Messman termination creates financial hardship.
Employment Contracts, Termination of Employment and Change-in-Control Arrangements
sec.gov
Mr. Messman entered into an employment agreement with Novell upon becoming Chief Executive Officer and President. The agreement currently provides for an annual base salary of $950,000. Mr. Messman is eligible to participate in Novell’s Fiscal 2006 Annual Bonus Program for Executives with an annual target bonus of 143% of his base salary if performance goals are met. Upon his initial employment, Mr. Messman received options to purchase a total of 2,408,045 shares of Novell’s common stock and the right to purchase 715,780 shares of restricted common stock for a purchase price of $.10 per share. Pursuant to the employment agreement, Mr. Messman is entitled to receive employee benefits made available to other employees and officers of Novell and their eligible dependents. Novell also maintains long-term disability insurance, short-term disability insurance, term life insurance coverage, accidental death and dismemberment coverage, and business travel accident insurance for the benefit of Mr. Messman.
Ms. Heystee and Messrs. Hovsepian, LaSala, and Tibbetts are all party to employment arrangements with us that provide for annual base salaries of $400,000, $650,000, $355,000, and $470,000, respectively. Ms. Heystee and Messrs. Hovsepian, LaSala, and Tibbetts are all eligible to participate in Novell’s Fiscal 2006 Annual Bonus Program for Executives that provides for the payment of bonuses if personal and corporate performance goals are met with annual target bonus of 100%, 100%, 75% and 90%, respectively. They are all entitled to receive employee benefits made available to other employees and officers of Novell and their eligible dependents.
Messrs. Messman, Hovsepian, LaSala, and Tibbetts and Ms. Heystee are parties to severance agreements with us. Generally, in the event of involuntary termination of an executive’s employment without a change in control, the agreements will provide the following benefits paid by Novell: (i) payment of a multiple of the executive’s base salary; (ii) a prorated bonus for the year of termination; (iii) twelve months of continued health and dental coverage; (iv) accelerated vesting of that portion of the executive’s outstanding stock options, if any, that would have vested within the one year period following the date of executive’s termination; (v) accelerated vesting of the portion of the executive’s outstanding restricted common stock, if any, that would have vested within the one year period from the date of executive’s termination; and (vi) reimbursement for outplacement benefits that are actually provided, not to exceed 20% of the executive’s base salary. The multiples referred to in (i) above for the Named Executive Officers are as follows: Mr. Messman— two times; and Messrs. Hovsepian, LaSala, and Tibbetts and Ms. Heystee— one and one half times. Additionally, Mr. Messman would also receive an amount equal to two times his target bonus.
The severance agreements also provide that in the event of an involuntary termination in connection with a change in control of Novell, the executive will receive the following benefits paid by Novell: (i) payment of a multiple of the executive’s base salary and target bonus; (ii) a prorated bonus for the year of termination; (iii) a certain number of months of continued health and dental coverage; (iv) a lump sum cash payment of what Novell would have paid as matching contributions under the Novell 401(k) plan for a certain number of months after the executive’s termination date; (v) a lump sum cash payment of what Novell would have paid as premiums under the executive’s split-dollar life insurance policy, if any, for a certain number of months after the executive’s termination date; (vi) payment of certain legal fees; (vii) outstanding restricted common stock, if any, and other equity rights, if any, will become fully vested; (viii) outstanding stock options, if any, will become fully vested; (ix) a lump sum payment equal to 20% of the executive’s base salary which may be used to cover the costs of outplacement assistance; and (x) if the payments provided to the executive exceed the amount that triggers the excise tax under section 4999 of the Tax Code by more than 10%, the payments will be grossed-up. The multiples and total number of months for health and dental insurance coverage, 401(k) plan matching contributions and life insurance premiums for each Named Executive Officer are as follows: Mr. Messman—three times and 36 months; and Messrs. Hovsepian, LaSala and Tibbetts and Ms. Heystee—two times and 24 months. Mr. Messman also has the right to terminate his employment for any reason during the 30-day period after the first anniversary of a change in control and receive these benefits. Additionally, all of the severance agreements contain non-competition and non-solicitation provisions.
Mr. Hovsepian’s severance agreement provides an additional event under which Mr. Hovsepian could receive severance benefits from Novell. In the event that Mr. Hovsepian does not succeed Jack L. Messman as the chief executive officer of Novell, and Mr. Hovsepian resigns from Novell within one year of the date that Mr. Messman ceases to serve as Novell’s chief executive officer, Mr. Hovsepian will receive the following benefits: (i) payment of one and one-half times his base salary; (ii) a prorated bonus for the year of termination; (iii) twelve months of continued health and dental coverage; (iv) accelerated vesting of all outstanding stock options, if any, subject to time-based vesting, but not those subject to performance-based vesting; and (v) accelerated vesting of all outstanding restricted common stock, if any, subject to time-based vesting, but not that common stock subject to performance-based vesting. Additionally, in the event that Mr. Hovsepian receives severance benefits under this provision, Mr. Hovsepian will not be bound by the non-competition provisions of the agreement, but he will be required to provide Novell with 120 days’ notice prior to the termination of his employment. Additionally, Mr. Hovsepian will continue to be bound by the non-solicitation provisions of the agreement. |
