As injection molder Moll Industries Inc. tries to resurrect itself from bankruptcy, the company and its creditors are fighting over something more personal: what kind of severance package Moll's former top executives, George Votis and Charles Schiele, should get.
In court papers filed Jan. 14, Moll's creditors objected to what they see as a sweetheart deal designed to ``enrich'' Votis and Schiele. The company, however, said the arrangement is typical and was needed to ease the two men out of their old jobs and let the firm move forward.
It's common in bankruptcies, of course, to slug it out over every penny. But a look at Moll's court papers sheds light on the sometimes private topic of executive severance.
Moll, based in Davie, Fla., was forced into bankruptcy in September by its biggest lender, Highland Capital Partners LP, after the economic downturn and the company's high debt caught up with it.
With Highland's cooperation, the bankruptcy, in U.S. Bankruptcy Court in San Antonio, since has been converted to a voluntary filing by Moll.
Creditors contend that Votis, Moll's majority owner and former chairman, and Schiele, its former president, are getting more than they should.
``A change of management ... should not provide an opportunity for Votis and Schiele to personally enrich themselves to the detriment of the creditors,'' according to a legal brief filed by Christopher Artzer, a Houston lawyer representing a committee of unsecured creditors. ``The debtor is seeking to `reward' the two persons who may be most responsible for the debtor's current financial condition.''
The severance deal would give Votis $750,000 - although he has agreed to waive that to pay off debt he owes Moll - and Schiele, $400,000. Both also would receive immunity from many potential claims against them for their time at Moll, immunity that creditors say is much too broad.
The creditors also object because the severance would mean that the company would waive the right to contest more than $1 million in payments beyond Votis' salary that Moll made in the past year to Votis or companies affiliated with him. Those payments include $183,000 in management fees, $744,000 to buy land, $150,000 to rent office space and a $75,000 retention bonus.
The creditors said they are not alleging wrongdoing, but they are continuing to examine the company's finances.
``Right now, I don't think it would be correct for us to say we have firm claims,'' said Artzer, a lawyer with Akin, Gump, Strauss, Hauer & Feld LLP. ``There are simply potential claims out there.''
Not surprising for a bankruptcy court fight, the dispute also is an argument over who has first dibs on what little money could be left. Creditors object that the severance agreement would give the two executives their money ahead of the unsecured creditors.
The money at stake is small compared to Moll's total debt. A September filing by Moll indicated that unsecured creditors are owed $87.2 million. About $52 million of that debt is to Highland. As part of the bankruptcy, Votis is expected to give up his ownership stake in Moll.
Moll officials strongly objected to the creditors' claims.
Votis' retention bonus, for example, actually is a delayed payment on a 2000 performance bonus that a ``significant number'' of employees at Moll received, said Bill Teeple, Moll chief financial officer.
The company does not want to go back and reclaim the bonus from Votis or any of its employees, he said. Schiele received a bonus of $100,000 under the same program.
Teeple said all of the payments to companies affiliated with Votis were proper and should not be challenged. The management fees have been paid for years, and commonly are used for tax purposes, and the other transactions like the land sale and rent were done at market rates.
``They are totally and completely above-board,'' he said. All of them were ``arms'-length transactions,'' he said.
Votis declined to comment because the matter is in litigation.
The two sides also are sparring over other debt that Votis may owe Moll. The creditors say Votis owes $390,000 plus interest from a 1995 loan.
Teeple said Moll does not think Votis owes that money. Nonetheless, Teeple said Votis agreed not to contest the creditors' argument and, in effect, give up his $750,000 severance to offset that loan plus interest, which totals about $750,000, Teeple said.
``George agreed to allow the offset to take place because he had the best interest of the company at heart and wants the process to move on,'' Teeple said. ``It takes a good man to do that.''
Both Votis and Schiele negotiated their new severance packages after the bankruptcy filing. The previous plan would have given Votis his annual base salary of $850,000 and had a less strict noncompete clause, but creditors said it would not have given him or Schiele broad release from claims.
Teeple said such releases from claims are standard, but Artzer said it is not common for them to be as broad as what Moll is proposing. Even though both Votis and Schiele have left their jobs, both men remain on the Moll payroll as consultants and are continuing to receive their salaries because the matter is being litigated and no severance agreement has been signed. Votis has been paid $156,000 and Schiele $100,000 since they stepped down, creditors said.
Teeple said the company and its major lenders are comfortable with the severance proposal: ``In the opinion of the company, it's the right thing to do. In the opinion of the senior lenders, it is the right thing to do. To make a lot more out of it than that is to lose the flavor of it.''