CHICAGO -- The top nine officers of Continental Bank Corp. will become eligible for $23 million of severance benefits when the unit is sold to BankAmerica Corp., but disenting the golden parachutes and seeking to block the deal.
San Francisco-based BankAmerica by Sept. 30 hopes to complete the acquisition of the $23 billion-asset Continental, in a cash and stock deal valued at roughly $2.3 billion. At an estimated $37.14 per share, the price represents roughly 124% of book value at March 31.
Stockholders Objecting
Five suits have been filed in Delaware, with shareholders alleging that the price is "grossly inadequate."
Litigants are seeking to block the merger and force a fresh auction of Continental, plus damages "for any alleged higher price that could have been obtained and for any benefits obtained by management."
In a proxy statement released late last week, Continental said it has "substantially meritorious" defenses against the suits, adding that any settlement would not hjave a marterial effect on its finances.
The five suits have been merged into one, but the consolidated action apparently has not gained class-action status.
Litigation Almost Routine
Lawsuits are fairly common after mergers, with litigants trading their power to block or delay major transactions for cash settlements.
In the banking industry, suits often seek promises of heightened community lending.
The trading value of Continental's common stock has held constant, indicating that Wall Street so far has not assigned a high degree of probability to the litigation's success.
Continental's stock fell 12.5 cents on Tuesday, closing at $37.25 per share. In a proxy statement released late last week, Continental said its sale to BankAmerica will trigger a potential $23 millionpayday for the top nine officers of the Chicago-based institution.
Breakdown of Payout
The nine executives will book a net gain of $5.74 million from an accelerated vesting of stock options, Continental said.
Seven of the officers will become eligible for $15.25 million of severance benefits; and two officers willg et lump sum payments of $1 million each.
Thomas C. Theobald, Continental's chairman and chief executive, will get severance benefits worth $4.15 million, plus gains on stock options. Richard L. Huber, a vice chairman, will get $2.5 million of severance benefits, plus option gains. Both officers have announced their intention to leave the company following its sale.
B of A Eligibility
In exchange for surrendering severance benefits triggered by Continental's sale, vice chairmen William M. Goodyear and Michael J. Murray each will be given lump-sum payments of $1 million, in addition to being enrolled in BankAmerica's severance package.
Mr. Goodyear will be chairman and chief executive of what will become Bank of America Illinois, and Mr. Murray will become head of BankAmerica's U.S. corporate banking group.
Aside from Mr. Theobald and Mr. Huber, severance packages will be activated for Michael E. O'Neill, chief financial officer; Roger H. Sherman, executive vice president; John J. Higgins, controller; Kurt P. Stocker, chief corporate relations officer; and Joseph V. Thompson, chief human resources officer.
Range of Values
The termination agreements for these five executives range in value from $1.4 million to $2.3 million, and can be triggered by the officers themselves through resignation.
A company spokeswoman said it was ot clear which, if any, of the five officers would elect to leave.
Continental said it had begun courting potential buyers in the summer of 1993, narrowing negotiations to BankAmerica in January 1994.
In presenting to Continental's directors the case for selling, management cited four factors:
They were: company's dependence on high-cost wolesale funds, a size disadvantage, constraints on growth through acquisition by virtue of a low stock trading multiple, "and the perception of the financial markets that earnings from certain of Continental's core business might not be sustainable or might have limited growth prospects."
