VLSI 'bonus' exposed

VLSI ‘bonus’ exposed
Chairman and CEO of VLSI Technology negotiated employment contracts including a $700,000 bonus; second contract included security for house, new cars, bodyguard/chauffeur and country club membership. David Manners The on-going takeover struggle between Philips and VLSI Technology has revealed an interesting chronology in documents filed with the US Securities and Exchange Commission (SEC). Last year chairman and CEO of VLSI Al Stein negotiated two employment contracts including a $700,000 salary for five years plus a $700,000 bonus for reaching targets which he did not achieve in 1998. The second ‘supplemental employment agreement’ in August included giving Stein security systems for his houses, new cars in 1998 and 2001 (if still employed by VLSI), a chauffeur/bodyguard and a country club membership. In September 98 Arthur van der Poel, chairman of Philips Semiconductors, approached Stein about a merger. This resulted in a conference call between the two in preparation for a November 23 meeting in San Jose. At that meeting, Van der Poel told Stein the Dutch company wanted to investigate the possibility of acquiring VLSI. On February 17 this year, Van der Poel and Stein exchanged e-mails to arrange a meeting for February 25 at which Philips made public its offer to buy the company for $17 a share. On February 19 and 22, Stein borrowed $6.2m from VLSI to exercise 646,821 share options. Stein has been CEO since 1983 when VLSI went public at $13 a share. Immediately before Philips made its offer the shares stood at $10.75. They are now over $19. VLSI has established a ‘data room’ and has held senior management interviews with third parties in ‘a process of exploring VLSI’s strategic alternatives’. “It is unfortunate that Philips has declined to participate in our process because we believe that, by their participation,” said Stein, “Philips would recognise that Philips’ offer does not reflect the strong business potential of VLSI.”

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