10:27am PT by Austin Siegemund-Broka
Relativity Wants Incentive Bonuses for Key Executives, Despite Objections
Relativity is working to secure bonuses for key executives who took salary reductions in the company's bankruptcy.
In a filing Wednesday in the New York bankruptcy court where the company's financial restructuring is unfolding, deputy chief restructuring officer Luke Schaeffer submits a new plan for incentive bonuses, following an objection two weeks ago from U.S. Trustee William K. Harrington.
The new plan moves three executives (the names are redacted in the public filing) into the group of "insiders" for whom the company wants bonuses, though Schaeffer notes he "firmly disagree[s] that these [three] key employees are 'insiders' of the debtors." The group now 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.
The company wants more than the previously requested $314,868 for bonuses. The new amount is redacted.
The new incentive plan divides the key executives into two groups. One would receive bonuses relative to the sale of the company, and the other (comprising Forman and Marcus) would receive them relative to the performance of the company's TV division.
The new incentive pool connected to the sale now will not be complete unless the company receives a bid of $8 million over the "stalking horse" bid, which is the bid of $250 million from an entity called RM Bidder set to start the auction of the company on Oct. 1.
The plan is designed to spur the key employees to secure higher bids for the company, says Schaeffer. "They will only receive a payment to the extent that their collective efforts, including engaging with potentially interested parties and and assisting the Debtors' advisers in the sale process, results in greater value to the Debtors through bids above the Stalking Horse Purchase Price," states the filing. "If there are no overbidders, the seven Key Employees under the Sale Metrics will receive nothing."
In the TV plan, Marcus and Forman's bonuses would be funded through a combination of Relativity collecting from existing revenue streams (network license fees and executive producer fees, for example) and selling new projects.
The division, with series like CBS' upcoming Limitless based on the studio's Bradley Cooper film of the same name, likely will become one of the biggest assets in the auction. Forman told staff the day the company filed for bankruptcy, "For us, it’s business as usual. The mission here is to just keep doing what we've been doing with the team that's been doing it. Quite simply, things in TV don't change as a result of this process."
In his Sept. 4 objection, Trustee Harrington argued Relativity had not demonstrated the primary purpose of the key employee bonus plan is to incentivize the executives and not to ensure they won't leave their jobs. He argued the previous benchmark of $4 million above the stalking horse price at which the executives would receive bonuses is "easily in sight" and creates insignificant performance incentive.
"Using these metrics, the bonuses are essentially guaranteed. Therefore, the KEIP is a retentive plan and not an incentive plan," states the objection (read here).
Separately, Relatvity wants money to pay non-"insider" employees staying with the company through the bankruptcy. Harrington objected to some of the 80 employees in the group, arguing titles like "president" and "executive vice president" indicate they should be grouped with the key executives.
Schaeffer says the group now comprises only 73 employees, three having left the company and an unidentified four now grouped with the key executives. The company now wants $381,103 (the earlier request was for $589,126) for employees who stay with the company through the Oct. 20 sale.