This excerpt taken from the ZUMZ DEF 14A filed May 1, 2006.
Section 162(m) Compliance
Section 162(m) of the Code limits us to a deduction for federal income tax purposes of no more than $1 million of compensation paid to certain executive officers in a taxable year. Compensation above $1 million may be deducted if it is performance-based compensation within the meaning of the Code.
The Compensation Committee has determined that stock options granted under the Incentive Plan with an exercise price at least equal to the fair market value of our common stock on the date of grant shall be treated as performance-based compensation. The Compensation Committee currently believes that we should be able to continue to manage our executive compensation program for Named Executive Officers so as to preserve the related federal income tax deductions, although individual exceptions may occur.
* Mr. Weber became a member of the Compensation Committee in April 2006, replacing Mr. Barnum.