JetBlue Airlines 2005 Annual Report Download - page 64

two-year offering period which will begin on the next business day following such purchase date and
the related purchase of shares. During 2005 and 2004, certain participants were automatically
transferred and enrolled in new offering periods due to decreases in our stock price.
Should we be acquired by merger or sale of substantially all of our assets or more than 50%of
our outstanding voting securities, then all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of the acquisition at a price equal to the lower of 85%of the
fair market value per share on the start date of the offering period in which the participant is enrolled
or 85%of the fair market value per share immediately prior to the acquisition.
The following is a summary of CSPP share reserve activity for the years ended December 31:
2005 2004 2003
Shares Weighted Average Shares Weighted Average Shares Weighted Average
Available for future purchases,
beginning of year............. 10,577,175 7,540,233 4,516,385
Shares reserved for issuance (1) . . 4,690,645 4,593,110 4,303,692
Common stock purchased ....... (1,561,575) $ 10.83 (1,556,168) $ 10.09 (1,279,844) $ 7.39
Available for future purchases,
end of year .................. 13,706,245 10,577,175 7,540,233
(1) On January 1, 2006, the number of shares reserved for issuance was increased by 5,178,659 shares.
The fair value of each purchase right is estimated at the inception of each offering period using
the Black-Scholes option pricing model. The following table shows our assumptions and weighted
average fair values of stock-based compensation used to compute the pro forma information for CSPP
purchase rights included in Note 1:
Year of Purchase Right
2005 2004 2003
Risk-free interest rate .................................... 3.9%2.0%1.3%
Average expected life (years) ............................. 1.25 1.25 1.25
Expected volatility of common stock ....................... 38.0%38.1%41.5%
Weighted average fair value of purchase rights .............. $ 4.33 $ 5.95 $ 7.63
Stock Incentive Plan: The 2002 Stock Incentive Plan, or the 2002 Plan, which includes stock
options issued during 1999 through 2001 under a previous plan, provides for incentive and
non-qualified stock options to be granted to certain employees and members of our Board of
Directors. The 2002 Plan became effective following our initial public offering. Stock options under
the 2002 Plan become exercisable when vested, which occurs in annual installments of three to seven
years or upon the occurrence of a change in control, and expire ten years from the date of grant. Our
policy is to grant options with the exercise price equal to the market price of the underlying common
stock on the date of grant. The number of shares reserved for issuance will automatically increase
each January by an amount equal to 4%of the total number of shares of our common stock
outstanding on the last trading day in December of the prior calendar year. In no event will any such
annual increase exceed 12.2 million shares. The 2002 Plan will terminate no later than
December 31, 2011.
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