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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
options, SARs and restricted stock under the 2004 Plan generally vest pro rata over five years and have a maximum term of ten years. The
cash-based performance grants will be tied to the achievement of certain performance goals during a specified performance period, not less
than one fiscal year in length. See Note 1 to the Consolidated Financial Statements for discussion of the Company’s measure of compensation
cost for its incentive stock plans, as well as an estimate of future compensation expense related to these awards.
Restricted stock and SARs outstanding, as well as the weighted average exercise price of SARs, were as follows:
*
Approved by shareholders on October 28, 2004
Other:
The Company has agreed to pay the Chief Executive Officer, commencing upon his retirement, an amount equal to 60 percent of his
salary, adjusted for inflation, for the remainder of his life. Additionally, the Company has a survivor benefit plan for the Chief Executive
Officer’s spouse, payable upon his death, at a rate of one half of his deferred compensation benefit, adjusted for inflation, for the remaining life
of his spouse. In addition, the Company has other unfunded deferred compensation contracts covering key executives based on their
accomplishments within the Company. The key executives’ benefits are based on years of service and the employee’s compensation prior to
departure. The Company utilizes a June 30 measurement date for these deferred compensation contracts and a discount rate based on the Aa
Bond index rate (6.25 percent at June 30, 2005). Compensation associated with these agreements is charged to expense as services are
provided. Associated costs included in general and administrative expenses on the Consolidated Statement of Operations totaled $2.2, $2.1 and
$2.3 million for fiscal years 2005, 2004 and 2003, respectively. Related obligations totaled $12.9 and $10.7 million at June 30, 2005 and 2004,
respectively, and are included in other non-current liabilities in the Consolidated Balance Sheet. The Company intends to fund its future
obligations under this plan through company-owned life insurance policies on the participants. Cash values of these policies totaled $10.9 and
$9.4 million at June 30, 2005 and 2004, respectively, and are included in other assets in the Consolidated Balance Sheet.
The Company also has entered into an agreement with the Vice Chairman of the Board of Directors (the Vice Chairman), providing that
the Vice Chairman will continue to service the Company until at least May 2007. The Company has agreed to pay the Vice Chairman an annual
amount of $0.6 million, adjusted for inflation, for the remainder of his life. The Vice Chairman has agreed that during the period in which
payments are made, as provided in the agreement, he will not engage in any business competitive with the business conducted by the Company.
Additionally, the Company has a survivor benefit plan for the Vice Chairman’s spouse, payable upon his death, at a rate of one half of his
deferred compensation
91
SARs Outstanding
Restricted Stock Outstanding
Weighted Average
Shares
Shares
Exercise Price
Balance, June 30, 2003
—
—
N/A
Granted*
72,500
110,750
$
42.79
Balance, June 30, 2004
72,500
110,750
42.79
Granted
85,250
97,750
35.49
Cancelled
(2,000
)
(11,750
)
42.79
Vested/Exercised
(14,100
)
—
—
Balance, June 30, 2005
141,650
196,750
$
39.16