When it comes to disclosure and executive exits, however, we’d like to think someone over at Choice Hotels was paying attention: An executive vice-president is being shown the door again, and the hotel chain seems to be going more or less by the book. The book, of course, is the severance terms the company’s lawyers had written in advance. The outgoing EVP is Bruce Haase, whose broad portfolio included global brands, marketing and operations, and the executive is going to get pretty much what he was promised.

Not that it’s easy to figure that out. The 8-K that Choice Hotels filed yesterday was a model of brevity, at just under 350 words. Unfortunately, it could probably have been boiled down to just a sentence or so: “Go take a look at his employment agreement, and the amendments attached to the 8-K.”

We should stress that in this case, there’s no indication that Haase is leaving under any kind of a cloud. The filing simply says his departure “will be deemed a termination without cause under Mr. Haase’s Non-Competition, Non-Solicitation and Severance Benefit Agreement.” But there are also no numbers to make clear what’s happening. The document simply refers readers back to that melodiously named “Non-Competition, Non-Solicitation and Severance Benefit Agreement” and a new amendment, dated January 27. The amendment is attached as another brief document, but unfortunately it amounts to a laundry-list of changes, without saying much about the original terms. Similarly, a two-page Transition Services Agreement spells out his pay and benefits entirely in reference to his earlier agreement and the recent amendment (and federal law, which isn’t all that illuminating either).

Given time and a little effort, it is possible to piece all this together — that’s how we can tell you it works out to something like $2.7 million, going by the proxy that Choice Hotels filed on March 31, 2011 (or maybe a smidgen less, given the 6.6% decline in the company’s stock since the end of 2010).

Most of that is cash, at 18 months’ salary ($600,000) and the equivalent of a bonus target of $220,000, or 55% of salary. Health benefits and outplacement services — last month’s amendment says he can use any outplacement firm he wishes — amounts to another $38,000 or so. Some $248,967 represents the pension he can start drawing at age 65 (he’s now about 50 years old). The rest — some $1.7 million — comes from from the continued vesting of stock and options over the 18 months after his termination. Not included in there, as far as we can tell, is the $4.3 million or so he’s accumulated in his deferred compensation account, including more than $370,000 in employer contributions and company-paid earnings for 2010 alone.

Beyond the fact that they could have made it a lot easier for shareholders to get the complete picture, we do have one other (small) bone to pick with Choice Hotels: The company first mentioned that Haase would be leaving in a separate 8-K filed on January 20 — and good on them for doing so; we’ve seen companies do less for more prominent executives. But in that two-sentence filing, Choice Hotels said cryptically that, three days before, it and Haase had “agreed that Mr. Haase will relinquish his title and authority as an officer” on January 31, and that “this event will occur in connection with Mr. Haase’s planned departure from the Company” in the second quarter. That wording makes it sound like this was some long-planned transition, though we don’t see any previous reference to the move.

Anyway, we can pick nits — we’re good at that — but Choice Hotels is at least moving in the right direction, in terms of sticking to the severance terms it already has on the books instead of cooking up ad-hoc arrangements. Now maybe the company can work on making its disclosures a little more investor-friendly.

Image source: Business travelers exiting photo via Shutterstock.

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Some executive departures are more significant than others, which is why it’s one of the dozens of signals we keep an eye out for in corporate disclosures. To see what you’re missing in corporate disclosures — from M&A indicators to accounting gimmicks — check out footnotedPro, our subscription service for professional investors, where we highlight hidden pitfalls and potential opportunities well in advance of the market. For more information, or to inquire about a trial subscription, please email Todd Serpico.

After spending 37 years with Lockheed Martin, Ralph D. Heath, Executive Vice President of the Lockheed Martin Aeronautics Company, is ready to retire. Heath has served in that role since January, 2005 and – based on the information in the 10-K filed in February, 2011 – is (or soon will be) 63 years old. Although his official date to step down as the Executive VP of Aeronautics is April 1, Heath agreed to keep working as an Executive Vice President until April 30, reporting to President and Chief Operating Officer Christopher E. Kubasik during that last month. Accordingly, his official retirement date is set for May 1.

