This story originally ran on April 27.
Vermillion is seeking a bonus of at least $500,000 for its former CEO, now executive chair of the board, if its Chapter 11 reorganization plan is approved.
As part of its efforts for Chapter 11 protection [See PM 04/02/09], the company last week asked the US Bankruptcy Court in Delaware to approve an incentive plan that would pay former CEO Gail Page, now its executive chair, the greater of $500,000 or 5 percent of the value of the cash, debt, or equity to be distributed when and if its reorganization plan is approved.
In its Chapter 11 filing, the company reported assets of $7.15 million through the first nine months of 2008. The company has not released earnings for the fourth quarter of 2008 or the first quarter of 2009.
Of the $7.15 million, $1.9 million is in cash and cash equivalents
Meanwhile, liabilities totaled slightly more than $32 million as of Sept. 30, 2008. Through the first nine months of 2008, Vermillion posted receipts of $124,000.
If Vermillion's reorganization plan is approved by the court, its two other remaining directors, James Burns and John Hamilton, would each receive $250,000 or 2.5 percent of the cash, debt, or equity to be distributed, whichever is greater.
The company is continuing to do business with a staff of three employees and four consultants who will be used on an as-needed basis while Chapter 11 proceedings continue. A hearing has been scheduled for May 11.
Its incentive plan also lays out bonuses to be paid to the three directors if the company has to sell assets as part of its reorganization: If there is an asset sale prior to approval from the US Food and Drug Administration for Vermillion's ovarian cancer diagnostic called OVA1, Page would be paid the lesser of $300,000 or 3 percent of the gross proceeds from the sale. Burns and Hamilton would each receive the lesser of $150,000 or 1.5 percent of gross proceeds.
If assets are sold after FDA approval of the OVA1 test, Page would receive $400,000 or 4 percent of gross proceeds, whichever is greater, while Burns and Hamilton would each be paid the greater of $200,000 or 2 percent of gross proceeds, whichever is greater.
If either the company's reorganization plan is rejected or there is no asset sale, none of the directors would be paid any bonus, Vermillion said in its motion.
Vermillion also said that a debtor's use of "reasonable performance bonuses and other incentives is a valid exercise of a debtor's business judgment," and that "maintaining a properly incentivized leadership team is key to [Vermillion's] business and vitally important to [its] reorganization objectives."
The bonuses, Vermillion added, are not aimed at keeping the three directors from fleeing while it tries to restructure its business, but rather are "pay-for-play" payments meant to reward Page, Burns, and Hamilton if they achieve specific performance goals "designed to maximize the value of [Vermillion's] estates for all constituents." As such, the incentive plan laid out in last week's motion is in the best interest of Vermilion's estate and its creditors, the company said.