A bankruptcy judge today said a bonus plan of up to $500,000 for Gottschalks' two top executives was justified if the pair can arrange a sale or liquidation of the Fresno-based retailer by Oct. 30.
Attorneys for Gottschalks had sought approval of the bonus plan as an incentive for Gottschalks President and Chairman James Famalette and Chief Financial Officer Gregory Ambro to either gain court approval for a bankruptcy plan or close a sale of the company. Judge Kevin Carey of the U.S. District Bankruptcy Court issued his order following a hearing this morning in Wilmington, Del.
Gottschalks, which operates 58 department stores in six western states, filed for bankruptcy in Delaware in mid-January, seeking protection from its creditors.
Gottschalks motion called for each executive to receive a bonus equal to half his annual salary if the company is sold as a "going concern," or 31.25% of his annual salary if the company is liquidated with a going-out-of-business sale. To receive the bonuses, a sale would have to close, or the judge appove a bankruptcy plan, by Oct. 30.
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According to court documents, Famalette earns a salary of $560,000 a year, while Ambro's annual salary is about $383,000. Together, the two executives could collect up to $500,000 in the incentive bonus package.
Carey's order also approves a second $500,000 bonus pool to keep as many as 30 key employees from leaving the company during the Chapter 11 process.
Carey said the bonuses were "justified by the facts and circumstances … and a necessary cost and expense of preserving the estate."
The judge added another condition to the bonuses, requiring that Gottschalks must repay the $125 million in financing it received from GE Capital Corp. to stay in business during the bankruptcy process before the incentives can be paid.