Orleans Homebuilders, Inc. has struck a separation and settlement agreement with the company's long-time CEO Jeffrey P. Orleans.
The Bensalem, Pa-based builder, which has been under Chapter 11 bankruptcy protection since March 1, has asked the bankruptcy court judge to approve an agreement that would have Orleans resign from his position as chairman of the board, chief executive officer and president in return for a $700,000 lump sum payment, according to the agreement, which was filed in the U.S. Bankruptcy Court's Delaware District on Thursday, Oct. 14.
Jeffrey Orleans has worked for the company his grandfather founded for more than 40 years. He's been a director since 1983 and served on the board and as CEO since 1986. He became president in the fall of 2009.
The company, the plan sponsors and Jeffrey Orleans have "engaged in lengthy discussions and negotiations regarding Mr. Orleans' future role with the Debtors" and, as a result, negotiated the $700,000 separation fee.
Under Orleans employment agreement, Orleans is owed $135,426.34 for deferred compensation, $42,308 for unpaid vacation time, and is eligible for a payment of as much as $500,000 in connection with the company's short-term employee incentive program. Orleans annual base salary is $1.1 million, but he voluntarily reduced his base salary to $675,000 during the bankruptcy. He also is entitled to 3% of the company's income before federal and state income taxes under his employment agreement.
Since those totals, plus the potential costs of litigation "far exceed" the $700,000 Jeffrey Orleans has agreed to accept for his resignation, the company said in the petition that they think the payment is reasonable, especially since Orleans has agreed to a number of other conditions as part of the proposed settlement as well.
In addition to resigning and agreeing to drop any other claims against the company, Orleans also is agreeing to sign away any rights he may have to any of the current trade names and trademarks and intellectual properties. He is agreeing to not use any of the Orleans names now in existence enumerated in a long list in the filing. He will, however, have the right in the future to use a list of names that start with "J.P. Orleans" and "AP Orleans".
Other items Jeffrey Orleans has agreed to include:
-Hold onto his equity interest in the company until the company's new plan for reorganization goes into effect.
-Refrain from saying or publishing, or encouraging anyone else from saying or publishing anything disparaging about the company.
-Not poach employees from Orleans Homebuilders for a year.
-Keep confidential information confidential.
-Not do anything to delay, hinder, or obstruct the company's solicitations of approvals for its reorganization plan.
A bankruptcy court judge has signed off on Orleans' disclosure plan, sending its reorganization plan off to creditors for a vote. A hearing for the court's approval of the plan is set for Nov. 16. If approved, the company would emerge with less than $200 million in debt, down from more than $500 million at the time of the filing on March 1.
Under the proposed plan three debt holders, who collectively hold roughly 85% of its debt, will hold a controlling interest in the company. These "plan sponsors" are Strategic Value Partners, Anchorage Illiquid Opportunities Offshore Master, and Bank of America's distressed debt desk.
It was these three creditors who reportedly opted to support the reorganization of the 90-year-old company rather than see it liquidated through a sale of its assets to the highest bidder. NVR had launched a starting bid of $170 million for all the company's assets. NVR is now suing.