Starting March 29th 2012 AOL CEO Tim Armstrong begins a new four year contract. Approved on the 28th by the compensation committee, Armstrong will be entitled to a $1 million annual salary plus bonuses which could reach to two times that amount. The contract actually excludes some benefits that were present in the prior contract as per new policies for executive compensation plans.
Under these new terms, Armstrong will remain as Chairman and Chief Executive Officer at the company until March 28, 2016. At that time he will begin a month to month employment which can be terminated at any time via 30 days written notice.
Below are the list of benefits and compensations the AOL board approved for Armstrong and submitted to the SEC:
• A non-qualified option to purchase shares of the Company common stock with a grant date value of $3 million at an exercise price equal to the fair market value of a share of Company common stock on the grant date. The option will have a ten-year term and the shares subject to the option will vest in accordance with the following performance criteria:
• 50% of the shares subject to the option will vest and become exercisable when the price per share of the Company’s common stock increases by at least 20% from the average closing price of the Company’s common stock for the 20 trading days prior to the date of grant and equaling or exceeding such average closing price for 20 consecutive trading days, subject to Mr. Armstrong’s continued employment until at least the first anniversary of the date of grant.
• 50% of the shares subject to the option will vest and become exercisable when the price per share of the Company’s common stock increases by at least 30% from the average closing price of the Company’s common stock for the 20 trading days prior to the date of grant and equaling or exceeding such average closing price for 20 consecutive trading days, subject to Mr. Armstrong’s continued employment until at least the second anniversary of the date of grant.
• If one or more of the above described performance criteria have not been achieved by four years from the date of grant, the unvested option shall terminate.
• An award of performance units settled in shares of Company common stock conditioned upon the achievement of the Company’s three-year relative total shareholder return during a performance period from January 1, 2012 until December 31, 2014. The target number of performance units subject to the award will have a value equal to $1 million based on the fair market value of the Company’s common stock on the grant date.
• An award of performance units settled in shares of Company common stock conditioned upon the achievement of the Company’s three-year revenue growth objectives during a performance period from January 1, 2012 to December 31, 2014. The target number of performance units subject to the award will have a value equal to $1 million based on the fair market value of the Company’s common stock on the grant date.
Here’s their claim about the annual bonuses at AOL:
On March 28, 2012, the Compensation Committee approved the material terms of the 2012 AOL Inc. Annual Bonus Plan (the “ABP”). The ABP is a cash-based incentive plan in which eligible employees, including our Named Executive Officers, may participate. Employees eligible to participate in any of our other incentive plans, such as a sales or commission plan, are generally not eligible to participate in the ABP. For our Named Executive Officers, target incentive payments under the ABP will be based 75% on Company performance determined by adjusted operating income before depreciation with such adjustments as set forth in the ABP (“Adjusted OIBDA”), and cash provided by continuing operations, less capital expenditures, principal payments on capital leases and product development costs with such adjustments as set forth in the ABP (“Free Cash Flow”) and 25% determined by individual performance. For the Company performance component, 70% will be based on Adjusted OIBDA and the remaining 30% will be based on Free Cash Flow. Each plan year, upon the recommendation of management, the Compensation Committee approves the annual individual performance metrics for our Named Executive Officers. The individual performance component is based on the Named Executive Officer’s overall performance rating in his or her annual review. Certain Named Executive Officers will be eligible to receive an additional discretionary cash award depending upon the overall performance rating earned. The annual target incentive under the ABP for each Named Executive Officer is reflected as a percentage of base salary unless the annual target incentive is governed by an employment agreement.