Between now and then, Heath will continue to earn his salary (calculated at $63,333 a month, or $760,000 per year) and benefits. But after May 1 he is set to get a nice check from the company and a consulting agreement, described in the filing as follows:

“Following his retirement, Mr. Heath will be paid $950,000 as part of the transition arrangement contingent upon executing a written release of claims…

Heath also agreed to provide “transitional consulting services” pursuant to a year-long consulting agreement. He can’t work more than 52 days between May 1, 2012 and April 30, 2013, but he will be paid $5,000 per day for his troubles. Lockheed Martin hasn’t filed either the Transition Agreement or the Consulting Agreement yet; but those may be filed shortly, or they may be filed with the annual report, which will probably be filed near the end of this month. However, given the $950,000 initial payment, and assuming Heath works the maximum number of 52 days as a consultant, his new, post-retirement gig is worth $1.21 million.

Of course, Heath will actually be retiring with far more money than that, having labored for so many years for the world’s largest defense contractor. In the March, 2011 proxy, the company disclosed that Heath’s interests in a variety of executive benefit plans (including the retirement plan and a supplemental plan, a Deferred Compensation account, a supplemental pension, and his various equity interests at the time) had an aggregate value of more than $15.78 million, assuming a termination date of December 31, 2010. That number is most certainly higher now, both because Heath continued to get equity awards in 2011 and because the stock is trading about 3.4% higher than it did a year ago.

Within the past couple of weeks, Secretary of Defense Leon Panetta announced that he was rescinding probation of Lockheed Matin’s F-35B program because of the great progress made in 2011. Thus, even with the looming budget cuts, at least Heath is making his exit on a high note.

Image source: Lockheed Martin Corp.

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On January 18, we published our 2012 footnotedPro M&A report, naming 10 companies we see as likely deal targets based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

Pinching pennies at the front door may actually be helpful for the company, however, given the significant cash that Wal-Mart has promised to pony up to a couple of  executives, according to an 8-K filed January 25.

One such executive is Rosalind G. Brewer, who was promoted into the role of president and CEO of Sam’s Clubs and will start her job on February 1 with a base salary of $800,000. She won’t have an employment agreement, but the 8-K revealed that her target cash bonus under the Management Incentive Plan (MIP) for the next fiscal year is set at 160% of her base salary, or $1.28 million, and she could get as much as $1.6 million.

Brewer will also get an annual equity award, including performance shares with a target value of $2,625,000 and restricted shares with a value of $875,000. The first award is subject to performance criteria over a three-year period; the second award vests on the third anniversary of the grant date.

But apparently the new salary, potential bonus, and up to $3.5 million in equity awards don’t really compensate Brewer adequately for her promotion, because the filing then adds:

“Ms. Brewer will also receive two additional awards of performance shares in connection with her promotion effective February 1, 2012, subject to approval of the CNGC [Compensation, Nominating and Governance Committee]. The first additional performance share award will have a target value of approximately $1,846,952, and will vest on the first anniversary of the grant date. The second additional performance share award will have a target value of approximately $1,797,014, and will vest on the second anniversary of the grant date.”

Thus, if the company’s performance meets whatever criteria are set by the Compensation, Nominating and Governance Committee, Brewer could get more than $3.64 million extra, which – to our way of thinking – even beats a celebratory promotion lunch at a swanky restaurant in Bentonville. Brewer also gets to use Wal-Mart’s jet for personal reasons “for a limited number of hours,” and the company is paying her relocation costs as she moves from Atlanta to Bentonville.

As for current Sam’s Club CEO and president, Brian Cornell, who joined the company in 2009, he advised his employer that he and his wife want to “move back to the Northeast for family reasons.” But even though he will cease being an executive on January 31, the filing notes that he will continue as “an associate” through April 1, 2012 (albeit one who gets “personal use of the Company aircraft for a limited number of hours”). The 2011 proxy doesn’t reveal Cornell’s base salary, but the 2010 proxy listed it as $800,000 at the time.

Although none of us will probably get an invitation to help Brewer celebrate her promotion, Wal-Mart made an announcement this morning that everyone can look forward to: The midnight party at 2,700 Wal-Marts to celebrate the DVD release of Twilight Saga: Breaking Dawn Part 1 set for February 10 is a go, complete with Edward and Bella collectibles, giveaways, and “Twilight-themed” bakery goods.

Image source: Wal-Mart, Inc.

