Thursday, October 26, 2006

New Executive Agreements at The Yankee Candle Co.--The Sweet Smell of Timing!

On September 14, 2006, the Board of Directors of The Yankee Candle Company, Inc. (YCC-$33.73) authorized the Company to enter into an Executive Severance Agreements with the Chairman of the Board and CEO Craig W. Ryden, President and COO Harlan M. Kent, CFO Bruce H. Besanko, as well as each of the other six top executives of the Company:

If any of the executives terminate their employment for “Good Reason” [is there any other kind?], or if the employment is terminated within two years following a “Change in Control” of the Company (without Cause) the executives will be entitled to receive severance benefits consisting of the following primary components:

  • a continuation of medical and dental benefits (subject to the severance period acknowledged for each so-named executive);
  • a one-time payment of their incentive award target under the executive compensation plan, pro rated based on the number of days of that fiscal year for the so-named executive was employed; Messrs. Ryden, Kent, Besanko could each receive (up to) an estimated $726,243, $200,000, and $187,000, respectively; and,
  • a one-time payment of the following amount: (1) in the case of CEO Ryden, an estimated $2.40 million; (2) in the case of the COO Kent, an estimated $912,000; (3) for the CFO Besanko, an estimated $653,190; and, (4) in the case of the Senior Vice Presidents, 100% of the sum of their base salary plus incentive award targets;

Immediately prior to a Change in Control Event,

  • all stock options held by the executives shall become fully vested (Ryden-540, 300 shares; Kent-155, 000 shares; and, Besanko- 60,000 shares);
  • each executive will be entitled to receive 66-2/3% of the target number of performance shares specified in the Award of Performance Shares Agreement covering the three fiscal years ending December 31, 2005, December 30, 2006 and December 29, 2007 (Ryden-29, 700 shares, Kent-6, 666 shares, and Besanko-6, 666 shares); and,
  • each so-named participating executive who remains employed by the Company for at least three months following a Change in Control Event will be entitled to a Special Retention Bonus, ranging from 20% -- to – 50% of their respective annual base salaries. Messrs. Rydin, Kent, and Besanko will receive an estimated $145,248, $81,605, and $124,230, respectively.

These Executive Severance Agreements smell as sweet as a Yankee candle—as long as a Change in Control event was to happen by April 1, 2007….

“We always have time enough if we will but use it aright.”Johanne W. Goethe

The scented-candle maker announced on Wednesday that is being sold to a Chicago-based private equity investment firm, Madison Dearborn Partners, LLC.

Under the agreement, Madison Dearborn will pay approximately $1.4 billion in cash -- or $34.75 a share -- and assume about $300 million in debt. The Company expects the transaction to close in the first quarter of 2007—one does not need to be a member of Mensa International to suppose that the deal will close by April 1, 2007.

Chairman and CEO Ryden said, " This transaction was in the best interest of our shareholders.”

In the case of Ryden and the other senior executives, his comment rings loud and true.

Editor David J Phillips does not have any financial interest in the stock of The Yankee Candle Company.

1 comment:

Ryan Simons said...

I have worked for YCC for almost 2 years now and due to their focus on customers (or "guests" to use the company lexicon) and budgets, they have failed to live up to their image. Due to a loophole in their Incentives Program (RSIP), they will not pay me my Yearly or Q4 bonus because I will no longer be employed with the company when the checks are cut and disbursed. They neglected to take into account that I have been employed with them through their fiscal year, I have covered many stores in their time of need, and have also prepared my store for "visits" from the men mentioned in this article. It's rather infuriating to learn these men will profit so greatly from a sale to save a failing company. I guess "the captain always goes down with the ship" doesn't apply to such wholesome companies and it's leaders. Craig was once in my store and made a purchase. I asked him for his SPN (Sales Person Number) to apply his discount to the purchase and he replied "Oh, I never use my discount". It sounded somewhat noble until I learned his salary and how much he will profit from this sale. Thanks for looking further into this than most of YCC's employees would. I plan to spread the word during my last week of employment. Maybe it'll bring a smile to their faces when they realize Craig's salary is 242 times the amount of my ghost bonus.