EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
December 10, 2003, by and between Atrium Corporation (successor by merger of KAT
Holdings, Inc. and Atrium Corporation), a Delaware corporation (together with
its successors and assigns permitted hereunder, the "Company" or "Parent"),
Atrium Companies, Inc., a Delaware corporation ("ACI"), and Xxxx X. Xxxx (the
"Executive"); provided, that this Agreement will not be effective until the
closing under the Agreement and Plan of Merger, dated as of October 27, 2003,
among Atrium Corporation, its securityholders and KAT Holdings, L.P. as amended
(as amended, the "Merger Agreement") which closing will be deemed to be the
"Effective Date" for purposes of this Agreement. In connection with amending the
Merger Agreement, ATR Acquisition LLC, a Delaware limited liability company
("LLC"), will become the institutional investor in the Company, and KAT
Holdings, L.P., a Delaware limited partnership ("KAT Holdings, L.P."), will
become a member of LLC.
RECITALS
A. The Company and the Executive entered into an Employment Agreement
dated as of January 1, 2003 (the "January 1, 2003 Agreement").
B. The Board of Directors of the Company (the "Board") determined that it
is in the best interest of the Company and its stockholders to
terminate the January 1, 2003 Agreement and to enter into this
Agreement for purposes of the Company employing the Executive on the
terms and conditions set forth herein.
C. ACI and its subsidiaries will benefit from the services to be provided
by the Executive hereunder.
AGREEMENTS
NOW, THEREFORE, in consideration of the respective agreements and covenants set
forth herein and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. EMPLOYMENT PERIOD
Subject to Section 3, the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to be employed by the
Company in accordance with the terms and provisions of this Agreement,
for a period commencing on the Effective Date and ending on December
31, 2006 (the "Initial Term", and including any and all renewals
thereof, including the Additional Term, the "Employment Period");
provided the Initial Term is renewable for another two-year term
thereafter as mutually agreed upon by the Company and Executive at
least 90 days prior to the end of the then current term. In order to
renew for such two-year additional term (the "Additional Term"), the
Company will specify to the Executive the "Renewal Package" for the
Additional Term within 60 days prior to the end of the Initial Term.
That "Renewal Package" will consist of an
employment proposal reflecting either (a) base compensation for each
year of the Additional Term at a level that is $200,000 above the
Annual Base Salary for the final year of the Initial Term (i.e., a
$200,000 increase for year 4 and no increase to base compensation from
such increased level for year 5 of the Additional Term), an incentive
bonus consistent with the incentive bonus described in Schedule A
hereto and that reflects for each year of the Additional Term a maximum
potential increase to the incentive bonus of $100,000 over the maximum
incentive bonus for the preceding year (i.e., a $100,000 per annum
increase in year 4 and a $100,000 per annum increase above such maximum
year 4 target level for year 5 of the Additional Term) and duties,
terms and conditions otherwise consistent with this Agreement
(including as to perquisites which shall not be reduced from those
provided as of the expiration of the Initial Term), or (b) if requested
by Executive, a base compensation, incentive bonus and perquisites
proposal (including as to amount and structure) proposed by a
nationally recognized executive compensation advisor or consultant that
is selected by the Board and reasonably acceptable to Executive,
together with other terms and conditions otherwise consistent with this
Agreement. Within 45 days prior to the end of the Initial Term, the
Company will determine in its discretion, whether to offer the Renewal
Package to Executive for the Additional Term, in which case, the
Company will notify Executive thereof of its binding offer of the
Renewal Package, and if so offered, the Executive may accept the
Renewal Package by notifying the Company thereof within 30 days prior
to the end of the Initial Term. If so offered and accepted, the Company
and Executive will proceed expeditiously and in good faith to enter
into definitive documentation and agreements reflecting the Renewal
Package by the end of the Initial Term. If the Company fails to observe
the foregoing, or determines not to so offer the Renewal Package to
Executive, then Executive may, as of the end of the Initial Term,
notify the Company that Executive has been terminated by the Company
without Cause, in which case, the Company and Executive will be
obligated under this Agreement, the Buy-Sell Agreement and the stock
purchase rights referenced in Schedule B hereto as if Executive was
terminated during the Initial Term by the Company without Cause. If the
Company determines to so offer the Renewal Package to Executive, and
does so offer the Renewal Package, and the Executive does not accept
the Renewal Package as described above, then the Company may, as of the
end of the Initial Term, notify the Executive that the Executive has
terminated voluntarily and without Good Reason, in which case, the
Company and Executive will be obligated under this Agreement, the
Buy-Sell Agreement and the stock purchase rights referenced in Schedule
B hereto as if Executive terminated voluntarily and without Good Reason
during the Initial Term. In addition, if Executive accepts the Renewal
Package and, as of the end of the Additional Term, the Company
terminates or determines not to renew or continue Executive's
employment on comparable terms and conditions, then Executive will be
entitled to receive $1 million payable in equal monthly installments
for a period of twelve (12) months following such termination of
employment.
