Marsh incentive plan awards key employees if stores are sold

May 22, 2017

Ten key employees of Marsh Supermarkets can collectively earn bonuses totaling up to $1.1 million as an incentive if they stay and help guide a sale of some of the struggling company’s core 44 stores.

Marsh on May 11 filed to reorganize under the protection of bankruptcy, saying it will close its remaining stores if it cannot find a buyer for all or parts of the chain. Bids will be taken until June 7, with an auction set for June 12.

On Thursday, Chief U.S. Bankruptcy Judge Brendan L. Shannon approved Marsh’s motion to administer the incentive plan.

The 10 employees, whom Marsh doesn’t identify by name in the filing, are described as executives and officers, as well as accounting, real estate and legal personnel.

“A company’s decision to file for Chapter 11 necessarily creates difficulties for its employees and can lead to, among other things, employee retention problems and low employee morale and productivity,” Marsh said in its filing. “Unfortunately, these negative consequences affect the company’s ability to continue its normal business operations, maintain vendor and consumer support, and impair the company’s ability to maximize sale values and achieve the highest or best possible recovery for stakeholders.”

Marsh continued: “For this reason, bankruptcy courts and stakeholders have long authorized incentive plans designed to, among other things, improve employee morale and incentivize job performance.”

The 10 employees are only eligible to receive bonuses if:

a sale results in a buyer or group of buyers purchasing more than 15 stores that will continue to operate as groceries;

proceeds from a transaction exceed $25 million;

the total value of the sale exceeds the value of Marsh’s inventory and equipment by at least $1 million;

the employees remain with the company through the closing of the transaction.

They together can earn between $526,250 and $1.1 million based on a percentage of a sale amount ranging from $25 million to more than $50 million.

The incentive plan considers only “going concern transactions,” defined as either the sale of the entire remaining business as a going concern or blocks of remaining stores being sold to other grocery chains that will be operated as a going concern, the filing said.

“… a transaction (or series of transactions) would bring more value to the debtors and their estates than the liquidation of the assets, keep landlord spaces filled, keep doors open for vendors to continue to sell product and customers to continue to purchase product, and keep as many employees employed as possible,” Marsh said.

Sun Capital Partners, a Florida-based private-equity firm, bought the Marsh grocery chain in 2006 for $88 million and the assumption of $237 million in debt, with hopes of turning around the struggling company’s fortunes and unloading it quickly for a tidy profit.

But, in the decade since, Marsh has limped along, trailing much of the competition and steadily closing stores. In recent months, the pace of closings accelerated, as delinquent-payment lawsuits from landlords and vendors piled up.

Sun quietly sold controlling interest in Marsh to Delaware-based JT Grocery Consulting LLC on March 24, the same day it formed. The buyer acquired “25 percent of the economic rights and all of the voting and control rights,” bankruptcy papers say.


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