of all outstanding restricted stock awards, and the right to receive the number of performance shares that are earned but unissued and that he would have earned had he remained employed through the end of the applicable performance period; and (iii) COBRA continuation for up to 15 months after the termination date.
The Griffin Agreement also sets out severance benefits that become payable if, within the period of time commencing three months prior to and ending two years following a change in control, Mr. Griffin’s employment is either (i) terminated by the Company without cause or (ii) terminated by Mr. Griffin for good reason (a “Qualifying Termination”). The severance benefits provided to Mr. Griffin in such circumstances will consist of: (i) a lump-sum payment equal to two and one-half times the sum of (A) his annual base salary immediately prior to the change in control, and (B) the CIC Bonus Amount; (ii) all of Mr. Griffin’s then-outstanding stock options will become exercisable for a period of 30 months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation for up to 18 months after the termination date.
The Griffin Agreement also provides that in the event of a Qualifying Termination, Mr. Griffin is entitled to full acceleration of the vesting of all of his outstanding stock options, restricted stock awards and restricted stock unit awards and partial acceleration of any performance share awards, in each case granted after January 22, 2015. However, in the event that the successor or surviving company does not agree to assume, or to substitute for, such outstanding equity awards on substantially similar terms with substantially equivalent economic benefits as exist for such award immediately prior to the change in control, then such awards will accelerate (as described in the preceding sentence) as of the change in control.
The Griffin Agreement also provides that all outstanding equity awards held by Mr. Griffin on January 22, 2015, that were granted under the Company’s Amended and Restated 2005 Long-Term Incentive Plan will continue, following January 22, 2015, to be governed by the terms of the 2005 Long-Term Incentive Plan and the applicable award agreements thereunder, which terms include automatic accelerated vesting upon a change in control; provided, however, that for purposes of these awards, a “change in control event” will be deemed to have occurred in the event of a change in control as defined in the Griffin Agreement.
In the event of Mr. Griffin’s death or permanent disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “IRC”)), the Griffin Agreement provides for full acceleration of the vesting of all then-outstanding equity awards subject to time-based vesting (including stock options, restricted stock awards, restricted stock unit awards) and all performance-based equity awards where the performance period has ended and the shares are earned but unissued. The Griffin Agreement also provides that if Mr. Griffin’s death or permanent disability occurs prior to the end of the performance period of a performance-based equity award, each such award will be deemed earned as to the greater of (i) the target level of shares for such award; (ii) the number of shares that would have been earned pursuant to the terms of such award had he remained employed through the end of the performance period, and such earned shares will become vested and issuable to him after the performance period ends. In addition, all outstanding stock options will be exercisable for a period of 12 months following the termination of employment (but not beyond the expiration of their respective maximum terms).
The Griffin Agreement has an initial two year term from May 11, 2016, and thereafter renews automatically on an annual basis for up to five additional years unless either the Company or Mr. Griffin timely provides a notice of non-renewal to the other prior to the end of the then-current term. The payments due to Mr. Griffin under the Griffin Agreement are subject to potential reduction in the event that such payments would otherwise become subject to excise tax incurred under Section 4999 of the IRC, if such reduction would result in his retaining a larger amount, on an after-tax basis, than if he had received all of the payments due.
Additionally, the Griffin Agreement requires that Mr. Griffin sign a release of claims in favor of the Company before he is eligible to receive any benefits under the Griffin Agreement and contains a non-solicitation provision applicable to Mr. Griffin while he is employed by the Company and for 12 months following the termination of his employment.
Compensation for Liam K. Griffin
Effective as of Mr. Griffin’s appointment as Chief Executive Officer, his annual base salary will be increased to $850,000. Under the FY 2016 EIP, Mr. Griffin is also eligible to earn a short-term cash incentive award equaling one-hundred and sixty percent (160%) of his base salary for the 2016 fiscal year if the Company achieves its target