Southmark Corp. Offer Revealed : Pact Would Place Nelson at Care Enterprises Helm
If Southmark Corp. succeeds in its efforts to acquire control of embattled Care Enterprises of Laguna Hills, at least one of the principals in the deal, dissident Care co-founder Ted Nelson, stands to be handsomely rewarded.
According to filings with the U.S. Securities and Exchange Commission, Nelson would be installed as chairman and chief executive if Dallas-based Southmark takes control. Nelson left the nursing home company last year in a dispute with his half-brothers and fellow co-founders, Dee R. Bangerter and Lee R. Bangerter.
A tentative five-year employment agreement between Nelson and Southmark calls for Nelson to be paid a $250,000 base salary in the first year, with 10% annual adjustments in each of the remaining four years. In addition, Nelson would be eligible to receive annual bonuses ranging from a minimum of 50% of his base salary up to a maximum of 150% of that salary if the company generated sufficient profits to cover the bonus payments.
The bonus provision, in essence, would give Nelson first call on any Care Enterprise profits up to a maximum of 1 1/2 times his salary. In the fifth year of the contract, when the base salary would be $365,000, the bonus could reach $547,500, for a total payment of $912,000.
Earlier this month, Nelson agreed to give Southmark the voting rights to the 23% block of voting shares he controls in Care Enterprises in exchange for a $7.3-million loan. Southmark says it wants to parlay Nelson’s stake into a controlling position within the company and turn over daily management of the company to Nelson.
Southmark, which owns 80% of National Heritage Inc., the nation’s fourth-largest nursing home operator, is also trying to buy the Care Enterprises stake controlled by Dee R. Bangerter. If successful, Southmark would own about 49% of Care Enterprises voting shares.
