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Payments Upon Termination or Change in Control Provisions

Employment Agreements

Gregory T. Barnum Employment Agreement.   On March 14, 2006, we entered into an employment agreement with Gregory T. Barnum, our Vice President of Finance and Chief Financial Officer.  Mr. Barnum is employed for an initial two year term, subject to earlier termination under certain circumstances. His 2006 annual base salary was $190,000 and was increased by our Compensation Committee for 2007 to $205,000. He is also entitled to receive annual cash bonuses on an annual basis determined by our Compensation Committee (which for 2007 is $123,000 at 100% achievement of financial and business milestones) and to participate in our standard benefit plans. Mr. Barnum’s employment term will automatically renew for additional two year terms unless we decide not to extend the term within 90 days prior to the commencement of a renewal term.

In connection with his employment, we awarded him 60,000 restricted shares of our common stock which vest 25% on each anniversary date of his employment, provided he has been in our continuous employment on each vesting date. He will receive dividends on the awarded shares only if vested and be entitled to vote them whether or not vested. We also recently awarded him 18,750 restricted shares on March 20, 2007 as discussed under “2007 Restricted Stock Awards” in our compensation discussion analysis section of this proxy statement.

Under the agreement, Mr. Barnum is entitled to a severance payment if (a) he is terminated by us without cause, (b) he resigns for good reason, (c) we do not renew his employment agreement, (d) we terminate his employment in anticipation of, in connection with, at the time of or within one year after a change of control, or (e) he resigns employment with us for good reason arising in anticipation of, in connection with, at the time of or within one year after a change of control.

If any of these events occur, and provided he complies with certain confidentiality, non-competition and non-solicitation covenants, we are to pay Mr. Barnum (a) all cash compensation accrued but not paid as of the termination date, (b) on the first day of the month following the termination date, a lump sum payment equal to one times the annual base salary, in effect immediately prior to the date of termination, and (c) for a period of 12 months, the cost of COBRA health insurance continuation coverage, including dependent coverage, subject to earlier termination if he is later employed and eligible to receive any health insurance benefits under another employer’s plans. Additionally, all of Mr. Barnum’s restricted stock awards will vest.

He has agreed to a one-year non-competition agreement with us after any termination of employment.

Robert R. Beyer Employment Agreement.   On February 16, 2007, we entered into an employment agreement with Robert R. Beyer, our new Vice President of Field Operations.

Mr. Beyer is employed for an initial two year term, subject to earlier termination under certain circumstances, at an annual base salary of $250,000 (subject to review and adjustment by our compensation committee). He is also entitled to receive annual cash bonuses of up to $125,000 at 100% achievement of financial and business milestones determined by us on an annual basis (subject to adjustment by our compensation committee). He is also entitled to participate in our standard benefit plans.

In connection with his employment, we have awarded him 75,000 restricted shares of our common stock. These shares vest 50%, 25% and 25% on the second, third and fourth anniversaries of his employment, provided he has been in our continuous employment on each vesting date. The vesting will accelerate 100% upon a change of control, if we terminate his employment without cause or if he voluntarily terminates his employment for good reason. He will receive dividends on the awarded shares only if vested and be entitled to vote them whether or not vested. We also recently awarded him 22,500

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restricted shares on March 20, 2007 as discussed under “2007 Restricted Stock Awards” in our compensation discussion analysis section of this proxy statement.

Mr. Beyer’s employment term will automatically renew for additional two year terms unless we decide not to extend the term within 90 days prior to the commencement of a renewal term. We have agreed to pay one year salary as severance compensation to Mr. Beyer in the event of termination of his employment on substantially the same terms as discussed above with respect to Mr. Barnum’s employment agreement. He has agreed to a one-year non-competition agreement with us after any termination of employment.

Change of Control Severance Agreements

In November 2004, we entered into change of control severance agreements with Messrs. Meland, Westling and Kinsella (who resigned in January 2006 and whose agreement terminated) and Ms. West effective so long as they are employed by us. Under these agreements, an executive is entitled to a severance payment if the executive is terminated by us without cause, or resigns for good reason, each in anticipation of, in connection with, at the time of or within two years after a change of control.

