Diamond’s motion was filed on March 6, and the objection was filed on March 20, one day after initial bids for company assets were due, and four days before the auction (see "Plans for Auction of Diamond, Alliance"). A hearing on the motion is scheduled for March 27.
The proposed bonuses were included in two programs, a Key Employee Incentive Plan, and a Key Employee Retention Plan. The Incentive Plan provided for payments to 17 employees as incentives to assist in the asset sale, and tied to benchmarks for the sale. The employees were identified as 5 employees of Diamond Comics, 11 employees of Alliance Game Distributors, and 1 employee of Diamond Select Toys.
Bonuses are tied to the sale prices of Alliance, Diamond Select, and the remaining assets. Over $1 million in payments is proposed, with over half coming in two payments to Alliance employees of $272,000 each. There's a big drop to the next largest, six payments of $40-$45,000, two for employees of Diamond and four for employees of Alliance. Payments of $30-$35,000 for three Diamond employees are proposed, with the remaining bonuses at $10-$25,000.
Another $56,000 in bonuses are available depending on the price paid collectively for the non-Alliance assets. That amount, proposed as a total amount for five Diamond employees is described as 5% of their annual salaries, an amount that would average $225,000. The amount triggering bonuses is $12 million, apparently what the expectation is for the value of Diamond, Diamond UK, and Diamond Select Toys.
The Retention Plan proposes payments of $241,900 to 17 Diamond and 3 Alliance employees in amounts ranging from $5,000 to $22,000 for staying through the sale of Alliance assets, around April 10; and another $35,000 in payments of $5,000 each for staying through final asset sales, around August 31. The amounts are described as 10-11% of the employee's base salary, so the salaries represented range from around $50,000 to around $220,000.
The plans were designed by Diamond's restructuring consultants, from Getzler Henrich & Associates LLC. The motion was accompanied by a declaration from Robert Gorin, one of the two Co-Restructuring Officers, in support of the plans. Surprisingly, Gorin noted that he was retained as CRO on July 17, 2024.
The bankruptcy trustee objected to both plans, especially noting the dates, since the sale of the assets will have occurred before the hearing on the motion. He notes that the prices that trigger the bonuses in the Incentive Plan are just over the stalking horse bid, so one bid will trigger payments. "In other words, the KEIP is not really an incentive bonus; it is a bonus to funnel money away from creditors and to certain favored key employees," he argues.
The trustee also notes that the motion states that only three of the employees in the Incentive Plan meet the definition of "Insiders," under the law, but that four of the employees have President titles, five have Vice-President titles, three have "Chief Officer," titles, and five have "director" titles.
He argues that the Retention Plan is unnecessary, since employees will only have to stay two weeks after the hearing on the plan to trigger the payments. "This is so without any evidence that a single proposed recipient has a job offer or any plans to leave in the next two weeks," he wrote.
The trustee also argued that the law requires that information on the names, titles, and salaries of the employees should be public, and that Diamond's motion to redact that info from public documents should be denied.
The hearing on this motion is scheduled for next Thursday, three days after the auction.
