Baskin Robbins 2011 Annual Report Download - page 105

Download and view the complete annual report

Please find page 105 of the 2011 Baskin Robbins annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 127

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127

1.4 years. The total potential unrecognized compensation cost related to the Tranche 2 shares is $59 thousand. As
the performance condition for Tranche 2 shares is not deemed probable of occurring, it is unlikely the
compensation cost will be recognized. There is no unrecognized compensation cost related to the
Tranche 3 shares. The total grant-date fair value of shares vested during fiscal years 2011, 2010, and 2009, was
$484 thousand, $1.3 million, and $1.9 million, respectively.
2006 Plan stock options—executive
During fiscal years 2011 and 2010, the Company granted options to executives to purchase 828,040 and
4,750,437 shares of common stock, respectively, under the 2006 Plan. The executive options vest in two separate
tranches, 30% allocated as Tranche 4 and 70% allocated as Tranche 5, each with different vesting conditions. In
addition to the vesting conditions described below, both tranches provide for partial accelerated vesting upon
change in control. The maximum contractual term of the executive options is ten years.
The Tranche 4 executive options generally vest in equal annual amounts over a five-year period subsequent to the
grant date, and as such are subject to a service condition. Certain options provide for accelerated vesting at the
date of grant, with 20% of the Tranche 4 options vesting on each subsequent anniversary of the grant date over a
three or four-year period. The requisite service periods over which compensation cost is being recognized ranges
from three to five years.
The Tranche 5 executive options become eligible to vest based on continued service periods of three to five years
that are aligned with the Tranche 4 executive options (“Eligibility Percentage”). Vesting does not actually occur
until the achievement of a performance condition, which is the sale of shares by the Sponsors. Additionally, the
options are subject to a market condition related to the achievement of specified investor returns to the Sponsors
upon a sale of shares. Upon a sale of shares by the Sponsors and assuming the requisite service has been
provided, Tranche 5 options vest in proportion to the percentage of the Sponsors’ shares sold by them
(“Performance Percentage”), but only if the aggregate return on those shares sold is two times the Sponsors’
original purchase price. Actual vesting is determined by multiplying the Eligibility Percentage by the
Performance Percentage. Additionally, 100% of the Tranche 5 options vest, assuming the requisite service has
been provided, if the aggregate amount of cash received by the Sponsors through sales, distributions, or
dividends is two times the original purchase price of all shares purchased by the Sponsors. As the
Tranche 5 options require the satisfaction of multiple vesting conditions, the requisite service period is the
longest of the explicit, implicit, and derived service periods of the service, performance, and market conditions.
Based on the sale of shares by the Sponsors in connection with public offerings completed in 2011, the
cumulative Performance Percentage as of December 31, 2011 was 28.5% resulting in compensation expense of
$1.1 million being recorded in fiscal year 2011. No Tranche 5 shares vested prior to fiscal year 2011, and
therefore no compensation expense related to Tranche 5 shares was recorded in fiscal years 2010 or 2009.
-95-