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On December 23, 2004, the company repurchased 1,808,774 shares at a $42.00 per share of its common stock from the Chairman of the company’s Board of Directors, members of his family and trusts controlled by his family upon his retirement from the company. The aggregate cost of the stock repurchase including transaction related costs was $77.2 million. 

At January 1, 2005, the company had a total of 3,856,344 shares in treasury amounting to $89.7 million. 

(C) WARRANTS In December 2002, the company repurchased and retired 358,346 of outstanding stock warrant rights held by American Capital Strategies (“ACS”), which had been issued in connection with a senior subordinated note agreement entered into in December 2001. The stock warrant rights allowed ACS to purchase Middleby common stock at $4.67 per share at any time through their expiration on December 21, 2011. The stock warrant rights were purchased for $2.7 million in cash. Conditional stock warrant rights of 445,100 exercisable under circumstances defined per the note agreement expired with the retirement of the notes in December 2002. See Note 8 for further discussion. 

(D) STOCK OPTIONS AND GRANTS The company maintains a 1998 Stock Incentive Plan (the “Plan”), as amended on December 15, 2003, under which the company’s Board of Directors issues stock options and stock grants to key employees. A maximum amount of 1,500,000 shares can be issued under the Plan. Stock options issued under the plan provide key employees with rights to purchase shares of common stock at specified exercise prices. Options may be exercised upon certain vesting requirements being met, but expire to the extent unexercised within a maximum of ten years from the date of grant. Stock grants are issued to employees are transferable upon certain vesting requirements being met. As of January 1, 2005, a total of 1,144,160 stock options have been issued under the plan of which 445,960 have been exercised and 698,200 remain outstanding. As of January 1, 2005, a total of 100,000 restricted stock grants have been issued of which all are unvested. In addition to shares under the 1998 Stock Incentive Plan, certain directors of the company have outstanding stock options. As of January 1, 2005, there were 56,000 shares outstanding, all of which are vested. 

A summary of stock option activity is presented below: 

<img src='content_image/64198.jpg'>

In fiscal 2004, the weighted average price of shares exercised, forfeited and repurchased under the employee stock plan was $8.00, $10.94 and $12.86, respectively. In fiscal 2004, the weighted average price of shares exercised, forfeited and repur- chased under the director stock plan was $7.15, $11.72 and $7.72, respectively. 

