When United Airlines (UAUA) and Continental (CAL) were rumored to be tying up, we took a look at the sweet change-in-control benefits that United executives stood to receive. After some brouhaha, it was announced that United’s chairman and chief executive, Glenn Tilton would forego big chunks of that, which got a little attention as well.

Last week, Continental filed its merger proxy, and sure enough, there’s Tilton’s sacrifice — along with some other details that make us wonder how much of a hardship it’ll really prove to be in the long run.

As the companies had promised, Tilton is giving up cash severance (valued at $4.6 million in the merger proxy), acceleration of vesting for stock options ($3.9 million) and restricted stock ($8.7 million). But he’ll get new restricted shares in lieu of the cash and restricted stock, and his options will all vest within two years (unless he’s fired for cause or quits without a good reason before then). Since he’s slated to stay on as non-executive chairman for two years, this seems less like a big hardship than like a little delayed gratification.

Which brings us to the question of his compensation going forward. And for that, we have to leave you with a big fat question mark: It hasn’t been set yet. More curiously, Tilton’s new pay deal won’t be negotiated between him and the new company’s board, but between him and a committee of United’s existing board. Here’s the merger proxy: 

“Prior to the completion of the merger, UAL is permitted to set Mr. Tilton’s compensation package as non-executive chairman of the board of the combined company, subject to the review and consent process agreed upon in the merger agreement.”

Continental’s board gets a sort of veto power; it “will have the opportunity to request changes to Mr. Tilton’s compensation package, and in such a case,” the two companies “will work together to negotiate such changes.” But for the most part, Tilton will be negotiating with the board he’s worked with for years. It’s arguable just how much that board has in the way of accountability to shareholders going forward.

In any case, before we get too worked up about Tilton’s big sacrifice, we’ll wait and see what his new employment agreement looks like. It could make all the difference.

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Corporate lawyers aren’t known for being early adopters, whether of cutting-edge technology or zippy new buzzwords. As a result, company filings may be one of the last places to spot new trends.

So we’re assuming that a recent sighting means social networking, that many-splendored creature, is here to stay: It’s now scary enough for the legal eagles to include in the stodgy Risk Factors section of the annual report Estée Lauder (EL) filed on Friday. (It could also mean the fad is fading, but we’re willing to reject that one out of hand.)

Here’s the relevant part of Estée Lauder’s warning:

“While we devote considerable effort and resources to shape, analyze and respond to consumer preferences, we recognize that consumer tastes cannot be predicted with certainty and can change rapidly. The issue is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions are shared.”

The makeup-maker goes on to warn that failure to respond quickly could mean “our financial results will suffer.” No doubt. And this just a month after Facebook announced 500 million active Facebook users, and just shy of two years since it boasted of its first 100 million.

The term “social media” (along with variations on it, and on “social networking’) has shown up in the filings before, of course, but primarily in those of tech and media companies — Google, Yahoo, Microsoft, News Corp and Walt Disney Co., to name a few. Other companies have mentioned the concept in discussing their marketing strategies.

The only other consumer-product company we’ve found that lists one of these terms as a risk factor in its 10-K has been lululemon athletica (LULU), the Vancouver-based maker of “yoga-inspired apparel.” For what it’s worth, we’re using a fairly broad definition of consumer products, including appliance, clothing, auto and alcohol producers, among others. lululemon’s risk-factor phrasing is similar to Estée Lauder’s:

“We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand could be adversely affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity. Any of these events could result in decreases in sales.”

Watch for the term to crop up in other risk factors near you in the near future. Meantime, if you’re looking for hot new trends, don’t bother with Securities and Exchange Commission filings.

Image source: Damien Basile via Flickr

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Although most of us will probably never know what it’s like to be a bona fide rock star, two named executive officers at OfficeMax, Inc. (OMX) got what looks like rock star treatment to us.

In an 8-K the company filed August 18, OfficeMax disclosed that it gave retention awards to Bruce Besanko, its Executive Vice President, Chief Financial Officer and Chief Administrative Officer, and to Ryan Vero, its Executive Vice President and Chief Marketing Officer.

Besanko got 66,881 RSUs. The company listed the approximate value of the award as $740,373. That’s a lot of money, to be sure, but it’s especially generous when you consider how much Besanko makes. According to the proxy that OfficeMax filed on March 4, 2010, Besanko joined the company on February 16, 2009 with a starting annual base salary of $550,000 and a sign-on bonus of $150,000. (Previously, he worked as an executive at Circuit City Stores, Inc. and The Yankee Candle Company, Inc.)  In October, 2009, in conjunction with his appointment to Chief Administrative Officer, the board raised his annual base salary to $575,000. Of course, base salaries are just a starting point for executives, and the proxy shows that Besanko’s total compensation for 2009 ended up at $1,863,403. Seen in that context, the grant of RSUs is still nice – nearly 40% of the total compensation package he got last year.

