Chemical Asks Officers to Skip Windfall

The chairman of Chemical Banking Corp. has asked more than 400 employees to surrender their rights to some windfall profits if shareholders approve the bank's merger with Manufacturers Hanover Corp.

Shareholders of both banks are voting on the plan today.

In a letter sent 10 days ago to about 435 officers, Walter V. Shipley asked the employees to give up their right to become fully vested in stock and option incentive plans that are triggered by a change in control. Chemical adopted the plan in 1989.

Impact Big on Some

Full vesting would permit employees to collect a mix of cash and stock or exercise options to buy the stock at a fixed price.

Two sources said they would be postponing a windfall as large as $100,000 by signing the agreement.

"The real purpose of a change-in-control provision is to protect employees who are adversely affected in a material way," Mr. Shipley wrote in the two-page letter. "The purpose is not to produce a windfall benefit to those who continue on with the combined company."

Mr. Shipley requested that employees return signed copies of the amended plan by Oct. 31, one day before the shareholder vote.

Chemical previously announced efforts to amend a plan that ensures guaranteed bonuses and other benefits over the next three years for 29 top executives.

A Test of Loyalty?

Several sources at Chemical said they understood Mr. Shipley's motives, but felt the "request" to sign the agreement was a loyalty test. Refusal to sign it, they feared, could lead to dismissal.

"It's a |state your intentions' letter," one officer said. "|Are you going to stay with the company or not?'"

Under the new plan, however, employees would be eligible for full vesting if they are laid off or demoted as a result of the merger.

William McDavid, Chemical's general counsel, denied that the bank had ulterior motives. He also said that the company was in the final stages of renegotiating the "golden parachutes" with the 29 senior officers.

Coordinating the Plans

Mr. Shipley said in his letter that the change would bring Chemical's change-of-control plan into alignment with Hanover's more restrictive plan.

"It would be unfair for executives at Chemical to receive a benefit from the merger that executives at Manufacturers Hanover do not," he wrote.

The two companies hope to merger by Dec. 31.

Officials are believed to be pushing for the amendment to appease shareholders angry over the golden parachutes.

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