Prescription to stay in Allscripts-Eclipsys deal …

Acquisitions bring anxious times, even for steely-nerved captains of industry, we’re told — and presumably that’s even more true for the ones who join as part of the company being acquired. Presumably, after all, they’re first on the chopping block if the going gets rough.

So we were interested to see that the first retention bonuses laid out in merger documents filed by medical-record company Eclipsys (ECLP) actually benefit the top officers of Allscripts (MDRX), which is buying Eclipsys for $1.3 billion or so in stock. (Eclipsys specializes in hospital records, Allscripts in records for doctors — and investors see dollar-signs in the recent health-care reform legislation, which pushes electronic medical records with gusto.)

It’s particularly interesting given that Allscripts seems to come out of the deal with considerably more of the goodies: Not only does its chief executive, Glen Tullman, stay CEO of the combined company, but Allscripts gets four directors to the three carrying over from Eclipsys — plus as as many as two more directors named by Allscripts’ current majority shareholder. Moreover, the deal includes a complex fillip under which that majority shareholder, Misys plc, relinquishes much of its 55% stake in Allscripts, essentially giving Tullman a freer hand at his company.

Yet Tullman is eligible for a “retention” bonus of as much as $1.9 million — two-and-a-half times his salary. Half of it would come in cash, to be paid over two years, and half in restricted shares that he can also collect over two years if the company hits “certain cost synergies and the booking of new integrated deals as established by the Allscripts board of directors.” Other Allscripts execs stand to collect between $620,000 and $1.5 million under similar terms.

Don’t fret for Eclipsys executives — a few of them can also expect decent paydays if things go reasonably well. Philip M. Pead, now CEO of Eclipsys and soon the combined company’s chairman, snagged a three-year contract paying him $675,000 a year, plus a target bonus of that much again. Vesting and converting stock-options could bring him $1.33 million.

Then there’s the vaguely worded retention plan for Eclipsys employees:

“The estimated total cost of the retention program, if provided to approximately 70 Eclipsys management level employees, is approximately $14.65 million, with a significant portion allocated to executive officers.”

It’s unclear just how big that significant portion will be, but half will come in cash (six installments) and the rest in performance restricted stock, paid out over two years or on termination without cause. Other executives also stand to receive payouts of between a few hundreds thousand dollars in cash and accelerated options and about $2 million if they’re terminated.

When it comes to Tullman’s retention payments, however, we can’t help but wonder if insiders expect a rocky road ahead — why else sweeten the deal for a man who gets positively breathless about the virtues of the “compelling strategic transaction” he’s engineering? Here’s how Tullman (an amateur magician, according to Crain’s Chicago Business) put it in a July 14 press release:

“Once approved, the merger will create a single company with the scale, breadth of applications and client relationships to transform healthcare by connecting hospitals, physician practices and post-acute organizations across the country.”

That doesn’t sound to us like a guy who needs $1.8 million to stick around. But to each his own. We just hope he can deliver the right payoff for Allscript shareholders.

Image source: kyknoord via Flickr