American Home Shield 2011 Annual Report Download - page 140

Table of Contents
disruption in American Home Shield caused by a third party service provider and schedule adjustments for implementation of a new CRM system
by American Home Shield;
Revenue; and
Cash Flow, which is calculated by making the following adjustments to ACOP: (i) adding back depreciation and amortization (excluding
depreciation and amortization related to assets established or re-valued as a result of the Merger); (ii) subtracting capital expenditures; and
(iii) adjusting for the change in net working capital.
These performance measures were selected as the most appropriate measures upon which to determine annual bonuses because they are the primary
metrics that management and the Equity Sponsors use to measure the performance of the Company for purposes unrelated to compensation. All of the
opportunity for payment under the ABP to our NEOs is based on these performance measures.
In addition to the performance measures discussed above, payments under the ABP were also subject to the achievement of a minimum level of
performance ("Gate") on a fourth financial measure. The Gate is calculated by adjusting prior year ACOP to add back depreciation and amortization
(excluding depreciation and amortization related to assets established or re-valued as a result of the Merger). In order to achieve any payment under the ABP,
the Gate had to be achieved at the corporate consolidated and, where applicable, business unit levels. For 2011, the Gates applicable to our NEOs were
$274.6 million and $560.5 million at the Terminix and corporate consolidated levels, respectively.
For executive officers holding positions within corporate headquarters functions, such as the CEO and CFO positions, ABP payments are based
100 percent on overall Company performance. For executive officers in charge of a business unit, payments are based on both Company and business unit
performance.
Performance targets are established by the Board toward the beginning of each year and are based on expected performance in accordance with the
Company's and, where applicable, the business unit's approved business plan for the year. In the event the Company and, where applicable, the business unit
achieve the performance targets, payout under the ABP would be 100 percent of a specified percentage of the executive's base salary. In the event the
Company and, where applicable, the business unit do not achieve the performance targets, a lesser bonus may be earned if the Company and, where
applicable, the business unit meet or exceed the threshold amounts for the performance targets, which are generally equal to the previous year's results
achieved for the applicable performance measure. In the event the Company exceeds the performance targets, the amount of the bonus will increase
accordingly. There is no maximum payout under the ABP on the theory that we pay for performance and our executives should receive additional
compensation when we exceed our performance goals. The components and weightings of the performance measures are reviewed and determined annually
by the Board to reflect Company strategy.
The tables below provide information regarding the 2011 ABP for our participating NEOs, including the performance goals and the weight assigned to
each, the thresholds required for minimum payout, and the payout as a percentage of the target bonus if the threshold or target performance is met. The
performance goals and relative weightings reflect the Board's objective of ensuring that a substantial amount of each NEO's total compensation is tied to
Company and, where applicable, business unit performance.
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