In-Shape secures approval of key employee incentive, retention plans

By Sarah Lizee

Olympia, Wash., Jan. 27 – In-Shape Holdings, LLC secured court approval to continue implementing its key employee incentive and key employee retention plans, according to an order filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

The KERP’s participants are 26 non-officer employees, and the total amount of potential payments is not to exceed $1,133,508, $374,560 of which became due and was paid prior to the petition date, as previously reported.

The KEIP is divided into two parts for officers and non-officers.

The officer KEIP provides for two incentive awards, both of which are payable upon reaching certain milestones toward achievement of a sale. The first incentive award, not to exceed $572,658 in total, $190,886 of which became due and was paid prior to the petition date, is calculated to be 150% of each KEIP officer’s 2020 target bonus.

One-third of the first incentive award was payable after signing of an asset purchase agreement by the debtors and a buyer on terms, including post-petition debtor-in-possession financing and agreed-upon budget, satisfactory to the debtors’ lenders. The debtors made this payment prior to the petition date.

The remainder of the first incentive award, representing 100% of each KEIP officer’s 2020 target bonus, will be payable upon the closing of a sale for the debtors’ assets and the achievement of other milestones.

Similar to the second incentive award to be paid to the KEIP officers, an incentive award would be payable upon the achievement of all of the KEIP milestones, to any of the four KEIP non-insider employees who are not offered employment by the successful bidder on terms comparable to their current employment with the debtors. The non-officer incentive award for each KEIP non-insider employee is calculated to be three months of that employee’s base 2020 salary, with the total amounts of the non-officer incentive awards not to exceed $234,000.

In-Shape added that in recognition of the importance of retaining and incentivizing the employees through the closing of a sale, the debtors’ stalking horse purchaser and DIP lenders agreed that payments under the plans should be included in the DIP budget and paid as earned, subject to court approval.

In-Shape is a Stockton, Calif.-based health club operator. The company filed bankruptcy on Dec. 16 under Chapter 11 case number 20-13130.

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