Chattem chiefs get paid to stay

Chattem's four top executives could receive retention bonuses totaling more than $16 million over up to five years as a result of its deal with Sanofi-Aventis, documents show.

Also, if Chattem finds a superior partner before the deal with the French company closes, expected to be this quarter, it would have to pay Sanofi-Aventis a $64 million termination fee.

The details are in Securities and Exchange Commission documents filed by Chattem following its blockbuster $1.9 billion acquisition by the French pharmaceutical maker.

Bob Bosworth, Chattem's president, said retention bonuses are not uncommon in those type of transactions.

"They are generally in place when the acquiring company really wants to retain management and induce people to stay in place," he said. "One of the critical factors in this deal was that management would stay in place."

According to SEC documents, Chattem Chief Executive Officer Zan Guerry would receive $13.49 million in a retention bonus. Mr. Bosworth would receive $1.56 million. Theodore Whitfield Jr., general counsel and secretary, would garner $955,800, while Robert Long, chief financial officer, would receive $580,300, figures show.

Paul Lapides, director of the corporate governance center at Kennesaw State University in Georgia, said while retention bonuses aren't unusual, he would have liked to have seen payment come at the end of the four- or five-year period in the agreement.

The document said the retention agreements contemplate a five-year period for Mr. Guerry and Mr. Bosworth and four years for Mr. Whitfield and Mr. Long. The first annual payment in each case would become payable on the 25th-month anniversary of the closing of the merger. Equal annual payments would follow to the extent the executive remains employed, the document said.

Mr. Lapides also said Mr. Guerry's payment appears large in comparison with the others.

Mr. Long said Mr. Guerry's bonus is based on a current change of control agreement already in place, as well as his experience running the maker of such products as Gold Bond powder and Selsun Blue shampoo.

Mr. Long said the bonuses are also based on an average of historical earnings and a multiplier off of that which is typical in the change of control-retention thought process.

Mr. Bosworth said the termination fee is standard procedure.

Once a company puts in a lot of effort to cement such a deal, it has expended much effort and time, he said.

The acquisition of 130-year-old Chattem by Sanofi-Aventis was announced late last month. Chattem officials said the move will help grow the company.