Security Pacific Executives to Reap Millions if B of A Deal Is Completed
Twenty-one senior executives with Security Pacific Corp. and its affiliates will receive $13.6 million in cash for stock they own if the acquisition of the Los Angeles bank by BankAmerica Corp. goes through, a filing with the Securities and Exchange Commission shows.
The payments would buy restricted stock that the Security Pacific executives received under an incentive program.
Heading the list of the executives is Security Pacific Chief Executive Robert H. Smith, whose restricted stock would be bought for an estimated $2.1 million. He is followed by two vice chairmen, Jerry A. Grundhofer and Nicholas B. Binkley, both of whom would receive $1.6 million each.
The disclosure could prove embarrassing for the two banks. Various analysts estimate that from 10,000 to 20,000 employees at the two banks will lose their jobs in the merger, with Security Pacific employees expected to take the brunt of the layoffs.
In a statement, Security Pacific called restricted stock awards “a very common form of incentive compensation” in financial services, noting that 11 of the nation’s top 12 banks give them to employees. Security Pacific’s awards were made mostly under a plan approved by stockholders in 1988.
The bank in the statement termed its compensation program “conservative,” one that has emphasized both short-term and long-term performance. The bank added that the repurchase “has been made necessary as a result of the merger with BankAmerica. The result will be more equalized ongoing long-term benefits for key executives.”
The price the executives receive would be equal to the 0.88 of a share of BankAmerica stock that Security Pacific shareholders are scheduled to receive in the $4.7-billion stock-swap merger. Included in the amounts is money they will receive to pay related income and excise taxes.
Also included in the 116-page filing are details of so-called “golden parachute” employment agreements for Grundhofer and Binkley, as well as a unique one for Smith.
Smith, whose new title will be president and chief operating officer of the merged banks, will be second-in-command under BankAmerica Chief Executive Richard M. Rosenberg. If Smith does not get named to the top spot by March 31, 1995, or within 30 days of the date Rosenberg leaves the job, the documents show, he is entitled to severence payments equal to three times the total of his annual salary and the average of his last three annual bonuses, one year’s worth of employee benefits and the vesting of stock awards and pension benefits.
Separately, BankAmerica revealed in the filing for the first time the extent of the divestitures the two banks are willing to make to ease federal antitrust concerns. The San Francisco bank said $4 billion in deposits at branches in California, Washington, Arizona, Nevada and Oregon have been identified for sale, although no locations were listed.
The filing also reveals that Smith called off the talks for more than three months last spring.
The merger began in late January with a phone call from Rosenberg to Smith not long after Security Pacific’s merger talks with San Francisco-based Wells Fargo & Co. fell apart. According to the documents, Smith terminated the talks in late March. Talks started back up again in early July.
