How long would Ken Klein (pictured), the chief executive at Wind River Systems, stick around should the Alameda supplier of embedded software become a division of the world’s largest chip maker? No one can say for sure, but two years would seem to be a relatively safe bet. That’s how long Klein needs to remain with the company in order to receive all of a $5 million retention bonus promised him as part of the merger agreement with Intel, which offered to buy Wind River last week for $11.50 a share in a deal it valued at $884 million.
Klein, whose annual salary as an Intel executive would be reduced to $500,000 from the $682,500 he’s currently being paid, would get $2 million if he makes it to the first anniversary of the deal’s completion, with an additional $3 million to be paid on the second anniversary.
News of the Intel’s offer may have helped overshadow the earnings Wind River released the same day when it reported its results for its fiscal 2009 first quarter that showed the first year-over-year decline in sales since Klein took over as CEO in early 2004.
Klein first became a director on Wind River’s board in July 2003 shortly after the abrupt departure of its then CEO Tom St. Dennis and was named chairman and CEO before the year was over. From the time Klein officially took over as CEO through Wednesday, the day before the deal with Intel was announced, Wind River shares had fallen 13 percent, twice as much as the 6.5 percent drop in the Amex Software index during the same period.
Since news of the deal, Wind River shares have been trading above Intel’s offering price. They closed Monday at $11.69, indicating that at least some investors think there may be other offers waiting in the wings. Any competing offer would have to take into consideration that Intel is entitled to receive a $30 million termination fee under certain circumstances if the deal falls through. At a minimum Wind River would need to pay the Santa Clara company $4 million to cover transaction costs.
Based on his holdings at the end of Wind River’s last fiscal year on Jan. 31, Klein holds exercise-able options that would net him about $5.9 million based on Intel’s offering price.
His new contract also calls for him to receive two-ear’s worth of accelerated vesting of his option shares and restricted stock, which are set to be converted into Intel stock should the deal close.