Panera Bread 2009 Annual Report Download - page 80

or other similar events) as incentive stock options, non-statutory stock options and stock settled appreciation rights
(collectively “option awards”), 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 and Stock Option 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 options, or deferred annual bonus match awards. On July 23, 2009, the Committee further
amended the 2005 LTIP to permit the Company to grant stock settled appreciation rights (“SSARs”) under the
choice awards and to clarify that the Committee may consider the Company’s performance relative to the
performance of its peers in determining the payout of performance awards, as further discussed below. For fiscal
2009, fiscal 2008 and fiscal 2007, compensation expense related to performance awards, restricted stock, and
deferred annual bonus match was $12.1 million, $6.9 million, and $3.7 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 are earned based on achievement of predetermined
earnings and operating performance metrics at the end of the three-fiscal-year performance period, assuming
continued employment, and after the Committee’s consideration of the Company’s performance relative to the
performance of its peers. 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 are 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 2009, fiscal 2008 and fiscal 2007, compensation expense related
to the performance awards was $5.3 million, $2.1 million, and $0.9 million, respectively.
Restricted stock of the Company under the 2005 LTIP is granted at no cost to participants. While participants
are generally entitled to voting rights with respect to their respective shares of restricted stock, participants are
generally not entitled to receive accrued cash dividends, if any, on restricted stock unless and until such shares have
vested. The Company does not currently pay a dividend, and has no current plans to do so. 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 is recorded at fair value on the date of
grant to stockholders’ equity and subsequently amortized to expense over the five year restriction period. The fair
value of restricted stock is based on the market value of the Company’s stock on the grant date. As of December 29,
2009, there was $18.5 million of total unrecognized compensation cost related to restricted stock included in
additional paid-in capital in the Consolidated Balance Sheets, which is net of a $4.6 million forfeiture estimate, and
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)