Baskin Robbins 2013 Annual Report Download - page 91

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described below, all three tranches of the restricted shares provided for partial or full accelerated vesting upon change in
control. Restricted shares that did not vest were forfeited to the Company.
Tranche 1 shares generally vested in four or five equal annual installments based on a service condition. The weighted average
requisite service period for the Tranche 1 shares was approximately 4.4 years, and compensation cost was recognized ratably
over this requisite service period.
The Tranche 2 shares generally vested in five annual installments beginning on the last day of the fiscal year of grant based on
a service condition and performance conditions linked to annual earnings before interest, taxes, depreciation, and amortization
targets ("EBITDA targets"), which were not achieved for fiscal years 2012 and 2011. Total compensation cost for the
Tranche 2 shares was determined based on the most likely outcome of the performance conditions and the number of awards
expected to vest based on those outcomes, and as such, no compensation cost was recognized in fiscal years 2012 or 2011
related to Tranche 2 shares. All remaining Tranche 2 shares outstanding were forfeited on the last day of fiscal year 2012 as the
EBITDA targets were not achieved.
Tranche 3 shares generally vested in four annual installments based on a service condition, a performance condition, and
market conditions. The Tranche 3 shares did not become eligible to vest until achievement of the performance condition, which
was defined as an initial public offering or change in control. These events were not considered probable of occurring until such
events actually occurred. The market condition related to the achievement of a minimum investor rate of return on the
Sponsor’s (see note 19(a)) shares ranging from 20% to 24% as of specified measurement dates, which occurred on the six
month anniversary of an initial public offering and every three months thereafter, or on the date of a change in control. As the
Tranche 3 shares required the satisfaction of multiple vesting conditions, the requisite service period was the longest of the
explicit, implicit, and derived service periods of the service, performance, and market conditions. As the performance condition
could not be deemed probable of occurring until an initial public offering or change of control event was completed, no
compensation cost was recognized related to the Tranche 3 shares prior to fiscal year 2011. Upon completion of the initial
public offering in fiscal year 2011, $2.6 million of expense was recorded related to approximately 0.8 million Tranche 3
restricted shares that were outstanding at the date of the initial public offering. The entire value of the outstanding Tranche 3
shares was recorded upon completion of the initial public offering as the requisite service period, which was equivalent to the
implicit service period of the performance condition, had been delivered. With the sale of the Sponsors' remaining shares in
August 2012, no further Tranche 3 vesting could occur, and all unvested Tranche 3 shares were accordingly forfeited.
A summary of the changes in the Company’s restricted shares during fiscal year 2013 is presented below:
Number of
shares
Weighted
average
grant-date
fair value
Nonvested restricted shares at December 29, 2012 1,049 $ 5.44
Granted ——
Vested (1,049) 5.44
Forfeited ——
Nonvested restricted shares at December 28, 2013 ——
As of December 28, 2013, no unrecognized compensation cost remains related to restricted shares. The total grant-date fair
value of shares vested during fiscal years 2013, 2012, and 2011, was $6 thousand, $1.2 million, and $484 thousand,
respectively.
2006 Plan stock options—executive
During fiscal year 2011, the Company granted options to executives to purchase 828,040 shares of common stock 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 5-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 3- or 4-year period. The requisite service
periods over which compensation cost is being recognized ranges from 3 to 5 years.
The Tranche 5 executive options become eligible to vest based on continued service periods of 3 to 5 years that are aligned
with the Tranche 4 executive options (“Eligibility Percentage”). Vesting does not actually occur until the achievement of a