 
Vitro Sale to Sun Closes; Court Denies
Motion for Million-Dollar Incentive Program
June 17, 2011
A federal Texas bankruptcy court has denied
a motion by Vitro
America and related Vitro subsidiaries for a key employee incentive
program (KEIP) that would have provided bonus compensation to
certain employees, for their work in closing the sale of their
assets to American Glass Enterprises LLC, an affiliate of Sun
Capital Partners. The court approved
the sale of Vitro America’s assets to the private equity
firm earlier this week, and USGNN.com™ has confirmed that
the sale closed today.
According to Ben Thomas, director of strategic
marketing for Arch Aluminum and Glass, also part of Sun Capital,
"We will begin the integration process now that the deal has
been completed.”
The incentive program would have compensated two key officers,
president and chief executive officer Arturo Carrillo and vice
president and chief financial officer Ricardo Maiz, and 15 essential
non-executive level employees. The incentive payments to Carrillo
and Maiz would have been based on the gross proceeds from the
sale, and could have ranged from $0 (for gross sale proceeds
less than or equal to $44 million) to a total of $1 million
(for gross sale proceeds of more than $50 million) to be split
among the two of them. The KEIP also proposed that each of the
15 essential non-executive employees receive a bonus of 12.5
percent of their annual base salaries—equaling a total of more
than $267,000.
However, the committee of unsecured creditors
had objected to the plan, calling it a “disguised retention
plan that does not satisfy the requirements” of the Chapter
11 bankruptcy code. In addition, the committee objects to the
bonus payments to the non-executive level employees noted in
the plan, saying that they are “inappropriate … because the
debtors have failed to provide adequate justification for these
payments under the facts and circumstances of these cases, particularly
given the limited amount of work remaining to close the sale
of the debtors’ assets.”
The court affirms these allegations in its denial.
“While the debtor makes a case for the KEIP as an incentive
plan, it does not set out enhanced job duties and/or goals,
but is based on the amount received at the auction that had
already passed the minimum requirements of the plan, and seems
to largely [be] based on retaining the two top executives through
the sale process … ,” writes the court. The judge goes on to
say that Vitro America and the related subsidiaries “have failed
to demonstrate how these individual participants have enhanced
the value of the debtors’ assets to improve the sales price,
or a justification for these additional payments for a sale
that will soon close to a going concern that may employ these
key individuals post-closing.”
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