Yahoo 2014 Annual Report Download - page 144

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CEO One-Time Retention Award. Ms. Mayer received a one-time retention equity award that vests
over five years. A total of $15 million of the grant date fair value of this equity award was granted as
restricted stock units on July 26, 2012 and vests over five years. The remaining portion of this equity
award (valued at $15 million per the offer letter) was granted in November 2012 as a performance-
based stock option that vests over the four and a half years after July 26, 2012, subject to satisfaction
of performance criteria. The number of performance options granted in November 2012 was
determined based on the grant date fair value as of July 26, 2012. See below for additional discussion
of the performance-based stock options.
CEO Make-Whole Restricted Stock Units. To partially compensate Ms. Mayer for forfeiture of
compensation from her previous employer, on July 26, 2012 she was granted restricted stock units
with a grant-date fair value of $14 million (the “Make-Whole RSUs”). Based on grant date fair values,
$4 million of the Make-Whole RSUs vested in 2012, $7 million vested in 2013, and $3 million vested in
2014.
Performance Options. The financial performance stock options awarded by the Company in
November 2012 to Ms. Mayer and Mr. Goldman include multiple performance periods. The number of
stock options that ultimately vest for each performance period will range from 0 percent to 100
percent of the target amount for such period stated in each executive’s award agreement based on
the Company’s performance relative to goals. The financial performance goals are established at the
beginning of each performance period and the portion (or “tranche”) of the award related to each
performance period is treated as a separate grant for accounting purposes. In February 2014, the
Compensation Committee established performance goals under these stock options for the 2014
performance year. The 2014 financial performance metrics (and their weightings) under the
performance stock options are GAAP revenue (70 percent) and adjusted EBITDA (30 percent). The
grant date fair value of the 2014 tranche of the November 2012 financial performance stock options
was $38 million, and is being recognized over the twelve-month service period. The Company began
recording stock-based compensation expense for this tranche in February 2014, when the financial
performance goals were established.
Performance RSUs. In February 2014, the Compensation Committee approved additional annual
financial performance-based restricted stock unit (“RSU”) awards to Ms. Mayer and other senior
officers, and established the 2014 annual performance goals for these awards as well as for the similar
performance-based RSUs granted in February 2013. The 2013 and 2014 performance-based RSU
awards are generally eligible to vest in equal annual target amounts over four years (three years for
Ms. Mayer) based on the Company’s attainment of annual financial performance goals as well as the
executive’s continued employment through each vesting date. The number of shares that ultimately
vest each year will range from 0 percent to 200 percent of the annual target amount, based on the
Company’s performance. Annual financial performance metrics and goals are established for these
RSU awards at the beginning of each year and the tranche of each RSU award related to that year’s
performance goal is treated as a separate annual grant for accounting purposes. The 2014 financial
performance metrics (and their weightings) established for the performance RSUs are: GAAP
revenue (70 percent) and adjusted EBITDA (30 percent). The grant date fair value of the first tranche
of the February 2014 performance RSUs was $9 million, and the grant date fair value of the second
tranche of the February 2013 performance RSUs was $17 million. These values are being recognized
over the tranches’ twelve-month service periods. The Company began recording stock-based
compensation expense for these tranches in February 2014, when the financial performance goals
were established.
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