If any of these events occur, and provided the executive complies with certain confidentiality, non-competition and non-solicitation covenants, and provides us with a customary release, we are to pay the executive (a) all cash compensation accrued but not paid as of the termination date, (b) on the first day of the month following the termination date, a lump sum payment equal to two times the annual base salary for Messrs. Meland and  Westling and one times the annual base salary for Ms. West, in effect immediately prior to the date of termination, and (c) for a period of 24 months, the cost of COBRA health insurance continuation coverage (or the equivalent thereof), including dependent coverage, subject to earlier termination if he or she is later employed and eligible to receive any health insurance benefits under another employer’s plans.

2006 Restricted Stock Agreements

In 2006, under our 1999 Incentive Compensation Plan, as amended, the Compensation Committee granted, to Messrs. Westling and Barnum and Ms. West shares of restricted stock that vest strictly on continued employment with us. In March and April 2006, the committee approved the grant of 75,000, 60,000 and 18,500 shares to Messrs. Westling and Barnum and Ms. West, respectively. Mr. Westling’s and Ms. West’s grants were made pursuant to restricted stock agreements and Mr. Barnum’s grant was made pursuant to his employment agreement discussed above. As originally issued, these shares vest 50% after two years of continued employment and 25% more after three and four years of continued employment. In February 2007, the committee changed the vesting arrangements of these grants so that they will vest 25% per continued year of employment. See “Long-Term Incentive Awards” on page 14 of this proxy statement.

Generally, if a change of control occurs during the restricted period, and provided the executive has been in our continuous services on the change of control date and certain change of control prices are met, all unvested restricted stock awards will accelerate and vest as of the change of control event.

Option Grants

Under our 1999 Incentive Compensation Plan, as amended, we have made awards of stock options in prior years to Messrs. Meland and Westling and Ms. West. All outstanding stock options issued to them are set forth in “Outstanding Equity Awards at 2006 Fiscal Year End” on page 19 of this proxy statement. All of these stock options were fully vested at December 31, 2006. We have no additional payment or acceleration obligations under these awards upon a termination of employment or a change of control.

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Definition of Cause, Good Reason and Change of Control

Under our employment agreements, our severance agreements, and our restricted stock agreements, “cause” generally means one or more of the following events which remains uncured for up to 30 days:

·       willful or grossly negligent failure by the executive to perform his or her duties;

·       willful or grossly negligent commission by the executive of an act of fraud or dishonesty resulting in economic, financial or reputation injury to us;

·       conviction of, or entry by the executive of a guilty or no contest plea to, a felony or a crime involving or relating to us or our business, or involving or relating to moral turpitude;

·       a willful or grossly negligent breach by the executive of his or her fiduciary duty which results in economic, financial or reputation injury to us; or

·       willful or grossly negligent breach of the executive’s confidentiality and non-solicitation obligations under a respective agreement.

Under our employment agreements, our severance agreements, and our restricted stock agreements, “good reason” generally means one or more of the following events which remains uncured for up to 30 days:

·       the assignment to the executive of substantial duties adversely and materially inconsistent with the executive’s position, authority, duties or responsibilities;

·       reduction in the executive’s annual base salary or annual targeted bonus opportunity;

·       relocation of our offices at which the executive is principally employed to a location more than 50 miles from the prior location; or

·       we fail to cure a material breach of our obligations under a respective agreement.

Under our employment agreements, our severance agreements, and our restricted stock agreements, a “change of control”, generally means any of the following events:

·       following an extraordinary corporate transaction, a majority of our Board of Directors no longer consists of individuals who were directors at the time of the applicable granting of the severance or equity awards under these agreements; 

·       the acquisition of our securities that results in any person owning more than 50% of either our outstanding voting securities or our common stock (other than persons who had beneficial ownership of 25% of our securities prior to such transaction); or

·       sale or other disposition of all or substantially all of the assets of our company excluding transaction whereby our beneficial owners of our common stock or voting securities prior to the transaction own more than 50% of our outstanding common stock or voting securities after the transaction; or

·       the approval by our stockholders of a complete liquidation or our dissolution.

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