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On January 18, we published our 2012 footnotedPro M&A report, naming 10 companies we see as likely deal targets based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

Then there are the part-time jobs pretty much anyone would love to have: corporate directorships. Earlier this month, Michelle footnoted how Google (GOOG) seems to have decided to double the value of the one-time stock grant for new directors, to $1 million, from $500,000. But in recent weeks, some other director pay arrangements have also caught our eye.

Like a lot of companies, WGL Holdings, a Washington, D.C.-area natural gas supplier, lets directors defer some of their pay, and promises to pay them interest on the deferrals. But it turns out that WGL goes further, according to the proxy it filed on Friday, guaranteeing its director a minimum of 8% interest, or, if it’s higher, the “weekly average yield to maturity for 10-year U.S. Government fixed interest rate securities issued at the time of the deferral…” For one director (Melvyn J. Estrin), that meant $89,932 in interest gains in fiscal 2011, or just over a third of his total compensation, and more than his $75,000 in stock awards for the year. It meant $48,309 for James F. Lafond, or just under a quarter of his total pay, and $30,005 for George P. Clancy, or 15% of his total compensation. (We wouldn’t mind getting rates like that on our savings — it would sure help pay the area’s higher-than-average gas bills.)

At first glance, director pay at laser-maker Coherent Inc. (COHR) looks relatively reasonable: The various annual retainers, displayed in a nice table on page 9 of its proxy, range from a base $40,000 for all board members, to $6,500 additional for governance-committee members. But it adds up fast: total compensation ranges from $258,385 for investor L. William Krause (who sits on at least four corporate boards) to $479,629 for Jay T. Flatley, CEO of aggressively independent Illumina (ILMN), who received $390,149 in stock options as part of that.

By contrast, the 8-K filed by Intermec Inc. (IN), an RFID and wireless-identification company, is something we don’t see very much: The company appears to have actually reduced what it’s paying board members. Directors will now receive restricted stock units with a grant-date value of $100,000, instead of RSUs worth $80,000 plus options valued at $80,000. Given the total pay reported in the company’s April proxy, that’s a significant change, assuming nothing offsets the cut: Last year, most of Intermec’s directors made $184,564 all-in — on the low side of what we tend to see.

Another company caught our attention with relatively low director pay — sort of. That’s TFS Financial (TFSL), a $2.9 billion market-cap thrift holding company in Cleveland, which filed a proxy on January 9 reporting annual pay of just $51,000 to $74,000 for six of its full-year directors. Of course, two new directors got $501,500 in new stock awards for joining the board, vesting over five years (or on retirement, which essentially means leaving after age 72; both are in their mid-60s).

Any way you slice it, it boils down to nice (or very nice) pay for part-time work, and we’re haven’t even seen filings from most of the outliers yet. Stay tuned.

Image source: boardroom via Shutterstock.com

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On January 18, we published our 2012 footnotedPro M&A report, naming 10 companies we see as likely deal targets based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

Last week we wrote about an American executive who got a sweet deal after his employer decided to move its headquarters from Chicago to London. But you needn’t worry that there will be some kind of executive vacuum here in the States:  Yesterday we found an equally impressive agreement that will soon transplant a London-based executive to New York.

The executive in question is C. William Eccleshare, who has been working as the Chief Executive Officer—International of Clear Channel Outdoor Holdings, Inc. (CCO). The company just promoted Eccleshare to the position of CEO of the entire company Clear Channel Outdoor Holdings (including its indirect parent entities, CC Media Holdings, Inc. and Clear Channel Communications, Inc.), which means that he will oversee operations here in the United States and internationally.

Clear Channel included a summary of the terms in Eccleshare’s new employment agreement in an 8-K filed January 24; presumably the agreement itself will be filed soon. The agreement’s term runs through December 31, 2014 and will automatically renew each year thereafter until one side or the other wants to end it. Eccleshare will get an annual salary of $1 million, but that’s just the tip of the compensation iceberg. He will also get a performance bonus under the new agreement that has a target of “not less than” $1 million, although he may earn up to twice that amount; and he can also earn up to $300,000 more for what Clear Channel is calling an “Additional Bonus Opportunity.”

Subject to the Compensation Committee’s approval (and does anyone out there think they won’t give it?), the board also agreed to give Eccleshare $4 million worth of Restricted Stock Units, or RSUs. The vesting of 25% of those RSUs is tied to performance targets, but the rest will vest in 50% increments on the third and fourth anniversaries of Eccleshare’s appointment as CEO.

