporation’s internal controls, including discussing with the CEO and CFO (i) any | |
| f. Review any special audit steps adopted in light of material control deficiencies. | |
| g. Review with the independent auditor the attestation and report on the assessment made by management, and consider with management, the internal auditors and the independent auditor whether any changes to the Internal Controls are appropriate in light of management’s assessment or the independent auditor’s attestation. | |
| h. To the extent it deems appropriate, review with management its evaluation of the Company’s procedures and controls designed to assure that information required to be disclosed in its periodic public reports is recorded, processed, summarized and reported in such reports within the time periods specified by the SEC for the filing of such reports and consider whether any changes are appropriate in light of management’s evaluation of the effectiveness of such disclosure controls. | |
| i. Review the internal audit function of the Corporation including Internal Audit responsibilities, budget, staffing, independence of the Internal Audit function, the ability of Internal 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 | |
| | |
| | |
| |
| a. Discuss with management 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. | |
| b. Review with the Corporation’s General Counsel (i) any material government investigations, (ii) material pending or threatened legal proceedings involving the Corporation and (iii) other contingent liabilities. | |
| c. Conduct or authorize an appropriate review of any related party transactions deemed significant by the Committee. | |
| d. Review reports and disclosures of insider and affiliated party transactions. | |
| e. Review the Corporation’s policies and procedures for compliance with laws and regulations | |
| f. Periodically review and approve the Corporation’s ethics code or “Code of Conduct” (as such code is set forth in the booklet entitled “TRUST” and other Corporation policies). Recommend material changes for approval by the Board of Directors. Monitor compliance with the ethics code by reviewing quarterly reports from the Corporation’s ethics officer. Provide for |
D-4
| and review prompt disclosure to the public of any substantive change in, or any waiver of, such ethics code. | |
| g. |
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| confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters. Monitor compliance with such procedures. | |
| h. | |
| | |
| | |
| |
B-5D-5
INDEX TO 2004 STOCK INCENTIVE PLAN
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JACK IN THE BOX INC.
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 February 14, 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:
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C-4
C-5
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:
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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
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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.
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.
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.
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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).
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.
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
C-9
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.
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
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(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.
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.
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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 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
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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 9.3 (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. Restriction Periods shall be a minimum of three years. 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.
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 incor-
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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 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. Performance Periods shall be a minimum of twelve months. 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:
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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.
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.
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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.
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
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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.
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
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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.
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.
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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.
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.
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EXHIBIT D
JACK IN THE BOX INC.
| 1) Audits of employee benefit plans | |
| 2) Audits of Jack in the Box Inc. | |
| 3) Consultation regarding the implementation of technical accounting standards | |
| 4) Due diligence assistance on acquisitions | |
| 5) Services related to the independent | |
| 6) Internal Control reviews | |
| 7) Agreed-upon or expanded audit procedures required to respond or comply with financial, accounting or regulatory matters. |
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 |
| 1) Each individual service shall not exceed | |
| 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 |
E-1
D-1
D-2E-2
| Address Change/Comments (Mark the corresponding box on the reverse side) | |||||
The Board of Directors recommends a vote FOR all nominees listed and Proposals 2 and 3.
| Mark Here for Address Change or Comments | o |
PLEASE SEE REVERSE SIDE | ||
(Instruction: To withhold authority to vote for any individual nominee write that nominee’s name below.)
| The Board of Directors recommends a vote FOR all nominees listed and Proposals 2, 3 and 4. | FOR | ALL | ||||
| 1. | ||||||
| o | o | |||||
4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting including with respect to any adjournment thereof.
ChooseMLinkSM for Fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® at www.melloninvestor.com/isd where step-by-step instructions will prompt you through enrollment.
| 01 | Michael E. Alpert | 05 Linda A. Lang | ||||||||
| 02 | Anne B. Gust | 06 Michael W. Murphy | ||||||||
| 03 | Alice B. Hayes | 07 L. Robert Payne | ||||||||
| 04 | Murray H. Hutchison | 08 David M. Tehle | ||||||||
| (Instruction: To withhold authority to vote for any individual nominee write that nominee’s name below.) | ||||||||||
FOR | AGAINST | ABSTAIN | ||||||
| 2. | Approval of Employee Stock Purchase Plan. | o | o | o | ||||
| FOR | AGAINST | ABSTAIN | ||||||
| 3. | Approval of Amended and Restated Performance Bonus Plan. | o | o | o | ||||
| YES | NO | |||||||
| I plan to attend the meeting. | o | o | ||||||
FOR | AGAINST | ABSTAIN | ||||||
| 4. | Ratification of appointment of KPMG LLP as independent registered public accountant. | o | o | o | ||||
| 5. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting including with respect to any adjournment thereof. | |||||||
| ChooseMLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® at www.melloninvestor.com/isd where step-by-step instructions will prompt you through enrollment. | ||||||||
Date | ||||||||||
| NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | ||||||||||
Internethttp://www.proxyvoting.com/jbx
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.
Telephone1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
Internet http://www.proxyvoting.com/jbx Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. | OR | Telephone 1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. | OR | Mail Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. | ||||||||||||
Mail
Mark, sign and dateyour proxy cardandreturn it in theenclosed postage-paidenvelope.
NOTE: If you vote your proxy by Internet or by telephone, or Internet,
you do
NOT need to mail back your proxy card.
THANK YOU FOR VOTING.
Proxy with telephone or Internet voting instructions — side onePROXY-----------------------------------------------------------------------------PROXYTHIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSJACK IN THE BOX INC.FOR ANNUAL MEETING OF STOCKHOLDERS ON FEBRUARY 14, 200517, 2006 AT 2:00 P.M.
