Mace gets kicked in the shins
Major disappointment for Mace yesterday with an arbitrator's decision that the company must pay more than $4 million to former CEO Louis D. Paolino. Essentially, Mace wasn't paying Paolino's severance that was part of his employment agreement, essentially arguing that he sucked out loud and was so bad it must have been at least partly on purpose, but the arbiters disagreed:
The arbitration panel found that Mr. Paolino did not engage in willful misconduct, and was therefore entitled to a severance payment under his Employment Agreement upon his termination as Chief Executive Officer of the Company on May 20, 2008.Here's the original story about Mace terminating Paolino (gosh, I love using that term as a synonym for "fire"). Note that they were less than pleased with him at the time:
The company's bylaws authorize the removal of a director at any time by the unanimous vote of all other directors. This vote occurred during a special meeting of the board held May 20. "The actions of Mr. Paolino that the Board has determined as willful misconduct generally relate to the Board's belief that Mr. Paolino has not followed the instructions of the Board or sufficiently performed his supervisory duties," according to the filing.So, I'm not sure whether the bylaws were misunderstood by the board, or just not legal as they were written, but Paolino has apparently proven that if he did, indeed, suck out loud, that it wasn't because he wasn't trying his darndest. Also note that Paolino gets back 1,769,682 options that he was denied when fired, so he's probably bummed that the news of his $4 million award crushed the stock price down to its 52 week low and it's sitting at 66 cents a share right now. Nor is that $4 million something to sneeze at. As Raefield says in the press release, the company can afford it, but for how long? The outlay represents about 45 percent of the company's $9 million+ in cash, but the company is burning through cash quickly. Check out the company's 2009 year-end filing. It's not pretty. The company has lost $9 million over the last 12 months on continuing operations, nearly $11 million all told, and it can only generate cash through the sale of car washes for so long. At some point, the company is going to need to get the ship righted or get a cash infusion from a new major investor through some kind of stock issuance or something. For positive signs, they can at least show they're kind of moving in the right direction, having lost nearly $13 million on continuing operations in 2008, but they generated $10 million less revenue this year (because of not focusing on the digital marketing stuff), so while it's good they lost less while generating less, they also still just generated less. And while they say they're focusing on security, even the security is $2 million less than last year. Looking at it another way, the company's loss represents a whopping 38 percent of revenues, vs. just 28 percent last year. That's not good. And the $4 million hit this year isn't going to help them show better numbers in 2010. I've got a call in to see what happened here, but they probably can't talk further about it.