Below is the primary body of the e-mail sent December 17, 2004, from Wendy's CEO Jack Schuessler to all employees regarding the conversion of stock options. Some Wendy's-specific information has been removed from the letter by the company.
Dear Fellow Employees:
In February, we informed you of a change in our equity (stock) compensation strategy as part of a larger initiative, which affected the WeShare Stock Option Plan.
During the last several months, we have been working on the strategy for the replacement of stock options. Significant consideration was given to providing competitive total compensation with direct linkages to employee and brand performance. We also considered the current regulatory environment, expectations of our shareholders and our strategic goals and objectives. Another consideration was historic stock option exercise patterns--the vast majority of employees use their options to obtain cash.
The stock option replacement strategy will deliver incentives in a more effective manner with cash. Cash incentives are not subject to stock market volatility and, therefore, carry less risk than stock options. Unlike stock options, cash incentives will not require vesting. In addition, cash incentives will effectively align payouts with business performance. All levels of management, professional and administrative employees will now be covered by an incentive plan, with rewards aligned directly to the business unit they support.
In order to accomplish our incentive compensation strategy, we are implementing the following:
We will expand the eligible participants in the Management Stock Incentive Plan (MSIP) to include restricted stock awards to employees in grades [x, y and z], effective with the 2005 award.
Effective with the 2005 plan year, we will increase the bonus targets for employees who are in an existing incentive plan, and who are not eligible for restricted stock awards.
We will also implement, effective at the beginning of 2005, a new incentive plan for eligible employees who are not currently in an incentive-eligible position.
During the next few months, we will provide you with more information, including eligibility and participation terms, about the new incentive plan along with the changes to our existing incentive plans. We feel these changes strengthen our commitment to deliver competitive total compensation to our employees while allowing us to achieve our strategic objectives.
Chairman and Chief Executive Officer