American Home Shield 2011 Annual Report Download - page 156

Table of Contents
Deferred Compensation Programs
The DCP is a nonqualified deferred compensation plan designed to afford certain highly compensated employees the opportunity to defer up to
75 percent of their compensation on a pre-tax basis. Deferred amounts are credited with earnings or losses based on the rate of return of investments selected
by the participants in the DCP. The Company, in its sole discretion, may make matching contributions, based on the amounts that are deferred by employees
pursuant to the DCP. The Company chose not to make matching contributions for 2011. Distributions are paid at the time elected by the participant in
accordance with the DCP.
The DCP is not currently funded by the Company, and participants have an unsecured contractual commitment from the Company to pay the amounts
due under the DCP. All plan assets are held in trust and are considered general assets of the Company. When such payments are due, the cash will be
distributed from the DCP's trust.
Participants in the 2007 offering under the MSIP were permitted to allocate eligible deferred compensation under the DCP to purchase DSUs, which
represent the right to receive a share of Holdings common stock on the first to occur of (i) the participant's termination of employment, (ii) a fixed date
selected by the participant or (iii) a change in control of Holdings. DSUs were acquired for $10 each. Messrs. Brackett and David Martin were the only NEOs
who elected to allocate a portion of their eligible deferred compensation to purchase DSUs.
Potential Payments Upon Termination or Change in Control
Severance Benefits for NEOs
Unless modified by separate agreement, upon a termination by the Company for cause, by the executive without good reason, or upon death or disability,
we have no obligation to pay any prospective amounts or provide any benefits to our NEOs. Our obligations will consist of those obligations accrued at the
date of termination, including payment of earned salary, vacation, reimbursement of expenses and obligations that may otherwise be payable in the event of
death or disability. For this purpose, "cause" means a material breach by the executive of the duties and responsibilities of the executive (other than as a result
of incapacity due to physical or mental illness) that is demonstrably willful and deliberate on the executive's part, committed in bad faith or without
reasonable belief that such breach is in the best interests of the Company and not remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach; or the commission by the executive of a felony or misdemeanor involving any act of fraud, embezzlement or dishonesty
or any other intentional misconduct by the executive that materially and adversely affects the business affairs or reputation of the Company.
Mr. Spainhour's retirement agreement provided for severance benefits equal to two times his highest annual base salary (a total of $1,970,000) and
highest annual target bonus (a total of $1,970,000) upon his retirement. The severance benefits are payable over a two year period following Mr. Spainhour's
retirement. The agreement also extended the period of time to exercise his vested non-matching stock options (a total of 525,000 options) from three months
to three years following his retirement. After his retirement, Holdings repurchased 300,000 shares from Mr. Spainhour. Additionally, Mr. Spainhour exercised
450,000 stock options following his retirement. Those shares were also subsequently repurchased by Holdings in 2011 at the fair market value ($11 per share)
on the date of repurchase. The Company will continue medical, prescription drug and life insurance for Mr. Spainhour and his dependents until his
65th birthday, May 2, 2015, with expenses shared in the same proportion as prior to his retirement for an estimated cost of $22,000. Mr. Spainhour's
severance benefits were subject to his signing a general release and observing covenants not to compete, solicit, nor disclose confidential information.
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