|APOLLO EDUCATION GROUP INC filed this Form DEF 14C on 12/29/2014|
(2) Performance Share Unit Awards for Mr. Cappelli. As part of Mr. Cappelli’s multi-year equity awards pursuant to his employment agreement entered into in April 2011, Mr. Cappelli has received the following performance share unit awards:
(i) Apollo Education Group Performance Share Unit Award. Mr. Cappelli received an Apollo Education Group performance share unit (“PSU”) award in July 2011. This award covered a target number of 55,617 PSUs. The performance period for this performance share unit award was completed on August 31, 2014 and no performance-qualified shares were earned by Mr. Cappelli under this award.
(ii) Apollo Global PSU Awards. Mr. Cappelli received an Apollo Global performance share unit award in July 2011 tied to the growth in the adjusted operating free cash flow of our subsidiary, Apollo Global, over a three-year performance period that ended with fiscal year 2014. This award covered a target number of 21,066 PSUs. In March 2012, Mr. Cappelli received the balance of the multi-year award for fiscal years 2012 through 2014 provided under his employment agreement in the form of an additional performance share unit award that was also tied to the growth in adjusted operating free cash flow of Apollo Global over a two-year performance period, which also ended with fiscal year 2014. This award covered a target number of 12,810 PSUs. Within the time limits prescribed by Code Section 162(m), the Compensation Committee modified the March 2012 award to authorize adjustments to cash flow from operations used to determine adjusted operating free cash flow in order to take into account the impact that dispositions of discontinued operations or other businesses or assets that occur during the Performance Period would have upon Apollo Global’s reported cash flow from operations.
The Compensation Committee believes that this entrepreneurial component was appropriate for Mr. Cappelli because of his significant involvement with our Apollo Global subsidiary and the particular leadership and direction he was providing to that entity. However, to mitigate risk, the grant-date fair value of those awards was limited to a relatively small percentage of his total multi-year equity award package so that the predominant portion would remain tied to our financial success and serve as a substantial incentive for him to remain primarily focused on the overall success of the entire organization.
In October 2013, outside of the time period permitted by Code Section 162(m), the Compensation Committee amended the July 2011 award to authorize the same adjustments to cash flow from operations used to determine adjusted operating free cash flow that had previously been authorized by the Compensation Committee when it amended the March 2012 award in October 2012. In October 2013, the Compensation Committee further amended both the July 2011 and March 2012 awards by reducing the adjusted operating free cash flow increases that must be attained. These amendments were made to reflect the changes to Apollo Global’s operations and expense structure that had occurred since the awards were originally granted and to align the financial targets for the two-year performance period of the March 2012 award with the financial targets for the three-year performance period award of the July 2011 award, as was intended by the Compensation Committee at the time the March 2012 award was made.
On the basis of the amount of the increase in adjusted operating free cash flow over the applicable performance period, the target number of performance share units awarded to Mr. Cappelli would be multiplied by the applicable percentage (which may range from 0% to 600%) pursuant to the schedules of financial targets set forth below to determine the maximum number of shares of our Class A common stock issuable based on the attained level of the performance goal. The number of share units from such conversion would constitute Mr. Cappelli’s performance-qualified shares.
The applicable formula for effecting such conversion of Mr. Cappelli’s July 2011 award, as modified by the Compensation Committee in October 2013, was as follows: