December 31, 2018 – Synergy Pharmaceuticals has filed a motion seeking approval of a key employee incentive plan (the “KEIP”) for the Debtors’ Chief Executive Officer and Chief Financial Officer [Docket No. 142].
The KEIP motion states, “As the Debtors implement the process for the sale of substantially all of their assets (the ‘Sale’), it is imperative that the Debtors’ top executives – the Chief Executive Officer (‘CE’) and the Chief Financial Officer (‘CFO,’ and with the CEO, each, a ‘KEIP Participant’) – are appropriately incentivized to maximize the total value received by the Debtors in any sale transaction to ensure optimal recovery for all stakeholders. The KEIP includes only the CEO and CFO. It is critical to maximizing the value of a Sale transaction that both KEIP Participants remain actively involved in the solicitation of higher and better offers for assets and facilitating a competitive auction process, while also continuing their current day-today responsibilities to ensure that the Company is operating efficiently and effectively….
The KEIP Participants will only receive a payout under the KEIP (i.e., the Threshold level) if a competing bidder participates at an auction and increases the Total Value that the Debtors will receive from the Sale process by $15 million from the total amount of consideration offered by the Stalking Horse Bidder, which represents the Stalking Horse Bid plus the expense reimbursement and break-up fee plus $5 million. The Threshold level is set conservatively compared to incentive programs of similarly situated companies, which provide for some payout simply upon consummation of the already documented sale.
The maximum aggregate payments under the KEIP would be approximately $2.08 million, in which case the Total Value of the Sale transaction would be $600 million (approximately three times the consideration offered by the Stalking Horse Bid), the Company’s creditors would be paid in full, and the Company’s equity holders would receive a distribution substantially in excess of the trading price of the Company’s common stock on the Petition Date. The KEIP awards would be paid out on the earlier of the closing of a Sale transaction or consummation of a plan of reorganization.”
KEIP Targets –
- Threshold – $215mn,
- Turning-Point – $350mn
- aximum – $600mn
The Court scheduled a hearing for January 17, 2019 to consider the KEIP motion.
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