EXCLUSIVE: The future of the Ryan Kavanaugh-run company seems to speed up and slow down several times and several court filings a day ever since they filed for Chapter 11 back on July 30. Late tonight, Relativity put pedal to the metal with a plan to pay out about $314,868 before the scheduled October 15 sale to company president Tucker Tooley, managing director Carol Genis, co-COO Greg Shamo, CFO and co-COO Andrew Matthews and Relativity Television boss Tom Forman in a proposed Key Employee Incentive Plan.
While Kavanaugh himself is not eligible for the KEIP, the potential fast tracked payout doesn’t end there. In another slew of motions filed late tonight, Relativity wants $923,806.33 to pay to seven producers and/or production teams to keep in business with them.
With “over 29 series in production and more than 46 contracted pilots and presentations, including eight upcoming scripted shows” in its network deals, the struggling company says that they “strongly believe that maintaining the viability of the television unit will be critical to the overall success of the Debtors’ pending sale process and these chapter 11 cases.” The producers Relativity want to pay are Jay Blumenfield and Tony Marsh, Bill Thompson Productions, Alibi TV, Ellen Rakieten Productions, Brian Lando Productions, Bogner Entertainment and Press Start, Inc. The agreements with these producers has been deemed “highly confidential” by Relativity and is being filed under seal.
These and a separate 80 employee retention plan comes as an already contentious hearing is scheduled for Tuesday in NYC before bankruptcy Judge Michael Wiles on another payment to Relativity from the $45 million debtor-in-possession financing plan. The judge is also expected to either rule or offer guidance on the plan and timing of selling the company.
And that sale is why Relativity want incentives in place for Tooley, Forman and the other key employees – essentially so they don’t bolt and bring the whole house of deals down. “Relativity has created and is proposing these employee incentive and retention plans to help motivate and retain talent throughout the sale process, which will help us maximize the value of our assets,” said a company spokesperson tonight after the KEIP filing.
“To ensure that the Sale Process is managed effectively and efficiently, the Debtors need the services of certain of the Debtors’ Key Employees to prepare the company for the Sale Process, engage with potentially interested parties both in telephonic and face-to-face meetings, and interact with the Debtors’ advisors who are assisting in the Sale Process,” says the motion filed at 10:17 PM ET Monday by Relativity’s lawyer Craig Wolfe and others at Sheppard, Mullin, Richter & Hampton LLP and Richard Wynne and others at Jones Day (read it here). “These critical tasks are in addition to the Key Employees’ normal duties in running the Debtors’ business and managing a rapidly unfolding process internally. The Key Employees are working the equivalent of multiple jobs and are absolutely critical to each.”
“For the five Key Employees, the salary reductions aggregated $795,000 and resulted in average pay reductions of 10.9%,” notes an accompanying declaration by Chief Restructuring Officer Dr. Brian Kushner tonight. Both Relativity’s motion and Kushner’s declaration note how the company has cut its staff down to 84 full time and 1 part time employees in the last month. “The proposed KEIP is an incentive program, with compensation contingent upon meeting the demanding, objective and pre-determined performance-based targets that are based upon the incremental proceeds generated in large part by the key employees’ performance,” adds the motion.
The KEIP pool will be fully funded if Relativity is sold in October for a penny more than $254 million. If the company is sold for $1 million more than the stalking horse price of $250 million, the KEIP pool will be 25% funded and so on via quarterly percentages up to 44 million over the current going price.
With a hearing on the matters being requested for September 10, expect to hear a new wave of objections from Relativity’s creditors about the incentives, retention and producer motions – on the money and the last minute timing.