On New Year's Eve, deCODE genetics, Inc., which filed for chapter 11 protection on November 16, 2009, sought court authority to reject a Change in Control Benefit Plan for the company's managerial employees. deCODE genetics intends to utilize the chapter 11 case to sell its interests in a subsidiary, Islensk erfdagreining ehf, its intellectual property and certain drug compounds to Saga Investments LLC or a higher bidder. A hearing on the approval of a sale is scheduled for January 14, 2010. All remaining assets and operations of deCODE will then be liquidated pursuant to a plan of liquidation.
In the motion, deCODE genetics acknowledges that the transactions that are contemplated by the sale to Saga could constitute a change in control under the benefit plan, which would entitle eligible employees to "among other things, the vesting of stock options or other equity plans, lump sum severance payments and certain insurance-related benefits." Following the sale to Saga (assuming no higher bidder is successful at a January 12th auction), "most of the Eligible Employees will likely remain in the employ of the ultimate purchaser." For those employees, the benefits that would accrue under the plan would constitute a "windfall" according to deCODE's motion. As a result, deCODE's board of directors terminated the plan on December 30, 2009. However, deCODE is also seeking court approval to reject the plan under section 365 of the bankruptcy code in the event that "such termination is later deemed to be ineffective."
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