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Webvan pays off Shaheen
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May 16, 2001: 6:33 p.m. ET
Former CEO to get $375,000 per year for life as part of retirement package
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NEW YORK (CNNfn) - George Shaheen, the former CEO of struggling online grocer Webvan Group Inc., will receive $375,000 a year for the rest of his life.
The payments are part of Shaheen's retirement package negotiated before the high-profile CEO joined Webvan, a spokesman said. In April, Shaheen left the online grocer but has still to announce any new plans. The former CEO will receive the payments even if he gets a new job, and the payments will continue to go to his wife if she outlives him.
"We honor our commitments," said Webvan spokesman Bud Grebey.
Shaheen left his post as CEO of Andersen Consulting, now known as Accenture Ltd., to join the startup firm in November 1999. To lure Shaheen, Webvan agreed to pay him 50 percent of his $500,000 base salary, plus 50 percent of a $250,000 bonus, for the rest of his life if he stayed at the online grocer past June 30, 2000.
Foster City, Calif.-based Webvan (WBVN: down $0.02 to $0.14, Research, Estimates) also threw in a $13.5 million signing bonus so he could buy 1.25 million shares of the company's stock, and provided him with an additional 15 million stock options. Those options had an exercise price of $8 per share.
Shaheen, 59, earned $4 million a year at Andersen and had a few years left before hitting a retirement milestone at the world's largest consulting firm, where he would have been very well compensated, he said.
"Shaheen was taking a risk coming into a startup," Grebey said. "He was giving up a guaranteed retirement that he was going to get from Andersen."
Webvan, which rocketed by 66 percent to $25 in its November 1999 initial public offering, is now struggling to stay afloat. Earlier this year, Webvan released a dismal annual report that included a warning from its auditor expressing "substantial doubt" about the company's ability to make it through this year.
In April, Webvan canceled its services in Atlanta and cut an additional 400 jobs in Foster City, Calif. The company, which at one point had 5,000 employees, now numbers 2,500 staff.
Webvan is in talks to receive $25 million in data equity financing with some unnamed investors and is optimistic it will success. "We don't anticipate needing the $25 million until the beginning of 2002. For the balance of this year we have the necessary funding," Grebey said.
The online grocer is also facing Nasdaq delisting. Its shares closed Wednesday at 14 cents, a severe drop from its 52-week high of $9.37. Webvan will make its case to stay on the stock market in an oral hearing scheduled for June 6, Grebey said.
"We will present our business plan so that we can stay on the Nasdaq," he said.
Shaheen's former employer, Accenture, has since filed with the Securities and Exchange Commission to raise $1 billion in an initial public offering. The highly anticipated IPO will be jointly led by underwriters Goldman Sachs & Co. and Morgan Stanley. The company will trade on the New York Stock Exchange under the symbol "ACN." 
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