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2. TERMS OF EMPLOYMENT
(a) Position and Duties
(i) During the term of the Executive's employment, the
Executive shall serve as Chairman, Chief Executive
Officer and President of the Company and ACI and, in
so doing, shall perform normal duties and
responsibilities associated with such position and as
reasonably directed by the Board. Promptly following
the commencement of the Employment Period, the
Company shall take all action necessary to appoint
the Executive as Chairman of the Board of the Company
and ACI, and thereafter, for so long as the Executive
remains the Chief Executive Officer of the Company
and/or ACI, (a) KAT Holdings, L.P. shall direct the
LLC to vote the common stock of the Company owned by
the LLC for the election of the Executive as a
director and Chairman of the Board of the Company and
ACI, and the Executive agrees to serve in such
capacities, and (b) while the Executive is Chairman
of the Board of the Company and ACI, the Executive
shall be a member of any Executive Committee or
substantially similar committee of the Board, if such
a committee exists at any time. In addition, during
the Employment Period, and if the Executive's
employment is terminated by the Company without Cause
or for Good Reason for so long as Executive (together
with his "permitted transferees" pursuant to
Executive's Buy-Sell Agreement of even date herewith)
holds at least 50% of the stock purchase rights
described in Schedule B hereto, KAT Holdings, L.P.
shall direct the LLC to vote the common stock of the
Company owned by the LLC for the election of the
Executive as a director of the Company and ACI,
unless Executive shall elect after the Employment
Period not to serve as a director thereof. To the
extent requested by the Board during the Employment
Period, the Executive shall also serve on any other
committees of the Board and/or as a director, officer
or employee of Parent or any other person or entity
which, from time to time, is a direct or indirect
subsidiary of Parent. The Executive's service as a
director of the Parent or as a director, officer or
employee of any subsidiary of Parent shall be without
additional compensation.
(ii) During the term of the Executive's employment, and
excluding any periods of vacation and other leave to
which the Executive is entitled, the Executive agrees
to devote substantially all his business time to the
business and affairs of the Company and to use the
Executive's best efforts to perform faithfully,
effectively and efficiently his duties and
responsibilities.
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(iii) During the term of the Executive's employment, it
shall not be a violation of this Agreement for the
Executive to (1) serve on industry trade, civic or
charitable boards or committees, (2) deliver lectures
or fulfill speaking engagements or (3) manage
personal investments, so long as such activities do
not interfere with the performance of the Executive's
duties and responsibilities as an Executive of the
Company.
(iv) Executive agrees to observe and comply with the
Company's rules and policies as adopted by the
Company from time to time.
(b) Compensation
(i) Base Salary. During the Initial Term, the Executive
shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in accordance with the
customary payroll practices of the Company, as
follows: (A) during the period beginning on January
1, 2003 and ending on December 31, 2003, in an amount
equal to $425,000 per annum, (taking into account any
amounts paid as compensation during such period prior
to the date hereof) (B) during the period beginning
on January 1, 2004 and ending on December 31, 2004,
in an amount equal to $475,000 per annum, (C) during
the period beginning on January 1, 2005 and ending on
December 31, 2005, in an amount equal to $525,000 per
annum, and (D) during the period beginning on January
1, 2006 and ending on December 31, 2006, in an amount
equal to $525,000 per annum. The Board, in its
discretion, may at any time increase the amount of
the Annual Base Salary to such greater amount as it
may deem appropriate, and the term "Annual Base
Salary," as used in this Agreement, shall refer to
the Annual Base Salary as it may be so increased. It
is understood that the Company may, at any time, in
the discretion of the Board, increase, but not
decrease, the amount of the Annual Base Salary.
(ii) Incentive Bonus. As of or promptly after the
Effective Date, the Executive will be paid $325,000,
which constitutes the portion of his incentive bonus
attributable to 2003 that is pro rated through
October 31, 2003 and such prorated bonus will not
exceed reserves or accruals therefor as in effect as
of October 31, 2003. In addition, the Company will
pay to Executive the remaining earned balance of such
2003 incentive bonus in accordance with the January
1, 2003 Agreement, on or about March 1, 2004. During
the period of the Initial Term, Executive shall be
entitled to an incentive bonus as set forth on
Schedule A hereto.
(iii) Incentive, Savings, Stock Option and Retirement
Plans. During the term of the Executive's employment,
the Executive shall be
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entitled to participate in all incentive, savings,
stock option, deferred compensation and any pension
or retirement plans, practices, policies and programs
applicable either generally to other employees of the
Company and/or ACI or that are offered to executive
employees of the Company and/or ACI (as amended, the
"Investment Plans"); provided, that the foregoing
will not (A) modify or supplement the separate
agreements (including the stock purchase rights
referred to herein and the stock warrants described
in Schedule B hereto) to which the Company and/or ACI
and the Executive are parties, (B) require the
Company to grant to the Executive any unissued and
unallocated stock options as of the date hereof
(5,250 shares) under the Company's 2003 Stock Option
Plan, or (C) require the Company to grant to the
Executive any option or other stock incentives that
are not granted generally to the officers of the
Company (including the top five officers) then
employed by the Company.
(iv) Health and Welfare Benefit Plans. During the term of
the Executive's employment, the Executive and/or the
Executive's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under the welfare benefit plans, practices,
policies and programs ("Welfare Plans") provided by
the Company (including, but not limited to, medical,
prescription, dental, disability, salary continuance,
employee life, group life, long-term care, accidental
death and travel accident insurance plans and
programs), as amended from time to time, to the
extent applicable either generally to other employees
of the Company and/or ACI or that are offered to
executive employees of the Company and/or ACI.
(v) Life Insurance. During the term of the Executive's
employment, the Company shall provide an annual
payment not to exceed $15,000 towards a life
insurance policy with a death benefit not to exceed
$2,500,000, which will be owned by the Executive and
payable to such persons as Executive shall designate.
(vi) Perquisites. During the term of the Executive's
employment, the Executive shall be entitled to
receive (in addition to the benefits described above)
such perquisites and fringe benefits appertaining to
his position in accordance with any policies,
practices and procedures established by the Board, as
amended from time to time.
(vii) Expenses. During the term of the Executive's
employment, the Executive shall be entitled to
receive prompt reimbursement for all reasonable
employment expenses incurred by the Executive in
accordance with the Company's policies, practices and
procedures,
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as amended from time to time. Such reimbursable
expenses shall include, but not be limited to,
professional association dues, assessments and fees
for such associations as Executive is a member of
consistent with past practices, costs associated with
the use of (or the provision to Executive of) a
private aircraft for business travel and payment for
reasonable expenses incurred by Executive for
professional assistance with taxes and financial
management, provided that such professional
assistance fees shall not in the aggregate exceed
$10,000 per year. The Executive shall be responsible
for variable costs associated with personal travel on
private aircraft provided by the Company.
(viii) Automobile. The Company recognizes the Executive's
need for an automobile for business purposes. During
the term of Executive's employment, the Company shall
provide the Executive with an automobile allowance of
$1,650 per month, which amount shall be grossed up
for income taxes, as applicable, plus reasonable
related expenses for maintenance, fuel and insurance.
