While Bug Music's owners are getting ready to sell the Los Angeles-based music publisher to BMG Chrysalis, Bug CEO John Rudolph has filed a suit against the sellers to make sure he gets all of a promised payout from the pending sale, according to a report in Law360.com.
Today, BMG Chrysalis announced it had signed a definitive agreement to acquire Bug, with the closing scheduled to happen by October. Terms of the deal were not disclosed, but sources say that it values Bug Music at $300 million.
Bids were due on Friday and sources say in addition to BMG Chrysalis, other suitors included Simon Fuller's XIX Entertainment, and the London office of the Macquarie Group, an Australian financial firm.
But on the day before bids were due, Rudolph filed a suit in a California court against his employer, claiming that they are short-changing him on a contractual promise of a 2% equity stake in the company, according to Bibeka Shrestha's report in Law360.
That amount was promised on a fully diluted basis in a July 2006 contract, according to the article and an amended October 2008 agreement reaffirmed the company's promise to continue granting Rudolph additional stock if the company's shares were diluted to ensure his stake equaled 2% of the company -- which would be approximately $6 million, based on the deal's alleged valuation.
But the story quotes the suit as saying Bug "breached its obligations to Mr. Rudolph by failing and refusing to provide Mr. Rudolph with the full amount of the promised equity," which he relied upon in continuing his employment at the company while passing up other lucrative opportunities.
In addition to the promised amount of equity, the suit also seeks damages, attorneys' fees and costs, according to the report.
Bug Music declined Billboard.biz's request for comment; at press time Rudolph had not responded to inquiries.