Einstein Bros 2007 Annual Report Download - page 71

http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
15. STOCK OPTION AND WARRANT PLANS (Continued)
options granted under the 2003 Plan. Options generally are granted with an exercise price equal to the fair market value on the date of grant, have a
contractual life of ten years and typically vest over a three-year service period. Generally, 50% of options granted vest upon service. We recognize
compensation costs for these awards using a graded vesting attribution method over the requisite service period. The remaining 50% of options
granted vest based on service and financial performance. Options that do not vest due to the failure to achieve specific financial performance
criteria are forfeited. Options to purchase approximately 39,016 shares of our common stock, which are not yet exercisable, are subject to future
financial performance conditions. We recognize compensation costs for performance based options over the requisite service period when
conditions for achievement become probable. For fiscal year 2007, 106,738 shares were forfeited as we did not meet certain financial goals, and
the related compensation expense that had been recorded during the year was reversed. As of January 1, 2008, there were 811,250 shares reserved
for future issuance under the 2003 Plan.
In February 2007, we granted options to purchase 124,250 shares of our common stock relating to the secondary public offering as further
described in Note 14. The option awards vested upon closing of the offering and we recognized approximately $651,000 in stock-based
compensation expense.
2004 Stock Option Plan for Independent Directors
On December 19, 2003, our board of directors adopted the Stock Option Plan for Independent Directors, effective January 1, 2004, as
amended on March 1, 2005 and February 28, 2007 (the "2004 Directors' Plan"). Our board of directors may amend, suspend, or terminate the 2004
Directors' Plan at any time, provided, however, that no such action may adversely affect any outstanding option without the option holders consent.
A total of 300,000 shares of common stock have been reserved for issuance under the 2004 Directors' Plan. The 2004 Directors' Plan provides for
the automatic grant of non-statutory stock options to independent directors on January 1 of each year and a prorated grant of options for any
director elected during the year. Options are granted with an exercise price equal to the fair market value on the date of grant, become exercisable
six months after the grant date and are exercisable for 5 years from the date of grant unless earlier terminated. As of January 1, 2008, there were
73,836 shares reserved for future issuance under the 2004 Directors' Plan.
Stock Appreciation Rights Plan
On February 17, 2007, our board of directors adopted the Stock Appreciation Rights Plan (the "SAR Plan"). The SAR Plan provides for
granting stock appreciation rights to employees. Unless terminated sooner, the SAR Plan will terminate automatically on March 31, 2012. The
board of directors has the authority to amend, modify or terminate the SAR Plan, subject to any required approval by our stockholders under
applicable law or upon advice of counsel, provided that, with limited exception, no modification will adversely affect outstanding rights. There are
150,000 shares issuable pursuant to stock appreciation rights under the SAR Plan.
The value of a share from which appreciation is determined is 100% of the fair market value of a share on the date of grant and will be paid in
stock when they are exercised by the employee. The rights expire upon the earlier of termination date of the SAR Plan or termination of
employment and typically vest over a two-year service period, and have a contractual life of five years. Generally, 50% of rights granted vest based
solely upon the passage of time. We recognize compensation costs for these
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EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
15. STOCK OPTION AND WARRANT PLANS (Continued)
awards using a graded vesting attribution method over the requisite service period. The remaining 50% of rights granted vest based on financial
performance. Rights to approximately 27,488 shares of our common stock, which are not yet exercisable, are subject to financial performance
conditions. We will recognize compensation costs for performance based stock appreciation rights over the requisite service period when
conditions for achievement become probable. For fiscal year 2007, 26,487 shares were forfeited as we did not meet certain financial goals, and the
related compensation expense that had been recorded during the year was reversed. Rights that do not vest are forfeited and are entered back into
the pool of shares to be distributed. As of January 1, 2008, there were 73,087 shares reserved for future issuance under the SAR Plan.