8:36am PT by Eriq Gardner
Relativity Bankruptcy: Objections to Employee Retention Plan Resolved as Judge Seals Incentive Targets
Objections to an employee incentive plan were resolved at Monday's hearing in Relativity's Chapter 11 bankruptcy case. At the hearing, debtor attorney Craig Wolfe disclosed that discussion with the United States Trustee have led to a resolution of the concerns over the debtor's plan to give key employees incentives so as to retain them through the bankruptcy process. The trustee had argued that there hasn't been enough justification for the incentive plan under bankruptcy code, that Relativity has fallen short on articulating the procedures on how bonuses will be awarded and that some of the individuals who are primed to receive them fit the definition of "insiders."
Changes to the plan, it was said at the hearing, have been "largely non-economic." Judge Wiles agreed to seal employee-by-employee incentive targets so no one will be able to mathematically figure out their salaries, although the maximum bonus pools are still non-sealed information. Wolfe cited safety as one reason for sealing the incentive target information. The trustee reported getting repeated calls from an un unnamed individual about Relativity. "I'm not going to decide this issue on the basis of whether a persistent creditor is a risk," the judge said. The trustee also said it was already possible to deduce employee salaries based on information in previous motions, but Wolfe disputes that assessment. He also said that Relativity's future buyer would have an interest in keeping this private.
Relativity wants to pay 81 employees bonuses after the sale is completed. Many of them took pay cuts at the time of the Chapter 11 filing. The group includes president Tucker Tooley, co-COO Greg Shamo, managing director Carol Genis, CFO and co-COO Andrew Matthews and television CEO Tom Forman and managing director Andrew Marcus. In court papers filed on Sunday night, the debtors talked about their role in assisting the bankruptcy process. In total, Relativity wanted to pay out about $1.5 million.
The judge took up the objection of Macquarie Investments in his private chambers. Macquarie,, which had provided millions in loans for the films, The Woman In Black 2: Angel Of Death, The Lazarus Effect and Beyond The Lights and claimed a lien on the domestic distribution agreements.
Among the objectors is Netflix, which court papers reveal has paid $283 million in license fees for Relativity's films since 2010. The streaming service has told the New York bankruptcy court that Relativity will likely miss the minimum number of films it has to deliver this year.