Blockbuster Lawyers Argue for Executive Perks18 Jul, 2011 By: Erik Gruenwedel
Lawyers object to Justice Dept. concerns regarding proposed incentive compensation to lone remaining executive
Lawyers for Blockbuster Inc. — the legal entity left following the movie rental chain’s asset sale to Dish Network LLC — July 18 filed a motion objecting to concerns by the United States Trustee regarding proposed compensation perks to Bruce Lewis, principal executive officer and lone employee.
Specifically, the motion claims Lewis’ bonuses would accrue from savings the executive extracted while finalizing payments to debt holders following Blockbuster’s 2010 bankruptcy, and are not part of an alleged long-term retention program.
U.S. Trustee Tracy Hope Davis, who works for a unit of the DOJ in charge of overseeing dissolutions of publicly held companies, earlier this month filed a separate motion claiming Lewis could be entitled to bonus payments of $125,000 for every $10 million that is paid to secured creditors by July 31.
Secured creditors are owed about $50 million in claims and receive preferential payment ahead of non-secured lenders, according to the filing.
Hope said efforts by Blockbuster Inc. to avoid abiding by legal requirements outlining bonus payments should in itself void any bonuses to Lewis.
Blockbuster’s lawyers argue that Lewis, who is receiving an annual base salary of $375,000 without benefits, is key to creditors receiving maximum value for their interests. The motion claimed Lewis’ efforts have already secured creditors $20 million from the purchase price adjustment escrow under the asset purchase agreement with Dish.
“Mr. Lewis is critical to the wind-down process and is the individual who is best equipped to accomplish it expeditiously, efficiently and, most importantly, economically,” read the motion. “The proposed program, which will incentivize him to achieve these goals and maximize funds available for distribution to holders of pre-sale administrative expense claims and secured claims, is fair and reasonable and, as stated, not one objection has been raised by any party with an economic interest in these cases.”
U.S. Bankruptcy Court Judge Burton Lifland is scheduled to hear the motion July 19.
Separately, Lifland extended until Oct. 11 the deadline when Blockbuster must decide whether to accept or terminate the lease on its largest disc distribution center in McKinney, Texas.