The Company does not have employment agreements with any of its named executive officers and does not provide change in control benefits to them, other than accelerated vesting of equity-based compensation at the Compensation Committee’s discretion.
The Company has entered into agreements with each of the named executive officers providing for severance for one year following each such executive’s termination of employment under certain circumstances. While the Company views this as a valuable retention mechanism for a relatively inexpensive compensatory benefit, the Company has specifically tied such severance to each named executive officer’s noncompetition covenant and, in circumstances in which the cost of severance may exceed the value of the executive’s noncompetition covenant, the Company reserves the right to waive the noncompetition covenant and deny severance benefits. In this way, the Company strives to ensure that the severance payments bear an appropriate relationship to the Company’s future needs.
In connection with the leveraged buyout of the Company in 2002, the Company entered into executive stock agreements with Mr. Cleary, Ms. Thompson, Mr. Danielson and Mr. Hay in order to provide additional equity incentives and to provide protection from the potential termination of employment of the named executive officers. Pursuant to these executive stock agreements, if the executive’s employment is terminated by the Company for any reason other than for cause or if the executive voluntarily terminates his or her employment within 90 days of a good reason event (defined to include relocation of our executive offices by more than 75 miles or a material reduction in the executive’s responsibilities or compensation), the Company will continue to pay the executive’s base salary for a period of twelve months after termination. The executive stock agreement also provides that the executive will not compete against us during the term of the executive’s employment and for one year thereafter (two years in the case of Mr. Cleary). However, the Company is not required to make any severance payment if we provide the executive with written notice within 15 days of the executive’s termination that we have elected to waive the covenant not to compete against us.