Takeover target Warrnambool Cheese and Butter Factory (WCB) will seek shareholder approval to grant $175,000 in performance rights to its chief executive, despite opposition from suitor Bega Cheese.
But WCB says it won't grant the performance rights unless it is sure that Bega's takeover offer for WCB will be unsuccessful.
Three companies are trying to take over WCB: Bega Cheese, Canadian dairy giant Saputo, and the Murray Goulburn Co-operative.
A condition of the Bega offer is that no performance rights are to be granted or issued during the Bega offer period, which currently closes on November 28.
WCB is seeking shareholder approval to grant extra performance rights to chief executive David Lord, at WCB's annual general meeting (AGM) on October 24.
WCB has asked Bega to waive the condition, but Bega has refused.
"Despite the above condition in the Bega offer and Bega's position not to waive it, WCB intends to still put the performance rights resolution to shareholders at the AGM as it is an important aspect of Mr Lord's remuneration package," WCB said in a statement on Monday.
"However, if the performance rights resolution is approved by WCB shareholders, WCB will not grant the performance rights to Mr Lord unless and until it becomes reasonably certain that the Bega offer is unlikely to result in Bega acquiring a majority of the WCB's shares on issue."
WCB said the number of extra performance rights proposed for Mr Lord was relatively modest, but they were an important part of his pay package.
WCB is proposing to grant Mr Lord performance rights worth up to $175,000, giving him the right to acquire WCB shares for nil consideration if various company performance measures are met.
Murray Goulburn has made a $420 million offer for WCB, at $7.50 per WCB share, trumping the offers from Bega and Saputo.
Saputo has bid $7 per WCB share.
Bega has offered $2 in cash plus 1.2 Bega shares for every WCB share.
Murray Goulburn currently owns more than 17 per cent of Warrnambool, around the same sized stake owned by Bega.Shares in WCB were 36 cents higher at $8.25 at 1034 AEDT. Bega was up 22 cents at $4.10.