Clear Channel is certainly doing what it can to make Eccleshare’s move to New York easier:  Besides paying for all “reasonable expenses” associated with the move, it’s also giving him an extra $200,000 to cover those little odds and ends that aren’t “otherwise covered by the Company’s relocation policy.” And then there’s this:

“…for the duration of Mr. Eccleshare’s assignment in New York City, [Clear Channel will] reimburse Mr. Eccleshare up to $20,000 per month, fully grossed-up for applicable taxes, for housing in New York City.”

That is enough to rent a 2,700 square foot, 4 bedroom, 4 bathroom apartment on the Upper East Side that boasts some nice touches like Mahogany and oak wood, imported Italian marble, Subzero appliances, and – of course – a doorman.

The full value of the free housing benefit will depend on how long Eccleshare stays in this role and whether this contract will continue renewing annually after the end of 2014, or whether at some point the parties will amend the agreement and change the terms. Eccleshare is young, though. His age in the February, 2011 10-K was listed as 55, which means that he’s probably around 56 by now; thus, a long-term stay in New York would add up to a significant amount of money.

And we can’t overlook the impending departure of Ronald H. Cooper, Chief Executive Officer—Americas, who will leave his job “no later than” February 29, 2012. The 8-K disclosed that Cooper signed a Severance Agreement and General Release (not filed yet) that will pay him a lump sum cash Severance Payment of $2,547,600, plus a 2011 bonus of $385,100.

Apparently, when it comes to money flowing from Clear Channel’s checkbook to its executives, the motto is “Easy come… easy go.”

Image source:  Check and fountain pen via Shutterstock

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On January 18, we published our 2012 footnotedPro M&A report, listing 10 companies we see as likely deal targets, based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

Correction: The headline on an early version of this post incorrectly said O’Donnell would get “free” clothing instead of discounted clothing. My apologies for the error.

American Eagle Outfitters (AEO) describes itself as offering “high-quality, on-trend clothing, accessories and personal care products at affordable prices.” But while it pours effort into making the case that its clothes are a good deal, it put far less into making clear just how good a deal its retiring chief executive got on his way out the door.

As retirement (or severance) packages go, James O’Donnell is no Samuel Palmisano. But he is getting a handsome sum as he steps down from the top job at American Eagle Outfitters on January 28, a move that was telegraphed at least as far back as March. (Sonya footnoted his replacement’s compensation package the day before Thanksgiving.)

The 8-K that AEO filed to disclose O’Donnell’s package is pretty spare: The only dollar figures in it are $552,500 and $2.21 million — the least and most, respectively, that O’Donnell can make from a one-year post-employment consulting gig he’s getting from American Eagle. (Unusually, any amount over the base $552,500 will be “based on attainment of performance goals for the Company’s 2012 fiscal year,” which sounds more like a bonus to us than like consulting fees, but OK.)

Other elements of the package are described blandly as “his deferred compensation,” “a lump sum retirement benefit determined in accordance with the O’Donnell Employment Agreement,” “severance equal to one year of his base salary less the accrued but unpaid cost of his personal use of the Company aircraft…” and so on.

It turns out that all of this vagueness probably adds up to something like $15.6 million.

The breakdown is fairly straightforward: a year’s base salary, or $1.7 million based on last year’s pay; that lump-sum retirement benefit, or $3.6 million (essentially salary plus bonus “for the highest compensated fiscal year of the prior seven fiscal years,” according to last year’s proxy); a 2011 cash bonus ($612,817 last year); his long-term incentive plan account balance ($1.2 million as of the proxy); his deferred-comp account ($2.4 million, the proxy says); and continued vesting for his stock options, restricted stock units and performance shares ($6.1 million as of last year’s proxy).

His options are underwater, so they’re valued at $0 in the above calculation, which could change if AEO’s stock price rises appreciably in the near future. And as intriguing as it sounds, that “accrued but unpaid cost of his personal use of the Company aircraft” turns out to reduce his severance by just $65,000, according to the text of his Succession Agreement.

Oh, and O’Donnell also gets a lifetime “discount on Company merchandise generally applicable to active employees” for himself and his spouse. The company’s benefits website simply describes its discount for employees as “great.” But judging from various rate-your-employer websites (including comments on this one, as well as comments on Yahoo Answers), it does sound pretty good, if you like the clothes, ranging from 25% for clearance items to 40% or even 50% for regular and new merchandise.

