The former top executives of Perseus Books could be looking at an extended legal fight to get what they see as their fair share from the company’s acquisition by Hachette Book Group.
Perseus and its former private equity owner Center Lane Partners told a Manhattan court on Monday that David Steinberger, Charles Gallagher and Richard Joyce, former chief executive, chief financial officer and chief marketing officer of Perseus, respectively, have no rights to any net proceeds realized by the 2016 acquisition in pushing for an outright dismissal of the lawsuit.
Perseus now operates as a publishing division of Hachette, as its distribution arm was sold to Ingram Content Group, but in their late March complaint, the former executives said they were “instrumental in growing and expanding Perseus until it reached the point of a highly successful sale of the company.” They claim the two sales totaled $120 million, but Perseus, Hachette and Ingram have never disclosed financial terms.
They also claim that their employment contracts entitle them to payouts for certain “stay bonuses,” a typical carrot offered to get high-level employees to stay on through a sale process, and some management share interests, based upon a full calculation of net proceeds from the deals. Although the former executives admit that a calculation of this kind can take years, Center Lane and Perseus “have dragged their feet and sought, at every opportunity, to avoid paying the executives the compensation to which they are contractually and rightfully due.”
And the amounts at stake are considerable. The stay bonus of Steinberger, who led Perseus since 2004, starts base of $808,000, with 15 percent annual interest to accrue. He’s also entitled to additional bonus amounts based on net sale proceeds in excess of $400,000, depending on certain financial thresholds, according to his amended employment agreement filed with the court.
Center Lane and Perseus disagree with the executives take on their employment contracts. First, they argued that the executives signed a release several weeks after the 2016 sale of Perseus, which included their terminations, which allegedly prohibits them from making “demands of whatever character,” be it for information or action by Perseus.
As for the payments the executives are allegedly owed, Center Lane and Perseus admitted that the relevant employment contracts call for payment on management interests and stay bonuses, but only after “a full and final calculation of net proceeds is capable of being made,” according to the dismissal motion.
Apparently that calculation can’t yet be made, even two full years after the acquisitions.
“Plaintiffs do not, and cannot, allege that a final calculation of net sale proceeds can be made at this time.…And if a final net sale proceeds calculation cannot yet be made, then plaintiffs are not entitled to any payment,” Center Lane and Perseus wrote. “Accordingly, without any final calculation of net sale proceeds, defendants necessarily have not breached and obligation to pay plaintiffs.”
With that, Center Lane and Perseus pushed the court to dismiss the suit with prejudice.
Representatives of Perseus, Center Lane and the executives could not be reached for comment.
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