Coram Healthcare Corp.'s chairman and board decided that an unusual transfer of their stock options may help boost the company's performance.
Coram announced that Chairman James M. Sweeney and the five outside members of its board of directors will return options they hold totaling 3.9 million shares of the company's stock.
Sweeney alone returned 3 million options with an exercise price of $11, and 500,000 at $3.50-his entire Coram stock ownership. He relinquishes his position as the company's largest single shareholder.
The stock options-about 10% of Coram's 40.4 million outstanding shares-will be made available to employees through the company's employee stock ownership plan, which is already in place.
The Denver-based home-care company, which has experienced major financial difficulties, is trying to motivate employees at all levels by giving them the opportunity to obtain an ownership interest, Coram executives said.
While the move may have the positive effect of helping the company retain key managers, Coram's investors will still need to closely watch the company's ability to reverse other negative trends, such as the erosion of its revenues, said Lori Price, a stock analyst with Oppenheimer & Co., New York.
The board members, Tommy H. Carter, Richard A. Fink, Stephen G. Pagliuca, L. Peter Smith and Gail R. Wilensky, returned a total of 390,500 options at exercise prices of $11 and higher. The options they returned had been granted to them automaticallyHome care
when they became directors, according to a Nov. 13, 1995, proxy statement.
Coram did not offer compensation for the returned options, according to Larry Watts, Coram spokesman.
Most of the options could not have been executed unless Coram stock more than doubled in value. When the board's decision was announced Jan. 2, Coram's stock price rose 50 cents, closing at $4.87 on the New York Stock Exchange. The exercise price of the options will be at or around the market price the day they are re-issued to employees, Watts said.
The proxy also disclosed that Sweeney received a $3.6 million bonus in 1994 in connection to his advisory position in the merger of four companies that formed Coram in July 1994. Pagliuca was paid a $2 million bonus in April 1995 for his involvement in Coram's acquisition of Caremark International's home infusion unit.
In a separate announcement, Coram said a U.S. District Court judge in Chicago dismissed a $117 million lawsuit that Caremark filed against it last October. Caremark filed the lawsuit one month after Coram filed a suit claiming Caremark failed to properly disclose the depth of a federal fraud probe before selling Coram its home infusion unit.
In the recently dismissed suit, Northbrook, Ill.-based Caremark alleged that Coram concealed separate plans to merge with Lincare Holdings, which lowered the value of Coram securities that Caremark received as part of the sale of the home infusion unit. That deal later fell through. Coram's lawsuit against Caremark is pending in Superior Court in San Francisco.