It would take a heck of a lot of $10 tank-tops to make much of a difference for O’Donnell financially, much less for AEO investors, who haven’t exactly had a blockbuster year. Then again, they’ve done pretty well overall since O’Donnell took the helm, so maybe they won’t begrudge him a few $19.99 Mohawk Trapper Hats. And hey, we’d sure love to see him in one.

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Bonus: iPad Watch – We’ve been noticing for a while that departing executives are frequently getting to keep their treasured company-issued iPads. We like Apple’s software and hardware here at footnoted, but for the life of us, we haven’t been able to figure out a legitimate business case for an iPad at most companies (including ours — or believe me, I’d be lobbying to expense mine, stat). Now we’ve found support for our skepticism in an 8-K filed by Smart Balance (SMBL) after 5 p.m. on Friday. According to the accompanying Separation Agreement and Release, departing CFO Alan Gever is being allowed to keep his laptop, iPad, cell phone and cell-phone number. However,

“Prior to his Separation Date, Gever shall provide the Company access to his laptop and Blackberry to purge all Company data and information.”

No mention is made of purging Gever’s iPad — presumably because, like his cell phone, it doesn’t hold any company data or information worth purging.

Image source: AEO clearance website (no, really, it’s for sale — or check out the model with reindeer horns for just $14.99)

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On January 18, we published our 2012 footnotedPro M&A report, listing 10 companies we see as likely deal targets, based on our close reading of SEC filings. To inquire about purchasing a copy, or to find out more about subscribing to footnotedPro, where we highlight hidden opportunities and easy-t0-miss red flags well in advance of the market, please email Todd Serpico.

Such is the case of Barbara M. Pooley, Chief Administrative Officer with Kimco Realty Corporation (KIM), the real-estate investment trust that leases 138 million square feet in 940 shopping centers located in 44 states and a handful of other countries.

Pooley has worked for Kimco for a little less than 5 years, having started in 2007 as a vice president of finance and investor relations. The company promoted her along the way, and she landed the job of Executive Vice-President and Chief Administrative Officer in June, 2010.

Kimco first filed an 8-K on January 18 to announce:

Barbara M. Pooley is concluding her employment with Kimco Realty Corporation (the “Company”) and will no longer serve as Chief Administrative Officer of the Company, effective January 13, 2012.”

The filing is dated January 18, which means that Pooley and the company parted ways five days earlier.

The very next day, Kimco filed another 8-K to disclose that Pooley and the company had entered into an Agreement and General Release that spelled out the rights and responsibilities of each party.

As far as we can tell, the rights are pretty heavily in Pooley’s favor, and the responsibilities are rather standard for both parties. For starters, Kimco will pay her $1.75 million over the next 30 months. She’s also going to get a 2011 Performance Bonus of $115,000 and company-paid COBRA premiums until July 31, 2013 (unless she is eligible to participate in a group health insurance plan available through another employer prior to that time). Pooley will further get up to $25,000 to pay for 3 months’ worth of rent on her New York apartment, plus “reasonable moving expenses.” Oh… and she gets to keep her company-issued iPad, too (the trend continues!).

Equity awards are another valuable part of Pooley’s departure package. Kimco agreed to accelerate the vesting on Pooley’s unvested stock options and restricted stock awards, an action worth nearly $988,000. In addition, it promised to give her the shares of restricted stock “that she otherwise would have been awarded pursuant to the Performance Share Award Grant Notice dated February 17, 2011″ and to classify those shares as vested, as of the payment date.

For those keeping score at home, we’re up to practically $2.88 million for Pooley’s departure package, plus whatever her benefits are worth.

There is no mention of why Pooley left – no “leaving for personal reasons” or “leaving to pursue other business opportunities.” Nor is there any representation that the departure is not the result of any disagreement between Pooley and the company (which – as last Friday’s post on Yahoo! pointed out – is often dubious, anyway). There is a promise that neither party will disparage the other, but those clauses are fairly common in the separation agreements that we see.

Whatever the reason, Pooley’s parting gift from Kimco is sufficiently generous that she can presumably take her time and figure out what happens next.

Image source: Money, Gift Wrapped via Shutterstock

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Last Wednesday, we published the 2012 footnotedPro M&A report, listing 10 companies we believe are likely acquisition targets. Three companies on last year’s Top 10 list announced deals within a little over three months. For more information about our 2012 M&A report, or to inquire about subscribing to footnotedPro, please contact Todd Serpico.

