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Key Employee Retention Program (KERP)

A program designed to retain a specified group of employees. A KERP usually contemplates the payment of a fixed lump sum, either on a one-time basis or a fixed, regular basis (i.e., a retention or “pay-to-stay,” bonus).

Chapter 11 debtors may seek to have a KERP approved as a means of retaining key employees through a specified term, as a means of retaining administrative and managerial continuity during a chapter 11 case.

Qualifications to receive payments under a KERP are typically only tied to an employee being or remaining in a debtor’s employee through a specified date, or the occurrence of a future event, like the consummation of a § 363 sale.

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