The U.S. Trustee assigned to the Republic Airways Holdings case filed with the U.S. Bankruptcy Court an objection to the Debtors’ key employee incentive plan (KEIP) and key employee retention plan (KERP).
The objection asserts, “The United States Trustee objects to the approval of the Motion because neither of the bonus plans satisfies the requirements of Section 503(c) of the Bankruptcy Code. The KEIP Plan, which seeks to pay quarterly based cash awards to six of the Debtors’ insiders (that is, the individuals that the Debtor considers to be its Executive Leadership Team), is a retentive based plan….Moreover, the argument that the KEIP Plan is incentivizing must be rejected. Based on the historical performance of the Debtors, the benchmarks described in the Motion as incentivizing the Executive Leadership Team are not difficult goals to achieve..”
The objection continues, “The KERP Plan is similarly deficient in two respects. First, the Debtors seek to compensate several employees holding the titles of Vice-President, Managing Director and Director. The Debtors’ argument that these individuals are not insiders because they do not have a ‘controlling interest’ and are ‘not in control of the debtor,’ Motion at section 44, fails to take into account the full definition of “insider” set forth in Section 101(31) of the Bankruptcy Code….Second, the Debtors have failed to provide any detail or criteria as to how they will determine to award and allocate the proposed bonuses under the KERP to the individual KERP participants.”
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