OCZ Technology Group Inc fka OCZTQ

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[url][/url]DJ OCZ Technology Seeks to Pay Bonuses to CEO, Others

Last update: 12/12/2013 9:29:09 am


By Jacqueline Palank


OCZ Technology Group Inc.'s (OCZ) chief executive and other employees stand to earn up to $2.36 million in bonuses if they can get Toshiba Corp. (TOSYY, 6502.TO) or a rival bidder to double the $35 million bid for the company that is slated to lead off an upcoming auction.

OCZ Technology on Wednesday filed papers requesting a bankruptcy judge's permission to pay between $1.275 million and $2.36 million in bonuses to 13 employees it says are "essential" to the success of the flash-storage vendor's Chapter 11 sale.

"The debtors believe that all of the [bonus plan] participants have the ability to materially impact the sale process, including the ability to maximize the recovery to creditors by effectuating the sale at the highest possible price," the company said in court papers.

Toshiba has offered $35 million for OCZ Technology, which OCZ is hoping to test at a Jan. 13 auction. If the bonus-eligible employees--including CEO Ralph Schmitt and Chief Financial Officer Rafael Torres--can sell the company for at least $5 million more than the Toshiba bid, then they will share in a minimum bonus pool of $1.275 million.

A sale price of $50 million would yield a $1.7 million payout, according to the proposal. Bonuses are capped at $2.36 million, which would be paid if the employees meet a "stretch" goal of selling the company for $70 million, or double the starting Toshiba offer.

Those eligible for bonuses include not only executives but also managers, department heads and regular employees. The company hopes to shield the other bonus recipients' identities from the public in order to protect their privacy and preserve employee morale.

While companies in Chapter 11 face strict rules when it comes to paying bonuses to executives and other corporate insiders, such bonuses are allowed when they are tied to difficult goals that, if achieved, will significantly benefit the company's restructuring.

OCZ Technology said its bonus plan, which would be paid from the sale proceeds or from the bankruptcy financing that Toshiba has offered, was crafted with "great care" to meet the legal requirements for executive bonuses.

The U.S. Bankruptcy Court in Wilmington, Del., will consider the bonus plan at a Jan. 8 hearing. First, though, the court will take up the company's auction proposal at a hearing Dec. 19.

OCZ Technology, of San Jose, Calif., filed for Chapter 11 protection on Dec. 2, after restating its annual financial results for the past several years and amid shareholder litigation.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)


Write to Jacqueline Palank at [e-mail].


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December 12, 2013 12:29 ET (17:29 GMT)

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