Potential Payments Upon Termination or Change in Control
As of October 31, 2022, the Company had the following lump sum payment obligations, under the LCP as described above, to its Named Executive Officers upon a change in control or termination: Laurans A. Mendelson $35,830,999; Carlos L. Macau, Jr. $7,769,099; Eric A. Mendelson $16,882,898 and Victor H. Mendelson $13,368,112. As of October 31, 2022, the Company’s payment obligation under the LCP to Steven M. Walker upon a change in control was $0 and upon termination was $1,171,675.
The unexercisable (unvested) options held by the Named Executive Officers as detailed in “Outstanding Equity Awards at Fiscal 2022 Year-End” would become immediately vested and exercisable upon (i) a change in control of the Company, (ii) the liquidation or dissolution of the Company, or (iii) any reorganization, merger, consolidation or other form of corporate transaction in which the Company does not survive or the shares are exchanged for or converted into cash or securities issued by another entity, or an affiliate of such successor or acquiring entity, unless the successor or acquiring entity, or an affiliate thereof, assumes the option or substitutes an equivalent option or right pursuant to Section 10(c) of the Company’s 2018 Incentive Compensation Plan, (each, an “Acceleration Event”). As of October 31, 2022, the value of this acceleration to the Named Executive Officers upon an Acceleration Event was: Laurans A. Mendelson $2,860,400, Carlos L. Macau, Jr. $1,167,450, Eric A. Mendelson $5,093,500, Victor H. Mendelson $5,093,500 and Steven M. Walker $253,515. The value of the accelerated vesting of the unexercisable options was calculated by aggregating the difference between the closing price of the applicable share class as of October 31, 2022 and the exercise price of such unexercisable option multiplied by the number of options for the applicable share class.
Pursuant to Item 402(u) of SEC Regulation S-K, we are required to disclose the ratio of the compensation of our Chief Executive Officer to the compensation of our median employee during fiscal 2022. SEC rules permit us to use the median employee that was identified in connection with the prior year’s pay ratio disclosure for purposes of this year’s disclosure as well, provided there have been no changes to our employee population or employee compensation arrangements that we reasonably believe would significantly affect our pay ratio disclosure. During fiscal 2022, there has been no change in our employee population or employee compensation arrangements that we believe would significantly impact our pay ratio disclosure. However, we concluded it would no longer be appropriate to use the employee identified in fiscal 2021 as the median employee in fiscal 2022 because of a change in the original median employee’s circumstances that makes such employee no longer a representative employee. Accordingly, as permitted by SEC rules, we identified another median employee for fiscal 2022 whose fiscal 2021 compensation was substantially similar to the original median employee based on the compensation analysis used to select the original median employee.
To calculate the annual total compensation of our median employee, we identified and calculated the elements of such employee’s fiscal 2022 compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. Based on the aforementioned methodology, we determined that the fiscal 2022 median total annual compensation of our median employee was $56,201. As reported in the Summary Compensation Table, the fiscal 2022 annual total compensation for Mr. Mendelson was $9,107,291 resulting in a pay ratio of 162:1.
Our pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.