Jack In The Box 2012 Annual Report Download - page 66

We also maintain a deferred compensation plan for non-management directors under which those who are eligible to receive fees or retainers may choose to defer
receipt of their compensation. The deferred amounts are converted to stock equivalents. The plan requires settlement in shares of our common stock based on
the number of stock equivalents at the time of a participant’s separation from the Board of Directors. This plan provides for the issuance of up to 350,000
shares of common stock in connection with the crediting of stock equivalents. As of September 30, 2012, 198,452 shares of common stock were available for
future issuance under this plan.
We maintain an employee stock purchase plan (“ESPP”) for all eligible employees to purchase shares of common stock at 95% of the fair market value on the
date of purchase. Employees may authorize us to withhold up to 15% of their base compensation during any offering period, subject to certain limitations. A
maximum of 200,000 shares of common stock may be issued under the plan. As of September 30, 2012, 118,845 shares of common stock were available for
future issuance under this plan.
Compensation expense — The components of share-based compensation expense recognized in each year are as follows ( in thousands):
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

Stock options
$3,549
$5,118
$7,234
Performance-vested stock awards
897
443
1,145
Nonvested stock awards
408
602
923
Nonvested stock units
1,874
1,727
1,024
Deferred compensation for directors
155
172
279
Total share-based compensation expense
$6,883
$8,062
$10,605
Stock options — Prior to fiscal 2007, options granted had contractual terms of 10 or 11 years and employee options generally vested over a four-year period.
Beginning fiscal 2007, option grants have contractual terms of 7 years and employee options vest over a three-year period. Options may vest sooner for
employees meeting certain age and years of service thresholds. Options granted to non-management directors vest six months from the date of grant. All option
grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant.
The following is a summary of stock option activity for fiscal 2012:
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



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







Options outstanding at October 2, 2011
4,835,651
$22.40
Granted
485,057
18.69
Exercised
(645,411)
15.78
Forfeited
(17,834)
22.47
Expired
(8,876)
13.00
Options outstanding at September 30, 2012
4,648,587
$22.95
3.45
$26,207
Options exercisable at September 30, 2012
3,709,435
$23.90
2.93
$17,845
Options exercisable and expected to vest at September 30, 2012
4,621,913
$22.97
3.43
$25,966
The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on September 30, 2012 exceeds the exercise price.
We use a binomial-based model to determine the fair value of options granted. Valuation models require the input of highly subjective assumptions, including
the expected volatility of the stock price. The following table presents the weighted-average assumptions used for stock option grants in each year, along with
the related weighted-average grant date fair value:
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

Risk-free interest rate
1.98%
1.19%
1.97%
Expected dividends yield
—%
—%
—%
Expected stock price volatility
39.84%
43.17%
38.65%
Expected life of options (in years)
6.64
6.05
4.46
Weighted-average grant date fair value
$7.37
$8.25
$6.54
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