Ruby Tuesday employee bonus plans OK’d, despite trustee objection

By Sarah Lizee

Olympia, Wash., Jan. 22 – The proposed modified key employee incentive plan for five senior leadership employees and a modified key employee retention plan for 48 participating non-insider employees of RTI Holding Co., LLC (Ruby Tuesday) was approved Friday by the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Regions 3 and 9 U.S. trustee Andrew R. Vara said in an objection Tuesday that the debtors sought approval of the KEIP even though they were not able to obtain a topping bid for their assets and projected payments to unsecured creditors may be limited to, at most, their pro rata shares of $3 million.

The proposed KEIP payments equal more than 20% of the total amount that may be available for all general unsecured creditors, Vara said.

“The KEIP is retentive, not incentivizing in nature and should not be approved,” the U.S. trustee stated.

Modified KEIP terms

Participants in the KEIP include the company’s chief executive officer, chief strategy officer, chief marketing officer, chief supply chain officer and chief operating officer, as previously reported.

Under the proposed KEIP, there are two tracks for senior leadership employee bonuses with different goals for each track depending on whether implementation of the plan results in a reorganization or a sale.

The tracks are mutually exclusive – if the applicable goal is achieved for one of the tracks, senior leadership employees would receive either track one bonuses or track two bonuses, but not both.

The first track is for a successful reorganization through restructuring transactions, and it is applicable only if no topping bid is received. If the track one goal is achieved, each senior leadership employee would receive a one-time bonus of 35% of their base salary. The maximum for track one bonuses is an aggregate of $619,500 if the track one goal is met by all of the senior leadership employees.

The second track is applicable only if a topping bid is received. These bonuses would be paid in two tiers.

Tier one of track two, the initial KEIP topping bid payment, was conceived as a one-time bonus from a pool of $550,000, payable if a topping bid is received by the applicable deadline in the restructuring support agreement. However, the initial KEIP topping bid payment is being eliminated under the KEIP/KERP modifications.

Prior to the KEIP/KERP modifications, tier two of track two was conceived as a one-time bonus paid from a pool of $800,000 if, as a result of an effective sales process, a topping bid is received, and a sale closes by the applicable deadline. But due to the elimination of the initial KEIP topping bid payment pursuant to the KEIP/KERP modifications, the entire track two bonus pool of $1.35 million is payable if the criteria for the tier two, track two payment is achieved.

Under the KEIP/KERP modifications, if NRD Capital Management, LLC or an affiliate submits a topping bid and is the successful bidder for the debtors’ assets, any bonus amounts payable under the KEIP to Shawn Lederman, the debtors’ chief executive officer, and to Darrin White, the debtors’ chief operating officer, will be reduced by 50%.

Modified KERP terms

Under the proposed KERP, each participating non-insider employee would receive one or more bonuses adding up to 5% to 20% of their base salary. Of such aggregate bonus percentage, 2.5% to 10% of base salary was to have been paid prior to Dec. 25, and 2.5% to 10% of base salary would be paid upon either the effective date of the plan if no topping bid is received or the closing date of a sale if a topping bid is received.

The maximum potential cost of the KERP is estimated to be $416,658.75 if all of its goals are met by all of the participating non-insider employees.

Under the KEIP/KERP modifications, the initial KERP payment will be made upon entry of the order granting the motion.

Ruby Tuesday is a Knoxville, Tenn.-based foodservice retailer. The company filed Chapter 11 bankruptcy on Oct. 7 under case number 20-12456.

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