Radio Shack 2004 Annual Report Download - page 51

Notes to Consolidated Financial Statements continued
RadioShack Corporation and Subsidiaries
applicable, are unable to fulfill these obligations, we would
be responsible for rent due under the leases. Our rent expo-
sure from the remaining undiscounted lease commitments
with no projected sublease income is approximately $154
million. However, we have no reason to believe that CompUSA
or the other assignees will not fulfill their obligations under
these leases or that we would be unable to sublet the
properties; consequently, we do not believe there will be a
material impact on our consolidated financial statements as
a result of the eventual resolution of these lease obligations.
Purchase Obligations: We have purchase obligations of
$485.9 million at December 31, 2004, which include our
product commitments, marketing agreements and freight
commitments. Of this amount, $464.2 million relates to 2005.
NOTE 16 Stock Options and Performance Awards
We have implemented several plans to award employees stock-
based compensation. Under the Incentive Stock Plans (“ISPs”)
described below, the exercise price of options must be equal to
or greater than the fair market value of a share of our common
stock on the date of grant. The 1997, 1999 and 2001 ISPs each
terminate after ten years; no option or award may be granted
under the ISPs after the ISP termination date. The Management
Development and Compensation Committee of our Board of
Directors specifies the terms for grants of options under these
ISPs; terms of these options may not exceed 10 years. Grants
of options generally vest over three years and grants typically
have a term of seven or 10 years. Option agreements issued
under the ISPs generally provide that, in the event of a change
in control, all options become immediately and fully exercisable.
Repricing or exchanging options for lower priced options is not
permitted under the ISPs without shareholder approval.
In 2004 the stockholders approved the RadioShack 2004
Deferred Stock Unit Plan for Non-Employee Directors
(“Deferred Plan”). The Deferred Plan replaced the one-time
and annual stock option grants to non-employee directors
(“Directors”) as specified in the 1997, 1999 and 2001 ISPs.
New Directors will receive a one-time grant of 5,000 deferred
stock units (“Units”) on the date they attend their first Board
meeting. Each Director who has served one year or more as of
June 1 of any year will automatically be granted 3,500 Units
on the first business day of June of each year in which he or
she serves as a Director. Under the Deferred Plan, one-third of
the Units vest annually over three years from the date of grant.
Vesting may be accelerated under certain circumstances. At
termination of service, death, disability or change in control
of RadioShack, Directors will receive shares of common stock
equal to the number of vested Units. Directors may receive
these shares in a lump sum or they may defer receipt of these
shares in equal installments over a period of up to ten years.
A brief description of each of our stock plans follows:
1993 Incentive Stock Plan (“1993 ISP”): The 1993 ISP
permitted the grant of up to 12.0 million shares in the form
of incentive stock options (“ISOs”), non-qualified stock
options (options which are not ISOs) (“NQs”) and restricted
stock. There were no shares available on December 31, 2004,
for grants under the 1993 ISP. The 1993 ISP expired March
28, 2003, and no further grants may be made under this plan.
1994 Stock Incentive Plan (“1994 SIP”): As part of our pur-
chase of AmeriLink in 1999 (see Note 6), we assumed the
existing AmeriLink 1994 Stock Incentive Plan and certain
related agreements and agreed to convert AmeriLink’s stock
options to stock options to purchase our stock, subject to an
agreed upon exchange ratio and conversion price. Thus, the
AmeriLink 1994 SIP was assumed and adopted by us in 1999.
All options in the 1994 SIP were fully vested on the date of
transition and management has determined that no further
grants will be made under this plan; there were no shares
available for grant at December 31, 2004, under the 1994
SIP. There were also certain restricted stock agreements that
were assumed by us at the time of acquisition. On September
10, 2003, we sold AmeriLink.
1997 Incentive Stock Plan (“1997 ISP”): The 1997 ISP permits
the grant of up to 11.0 million shares in the form of ISOs, NQs
and restricted stock. The 1997 ISP provides that the maximum
number of shares of our common stock that an eligible employ-
ee may receive in any calendar year with respect to options
may not exceed 1.0 million shares. There were 705,944 shares
available on December 31, 2004, for grants under the 1997 ISP.
1999 Incentive Stock Plan (“1999 ISP”): The 1999 ISP permits
the grant of up to 9.5 million shares in the form of NQs.
Grants of restricted stock, performance awards and options
intended to qualify as ISO’s under the Internal Revenue Code
are not authorized under the 1999 ISP. The 1999 ISP provides
that the maximum number of shares of our common stock
that an eligible employee may receive in any calendar year
with respect to options may not exceed 1.0 million shares.
There were 493,316 shares available on December 31, 2004,
for grants under the 1999 ISP.
2001 Incentive Stock Plan (“2001 ISP”): The 2001 ISP permits
the grant of up to 9.2 million shares in the form of ISOs and
NQs. The 2001 ISP provides that the maximum number of
shares of our common stock that an eligible employee may
receive in any calendar year with respect to options may not
exceed 0.5 million shares. There were 5,613,018 shares avail-
able on December 31, 2004, for grants under the 2001 ISP.
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