Harris Teeter 2008 Annual Report Download - page 48

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RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
One preferred share purchase right is attached to each outstanding share of common stock, which rights
expire on November 16, 2010. Each right entitles the holder to purchase one one-hundredth of a share of a new
Series A Junior Participating Additional Preferred Stock for $60. The rights will become exercisable only under
certain circumstances related to a person or group acquiring or offering to acquire a substantial portion of the
Company’s common stock. If certain additional events then occur, each right would entitle the rightholder to
acquire common stock of the Company, or in some cases of an acquiring entity, having a value equal to twice
the exercise price. Under certain circumstances the Board of Directors may extinguish the rights by exchanging
one share of common stock or an equivalent security for each qualifying right or may redeem each right at a
price of $0.01. There are 600,000 shares of Series A Junior Participating Additional Preferred Stock reserved for
issuance upon exercise of the rights.
The Board of Directors adopted a stock buyback program in 1996, authorizing, at management’s discretion,
the Company to purchase and retire up to 10% of the then outstanding shares of the Company’s common stock for
the purpose of preventing dilution as a result of the operation of the Company’s comprehensive stock option and
awards plans. Pursuant to this plan, the Company purchased and retired 250,000 shares at a total cost of $8,000,000,
or an average price of $32.05 per share and 395,000 shares at a total cost of $7,899,000, or an average price of $20.00
per share during fiscal 2008 and 2006, respectively. There were no stock purchases during fiscal 2007.
STOCK OPTIONS AND STOCK AWARDS
At September 28, 2008, the Company has 1993, 1995, 1997, 2000 and 2002 equity incentive plans, which
were approved by the Company’s shareholders and authorized the issuance of 5,500,000 shares of common
stock pursuant thereto. Under certain stock option plans, the Company has granted incentive stock options
to employees or nonqualified stock options to employees and outside directors. The Company’s incentive
stock options generally become exercisable in installments of 20% per year at each of the first through fifth
anniversaries from grant date and expire seven years from grant date and nonqualified stock options expire ten
years from grant date. Historically and pursuant to the terms of certain plans, the Company grants a single, one-
time nonqualified stock option of 10,000 shares, generally vested immediately, to each of its outside directors
at the time of their initial election to the Board. Under each of the stock option plans, the exercise price of each
stock option shall be no less than the market price of the Company’s stock on the date of grant, and an option’s
maximum term is ten years. At the discretion of the Company, under certain plans a stock appreciation right
may be granted and exercised in lieu of the exercise of the related option (which is then forfeited). Certain of the
plans also allow the Company to grant stock awards such as restricted stock. Under the plans, as of September
28, 2008 the Company may grant additional options or stock awards and performance shares in the amount of
1,309,000 shares.
Beginning in November 2004, the Board of Directors began approving equity awards in lieu of stock
options. Historically these awards were apportioned 50% as a fixed award of restricted stock (restricted from
sale or transfer until vesting ratably over a five-year period of continued employment) and 50% as performance
share awards, based on the attainment of certain performance targets for the ensuing fiscal year. If the fiscal year
performance targets are met, the performance shares are subsequently issued as restricted stock and vest over
four years of continued employment.
In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”) as a
replacement to SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R supersedes APB No.
25, “Accounting for Stock Issued to Employees” and related interpretations, which allowed companies to use the
intrinsic method of valuing share-based payment transactions. SFAS 123R requires all share-based payments
to employees, including grants of employee stock options, to be recognized in the financial statements based
on the fair-value method as defined in SFAS 123. The Company adopted SFAS 123R as of the beginning of the