April 14 (Bloomberg) -- Six Flags Inc., the U.S. theme-park owner facing possible bankruptcy, set a $3 million “success bonus” for Chief Executive Officer Mark Shapiro, to be awarded if the company restructures its debt out of court or goes through Chapter 11 reorganization.

The bonus is part of an employment agreement with Shapiro extended through April 1, 2013, Six Flags said in a regulatory filing yesterday. Five other managers also had contracts extended with such bonuses. The accords keep the base salaries at current levels.

Shapiro receives a base salary of $1.3 million a year. Chief Financial Officer Jeffrey Speed, who earns $775,000, would get another $750,000 as a “success bonus.” The plan would also give the executives stock options and restricted shares.

Six Flags hasn’t posted a profit since 1998. The New York- based company faces bankruptcy if it fails to restructure $287.5 million in Preferred Income Equity Redeemable Shares, or PIERS, plus accrued dividends, before a mandatory Aug. 15 redemption.

The stock plunged 88 percent in the last year, and Six Flags said last week it will be suspended from trading on the New York Stock Exchange for not meeting listing standards.

“A ‘success bonus’ -- it just makes a profanation of the word ‘success,’” said Graef Crystal, a former compensation consultant and author of “The Crystal Report on Executive Compensation.” “Success is going bankrupt?” he said in an interview yesterday. “Success is coming out of bankruptcy?”

Six Flags said in March that it may have to seek a pre- packaged or pre-arranged Chapter 11 filing if it can’t negotiate a restructuring agreement with the PIERS holders out of court.

‘Success Fee’

“The success fee is based on a successful restructuring and substantial de-leveraging of our balance sheet,” CFO Speed wrote in an e-mail yesterday. The restructuring “is intended to provide the company with operational and financial flexibility to enable it to generate long-term growth,” he said.

The company also said last month that one of the principal holders of its senior notes due 2010 has declined to meet about restructuring. The portfolio manager, whom Six Flags didn’t identify, “has refused to even meet with me in person,” Shapiro said on a conference call with analysts and investors.

“Management’s efforts are focused on an out-of-court solution,” Speed said by e-mail. “However, if that solution is not achievable due to the unwillingness of certain investors, we may be forced to utilize the courts to effect the restructuring.”

$2.1 Billion Debt

Shapiro, a former ESPN sports-television executive, was named CEO in December after Washington Redskins owner Daniel Snyder won a three-month battle with former CEO Kieran Burke for control of the company. Six Flags had more than $2.1 billion in long-term debt at the end of 2005, when the new management team took over.

“The company is making progress with its turnaround strategy,” Moody’s Investors Service Inc. analysts John Puchalla and Alexandra Parker wrote in a March 16 research note. Six Flags posted positive free cash flow for the first time in 2008, according to a March 10 statement.

“The first step to fixing this company was turning around the operations and restoring faith in our brand,” Shapiro said on a conference call last month. “The next step was always the balance sheet.”

U.S., Canada, Mexico Parks

Six Flags owns 20 amusement parks in the United States, Canada and Mexico. Under Shapiro, the company sold $400 million in “non-core” assets and entered into a $1 billion credit facility with extended maturities. It also eliminated $130 million in debt in a 2008 bond exchange to try to improve its balance sheet, Shapiro said.

Stockholders are likely to be wiped out in a bankruptcy, Fitch Ratings analyst Mike Simonton wrote in an e-mail yesterday. Unsecured bondholders, who have no collateral backing their claims, may recover less than 10 percent, “and likely as little as zero,” he said.

The “success bonus” plan may not hold up through an in- court proceeding, Simonton said.

“Labor agreements and other deals can be opened up and re- cut by the judge in a bankruptcy,” he said. “So it’s unclear if the post-bankruptcy portion of this arrangement would withstand the test of the court should the company actually file.”

Six Flags had $210.3 million in cash and more than $2.1 billion in long-term debt at the end of 2008, according to the March 10 statement. Sales for the year ended Dec. 31 were $1.02 billion, up 5.2 percent from 2007.

Other Managers

Other managers whose employment contracts were extended are Louis Koskovolis, executive vice president of corporate alliances - sponsorship; Mark Quenzel, executive vice president of park strategy and management; Andrew M. Schleimer, executive vice president of strategic development and in-park services; and Michael Antinoro, executive vice president of entertainment and marketing.

Six Flags also set additional bonuses tied to financial performance, of $1.3 million for Shapiro and $775,000 for Speed, with lesser amounts for the other four executives.

Six Flags fell 2 cents, or 9.5 percent, to 19 cents at 4:15 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net.

Last Updated: April 14, 2009 16:26 EDT