MARRIOTT MISSION VALLEY, 8757 RIO SAN DIEGO DRIVE, SAN DIEGO, CALIFORNIAThe undersigned hereby appoints Robert J. Nugent,Linda A. Lang, Jerry P. Rebel 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, 2005,17, 2006, 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” each of Proposals 2, 3 and 3.4.The Board of Directors recommends a vote FOR the above proposals.(Continued, and to be marked, dated and signed, on the other side)Address Change/Comments (Mark the corresponding box on the reverse side)5éFOLD AND DETACH HERE5éJACK IN THE BOX INC.ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 14, 200517, 2006 AT 2:00 P.M.MARRIOTT MISSION VALLEY
8757 RIO SAN DIEGO DRIVE
SAN DIEGO, CALIFORNIA
Proxy without telephone or Internet voting instructions — side two-----------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees listed and Proposals 2, 3 and 4. | ||||||
| for Address Change or Comments | o | |||||
| WITHHOLD | ||||||||||||||||||||||||||||||
| FOR | ALL | FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | |||||||||||||||||||||||
| 1. | Election of Directors Nominees: 01 Michael E. Alpert 02 Anne B. Gust 03 Alice B. Hayes 04 Murray H. Hutchison | o 05 Linda A. Lang 06 Michael W. Murphy 07 L. Robert Payne 08 David M. Tehle | o | 2. | Approval of Employee Stock Purchase Plan. | o | o | o | 4. | Ratification of appointment of KPMG LLP as independent registered public accountant. | o | o | o | |||||||||||||||||
| 3. | Approval of Amended and Restated Performance Bonus Plan. | o | o | o | 5. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting including with respect to any adjournment thereof. | ||||||||||||||||||||||||
| (Instruction: To withhold authority to vote for any individual nominee write that nominee’s name below.) | ||||||||||||||||||||||||||||||
| YES | NO | |||||||||||||||||||||||||||||
| I plan to attend the meeting. | o | o | ||||||||||||||||||||||||||||
| Signature(s) x | Dated: | , | 2006 | ||||||
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.
PROXY
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARDPROMPTLY USING THE ENCLOSED ENVELOPEThis voting instruction is requested by Mellon Bank, N.A. in conjunction with a proxy solicitation by theBoard 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 FORMTo: Mellon Bank, N.A.as Trustee of the Jack in the Box Inc. Easy$aver Plus Plan
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, 2005, 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 10, 2005 at P.O. Box 3821, South Hackensack, NJ 07606-9521. 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.
(Instruction: To withhold authority to vote for any individual nominee write that nominee’s name below.)
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 Proposals #2 and #3, Mellon Bank, N.A. will vote “FOR” these Proposals.
4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting including with respect to any adjournment thereof.
ChooseMLinkSM for Fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® at www.melloninvestor.com/isd where step-by-step instructions will prompt you through enrollment.
| BALLOT | JACK IN THE BOX INC. | BALLOT |
| 1. | Election of Directors: Michael E. Alpert, Anne B. Gust, Alice B. Hayes, Murray H. Hutchison, Linda A. Lang, Michael W. Murphy, L. Robert Payne and David M. Tehle. |
| ¨ | FORall nominees listed. | |||
| ¨ | WITHHOLD AUTHORITYto vote for all nominees listed. | |||
| ¨ | FORall nominees listed except | |||
| 2. | Approval of Employee Stock Purchase Plan. | o FOR | o AGAINST | o ABSTAIN | ||||
| 3. | Approval of Amended and Restated Performance Bonus Plan | o FOR | o AGAINST | o ABSTAIN | ||||
| 4. | Ratification of appointment of KPMG LLP as independent registered public accountants. | o FOR | o AGAINST | o ABSTAIN |
Stockholder’s signature |
Proxy signature (if ballot is cast by proxy) |
| BALLOT | JACK IN THE BOX INC. | BALLOT |
| 1. | Election of Directors: Michael E. Alpert, Anne B. Gust, Alice B. Hayes, Murray H. Hutchison, Linda A. Lang, Michael W. Murphy, L. Robert Payne and David M. Tehle. |
| ¨ | FORall nominees listed. | |||
| ¨ | WITHHOLD AUTHORITYto vote for all nominees listed. | |||
| ¨ | FORall nominees listed except | |||
| 2. | Approval of Employee Stock Purchase Plan. | o FOR | o AGAINST | o ABSTAIN | ||||
| 3. | Approval of Amended and Restated Performance Bonus Plan | o FOR | o AGAINST | o ABSTAIN | ||||
| 4. | Ratification of appointment of KPMG LLP as independent registered public accountants. | o FOR | o AGAINST | o ABSTAIN |
Stockholder’s signature |
Proxy signature (if ballot is cast by proxy) |
| BALLOT | JACK IN THE BOX INC. | BALLOT |
| 1. | Election of Directors: Michael E. Alpert, Anne B. Gust, Alice B. Hayes, Murray H. Hutchison, Linda A. Lang, Michael W. Murphy, L. Robert Payne and David M. Tehle. |
| ¨ | FORall nominees listed. | |||
| ¨ | WITHHOLD AUTHORITYto vote for all nominees listed. | |||
| ¨ | FORall nominees listed except | |||
| 2. | Approval of Employee Stock Purchase Plan. | o FOR | o AGAINST | o ABSTAIN | ||||
| 3. | Approval of Amended and Restated Performance Bonus Plan | o FOR | o AGAINST | o ABSTAIN | ||||
| 4. | Ratification of appointment of KPMG LLP as independent registered public accountants. | o FOR | o AGAINST | o ABSTAIN |
Stockholder’s signature |
Proxy signature (if ballot is cast by proxy) |