Salary and Benefits. Pursuant to the Employment Agreement, as of the Effective Date, Mr. Aaron’s initial annual base salary would be paid at the rate of $1,000,000 per year, subject to such increases as may be approved at the discretion of the Compensation Committee. Mr. Aaron will be entitled to participate in all employee benefit plans that are generally available to senior executives of the Company, subject to eligibility requirements.
Special Bonus and Retention Bonus. In recognition of the significantly reduced annual incentive cash payments that Mr. Aaron has voluntarily agreed to under the terms of the Employment Agreement, the Employment Agreement provides for a one-time special bonus of $2,000,000 payable within 15 days of the Effective Date. In addition, Mr. Aaron is entitled to a one-time retention bonus of $1,000,000, provided that, as of January 31, 2025, the Company has not terminated the Employment Agreement for “cause” or Mr. Aaron shall not have terminated the Employment Agreement without “cause” or without “Good Reason” (each of the terms as defined in the Employment Agreement). The retention bonus is payable within 15 days of January 31, 2025.
Annual Cash Incentive. During each of the Company’s fiscal years during the Employment Term, commencing with the fiscal year ending January 31, 2024. the new annual cash incentive program for Mr. Aaron provides for an annual target cash incentive of $3,000,000 (the “Target Bonus”) that could be earned based on financial metrics determined each year by the Committee. For fiscal 2024, the annual cash incentive will be based on Adjusted Pre-Tax Income. The target amount would be paid if the Company’s Adjusted Pre-Tax Income is equal to the Goal determined by the Committee with a maximum payout of two times the target if Adjusted Pre-Tax Income exceeds the Goal by specified amounts and a minimum payout of one-half of the target if Adjusted Pre-Tax Income is below the goal. There would be no annual cash incentive paid if Adjusted Pre-Tax Income is less than 80% of the Goal. The amount of the annual cash incentive can be increased by up to 5% based on a decrease in shares outstanding or decreased by 5% based on an increase in shares outstanding. In addition, the target bonus could be increased by up to 15% based on an increase in Adjusted EPS compared to the prior year and decreased by up to 15% based on a decrease in Adjusted EPS compared to the prior year. There is expected to be a significant reduction in the annual cash incentive paid to Mr. Aaron under the Employment Agreement compared to the annual cash incentive based on the formula contained in the prior employment agreement.
Annual Equity Grant. The Employment Agreement provides for an annual grant of PSUs and RSUs commencing with the fiscal year ending January 31, 2025. Executive shall be entitled to receive annual grants for an aggregate of 225,000 shares with 60% of such shares being subject to PSUs and 40% of such grants being subject to RSUs; provided, however, that the aggregate grant date fair value for the annual grant based on the closing price of the Company’s common stock on the date of grant may not exceed $4,500,000. (By way of example, if the closing price of the Company’s common stock on the date of grant is $20 or less, then the annual grant shall be for an aggregate of 225,000 shares. If the closing price of the Company’s common stock on the date of grant is greater than $20, the aggregate number of shares subject to the annual grant will be the amount determined by dividing $4,500,000 by such closing price with 60% of such shares being subject to PSUs and 40% of such shares being subject to RSUs.) The performance metrics and other terms and conditions of the PSUs, including time vesting provisions, shall be as determined by the Compensation Committee and subject to a PSU Agreement and the terms of the Plan governing such grants, and the RSUs shall be subject to an RSU Agreement that provides for three-year cliff vesting and the terms of the Plan.
The number of shares of common stock to which the PSU and RSU awards relate will be appropriately adjusted in the event of stock splits, stock dividends and other extraordinary corporate events.
Effect of Termination. In the event of Mr. Aaron’s death during the term, his estate will receive 12 months of his then current salary plus compensation pursuant to the annual cash incentive for that fiscal year (based on actual performance) prorated according to the number of days of employment in such fiscal year. In the event of his termination due to disability during the term, he will receive 50% of annual base salary for the remaining term of the Employment Agreement.
If during the term of the Employment Agreement the Company terminates Mr. Aaron’s employment without “cause” or if he terminates his employment with “cause” or for “Good Reason” (all as defined in the Employment Agreement), Executive will be entitled to receive (x) his then current annual base salary payable for two (2) years thereafter in equal payroll installments, plus (y) his Target Bonus for the fiscal year in which his employment terminates and for the following fiscal year, in each case payable at the same time such Target Bonus would have been paid had the Executive’s employment not terminated.
Effect of Change of Control. If, during the term of the Employment Agreement, a “Change In Control” (as defined therein) occurs, and the Company terminates Executive’s employment without “cause” or if he terminates his employment for “cause” or “Good Reason” after a “Change In Control,” then at any time within two years after the
