11 U.S.C. §363; Key Employee Retention Plan
In re Allied Holdings, Inc., 337 B.R. 716, Case No. 05-12515 (Bankr. N.D. Ga. December 19, 2005)(Drake)
Debtor and its affiliates, also Chapter 11 debtors, were likely the largest providers of car haul and delivery services in the United States. Debtors have approximately 6400 employees, approximately 500 of who are non-union. The debtor proposed a Key Employee Retention Plan (“KERP”) that would provide severance and packages for approximately 80 non-union employees who debtor contended were essential to the debtors’ operations and reorganization.
The specific details may be reviewed in the Opinion, but some of the more important details of the case are as follows:

* The KERP was supported by the unsecured creditors committee and post-petition lenders, but opposed by the US Trustee and the Teamsters union. It was prepared with the input of the debtors’ senior management, compensation committee, and an outside consulting firm. Assuming all bonuses and payments were made, the amount at issue would be 0.5% of the debtors’ annual revenues.
* The standard of review employed by the court was essentially the “business judgment rule,” and a determination of whether there is a sound business purpose for the plan and whether the terms are fair and reasonable. The court held that the debtors met the sound business purpose requirement.
* The eligible employees had suffered through an absence of raises, more job duties, reduced benefits and unpaid furloughs. There was also a higher turnover rate at that level and without the KERP, several key employees may leave.
* The court found the terms of the KERP were generally fair and reasonable, with some exceptions. The court found that some provisions of the severance plan may encourage employees to resign, and therefore, some triggers should be eliminated. Further, the cash bonuses for higher level management were somewhat excessive and should be lowered. Certain bonuses should also be delayed since as of the hearing date they would only have to work another two weeks to be entitled to a bonus. The parties were to confer in good faith to work out the details of the court’s changes.