On the day before a hostile takeover attempt was initiated by Allied Stores Corp., Garfinckel, Brooks Brothers, Miller & Rhoads Inc. granted its ranking management a lucrative compensation package that could be exercised if an unfriendly takeover bid is successful.
Under terms of the package approved Aug. 13 by the compensation and benefits committee of the Garfinckel board of directors, top management personnel would receive a lump-sum payment equal to three times their annual compensation if they voluntarily leave the firm within two years of a hostile takeover, according to the Richmond News Leader.
The next day, Aug. 14, Allied Stores Corp. of New York made an unwelcome bid to buy the Washington firm for $207 million, or $48 a share. The effort was denounced immediately by Garfinckel Chairman David R. Waters as "deceitful and trecherous," and on Aug. 16 the board of Garfinckel, Brooks Brothers, Miller and Rhoads Inc. voted unamimously to reject Allied's offer.
The payment of the lump sum amounting to three years compensation would be available to the top management if the firm were taken over by a company not approved by the current board of directors, according to the Richmond paper. This would appear to fit the current situation if Allied is successful.
The News Leader quoted an unnamed financial analyst who said the decision to set up the compensation program was "highly coincidental" with respect to the announcement of Allied Stores Corp. to initiate the takeover bid the next day. Details of the compensation package were sent to Garfinckel shareholders in an Aug. 17 letter from Waters, the paper said.
Attempts to reach Waters and Harold S. Trimmer Jr., the Garfinckel general counsel and secretary, and to confirm details of the compensation package were unsuccessful yesterday. Robert G. Vandemark, vice chairman, said he he had heard of some kind of compensation plan, but said he was out of town at the time of the board meeting.
According to the Garfinckel notice to stockholders of its annual meeting last May, salaries, fees and bonuses for Waters, who is chairman of the board and chief executive officer, were $275,696; for Manuel Rosenberg, president, $217,616; for Frank T. Reilly, senior vice president and president of Brooks Brothers, $216,333; for Vandemark, $178,150; and for Charles C. Stanwood, vice president and president of the Miller & Rhoads division, $149,918.
It was not clear whether the executives would be eligible under terms of the new compensation plan to receive three times these figures were they to leave the firm after a successful takeover by Allied or any other firm opposed by the directors. In addition, it was not clear how many executives would be covered.
Aside from the Aug. 13 compensation package, Garfinckel has a series of contracts with 10 members of top managment guaranteeing them mimimum salaries for varying numbers of years. Waters, for example, is guaranteed employment with the company at a mimimum salary of $233,000 until 1987. If his contract is not renewed, the company has agreed to pay him, in addition to the retirement plan, one-half of his salary for a year, one-third of the salary for the second year and one-quarter in the third year.