On Chattem Execs and retention bonuses…

December 30, 2009

While business often slows down at many companies during the holiday season, that doesn’t appear to have been the case at Chattem, Inc. (CHTT), where the company’s attorneys have been filing a flurry of documents with the SEC related to its deal announced last Monday to be acquired by Sanofi-aventis (SNY). Sanofi, however, which is based in France, appears to have given its attorneys the holidays off, since the last time they filed anything was Dec. 22. Chattem, which has been around for about 130 years, makes well-known over-the-counter products such as Gold Bond, Icy Hot, and Selsun Blue.

In addition to the 8-K that announced the $1.9 billion deal, there’s been a flurry of other filings. One of our favorites was this 8-K filed late last Wednesday that provides some interesting details on how the proposed merger will affect the named executive officers.

According to the document, besides amending the terms of their severance agreements (details on pp. 4-5 if you’re interested), Chattem’s named executives also signed retention agreements, which will become effective when the merger occurs. As we footnoted last week when the deal was announced, several entities — including Chattem shareholders — stand to do very well by the deal. That includes the executives according to the 8-K filed last week. The filing states:

“The retention agreements provide for the ability to earn a retention bonus based on continued employment, in the following amounts for each of Messrs. Guerry, Bosworth, Whitfield, and Long, respectively: $13,499,864, $1,567,027, $955,827, and $580,304.”

Granted, these retention agreements actually seem to have some teeth since they contemplate a five year retention for two executives and a four year retention for two others and the first payments don’t kick in until 25 months after the deal closes, so it’s not money for nothing as we’ve seen in lots of other deals — or sticking around as a well-paid vice chairman while playing golf.

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Image source: Chattem Inc.

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