It's the standard "poisin pill" in the industry - Top management gets all the money and stock holders get a toast from the back of corporate limousine.
May 14, 1999
Options Granted During Takeover Talks Are Boon for Executives at Fore Systems
By TIMOTHY D. SCHELLHARDT
Staff Reporter of THE WALL STREET JOURNAL
If executives trade shares in their company's stock while secret takeover talks are under way, they could face insider-trading-law sanctions. But what if directors grant huge and lucrative stock option awards while such private discussions are under way?
That's the issue involving the pending $4.5 billion acquisition of Fore Systems Inc. by Britain's General Electric Co. PLC. In what securities-law experts call highly unusual actions, directors of the Warrendale, Pa., maker of Internet-switching equipment granted hundreds of thousands of stock options to seven top executives while Fore Systems was in talks to be acquired by GEC, which isn't related to General Electric Co. of the U.S.
The executives stand to reap millions of dollars next month when the acquisition is expected to be completed, because the stock options, at prices ranging from $13.44 to $20.56 a share, are well below GEC's $35-a-share cash offer. Employment agreements signed between GEC and the seven Fore Systems executives on April 26, the date the acquisition was announced, permit them to get a cash award representing the difference in price between their stock options and the $35-a-share offer price.
Thomas J. Gill, Fore Systems' president and chief executive, qualifies for a $15.4 million cash award, including $2.8 million gained from his 150,000-share award approved by the board's compensation committee on April 7, more than a month after the initial overture by GEC to Fore Systems and Mr. Gill.
Christopher H. Gebhardt, Fore Systems' vice president and corporate counsel, said the company "doesn't believe it violated any laws" with the option grants. He added, "I'm not going to make any further comment."
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