Mr. Cappelli waived the scheduled increase in his base salary to $750,000 for the 2013 fiscal year.
For each fiscal year within the term of the extended agreement, Mr. Cappelli’s target bonus will be set at not less than 100% of his rate of base salary for that year, and for the 2013 fiscal year such target bonus was in the amount of $750,000, as if his waiver of the salary increase for that year had not occurred. The actual bonus earned for each such fiscal year will be based on the level at which the applicable performance goals for that year are attained.
If Mr. Cappelli’s employment is terminated by the Company other than for “cause” or “disability” or he resigns for “good reason” (as those terms are defined in Mr. Cappelli’s employment agreement which is filed as Exhibit 10.52 to the Company’s Annual Report on Form 10-K for the year ended August 31, 2013), or if the Company elects not to renew his extended employment agreement, he will be entitled to the following severance benefits, provided he executes and delivers a general release to the Company:
a separation payment equal to (A) two times his annual rate of base salary in effect at the time and (B) two times the average of his actual bonuses for the three fiscal years immediately preceding the fiscal year in which such termination of employment occurs, with such payment to be made over the 12-month period measured from the date of his separation from service, subject to any required hold-back under applicable federal tax laws.
one year of additional service-vesting credit for each component of the three-year aggregated equity award made to him in lieu of annual equity awards for the 2012, 2013 and 2014 fiscal years, the stub-period equity award, and the special retention award.
an extended period of twenty-four (24) months following termination to exercise his options that are vested as of his termination date, including the options that vest as a result of the one year of additional service-vesting credit.
a lump sum payment to cover 18 months of estimated COBRA coverage costs.
In the event Mr. Cappelli’s employment terminates due to death or disability, he or his estate will be paid his target bonus, pro-rated for his actual period of employment with the Company during the year in which his employment terminates. In addition, he will be entitled to the 12-month service-vesting credit with respect to each of his unvested stock options, restricted stock units or other equity awards. However, should any such unvested equity awards also have a performance-vesting condition at the time of his death or disability, then upon the attainment of the applicable performance goals, the applicable service-vesting credit will be applied toward the satisfaction of any service-vesting requirement that was not otherwise satisfied at that time.
If Mr. Cappelli provides notice to the Company at least six (6) months before the August 31, 2014 expiration date of the initial term of his extended contract that he intends to resign on that date, then upon the effective date of such resignation, he will receive a partial service-vesting credit with respect to each of his April and July 2011 equity awards that is otherwise unvested at the time. Such vesting credit will be applied as if the service-vesting condition for the annual installment of each such award in which his August 31, 2014 resignation date occurs were in the form of twelve (12) successive equal monthly installments of continued service and will be in the amount necessary to bring his service vesting within that installment period to a total of 6 months. However, in no event will any such service-vesting credit result in the vesting in whole or in part of any equity award with performance-vesting conditions if those conditions are not in fact satisfied.
For the one-year period following termination of employment, Mr. Cappelli will be subject to certain non-compete and non-solicitation covenants.
Executive Severance Pay Plan
On June 24, 2010, the Company implemented the Senior Executive Severance Pay Plan (“Severance Plan”) pursuant to which the Company’s executive officers and other senior executives may become entitled to salary continuation payments and certain other severance benefits in the event their employment with the Company is involuntarily terminated other than for cause. The Severance Plan was amended in July 2012, October 2012, and July 2013 to extend severance benefits to employees at Grade Level 17 and to allow an enhanced level of severance benefits for all participants during limited window periods in which involuntary terminations might occur. The severance benefits to which the named executive officers may become entitled under the terms of the amended Severance Plan upon an involuntary termination of employment other than for cause may be summarized as follows:
separation pay in the form of salary continuation payments ranging from eighteen (18) months to twenty-four (24) months;
100% of the average of the named executive officer’s annual bonuses earned for the three (3) fiscal years preceding the fiscal year of his or her termination;
a lump sum payment of estimated COBRA health care coverage costs for a period coterminous with their salary continuation period;
limited pro-rata vesting of equity awards made on or after June 24, 2010, with such pro-rata vesting to be applied as if the annual vesting installment for the twelve (12)-month measurement period in which such termination occurs had vested in twelve successive equal monthly installments, but subject to the attainment of any applicable performance goals; and
outplacement assistance for up to six (6) months.