T2 Medical will pay James Sweeney a multimillion-dollar finder's fee if he agrees to remain chairman and chief executive officer of Coram Healthcare Corp. until Dec. 1, according to the company's proxy statement.
Mr. Sweeney was instrumental in engineering the four-way merger that led to Coram's creation.
An agreement to create Coram was reached last February after T2 Medical merged with home infusion firms Curaflex Health Services, HealthInfusion and Medisys in a $550 million deal (Feb. 14, p. 32). The proposed maximum aggregate value of the merger has since risen to $807 million, according to the proxy.
The merger must still receive final approval from shareholders and is expected to be completed in late July. Shareholders from all four companies will vote on the merger July 8.
Mr. Sweeney, 51, was hired in November of last year by T2's management to find a buyer for the struggling home infusion firm. He had been the head of McGaw, a hospital intravenous supply company. Under the proposal outlined in the proxy, he would receive a cash fee equal to 0.67% of Coram's average total market capitalization, which will be calculated over the 10 trading days immediately following the completion of the merger.
While it remains unclear exactly how much Mr. Sweeney will receive in December, he would have received a cash fee of $4.5 million in early May based on Coram's total market capitalization at that time, the proxy said.
Mr. Sweeney is also in line to receive a stock option to purchase an additional 3 million shares of Coram common stock at an exercise price per share equal to the closing selling price per share of Coram stock on Dec. 1.
The cash and stock incentives outlined in the proxy reaffirm how important Mr. Sweeney's role is to the overall success of the newly formed home infusion giant. Industry observers said they expected him to receive a greater stake in Coram once he replaced Curaflex's Charles Laverty as Coram's CEO (May 23, p. 8).
Mr. Laverty, 48, who has been reassigned as senior executive vice president, has a one-year deal with the company that will pay him an annual base salary of $450,000 as well as an incentive bonus of as much as 100% of his salary if the company meets certain performance objectives.
He also has an option grant to purchase 100,000 shares of Coram stock Dec. 1 at an exercise price equal to the closing selling price of Coram's stock on that date. And, Coram will forgive a $400,000 loan made to Mr. Laverty by Curaflex if he completes his contract. Finally, his contract includes a $2.5 million severance payment, which he will receive over a three-year period.
In addition to Mr. Sweeney and Mr. Laverty, five others will sit on Coram's board of directors. They are T2 President Tommy Carter, recently named Coram's vice chairman; HealthInfusion CEO Miles Gilman; Medisys CEO William Brummond; and T2 directors Richard Fink and Stephen Pagliuca.
Other items disclosed in the 227-page proxy include a $15 million restructuring charge that T2 will record during the third quarter ended June 30. That charge will go toward settling shareholder lawsuits against the company (June 20, p. 16).
Shareholders filed class-action suits against T2 in 1992 and 1993. Both suits accuse T2 executives of making misleading statements about the company's finances.
T2 has been involved in a myriad of lawsuits and federal investigations during the past three years. The most recent was a Securities and Exchange Commission probe that is investigating events surrounding the company's decision to downwardly restate its earnings for the first and second quarters of fiscal 1993.
Last month, MODERN HEALTHCARE reported that an internal conflict involving T2 Chairman Thomas Haire and former CEO Joseph Allegra, M.D., ultimately prevented Dr. Allegra from initiating a formal bid to buy the company last August (May 2, p. 17). The restatement of T2's earnings derived from an internal investigation of the company's accounting records during Dr. Allegra's tenure as T2's president and CEO. Dr. Allegra resigned from the company last August.
T2 announced the SEC probe in December. Since then, several former T2 executives have been subpoenaed by the SEC as part of its ongoing investigation.