stock options

Re-pay Company for Backdated Stock Options Language

From the Resignation Agreement between KB Home and Bruce Karatz:

6. Karatz acknowledges and agrees that the exercise price of each annual stock option granted to him since October 2, 1998 (the “Subject Options”) shall be changed to the closing price per share of the Company’s common stock on the new measurement dates selected by KB Home for such grants as reflected in the restated financial statements or adjusted books and records expected to be completed by KB Home. For each Subject Option exercised by Karatz prior to the date hereof, Karatz shall pay to KB Home, in cash, the product of (i) any positive difference between the exercise price and the fair market value of KB Home common stock on the new measurement date for the Subject Option and (ii) the number of shares subject to such Subject Option. KB Home will provide Karatz with a schedule containing reasonable detail regarding the new measurement dates and amounts payable by Karatz in respect of the Subject Options within 15 days of filing financial statements with the Securities and Exchange Commission and Karatz shall make the required payments and enter into amended option agreements within 90 days thereafter. Karatz acknowledges that KB Home makes no representation as to the tax treatment of Karatz’s KB Home stock options and shares of restricted stock and that he will be responsible for any tax obligations that may arise therefrom.

We’re not talking about loose change here. The accompanying press release states: “This is expected to involve an aggregate voluntary value transfer from Mr. Karatz to the Company of approximately $13 million.” Wow!

employment agreement severance agreement stock options

Stock Options Backdating Scandal Widens

New York Times: KB Home Ousts Its Chief and 2 Others. The longtime chief executive of KB Home, one of the nation’s largest home builders, resigned under pressure on Sunday night and agreed to return $13 million in profit from backdated stock options, the company said.

At first, I thought the stock options backdating problem was only a tech company issue. However, recent events indicate that this problem spans across companies from different industries and may be more widespread. I’ve posted KB Home contracts to the web site where you can find the employment agreement for Bruce Karatz from 1995 and 2001, as well as his recent resignation agreement with KB Home.

stock options

Repricing Stock Options

The Company has determined that the stock option (“Option ”) granted to you on June 7, 2004 in respect of 30,000 shares of our Series B common stock (“Common Stock ”) at an exercise price of $10.00 per share was granted with an exercise price less than the fair market value of the Common Stock at the time of grant.

[Y]ou and the Company desire to raise the exercise price of the Common Stock in respect of the Option from $10.00 per share to $21.25 per share, which the Company has determined to be the fair market value of the Common Stock on June 7, 2004.

Just a few years ago, companies were racing to reprice stock options that had gone underwater. Now, we have an agreement to reprice an option to a higher exercise price. How about that? Read the full agreement between ExlService Holdings Inc. and Amit Shashank.

litigation stock options

Former Comverse Chief Flees

New York Times: F.B.I. Calls Ex-Comverse Chief a Fugitive, and Casts a Wide Net. The hunt for Jacob Alexander, known as Kobi, was stepped up yesterday after the Federal Bureau of Investigation declared him a fugitive and said agents were seeking his arrest.

Earlier this month, the Department of Justice announced that three former executives of Comverse Technology Inc. (“Comverse”), a publicly-held computer software company, were charged for their roles in orchestrating a long-running scheme to manipulate the grant of millions of Comverse stock options to themselves and to employees. Former Chief Executive Officer Jacob “Kobi” Alexander, former Chief Financial Officer David Kreinberg, and former General Counsel William F. Sorin allegedly orchestrated the scheme by fraudulently backdating the options and operating a secret stock options slush fund.

I’ve added Comverse Technology contracts to the website, including the Employment Agreement between Comverse Technology Inc. and Kobi Alexander.

corporate buzz stock options

Backdating Options

Lately, a lot of companies have been caught up in stock option backdating scandals. Here are all the Stock Option Agreements that I’ve archived so far. More to come later…