The following table provides certain actuarial values for the accumulated benefit pertaining to each of the Supplemental Retirement Benefit Plan agreements with the executive officers named in the Summary Compensation Table above. The actuarial values do not account for the probability that the executive officer may not continue in employment with the Company to the specified retirement age, but rather, such calculations assume that the executive officer will receive the benefits of the agreement and that the executive officer will receive future salary increases. As such, years of credited service with the Company is not a relevant consideration. No benefit is payable to the executive officers unless they reach the specified retirement age while employed by the Company.
SUPPLEMENTAL RETIREMENT BENEFITS
At 2007 Fiscal Year End
| Name | Present Value of Accumulated Benefit1 ($) |
|---|---|
| Garry O. Ridge | $906,336 |
| Michael J. Irwin | $381,956 |
| Graham P. Milner | $425,338 |
| Michael L. Freeman | $487,254 |
| William B. Noble | $548,028 |
1 The Present Value of Accumulated Benefit for each NEO represents the actuarial present value of the obligation of the Company with respect to the Supplemental Retirement Benefit Plan agreements described in the narrative on page 25 of this proxy statement. The actuarial present values as of the fiscal year end were determined using a weighted-average discount rate of 6.5% and a weighted-average rate of compensation increase of 4%. No adjustment to the calculations has been included to account for the probability that no payment obligation will be incurred unless the NEO continues employment with the Company until retirement after reaching age 65.
Change of Control Severance Agreements
On February 14, 2006, the Company terminated pre-existing employment agreements with the Named Executive Officers. Each executive officer serves in office at the pleasure of the Board of Directors. On February 14, 2006, the Company entered into Change of Control Severance Agreements (“Severance Agreements”) with each of the Named Executive Officers and with one additional executive officer. The new Severance Agreements provide that each executive officer will receive certain severance benefits if he is terminated without “Cause” or resigns for “Good Reason”, as those terms are defined in the Severance Agreements, within two years after a “Change of Control” as defined in the Severance Agreements and summarized below. If the executive officer’s employment is terminated during the aforementioned two-year period by the Company without Cause or by the executive officer for Good Reason, the executive officer will be entitled to a lump sum payment (subject to limits provided by reference to Section 280G of the Internal Revenue Code which limits the deductibility of certain payments to executives upon a change in control) of twice the executive officer’s salary, calculated based on the greater of the executive officer’s then current annual salary or a 5-year average, plus twice the executive officer’s bonus compensation, calculated based on the greater of the most recent annual bonus compensation or a 5-year average. Further, any of the executive officer’s stock options and other equity incentive benefits that are not then fully vested will be accelerated and vested in full following such termination of employment within such two-year period and the executive officer will be entitled to continuation of health and welfare benefits under the Company’s then existing benefit plans or equivalent benefits. No employment rights or benefits other than the change of control severance benefits are provided by the Severance Agreements.
For purposes of the Severance Agreements and subject to the express provisions and limitations contained therein, Change of Control means a transaction or series of transactions by which a person or persons acting together acquire more than 30% of the Company’s outstanding shares; a change in a majority of the incumbent members of the Company’s board of directors as specified in the Severance Agreements, a reorganization, merger or consolidation as specified in the Severance Agreements or a sale of substantially all of the assets or complete liquidation of the Company. As specified more particularly in the Severance Agreements, Change of Control does not include a reorganization, merger or consolidation or a sale or liquidation where a majority of incumbent members of the board of directors continue in office and more than 60% of the Company’s pre-transaction stockholders continue to maintain control of the resulting or successor company.
The Severance Agreements have a term of two years, subject to automatic renewal for successive two year periods unless notice of non-renewal is provided by the Company’s board of directors not less than six months prior to the end of the current term. The term of the Severance Agreements will be automatically extended for a term of two years following any Change of Control.
The following table sets forth amounts payable to each of the NEOs pursuant to their respective Severance Agreements on the assumption that each NEO is terminated without Cause or otherwise for Good Reason effective as of the end of the Company’s fiscal year 2007 following a Change of Control as provided for in the Severance Agreements.
| Name | Severance Pay and Welfare Benefits1 |
Accelerated Vesting of Stock Options2 |
|||||
|---|---|---|---|---|---|---|---|
| Garry O. Ridge | $ | 1,720,677 | $ | 146,916 | |||
| Michael J. Irwin | $ | 750,621 | $ | 65,637 | |||
| Graham P. Milner | $ | 672,550 | $ | 63,294 | |||
| Michael L. Freeman | $ | 749,421 | $ | 56,265 | |||
| William B. Noble | $ | 911,972 | $ | 67,980 | |||
1 For each NEO, Severance Pay and Welfare Benefits includes 2 times the reported fiscal year 2007 Salary and 2 times the reported fiscal year 2006 Non-Equity Plan Compensation from the Summary Compensation Table above plus an estimate of the Company’s cost to provide 2 years of continuation coverage under the Company’s welfare and benefit plans. The estimated 2 year cost for such continuation coverage is $10,877 for Mr. Ridge; $29,021 for Mr. Irwin and Mr. Freeman; $19,750 for Mr. Milner; and $5,772 for Mr. Noble.
2 The value provided for accelerated vesting of stock options equals the value of the in-the-money unexercisable stock options for each NEO as reported in the Equity Awards Outstanding at Fiscal Year End table above equal to the difference between the closing price for the Company’s common stock as of August 31, 2007, $34.77, and the exercise price for each option.