Panera Bread 2008 Annual Report Download - page 84

average period of approximately 2.7 years. The Company uses historical data to estimate pre-vesting forfeiture
rates.
As of December 30, 2008, the Company had one active stock-based compensation plan, the 2006 Stock
Incentive Plan (“2006 Plan”), and had options and restricted stock outstanding (but can make no future grants) under
three other stock-based compensation plans, the 1992 Equity Incentive Plan (“1992 Plan”), the Formula Stock
Option Plan for Independent Directors (“Formula Plan”) and the 2001 Employee, Director, and Consultant Stock
Option Plan (“2001 Plan”).
2006 Stock Incentive Plan
In March 2006, the Company’s Board of Directors adopted the 2006 Plan, which was approved by the
Company’s stockholders in May 2006. The 2006 Plan provides for the grant of up to 1,500,000 shares of the
Company’s Class A common stock (subject to adjustment in the event of stock splits or other similar events) as
incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based
awards. As a result of stockholder approval of the 2006 Plan, effective as of May 25, 2006, the 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 Committee (“the
Committee”).
Long-Term Incentive Program
In the third quarter of 2005, the Company adopted the 2005 Long Term Incentive Plan (“2005 LTIP”) as a sub-
plan under the 2001 Plan and the 1992 Plan. In May 2006, the Company amended the 2005 LTIP 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 or some combination of
cash and common stock as determined by the Committee), restricted stock, choice awards of restricted stock or
stock options, or deferred annual bonus match awards. For fiscal 2008, 2007 and 2006, compensation expense
related to performance awards, restricted stock, and deferred annual bonus match was $6.9 million, $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 150 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 or some combination of cash and
common stock as determined by the Committee. For fiscal 2008, 2007 and 2006, compensation (income) expense
related to the performance awards was $2.1 million, $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.
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)