The old cliche "you can't take it with you" has a painful new meaning for Lee Iacocca, one that could cost the former chairman and chief executive of Chrysler Corp. nearly $32 million.
Chrysler's board, angered at his alliance with Kirk Kerkorian's attempt to take over the automaker, has refused to allow Mr. Iacocca to exercise stock options he received after retiring from Chrysler in 1992, the company said in a document filed yesterday with the Securities and Exchange Commission.
According to the filing, the directors determined that Mr. Iacocca violated the terms of the stock option plan by assisting Mr. Kerkorian, the company's largest shareholder, in his recent failed takeover bid for the company and in a subsequent offer for Chrysler shares that Mr. Kerkorian announced last month.
While Mr. Iacocca was seeking to exercise options for only a fraction of his holdings -- options on 112,500 shares of a total of 1.49 million shares -- the board's decision appears to apply to all of his options.
The options have an average exercise price of $28.22, which means that at Thursday's closing price on the New York Stock Exchange of $49.50 a share for Chrysler stock, the board's decision could cost Mr. Iacocca almost $32 million.
Chrysler's stock option plan requires that any option holder who leaves the company must seek the written permission of Chrysler before taking other employment or offering services to others. In addition, a former executive cannot "conduct himself in a manner adversely affecting the company."
The board determined that, by working with Mr. Kerkorian, Mr. Iacocca violated those requirements, and therefore would not be permitted to exercise them to purchase Chrysler stock.
A woman answering the telephone at Mr. Iacocca's office in Los Angeles yesterday said he was not making any public comments.
Mr. Iacocca was informed of the board's decision in a June 30 letter from William J. O'Brien, the general counsel of Chrysler. In response, Mr. Iacocca sent additional information to the board to consider at its monthly meeting yesterday.
However, that information proved unpersuasive, and the board again rejected Mr. Iacocca's request, according to documents included with the filing at the SEC.
"The board has determined that the conditions precedent to stock option exercise specified in the plan have not been satisfied," Mr. O'Brien wrote in a letter yesterday to Mr. Iacocca. "Accordingly, the company will not process the option exercise plan made on your behalf last week."
Unlike the first communication, Mr. O'Brien's second letter offers Mr. Iacocca no further avenues for appeal within the corporation.
The board's concern centers on Mr. Iacocca's consulting agreement with Tracinda Corp., a Nevada company controlled by Mr. Kerkorian, as well as a so-called value sharing agreement that the former Chrysler chairman reached with the company.
According to the filing, the consulting agreement was signed May 9, less than a month after Mr. Kerkorian announced his hostile takeover bid for Chrysler.
Under the agreement, Mr. Iacocca would provide consulting and advisory services to Mr. Kerkorian in exchange for a monthly fee of $41,667.67. Under the terms of the stock option plan, such an agreement would appear to require the written approval of Chrysler.
The value sharing agreement between Mr. Iacocca and Tracinda was reached June 24, after Mr. Kerkorian announced his separate tender offer for Chrysler shares.
Under that agreement, by June 1999, Mr. Iacocca will receive 4 percent of the value of 32 million Chrysler shares held by Tracinda in excess of $47 a share. This agreement would also appear to require Chrysler's approval if Mr. Iacocca hoped to exercise his stock options.
The filing at the SEC largely presented Chrysler's view to investors of Mr. Kerkorian's tender offer. The company said that, if successful, the tender offer would leave Mr. Kerkorian short of a 15 percent limit on the number of shares held by any one investor.
Any holding above 15 percent would set in motion the company's anti-takeover provisions.
Because the tender offer involves a small percentage of the company's shares and would not cause Tracinda to exceed the 15 percent trigger, Chrysler's board decided not to make any recommendations to stockholders about the proposal, the filing said.