[somewhat off topic] C-Cube mentioned....
San Jose Mercury News, Calif., Silicon Street Column
Adam Lashinsky, San Jose Mercury News, Calif.
11/09/98
KRTBN Knight-Ridder Tribune Business News: San Jose (Calif.) Mercury News
Copyright (C) 1998 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM)
Nov. 9--VLSI CHIEF EXEC'S NEW FIVE-YEAR DEAL IS CHOCK FULL OF GOODIES: The last time VLSI Technology Inc. (Nasdaq, VLSI) Chairman and CEO Alfred J. Stein showed up in this space, his company's stock price had fallen below its 1983 initial public offering price of $13 and every VLSI employee -- including Stein -- had been given the opportunity to re-price their stock options for about $7.50.
It turns out that Stein did not re-price his options, an anti-shareholder employee-retention technique that allows companies to reward workers, although the stock has plummeted. Instead, Stein did one better: He got the San Jose-based semiconductor maker's board of directors to grant him 1 million new options at current market prices.
Stein routinely declines through a spokesman to be interviewed, but VLSI's quarterly financial filing last week with the Securities and Exchange Commission says it all. It details the "reduction in workforce of approximately 190 positions" the company announced about six weeks before signing Stein's new five-year employment agreement, which is printed in full in the filing.
In addition to granting the options to buy a million shares, the board agreed not to cut Stein's salary from its current $700,000 for five years (but reserves the right to raise it) and to pay him a bonus of the same amount if he achieves a set of undescribed "performance targets" set by the board.
There's more. The board agreed to make loans to Stein, cover his entertainment expenses and pay up to $50,000 for his estate planning -- all common perquisites. Less common are the "special retirement benefits" it agreed to pay Stein and a special payment upon termination, for any reason, that would equal $1,155,000, or 165 percent of his base salary.
The contract, by the way, specifically mentions that it negates none of the provisions in Stein's July 8, 1998, employment contract, which granted him a bevy of goodies in the case of a "change of control," an event sources say came close to happening when LSI Logic Corp. (NYSE, LSI) tried buying VLSI.
The employment agreement is signed by Stein and Robert P. Dilworth (remember that name), chairman and former CEO of Los Gatos-based Metricom Inc. (Nasdaq, MCOM), a provider of Ricochet wireless modems that is having its own financial problems and management turnover.
Inevitably with VLSI, there are some things the quarterly report neglects to mention, like the fact that since its last quarterly filing (on Aug. 6) five senior managers, including President Richard M. Beyer, have left the company for a variety of reasons.
General counsel Larry Grant resigned. Balakrishnan S. Iyer, the chief financial officer, quit to take the same job at the pending spinoff of Rockwell International Corp.'s (NYSE, ROK) semiconductor unit. Umesh Padval, who headed VLSI's unit that makes chips for digital entertainment devices, departed to become president of C - Cube Microsystems Inc. (Nasdaq, CUBE). The most recent departure is Douglas M. McBurnie, formerly senior vice president for networking and advanced computing products, who is joining a start-up.
To review, VLSI is a company whose stock has made zero money for its shareholders, is hemorrhaging senior management and whose CEO can't have his pay reduced and is guaranteed fat bonuses as long as he hits "targets" his own pocket board determines.
Oh, and there is one more thing. Company sources say Douglas McBurnie has been replaced by board member Dilworth, one of the two members of VLSI's compensation committee, but the only one who lives in the Bay Area.
It isn't clear if Dilworth officially has become an officer of the company, but if he has the board -- which meets later this week --might consider asking him to step down from the committee that determines the salary of the CEO. Otherwise, he just might get preferential treatment from the boss.
VLSI's stock finished the week at $11. |
