A reluctant move to Ohio…
Although the global workplace has a lot of advantages, occasionally a company decides that people need to move in order to work in a particular location – a decision that doesn’t always sit well with those who are affected.
That seems to be the case at Wendy’s/Arby’s Group, Inc. (WEN), which announced in Jan. 2011 that it was exploring strategic alternatives for the struggling Arby’s brand, including a sale of the brand. (FootnotedPro subscribers already knew from our Aug. 20, 2010 report [subscription only] that things at Arby’s were bad and likely to get worse.)
At the time the “strategic alternatives” decision was made, Wendy’s/Arby’s also disclosed (in this March 3, 2011 10-K) that it had created a retention program “to address uncertainties for our employees created by this process,” although payment of part of the money would only occur if Arby’s is sold and its executives were moved from Atlanta, Ga. to Dublin, Ohio, where Wendy’s is based.
In Exhibit 10.5 to the 10-Q that Wendy’s/Arby’s filed May 10, we found a March 22, 2011 letter from the company to Nils H. Okeson, the Senior Vice President, General Counsel, and Secretary. Apparently Okeson – who worked for the Arby’s Restaurant Group, Inc. before it combined forces with Wendy’s – wasn’t keen about the idea of moving to the Buckeye State. In fact, he invoked the “triggering event” clause in his Dec. 18, 2008 employment letter, which gave him justification to leave his job (and collect money on his way out the door) if the company forced him to move “without [his] consent, [and relocate] to a work situs not in the Atlanta, Georgia greater metropolitan area.”
The letter promised Okeson that if he moved to Ohio and stayed for 6 months after Arby’s was sold, the company would pay him a cash retention bonus of $500,000. One-third of that would be paid 7 days after the sale of Arby’s, and the rest would be paid at the end of the 6 months. Here’s a snippet from the letter:
“If Arby’s is sold, the new Company headquarters would be based in Ohio. In that case, your position would be required to move to Ohio. This would be a ‘triggering event’ as defined in the December 18, 2008 letter agreement between you and WAG. You have indicated that you would not consent to a move to Ohio and would instead terminate employment as a result of the ‘triggering event’ at the appropriate time. In order to mitigate issues regarding the transfer of your responsibilities and to facilitate an orderly transition, the Company would like you to agree to a job end date, which would be six months after the closing of the sale of Arby’s. The job end date may be changed, but only with the written consent of both you and the Company.”
The letter and the 10-K make it clear that if Okeson remains employed through the 6-month-period that follows the sale, he will also be entitled to “the compensation described in the December 18, 2008 letter agreement and any currently outstanding stock options or time based restricted stock awards would vest and [he] would have 18 months to exercise vested stock options.”
And that’s worth a pretty penny. The company will have to pay Okeson a year’s salary ($500,000 in 2010, per the April 8, 2011 proxy) and the amount of last year’s bonus ($239,738), the total of which would be paid in semi-monthly payments over 12 months. If he hasn’t landed another job at the end of the 12 months, the company will pay him another $500,000; but if he has secured another job or is providing consulting services, the $500,000 will be reduced by the amount of Okeson’s then-current salary or consulting income. Okeson would also be eligible for other goodies: a bonus, continued health insurance coverage (at his expense), and accelerated vesting of some stock options.
Granted, the extra $500,000 retention bonus comes with the hassle of moving to Ohio for six months. But considering that works out to an extra $2,777.77 per day, plus a payoff of at least $740,000 (with potentially another $500,000 on top of that), he might just want to get a calendar and draw a big red “X” through each day while he’s there.
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