]]> http://www.footnoted.com/my-big-fat-deal/a-farewell-package-from-kimco-realty/feed/ 0 http://www.footnoted.com/my-big-fat-deal/aons-ex-pat-games-london-on-1537-a-day/ http://www.footnoted.com/my-big-fat-deal/aons-ex-pat-games-london-on-1537-a-day/#comments Tue, 17 Jan 2012 15:58:29 +0000 Theo Francis http://www.footnoted.com/?p=6652 Aon Corp. (AON), the big insurance brokerage based in Chicago, made a splash in that city recently with the announcement that it would move its global headquarters to London.

Moving the HQ means moving the top brass as well, and that’s where — in our narrow view — things get pretty interesting. Because Aon is making sure it’s worth its executives’ while to make the move, and it’s splashing out quite a bit of hard cash to smooth the transition, according to the International Assignment agreements it filed with an early-Friday 8-K.

Consider the deal that Chief Executive Greg Case is getting to move across the pond. To start with, his agreement promises him $135,000 a year as an “annual foreign service allowance,” paid as part of his regular paycheck — a raise, in effect, for moving overseas. But he also gets another $336,000 — or $28,000 a month — as an

“annual housing allowance … to be used to pay accommodation and furniture rental costs and associated utility costs (excluding telephone and internet access which are personal expenses).”

Good thing the company isn’t picking up phone and Internet access — I mean, we wouldn’t want to go overboard, right? But the housing allowance will be adjusted annually “to reflect foreign exchange and local market rate variation,” and Case will have to cover his U.S. housing costs himself, should he keep his current residence there.

But housing and, um, foreign service costs apparently don’t begin to cover the difference between Chicago and London. Ergo, Case also needs (and gets) a $90,000 annual cost of living allowance, “intended to replicate your U.S. purchasing power in London and … based on a family size of four.”

Moving involves a lot of one-time costs as well, and it would be foolish to expect Case to cover that with the $1.5 million he made in salary last year, or his $17 million in stock awards. And, to be fair, companies do usually pay the cost of work-dictated moves — but in our experience, typically not in addition to a one-time, $80,000 “relocation allowance” that is “intended to cover all miscellaneous expenses not covered by other provisions included in your relocation package.”

By our tally, that comes to $561,000 a year extra — effectively, a 37% raise over his current salary, and the equivalent of $1,536.99 a day — plus full moving expenses and another $80,000 for all those miscellanea. When he moves back to the U.S., of course, the company will pay transportation and moving costs (and we wouldn’t be surprised to see another hundred grand or so go toward “resettlement costs” or the like.)

In addition to Case’s full attention to the job in London, the company is getting something in return. It can claw back up to a year’s worth of benefits if Case quits to work for a “direct competitor” or does so within a year after he returns from the U.K.

Other Aon executives get similar deals, though in some aspects a little less rich, since it’s presumably cheaper to be relocated when you have a less lofty title. Christa Davies, the company’s chief financial officer, gets a foreign service allowance of $15,000 a year less, though the figure is apparently going to be worked into her target bonus amount, which will be 150% of her salary and the $120,000 allowance. Her housing allowance will be just $252,000 a year, and her one-time relocation stipend just $76,667  – but she’s also getting $34,500 a year in “school tuition allowance” and $23,500 for a car allowance, plus one round-trip ticket to the U.S. per family member per year (and two trips for immediate family members left behind in the U.S., like college-age kids).  Davies also gets another $419,976 for agreeing to waive the right to quit and get severance because her workplace is moving — something Case did for free (or at least, for no extra cash). She also benefits from a “tax equalization policy” making up for any difference between U.K. and U.S. taxes, and expanded tax-prep and financial-planning assistance.

You get the idea. If you want, you can also check out the additional agreements, for Steve McGill, CEO of Aon Risk Solutions, and Michael J. O’Connor, COO of Aon Risk Solutions.

If we were Chicago’s community leaders, we wouldn’t wring our hands about losing a big multinational outfit. We would embrace these agreements as evidence of just how affordable the city really is. And let’s face it, Aon grew to be a major global company there on the banks of Lake Michigan, so the Windy City can’t be too terribly constraining.

Then again, if Joe Mansueto should be reading this, we just want to be clear: We’re willing to move to London for a lot less. Give us a shout.

