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July 2, 2000

Tortorello, O'Brien and Kellman Son Could be Big Losers if Safelite Motion is Granted

Reported by AGRR Magazine:

Safelite Glass Corporation has filed a motion asking the court to reject certain of its on-going contracts with individuals, which if granted, could cost three individuals nearly $900,000 in monies due them.

In a motion before the U.S. Bankruptcy Court in Delaware on June 27, Safelite asked that it be allowed to reject the remainder of certain contracts it has with former Vistar CEO William (Bill) Tortorello, Jack Kellman (son of former Globe Glass and Mirror president Joseph Kellman) and Thomas O'Brien, former vice president of field operations for Vistar. Vistar had been created when Globe Glass & Mirror merged with Windshields America. Safelite subsequently merged with Vistar in December 1997.

Safelite, the nation's largest retailer of auto glass repair and replacement services, filed a petition for reorganization under Chapter 11 of the bankruptcy code on June 9. It cited reduced margins since its merger with Vistar as one of the reasons for the need to reorganize. Late last year, its largest customer Allstate Insurance, provided notice that it would not be renewing its Best Efforts Agreement with Safelite.

Each of the contracts from which Safelite seeks relief is distinct. The Tortorello contract is a severance agreement which provided that Tortorello receive at the time of the merger:

- A one-time bonus of $2,755,506;

-$700,000 (the amount equal to one year's salary) per year for three years;

-Continued health benefits for three years;

-$633,849 in cash, representing benefits accrued under a compensation plan existing at the time;

-A pro rata award under an existing bonus plan paid within 90 days of the closing;

-$1 million in cash payable upon closing;

-A consulting fee of approximately $1.1 million payable three months after the Vistar merger closed;

Safelite estimates that Tortorello is still due approximately $376,928, excluding benefits, under terms of the agreement which ends in December, 2000.

Kellman's Consulting Agreement was signed in July 1999 and calls for him to be paid $150,000 annually and to receive a bonus of $100,000 within 15 days of renewal of the Best Efforts Agreement between Allstate and Safelite, and an additional $50,000 if such an agreement occurs in 1999. Kellman was also due a bonus of $25,000 for every point (one percent) of compliance under the Allstate program in excess of an agreed-upon target. Safelite estimates Kellman is still due $312,000, exclusive of bonus and benefits, under the agreement which is also scheduled to end in December, 2000.

O'Brien is still due approximately $188,462, excluding benefits, under the terms of his employment agreement with Vistar. O'Brien's employment had been terminated in September 1998 and his employment contract require that Safelite make severance payments based on his annual salary of $350,000 and continuing until December, 2000.

In its motion, Safelite argues that "the remaining obligations of the non-debtor parties to the contract relate to certain restrictive covenants, and the Debtor (Safelite) does not believe any remaining value to be received in connection with such covenants justifies the Debtor's remaining obligations under the contracts."

"Moreover, due to Allstate's announcement that it does not expect to renew its Best Efforts Agreement with Safelite ... the benefit of Mr. Kellman's consulting services relating to this agreement is substantially diminished, if not completely extinguished."

A hearing on the motion will take place only if objections to the motions are received by the Court in writing by 4 p.m. on July 12, 2000.

(c)2000 by Key Communications, Inc., publishers of USGlass and AGRR magazines. All rights reserved. Reprinted with permission.

Case #00-02252-MFW  / Judge Hon. Mary F. Walrath

You can view the court documents (62 pages) relating to the motion filed regarding the above mentioned contracts in .pdf format (1.53mb)
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Update July 22, 2000> O'Brien & Kellman File Objections to Motions

source: AGRR Magazine & US Bankruptcy Court Delaware District