Newspaper article St Louis Post-Dispatch (MO)

Pet Officers to Pocket $26 Million 13 People Will Collect on Options, Parachutes

Newspaper article St Louis Post-Dispatch (MO)

Pet Officers to Pocket $26 Million 13 People Will Collect on Options, Parachutes

Article excerpt

Pillsbury's merger with Pet Inc. promises to be very profitable for the executives who have guided Pet through its most recent sojourn as a public company.

Pet's top 13 executives will collect as much as $26 million by selling Pillsbury the 1.1 million shares they own or control through options. Pillsbury is paying $26 a share - $2.6 billion in all - to buy Pet in a tender offer that expires Feb. 8.

Pet's top five officers stand to collect another $1.8 million for "unexercisable" options granted since Pet split off from Whitman Corp. on April 1, 1991. The merger agreement calls for Pillsbury to pay Pet employees the difference between the option value and $26 a share.

Stock options give an employee the right to buy stock at a fixed price, generally the market price of the stock on the day the option is granted. Most options can be used, or exercised, only after a waiting period specified when the option is granted. Before the period expires, an option is "unexercisable," meaning that it can't be used.

The merger also could trigger big cash payments under "golden parachute" agreements with top officers. The agreements call for Pet to pay executives three times their yearly pay if they lose their jobs within two years after a change in control of the company.

Pet declined to answer questions about the executives' stock holdings, options or potential parachutes. Beatrice Miller, Pet's public relations officer, said the company is "continuing our current practice of making no public comment during this transition period."

Miles L. Marsh, Pet's chairman and chief executive, could collect more than $14 million in parachute payments, stock sales and payments for options.

Severance agreements with top officers call for the company to pay executives three times their salary and bonus, plus money to cover extra tax liability they may incur because of the parachute payments.

Marsh's salary and bonus in the year ending last June 30 came to $1.02 million, not including contributions to a supplemental retirement and savings plan for executives. Marsh's parachute could be $3.07 million or more, depending on whether he got a raise after June 30 and whether he could qualify for a larger bonus.

Marsh owns or controls 365,924 shares, according to the proxy statement for Pet's last shareholder meeting. At $26 a share, he could collect $9.5 million from Pillsbury, less any payments for shares under option but not yet purchased.

Marsh's total includes 171,280 shares he owns outright, 19,387 shares that are held in trust for his children and 175,257 shares covered by options Marsh could have exercised as of last summer.

If Marsh did not exercise the options before the merger was announced Jan. 9, he would get only the difference between the option price and the $26 a share that Pillsbury is paying for Pet - about $1.87 million for the 175,257 options. His payout for shares he owns outright and his children's shares would then come to $4.95 million.

The merger also gives Marsh the right to payments for options on 80,800 shares that were "unexercisable" last September. Pet gave Marsh the options in 1993, setting an option price of $15 a share. Under the Pillsbury merger agreement, Marsh can get $11 for each option, or a total of $888,800 on the unexercisable options.

Other officers eligible for parachutes and stock payouts are John C. Elbin, senior vice president and chief financial officer; Ernst A. Haberli, president of international business; Richard L. Mittelbusher, senior vice president for administration and Raymond J. DeRiggi, executive vice president of sales.

Marsh and the other executives amassed much of their stock through executive pay plans in effect before and after Pet split off from Whitman, a Chicago-based conglomerate that took Pet over in 1978. …

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