Image source: Sunrise in London via Shutterstock.com

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The disclosures buried in SEC filings aren’t always fun and games. At footnotedPro, we spot red flags and hidden opportunities well in advance of the market. To inquire about a trial subscription, or about our report on likely M&A targets in 2012, please contact Todd Serpico.

In this case, the common theme is Steve Madden’s ever-expanding paycheck, thanks to a very long contract that assures him all kinds of new wealth, including raises of approximately $2 million each year. Yes, you read that correctly!

The new agreement, which is a confusingly-named exhibit attached to the 8-K, is entitled “Second Amendment to Third Amended Employment Agreement.” Like an impressively engineered platform sandal, that document raises Madden’s base salary to bold new heights. Back in 2005, shortly after Madden finished serving a 41-month sentence in a Florida federal prison for insider trading and stock fraud, Madden’s employment agreement at the time assured him a base salary of $600,000 and a 7% raise every other year as a cost of living adjustment. Contrast that with this new agreement, which – effective January 1, 2012 – gives Madden a new base salary of more than $5.41 million.

The single-digit cost of living increases from 2005 are gone. In their place is a promise that Madden’s “base salary shall be adjusted annually as set forth on Exhibit B attached hereto and made a part hereof….” for the term of his employment agreement, which runs through December 31, 2023, one of the longest contracts we’ve ever seen in over 8 years of reading these things. And, as mentioned, Madden will get a raise of about $2 million each year. Regrettably, the table on Exhibit B won’t reproduce well into this web page; however, here are the numbers for Madden’s future base salary rates:

BASE SALARY

2013    $7,416,667

2014     $9,666,667

2015     $11,916,667

2016 – 2023      $10,697,917

In addition to also giving Madden an “Annual Cash Bonus” and a “New Business Bonus” (to be determined based on a percentage of earnings and revenues, respectively), the new agreement gives Madden restricted shares of stock worth $40 million.

And because one $40 million stock grant might not be enough for a guy, there’s also a section called an “Additional Restricted Shares Amendment” which gives Madden even more restricted shares of stock worth – you guessed it – another $40 million.

Finally, the new agreement touches on one other big topic.  Back in 2007, Madden borrowed $3 million from the company in exchange for this Promissory Note (amended in 2009) that promised to repay the loan with 6% interest by June, 2015. The new amendment, though, indicates that the board is evidently in a forgiving mood, based on the following passage:

“Commencing on December 31, 2014 and continuing annually on each December 31 thereafter through December 31, 2023 (the “Maturity Date”), one-tenth (1/10th) of the aggregate principal amount payable hereunder together with all interest accrued thereon shall be cancelled by the Corporation provided that the Borrower continues to be employed by the Corporation on each such December 31st and the Corporation shall release a number of Pledged Shares (as hereinafter defined) to be determined by the Corporation’s Board of Directors, in its sole discretion, generally to correlate with the amount cancelled without leaving the Corporation inadequately secured.”

The company seems to be humming along at a good clip, with the stock price up almost 29% from a year ago (although sales are up in part because of the Cejon and Topline acquisitions that occurred in 2011). But for Madden himself, the raises are a bigger and bolder, kind of like the stratospheric-heeled shoes that some women wear (although how they walk in them, we’ll never know). We’ll leave it to investors to figure out the very important question that consumers with a penchant for heels also face:  How high is “high enough”?

Image source: nozomiiqel via flickr

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At footnotedPro, we highlight unusual opportunities and potential problems well in advance of the market, based on what’s buried in the footnotes and text of SEC filings. To find out what you’re missing in SEC filings, and to inquire about a trial subscription, email Todd Serpico.

]]> http://www.footnoted.com/my-big-fat-deal/sky-high-comp-for-steve-madden/feed/ 2 http://www.footnoted.com/my-big-fat-deal/exec-vs-wild-at-discovery-communications/ http://www.footnoted.com/my-big-fat-deal/exec-vs-wild-at-discovery-communications/#comments Tue, 10 Jan 2012 15:21:02 +0000 Theo Francis http://www.footnoted.com/?p=6637 Discovery Communications (DSC) and its Discovery Channel has made a name for itself in part with a host of shows about rough-and-ready folks taking what comes: Storm Chasers, Man vs. Wild, Deadliest Catch, Dirty Jobs.

