Friday, March 09, 2007

Calls of Note Part 3

- JP Morgan has an interesting note out on McAfee (NYSE:MFE) after the co filed an 8K announcing the pay package for incoming CEO Dave Dewalt. After a quick read, and before any contact with the company, the firm is surprised about location of the CEO and treatment of options in change of control (acquisition) situations.

MFE has a big location in Plano, Texas and that is where CFO Eric Brown is located. Now it appears that company will continue the shift to Texas as the employment agreement has payments to cover transaction costs for Mr. Dewalt to purchase a residence in Dallas and sell his home in California.

There is no 100% vesting of options in change of control: Instead there is a clause calling for the greater of a twelve months accelerated vesting, or 50% of the then unvested shares accelerated vesting in the case of a change of control. Firm finds this surprising as agreements like the one RSA Security did with its in coming CFO prior to it being acquired called for 100% vesting of unvested stock/options in case of change in control.

The need to uproot to move to Texas and not getting 100% vesting on change of control is not a situation that they would want if they believed the company was about to be acquired. This supports firm's thesis that the Board of Directors of MFE appears to be running the company in a way that says they will be independent for quite some time.

Notablecalls: Not actionable but good to know category.

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