Nine top Hawker Beechcraft executives will receive an aggregate bonus of up to $5,328,000 if the company completes a sale of its assets or a standalone restructuring and exit from Chapter 11, according to a proposed compensation plan the company filed today with the U.S. Bankruptcy Court in Manhattan.
Another 31 management-level employees could see an aggregate payout of up to $1.9 million under the plan.
Hawker says it paid about $10.25 million in management bonuses in 2010, but “because the applicable performance metrics were not achieved in fiscal year 2011,” it paid no bonuses last year. The company did, however, increase the base salary for certain members of its management team by 4% in the first quarter of 2012, and promoted Alexander Snyder from vice president and general counsel to executive VP and general counsel on June 4 of this year, bumping his salary from $245,000 to $325,000, court records show.
As LCD has reported, Hawker is currently pursuing a sale of its assets to Superior Aviation Beijing Co. Ltd. for $1.79 billion (See, “Hawker details terms of $1.79B proposal with Superior Aviation,” LCD News, July 10, 2012). At a hearing scheduled for July 17, Hawker will ask the bankruptcy court for approval to enter into a 45-day exclusivity period during which Hawker and Superior will negotiate the terms of a stalking-horse agreement. If Superior is named the stalking-horse, Hawker will hold an open auction based on the Chinese company’s opening bid. If not, Hawker will proceed with seeking confirmation of its already-filed reorganization plan (See, “Hawker files reorganization plan, outlines potential sale,” LCD News, July 3, 2012).
Under the proposed bonus plan, nine Hawker executives will receive a sale bonus of 200% of their base salary if the court approves of a sale prior to Dec. 15, provided the purchase price is at least $1.79 billion and the deal closes no later than Jan. 15, 2013. If the sale price is less than $1.79 billion, the bonuses would decrease by 25% of each executive’s base salary for each $100 million in purchase price below $1.79 billion. An exception to that diminution is built into the plan, however. The bonuses will remain at 200% if the decrease in price is the result of an adjustment triggered by the assumption of certain liabilities, and the assumption is supported by the committee. Superior’s offer for Hawker specifies that it will not assume liabilities for the company’s three defined benefit pension plans.
If a sale falls through and Hawker toggles to a standalone reorganization, bonuses will be adjusted for certain cash costs expected to be incurred while pursuing a sale, according to the proposed bonus plan. Under the standalone transaction award, half of the bonus is based on the date of plan consummation, and the other half is based on achieving a target level of cumulative net cash flow. If Hawker can exit Chapter 11 by Nov. 17, and hit certain cash flow goals, the management team will receive up to $5,328,000 in bonuses. However, if the case drags on for another month, beyond Dec. 15, the bonus disappears – with the caveat that the bonus deadlines may be extended by up to 30 days for each day beyond Aug. 31 that the court “has not resolved treatment of the company’s three defined benefit pension plans,” according to the motion. – John Bringardner