Jamba Juice 2009 Annual Report Download - page 98

Table of Contents
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As of December 30, 2008, the Company is subject to U.S. federal income tax examinations for the tax years ended June 27, 2006 and November 28,
2006 for the subsidiary returns and the tax year ended December 31, 2006 for the consolidated return. The Internal Revenue Service (“IRS”) has completed its
examinations of the subsidiary’s federal income tax return for the tax years ended June 29, 2004 and June 28, 2005. The Company is also subject to state and
local income tax examinations for tax returns filed for the years ended June 24, 2003 through December 31, 2006.
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Stock Options—The Company maintains three share-based compensation plans (collectively, the “Plans”). The Company’s 2006 Employee, Director
and Consultant Stock Plan (the “2006 Plan”) was approved by the Company’s stockholders on November 28, 2006, and provides for the granting of up to
5 million shares of common stock in the form of nonqualified and incentive stock options, stock grants or other stock-based awards to employees,
nonemployee directors and consultants. In addition, in December 2008, the Company also granted stock options as an “inducement” grant outside of the
Company’s existing equity plans to its President and Chief Executive Officer. In connection with the Merger with Jamba Juice Company, the Company
assumed the outstanding options under the Jamba Juice Company 1994 Stock Incentive Plan (the “1994 Plan”) and the 2001 Equity Incentive Plan (the “2001
Plan”), which provided for granting nonqualified and incentive stock options to employees, nonemployee directors and consultants. No additional grants are
available under the 2001 Plan and the 1994 Plan.
Options granted under the 2006 Plan have an exercise price equal to the closing price of the Company’s common stock on the grant date. Options granted
in 2006 under the 2006 Plan have an exercise price equal to the average of the closing price of the Company’s common stock for five trading days, consisting
of the two days immediately following the date of grant, the day of the grant, and two days immediately before the date of grant. Options under the 2001 Plan
and 1994 Plan were granted at an exercise price equal to or greater than the fair market value of the common stock at the date of the grant and are exercisable
for up to 10 years. Options remaining under the 1994 Plan generally vest over four years. Options remaining under the 2001 Plan granted prior to January 1,
2004 vested 20% at date of grant and 20% per year thereafter. Options granted under the 2001 Plan after January 1, 2004 and under the 2006 Plan generally
vest 25% on the first anniversary of the grant date and 25% per year thereafter. Approximately 337,900 performance based shares were granted to officers of
the Company in December 2007. Options granted under the 2006 Plan with performance-based measures vest on March 15, 2009 upon achievement of certain
goals. Shares available for grant were 1,585,110 as of December 30, 2008.
In December 2008, the Company granted an aggregate of 1,500,000 shares of stock options to its new President and Chief Executive Officer, resulting in
an increase in the number of shares issued under stock option awards outstanding. This award was granted as an “inducement” grant outside of the
Company’s existing equity plans.
The fair value of options granted was estimated at the date of grant using a Black-Scholes option-pricing model. Option valuation models, including
Black-Scholes, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an
award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award. The risk-free
rate of interest is based on the zero coupon U.S. Treasury rates appropriate for the expected term of the award. Expected dividends are zero based on history of
not paying cash dividends on the Company’s common stock. Expected volatility is based on a 50/50 blend of historic, daily stock price observations of the
Company’s common stock since its inception and historic, daily stock price observations of
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