Panera Bread 2007 Annual Report Download - page 80

Company will grant no further stock options, restricted stock or other awards under the 2001 Plan or the 1992 Plan.
The Company’s Board of Directors administers the 2006 Plan and has sole discretion to grant awards under the 2006
Plan. The Company’s Board of Directors has delegated the authority to grant awards under the 2006 Plan, other than
to the Company’s Chairman and Chief Executive Officer, to the Company’s Compensation and Stock Option
Committee (“Committee”).
Long-Term Incentive Program — In the third quarter of 2005, the Company adopted the 2005 LTIP as a sub-
plan under the 2001 Plan and the 1992 Plan. In May 2006, the Company amended the Long-Term Incentive Program
to provide that the 2005 LTIP is a sub-plan under the 2006 Plan. Under the amended 2005 LTIP, certain directors,
officers, employees, and consultants, subject to approval by the Committee, may be selected as participants eligible
to receive a percentage of their annual salary in future years, subject to the terms of the 2006 Plan. This percentage is
based on the participant’s level in the Company. In addition, the payment of this incentive can be made in several
forms based on the participant’s level including performance awards (payable in cash or common stock), restricted
stock, choice awards of restricted stock or stock options, or deferred annual bonus match awards. For the fiscal year
ended December 25, 2007 and December 26, 2006, compensation expense related to performance awards, restricted
stock, and deferred annual bonus match was $3.7 million and $1.7 million, respectively.
Performance awards under the 2005 LTIP are earned by participants based on achievement of performance
goals established by the Committee. The performance period relating to the performance awards is a three-fiscal-
year period. The performance goals, including each performance metric, weighting of each metric, and award levels
for each metric, for such awards are communicated to each participant and are based on various predetermined
earnings and operating metrics. The performance awards will be earned based on achievement of predetermined
earnings and operating performance metrics at the end of the three-fiscal-year performance period, assuming
continued employment. The performance awards range from 0 percent to 300 percent of the participants’ salary
based on their level in the Company and the level of achievement of each performance metric. The performance
awards will be payable 50 percent in cash and 50 percent in common stock unless the Committee otherwise
determines. For the fiscal years ended December 25, 2007 and December 26, 2006, compensation (income) expense
related to the performance awards was $0.9 million and ($0.2) million, respectively.
Stock options under the 2005 LTIP are granted with an exercise price equal to the quoted market value of the
Company’s common stock on the date of grant. In addition, stock options generally vest ratably over a four-year
period beginning two years from the date of grant and have a six-year term.
Restricted stock of the Company under the 2005 LTIP is granted at no cost to participants. Participants are
generally entitled to cash dividends on restricted stock, although the Company does not currently pay a dividend,
and has no current plans to do so, and voting rights with respect to their respective shares. For awards of restricted
stock to date under the 2005 LTIP, restrictions limit the sale or transfer of these shares during a five year period
whereby the restrictions lapse on 25 percent of these shares after two years and thereafter 25 percent each year for
the next three years, subject to continued employment with the Company. In the event a participant is no longer
employed by the Company, any unvested shares of restricted stock held by that participant will be forfeited. Upon
issuance of restricted stock under the 2005 LTIP, unearned compensation equivalent to the market value at the date
of grant is charged to stockholders’ equity and subsequently amortized to expense over the five year restriction
period. For the fiscal years ended December 25, 2007 and December 26, 2006, restricted stock expense was
$2.1 million and $1.4 million, respectively.
Under the deferred annual bonus match award portion of the 2005 LTIP, eligible participants receive an
additional 50 percent of their annual bonus which is paid three years after the date of the original bonus. For the
fiscal years ended December 25, 2007 and December 26, 2006, compensation expense related to the deferred annual
bonus match award was $0.7 million and $0.6 million, respectively.
1992 Equity Incentive Plan — The Company adopted the 1992 Plan in May 1992. A total of 8,600,000 shares
of Class A Common Stock were authorized for issuance under the 1992 Plan as awards, which could have been in
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)