AST Buyouts Top $3 Million : Computers: Struggling Irvine firm’s SEC filing also shows it’s paying new chief Ian Diery $700,000 a year, stock options and $500,000 to move in. Base pay is among highest in O.C.

IRVINE — Breaking up is not only hard to do, it sometimes costs a bundle.

At a time when AST Research Inc. is desperately trying to contain costs, a spate of terminations in recent months has cost the computer manufacturer more than $3 million in payments to departed top executives, according to documents filed with the Securities and Exchange Commission this week.

The company’s proxy statement, filed in advance of AST’s annual meeting next month, also offers the first glimpse of what the company paid to attract new chief executive Ian Diery, a former Apple Computer executive.

As part of his compensation package, Diery gets a $700,000 annual salary, options that could ultimately let him buy 1 million shares of common stock, and a $500,000 allowance to move from his Bay Area home to Southern California.

Diery’s salary ranks as one of the highest in Orange County and appears to be the most generous ever paid to an AST executive, surpassing the base pay received last year by AST co-founder and longtime leader Safi U. Qureshey.

For his part, Qureshey volunteered to take a 50% pay cut until AST returns to profitability. Qureshey, who relinquished the title of chief executive last month, will be paid $325,000 this fiscal year.

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Experts say AST’s expenditures on executives are not outlandish, but do underscore how costly it can be for companies to hire and fire top managers.

“Executives are a form of expensive capital equipment,” said Elliot Gordon, manager of the Newport Beach office of Korn/Ferry International, an executive search firm. “It’s expensive to bring them on board, expensive to maintain them and expensive to terminate them.”

AST officials were unavailable for comment.

The bulk of the expenditures reflect “golden parachute” severance packages that billowed above executives as they were shoved out of AST’s executive suite this fall.

The largest parachute belonged to James T. Schraith, formerly president of AST and one of three executives who resigned Sept. 11 when the company warned investors that it would post substantial losses in its first fiscal quarter.

Schraith was paid a lump sum of $1.47 million upon his resignation, more than triple his annual salary last year, according to the company’s proxy. “That seems on the high side,” said Gordon, who added that it’s common for executives to get a severance package roughly equal to their annual salary. Schraith has since landed a job as chief executive at the Cerplex Group, a Tustin-based electronic parts supply company.

Accompanying Schraith out the door at AST were Scott A. Smith, vice president and general manager of desktop products, and James Wittry, senior vice president of sales and service in North and South America. Smith was paid $477,500 upon his dismissal, and Wittry received $461,600, according to the proxy.

A fourth executive, Richard Ottaviano, senior vice president of administration, was paid $720,100 when he left Oct. 20, bringing the total tab for the four departed executives to $3.13 million.

Those hefty payments came just weeks before AST posted a whopping first-quarter loss of $96 million. The company, which has had problems building computers and getting them to resellers on time, reported a loss of nearly $100 million for fiscal 1995.

Diery is the man charged with turning the company around, and AST has loaded his compensation package with enough incentives to make sure he is properly motivated.

On top of his salary, Diery has been granted options to buy 1 million shares of AST stock, which could make him millions of dollars if he is able to restore the company to profitability and get its stock price climbing.

The options, which Diery will be able to exercise over several years, enable him to buy AST stock at $9.375 per share, the closing price on the day he was hired. The options are worthless now, with AST shares trading at $8.875 Wednesday. But if the price soars, Diery will be in a position to buy low, sell high and pocket the difference.

“That’s a very standard, reasonable and good part of the package,” Gordon said. “He only makes a lot of money if all the shareholders also make a lot of money.”

Diery, 46, also gets $12,000 per year for a car, $20,000 per year for medical expenses not covered by insurance and $10,000 per year to hire a financial planner.

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Costly Commodities

In the past three months, financially ailing AST Research has paid more than $3 million to dismissed executives and made Ian Diery, its new president/CEO, one of the highest paid executives in Orange County. Co-founder Safi U. Qureshey, who stepped down as CEO in favor of Diery, has taken a voluntary 50% pay cut, to $325,000 a year.

WHO’S IN

Ian Diery

Title: President/CEO

Hired: Nov. 2, 1994

Salary: $700,000

Stock options: May buy as many as 1 million shares

ALLOWANCES:

Relocation: $500,000

Automobile: $12,000 per year

Medical: $20,000

Financial planning: $10,000

Other perks: Profit sharing, 401K plan, management-incentive and quarterly bonus plans, severance clause guaranteeing two years’ salary and bonuses if terminated

WHO’S OUT

James T. Schraith

* Former position: President

* Appointed: July, 1994

* Terminated: September

* Payout: $1,472,500

Scott A. Smith

* Former position: Vice president and general manager, desktop products

* Appointed: January, 1993

* Terminated: September

* Payout: $477,500

James D. Wittry

* Former position: Senior vice president, Americas

* Hired: November, 1994

* Terminated: September

* Payout: $461,600

Richard Ottaviano

* Former position: Senior vice president of administration

* Appointed: November, 1992

* Terminated: October

* Payout: $720,100

Source: AST Research, Times reports; Researched by JANICE L. JONES / Los Angeles Times