In the executive suite, needless to say, none of that seems to apply. Another Discovery Channel show, Gold Rush, may be more appropriate, to judge from the 8-K that Discovery filed yesterday with details of its incoming chief financial officer’s pay.

Discovery is hiring Andrew Warren away from the same post at Liz Claiborne (LIZ), where he’s been CFO since July 2007. The parting there seems amicable enough, since Warren doesn’t leave (or start at Discovery) until March. Once he starts, though, the cable network is pulling out all the stops. (Update: Warren is also getting big bucks from his former employer. See note below.)

He gets a nice salary, of course — $900,000 a year, matching what Apple CEO Tim Cook is pulling down as head of one of the biggest companies on earth — and a target bonus of the same amount. He’s also slated to get $1 million in stock options and another $1 million is restricted stock units. (Discovery’s 8-K doesn’t make clear how long it will take for those equity awards to vest, and it didn’t file Warren’s actual employment agreement yet, so we’ll have to wait to find out the terms.)

But Discovery is also making his relocation easy. Liz Claiborne, of course, is based in Manhattan, while Discovery is based 223 miles away in Silver Spring, Maryland, just outside of Washington, D.C. The company is providing unspecified relocation benefits, but “[i]n addition to the benefits under the relocation policy,” the company is also giving him as much as $30,000 this year and $20,000 next year “for travel expenses” (presumably to ease the commute until he moves to the area). Given that Delta just quoted us $892 for a round-trip, first-class, refundable, week-long flight (without a Saturday stay) from LaGuardia to Reagan National, that $50,000 should be good for a flight a week if Warren is reasonably prudent. In any event, we doubt we’ll see him on BoltBus, our preferred way to travel between NYC and DC.

Moreover, his stay in Washington will be no Man vs. Wild challenge: Warren will be traveling around the D.C. area in style, in a company-paid car — with a maximum of $1,500 a month — and “a suitable corporate apartment in the Washington, D.C. area” until as late as August 31, 2013. Just to put that in perspective, Yahoo’s monthly car-lease calculator suggests he could get a three-year lease on a BMW 650i convertible for a mere $1,300 or so a month. And five grand will get him the 2,420-square-foot, three-bedroom, two-and-a-half bath Penthouse 13 at the The Grand in nearby Bethesda, including Jacuzzi and granite counter-tops, plus a “grand piano room” and concierge among the building’s amenities.

Assuming Warren does move to D.C., his three-year employment agreement makes it tough for him not to make a bundle over the next few years. If he gets canned for anything but some pretty serious infractions, or if he leaves for the usual sorts of “good reasons” (like being demoted), Discovery is obliged to pay him his salary for the rest of the contract’s term — as much as three years, and at least one year.

But if Discovery doesn’t actually fire him, and just decides not to renew his contract, he gets the same benefits as if he had been fired. And if it does want to renew his contract, but Warren isn’t interested, Discovery has to pay him as well — half his base salary for 12 months (or $450,000 assuming he gets no raises in the meantime).

As far as we can tell, there are only a couple real catches. For one thing, Discovery seems to want to make sure that Warren actually moves down to the D.C. area. It has decreed that he won’t get a bonus in 2013 if he doesn’t. Meantime, if Warren is canned, leaves for good reason, or his contract isn’t renewed, Discovery can offset what it has to pay him with any income he gets from consulting or working elsewhere. All this, of course, is in the name of securing non-compete and similar commitments from Warren.

All told, it’s a pretty sweet deal for a position that isn’t even the top job at the company.

Update: If nothing else, it looks like Discovery is getting a savvy negotiator — Warren isn’t just getting big bucks and perks to join Discovery, he’s also getting big bucks on his way out Liz Claiborne’s door. (Of course, it might be that LIZ is forcing him out, but we’ll assume the best.)

According to an addendum to the earnings 8-K that Liz Claiborne filed just this morning, the company is accelerating the vesting on 492,500 stock options, 192,600 restricted stock units and 9,550 restricted shares, as long as Warren sticks around until March 16. Given LIZ’s stock price of a little over $8.50, we figure the options are worth some $1.6 million, and the restricted shares and RSUs another $1.7 million.

An especially nice touch: The 192,600 RSUs ($1.6 million worth at today’s price) were apparently granted as a “special retention award” on June 13 last year — which worked for all of, what, nine months?

Image source: photo of the Discovery Building during Shark Week via Wikipedia