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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
62
Co-Chief Executive Officers, to the Company’s Compensation and Management Development Committee (“the Compensation
Committee”).
Long-Term Incentive Program
In fiscal 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
Compensation 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 Compensation Committee), restricted stock,
choice awards of restricted stock or options, or deferred annual bonus match awards. On July 23, 2009, the Compensation
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 Compensation 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 2012, fiscal 2011
and fiscal 2010, compensation expense related to performance awards, restricted stock, and deferred annual bonus match was
$16.2 million, $17.2 million, and $19.3 million, respectively.
Performance awards under the 2005 LTIP are earned by participants based on achievement of performance goals established by
the Compensation 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 metrics. The performance awards are
earned based on achievement of predetermined earnings performance metrics at the end of the three-fiscal-year performance
period, assuming continued employment, and after the Compensation Committee’s consideration of the Company’s performance
relative to the performance of its peers. The performance awards range from 0 percent to 300 percent of the participant's salary
based on their level in the Company and the level of achievement of each performance metric. However, the actual award payment
will be adjusted, based on the Company’s performance over a three-consecutive fiscal year measurement period, and any other
factors as determined by the Compensation Committee. The actual award payment for the performance award component could
double the individual’s targeted award payment, if the Company achieves maximum performance in all of its performance metrics,
subject to any adjustments as determined by the Compensation Committee. 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 Compensation
Committee. For fiscal 2012, fiscal 2011, and fiscal 2010, compensation expense related to the performance awards was $6.3
million, $7.6 million, and $10.2 million, respectively.