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June 15, 2022 – At a June 15th hearing, the Court approved amendments to the Debtors' key employee incentive program (the "KEIP") as it had been proposed in a an April 27th motion [Docket No. 4707]. On May 20th, the Court had previously issued an order approving the KEIP as to four members of Purdue's senior management team, deferring consideration of the KEIP as to the Debtors' Chief Executive Officer, Dr. Craig Landau, until this hearing.
An order memorializing the KEIP amendments was filed on June 27th [Docket No. 4924]
The present KEIP amendments now include a $500k reduction in respect of the maximum amount that Dr. Landau could pocket under the KEIP and, more significantly for Dr. Landau, include his agreement to waive approximately $2.9mn in severance payments. An order has yet to be filed, but a revised proposed order (and blackline) has been filed at Docket No. 4905.
As recently as June 13th, the Debtors had argued that Dr Landau should be able to benefit from the KEIP as proposed, subject to a caveat that if he was subsequently found by a "final order of this Court or any other court of competent jurisdiction to have (x) knowingly participated in any criminal misconduct in connection with his employment with the Debtors" he would have to sacrifice any payments approved by the KEIP order [Docket No. 4894].
In arguing for full KEIP benefits, the Debtors rejected the characterization of Dr. Landau ("Dr. Landau should not receive incentive compensation because he is the 'author' of a 'sick' corporate culture at Purdue") included in an objection [Docket No. 4766] filed by the Ad Hoc Group of Non-Consenting States (the “Objecting States”). Conceding that Dr. Landau had been at the helm of Purdue since June 2017, the Debtors argued that this was "well after the conduct that…was the subject of a DOJ investigation and the decades of misconduct referred to in the objection."
Those arguments did not carry the day with Judge Robert Drain who was presiding over what may be his last Purdue hearing (and ceratinly one of his last hearings as a bankruptcy judge). Perhaps stung by accusations that he had mishandled the Purdue case and an ongoing appeal of his decision to confirm the Purdue Plan (which includes releases of non-debtor Sackler family members), Judge Drain announced at the end of September that he would be stepping down from the bench on June 30th, considerably earlier than expected (he began a second 14-year term in 2016).
The agreed revised KEIP order now adds as to the Debtors' CEO: "The 2022 KEIP is approved…as to the CEO, provided that (i) aggregate payments to the CEO under the 2022 KEIP shall not exceed $2,552,167.00, which represents a $500,000 reduction from the maximum amount of aggregate authorized payments with respect to the CEO sought in the Motion, (ii) the CEO irrevocably waives, and no claim shall be allowed or paid on account of, any extant rights to severance in connection with any separation of the CEO from the Company (or any new entity formed in connection with emergence), including under the Company’s generally applicable severance plan (which currently would equate to $2,870,100.00) and (iii) Dr. Landau will, on the effective date of any chapter 11 plan, tender an undated notice of retirement to the board of directors (or equivalent governing body) of the Debtors’ successor, which board may accept and effectuate it if and when they see fit, provided that any retirement pursuant to such notice shall be deemed a termination without cause as of the date that it is effectuated for the purpose of the 2022 KEIP and all prior incentive compensation and similar programs (and, provided further, for the avoidance of doubt, that nothing in this paragraph shall limit any other rights of the company or Dr. Landau with respect to retirement, resignation or termination)."
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