Yahoo 2015 Annual Report Download - page 148

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 March 2015, the
Compensation Committee established performance goals under these stock options for the 2015
performance year. The 2015 financial performance metrics (and their weightings) under the
performance stock options are GAAP revenue (one-third), revenue ex-TAC (one-third), and adjusted
EBITDA (one-third). The grant date fair value of the 2015 tranche of the November 2012 financial
performance stock options was $31 million, and is being recognized over the twelve-month service
period. The Company began recording stock-based compensation expense for this tranche in March
2015, when the financial performance goals were established.
Performance RSUs. In March 2015, the Compensation Committee approved additional annual
financial performance-based RSU awards to Ms. Mayer and other senior officers, and established the
2015 annual performance goals for these awards as well as for the similar performance-based RSUs
granted in February 2013 and February 2014. The 2013, 2014, and 2015 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 2015 financial
performance metrics (and their weightings) established for the performance RSUs are: GAAP
revenue (one-third), revenue ex-TAC (one-third), and adjusted EBITDA (one-third). The grant date
fair value of the first tranche of the March 2015 performance RSUs was $9 million, the grant date fair
value of the second tranche of the February 2014 performance RSUs was $11 million, and the grant
date fair value of the third tranche of the February 2013 performance RSUs was $19 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 March 2015, when the financial
performance goals were established.
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