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Agere Details CEO's Stocks

Posted on: Thursday, 3 November 2005, 00:00 CST

By Jeanne Bonner, The Morning Call, Allentown, Pa.

Nov. 3--Agere Systems has awarded 500,000 stock options and 250,000 restricted stock units to its new chief executive officer.

The stock awards are the long-term portion of Richard Clemmer's compensation, according to a filing the company made with the Securities and Exchange Commission on Tuesday.

It's the first information Agere of Hanover Township, Lehigh County has released about compensation for the chief executive who replaced John Dickson last week. The company expects to file Clemmer's base salary, bonus and short-term incentives with the SEC shortly, a spokesman said.

Clemmer, 53, joined Agere's board of directors in October of 2002. After a year of disappointing revenue and falling stock price, the board appointed Clemmer as chief executive.

Agere, which employs 1,900 people in the Lehigh Valley, makes chips for cell phones, hard-disk drives and telecommunications equipment.

Stock options are grants to purchase a company's shares at a certain price within a particular period of time. Clemmer's stock options were granted at an exercise price of $9.84. That means Clemmer won't be able to cash the options and make a profit unless the stock is trading above $9.84. The options will begin to vest in October of 2006. The vesting schedule allows for 25 percent of the options to vest each year for four years.

In accordance with new accounting rules for public companies, Agere will expense stock options beginning this quarter.

Unlike options, restricted stock units are shares of the company. Agere is providing two types of restricted stock to Clemmer. Of the 250,000 restricted stock units granted to Clemmer, 150,000 will vest in 2009 only if the stock price and other shareholder return measurements exceed that of Agere's peers, said company spokesman Glen Haley. The remaining 100,000 will vest over four years in 25 percent increments, beginning next year.

Parveen Gupta, a professor of accounting at Lehigh University, said restricted stock can create more of an incentive than options.

"The target is very tangible," said Gupta, who had not looked at the Agere filing.

Since spinning off from Lucent Technologies in 2001, Agere has struggled to be profitable and build revenue. Agere's revenue fell 12 percent, to $1.68 billion, for the fiscal year ended Sept. 30. It narrowed its 2005 loss to $8 million, compared to a loss of $90 million in fiscal 2004.

Wall Street analysts applauded the board's decision to replace Dickson. "Agere instituted some much-needed change this quarter," Allan Mishan of CIBC World Markets wrote last week.

Clemmer had worked as chief executive of PurchasePro.com Inc., which sold software to help companies buy and sell merchandise online, and as chief financial officer of hard-disk drive-maker Quantum Corp. and Texas Instruments' semiconductor group.

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AGR, LU, BCM, CM, DSS, TXN,

Source: The Morning Call, Allentown, Pennsylvania

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