Yahoo (YHOO) will pay its new CEO Carol Bartz an annual base salary of $1 million. Carol’s also eligible for an annual 400% bonus.
She’s also getting stock options for 5,000,000 shares and an equity grant of $18 million of stock, which, given Yahoo’s low share price could be Carol’s real prize. The option vesting is clearly structured to reward her for increasing the stock price as soon as possible.
From the SEC filing:
The Agreement provides that Bartz will receive an annual base salary of $1,000,000, subject to annual review for increases, and will be eligible to receive an annual bonus with a target amount of 200% of base salary and a maximum amount of two times the target amount. The actual amount of the annual bonus will be determined by the Compensation Committee of the Board (the “Compensation Committee”) based upon both the Company‘s and Bartz’s performance for the relevant year.
In addition, Bartz will receive stock options (the “Inducement Options”) for 5,000,000 shares of the Company‘s common stock (“Common Stock”), with a per share exercise price equal to the closing price of the Common Stock on the grant date (expected to be January 30, 2009) and a maximum term of seven years.
Vesting of the option will be dependent upon the attainment of average closing prices for the Common Stock for 20 consecutive trading days prior to January 1, 2013 (or, if a Change in Control occurs prior to January 1, 2013 or after that date if it is pursuant to an agreement signed before that date, the price immediately preceding the closing of the Change in Control) as follows: (i) 1/3 (1,666,667 shares) will vest at 150% of the exercise price; (ii) 1/6 (833,333 shares) will vest at 175% of the exercise price; (iii) 1/6 (833,334 shares) will vest at 200% of the exercise price; (iv) 1/12 (416,666 shares) will vest at 225% of the exercise price; (v) 1/12 (416,666 shares) will vest at 250% of the exercise price; and (vi) 1/6 (833,334 shares) will vest at 300% of the exercise price (the “Vesting Levels”). Any shares acquired upon exercise of the Inducement Options must be held until January 1, 2013, except in the event of death or a Change in Control.
Bartz will also be granted annual equity grants at the time grants are generally made to senior executives as determined by the Compensation Committee. She will receive an annual grant for 2009 with a value of approximately $8,000,000 which is expected to be granted in February 2009.
Bartz will be eligible to participate in the benefit programs generally available to senior executives of the Company, including health insurance, life and disability insurance, the Employee Stock Purchase Plan, 401(k) plan, and a Flexible Spending Plan. She will be entitled to four weeks of vacation per year. The Company will also pay or reimburse her for reasonable expenses incurred in connection with her employment, including up to $150,000 for advisory fees incurred in connection with entering into the Agreement.
In addition, to compensate Bartz for the forfeiture of the value of equity grants and post-employment medical coverage from her previous employer, the Agreement provides for an equity grant with a grant-date value of $10,000,000, payable 25% in cash and 75% in restricted stock, which will vest and be settled in equal and proportionate quarterly installments in 2009 (the “Make-Up Grant”). The Make-Up Grant will be subject to certain clawback provisions in the event of a termination for Cause or without Good Reason during the Term. The Company will also provide post employment medical coverage under its plans to Bartz, her spouse and eligible dependants as necessary, with Bartz paying the full premiums.