Friday August 29, 2008
"When Ricoh Co. Ltd. agreed to buy Ikon Office Solutions Inc. for $1.6 billion earlier this week, one thing that was clear was that Ikon management was going to stay on to run the big office equipment distribution business based in Malvern.
They have a million reasons to do so.
Under executive retention agreements, CEO Matthew J. Espe and five other senior executives would receive some hefty payments if they stay a full two years following the sealing of the deal.
The maximum Espe could receive is $8,630,400 over two years. He could stay as little as six months following the closing of the acquisition and get $1,294,560. The agreement is structured in a way that escalates payments the longer Espe stays. So $1,726,080 after 12 months, $2,157,600 after 18 months, and $3,452,160 after 24 months.
Retention bonuses are common in big deals like this, because often the last thing an acquirer wants is to be handed the keys and watch the top management wave good-bye.
According to a filing with the Securities and Exchange Commission, Ikon says these retention agreements replace severance pay the executives would have been entitled to receive. So they turned severance pay into incentive pay.
Here are the maximum payouts for other Ikon executives:
* Robert F. Woods, Ikon's chief financial officer, $2,122,375;
* Jeffrey Hickling, its senior vice president of operations,$1,850,625;
* David Mills, president of Ikon Europe, 906,144 pound sterling.
The retention agreements for Mark A. Hershey, Ikon's general counsel, and Mark Bottini, senior vice president of US field sales, were not attached to today's filing."
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