On the same day, OfficeMax gave Vero 62,054 RSUs with an approximate value of $686,938. Vero has actually been with the company since 1996, working his way up through a variety of management roles. In 2009, he earned a base salary of $533,540, which – when combined with equity awards and other types of compensation – grew to $1,305,886 in total compensation for that year. He, too, got more money from the retention award (assuming its value holds) than he makes from his regular paycheck.

For both men, the restricted shares vest on a pro-rated basis over three years, with a third of the shares vesting on each consecutive anniversary of the Award Date, August 13, 2010. The “2010 Restricted Stock Unit Award Agreement – Time Based”, attached as Exhibit 99.1 to the 8-K, governs the specific terms of whether the shares will vest in a variety of different circumstances (e.g., termination, death, etc.)

Maybe this kind of rock star treatment gives you the best of both worlds:  You get the money and glory… without the paparazzi.

Image source: xJasonRogersx via flickr

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Yesterday saw news of another big merger: the tie up between Intel (INTC) and McAfee (MFE). Between the news release and the conference call and various other merger documents, we counted 13 different filings yesterday. And that’s just McAfee’s filings. Intel had another four. Clearly, that makes for some very busy attorneys.

But one filing that really caught our attention was this 8-K filed by McAfee exactly one week before the deal was announced. We’re sure it’s just an odd coincidence but we found it very interesting that McAfee made some very generous grants of both restricted stock units (RSUs) and performance-based stock units (PSUs) to its CFO, Jonathan Chadwick. According to the filing, Chadwick got 97,500 PSUs and another 125,000 RSUs. That ought to help numb the pain of all those late nights pulling numbers together for a deal, especially given the sharp increase in McAfee’s price once the deal was announced.

Despite those massive amount of filings, we didn’t see anything about whether Chadwick would be keeping his job post-deal. But it’s fairly common for CFOs to lose their job, which could explain the generous grant. Then again, it’s easy to explain the grant because Chadwick only joined the company two months ago, having been the Chief Accounting Officer at Cisco (CSCO). In any event, even if he is out of a job, Chadwick seems to have had pretty good timing on switching jobs. It gives new meaning to Total Protection, one of McAfee’s key products.

Speaking of the conference call, we always find it amusing to hear the analysts who, in theory at least, are supposed to be assessing the deal, voice their congratulations to the executives they’re supposed to be assessing. We counted four analysts who congratulated company executives on the deal.

Image source: McAfee

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Friday the 13th may be unlucky for some, but it turned out well for Mark E. Watson III, the president/CEO of Argo Group International Holdings, Ltd. (AGII).  At 5:27 p.m. that day, Argo Group filed an 8-K to disclose its new employment agreement with Watson.

The juiciest term is actually not in the 8-K itself, but in the second attachment to it, a Letter Agreement dated August 10, 2010 (attached as Exhibit 10.2 to the 8-K).  The letter, which accompanied Watson’s new Executive Employment Agreement, states that the company “is pleased to offer you the following benefits in recognition of your services.” Basically, Argo Group promises to pay Watson a $30,000 per month housing allowance, a $3,333 per month “home leave allowance,” and a $4,000 per month educational allowance. For each category, it states that he gets the payments “while [he is] a Bermuda resident.” And then comes the last – but certainly not least important – subsection:

“4. Retention Bonus. Upon execution of the Agreement and this letter the Company shall pay you a lump sum amount, in cash, equal to Three Million Dollars (US $3,000,000), payable within four (4) business days following the Effective Date.”

As consideration for the payments, Watson has to deliver 65,000 shares of common stock that he owns to the company “…so that the Company can cause the shares to be restricted from transfer, disposal or encumbrance until March 15, 2014….”

The Executive Employment Agreement itself, attached as Exhibit 10.1 to the 8-K, is still important, but it’s less newsworthy than the letter. Also dated August 10, 2010, it states that Watson’s tenure as top executive with Argo Group will continue through March 15, 2014.  It entitles Watson to a $1 million annual base salary, but that number isn’t any higher than the base salary set out in his prior employment agreement, Exhibit 10.1 to an 8-K dated August 17, 2007.  (However, the 2010 proxy, filed March 15, 2010, confirms that in 2009, Watson’s total compensation added up to more than $4.37 million.)

The agreement also assures Watson that his base salary shall be reviewed each year by the Board of Director’s Human Resources Committee “…for possible increase (but not decrease).” If the company meets certain objectives, the board may give him an incentive bonus.  And he’s also eligible to participate in the company’s equity compensation plans and benefits plans.

By our count, Watson probably got his $3 million check earlier this week, which may have topped last week’s good fortune – if that’s possible.

Image source: Abhijeet Rane via flickr

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