(ix) Vacation. During the term of the Executive's
employment, the Executive shall be entitled to four
(4) weeks paid vacation each calendar year. Any
vacation shall be taken at the reasonable and mutual
convenience of the Company and the Executive. Accrued
vacation not taken in any calendar year will not be
carried forward or used in any subsequent calendar
year and the Executive shall not be entitled to
receive pay in lieu of accrued but unused vacation in
any calendar year. Vacation will be deemed to accrue
daily for purposes of the payments described in
Section 4 hereof.
(x) Stock Purchase Rights. Upon or prior to the effective
date of this Agreement, the Executive will be
entitled to the stock purchase rights described on
Schedule B hereto.
(xi) Gross-up Payment. In the event that any payments or
benefits either under this agreement or otherwise to
which the Executive is entitled from his employment
with the Company (other than payments payable
pursuant to this Agreement, the stock purchase rights
referenced in Schedule B hereto and the Merger
Agreement in connection with the consummation of the
transactions contemplated hereby and by the Merger
Agreement) (together, the "Payments"), will be
subject to the excise tax imposed by section 4999 of
the Internal Revenue Code or any successor provision
("section 4999"), the Company will, prior to the date
on which any amount of the excise tax must be paid or
withheld, make an additional lump-sum payment (the
"gross-up payment") to the Executive as described in
the immediately succeeding sentence; provided that
the Executive shall not be entitled to this gross-up
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payment if a reduction in the Payments (the "section
4999 Reduction Amount") to the largest amount that
would not be subject to excise taxes under section
4999 would provide the Executive with an amount (net
of federal, state, and local income taxes) greater
than or equivalent to the amount of the unreduced
Payments (net of all federal, state and local income
taxes, and excise taxes); provided, however, that the
immediately preceding proviso shall not apply if the
section 4999 Reduction Amount would exceed 10% of the
unreduced Payments. If payable, the gross-up payment
will be sufficient, after giving effect to all
federal, state and other taxes and other charges
(including interest and penalties, if any) with
respect to the gross-up payment, to make the
Executive whole for all taxes (including withholding
taxes) and any associated interest and penalties
imposed under or as a result of section 4999. Any tax
determinations required under this paragraph shall be
computed at the highest applicable marginal tax rate,
and shall be made in writing by the Company's
independent accountants, whose determination shall be
conclusive and binding for all purposes on the
parties and their successors. The Company shall
provide the Executive with a detailed accounting of
the underlying assumptions and calculations.
(xii) Key-Man Insurance. During the term of Executive's
employment, the Company shall have the right to
insure the life of the Executive for the Company's
sole benefit, and to determine the amount of
insurance and the type of policy. The Executive shall
cooperate with the Company in taking out such
insurance by submitting to physical examinations, by
supplying all information required by the insurance
company, and by executing all necessary documents.
The Executive shall incur no financial obligation by
executing any required document, and shall have no
interest in any such policy.
3. TERMINATION OF EMPLOYMENT
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. If the Disability (as defined below) of the
Executive has occurred during the Employment Period, the
Company may give to the Executive written notice in accordance
with Section 13(b) of its intention to terminate the
Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the
60th day after receipt of such notice by the Executive (the
"Disability Effective Date"), if, within the 60 days after
such receipt, the Executive shall not have returned to
perform, with or without reasonable accommodation, the
essential functions of his position. For purposes of this
Agreement, "Disability" shall mean the Executive's inability
to perform, with or without reasonable accommodations, the
essential functions of his position hereunder for a
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period of 120 days, consecutive or non-consecutive, in any
12-month period due to mental or physical incapacity, as
determined by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's
legal representative, such agreement as to acceptability not
to be unreasonably withheld or delayed. Any refusal by
Executive to submit to a medical examination for the purpose
of determining Disability under this Section 3(a) shall be
deemed to constitute conclusive evidence of Executive's
Disability. Nothing in this Agreement shall be construed as a
waiver of Executive's rights under the Americans with
Disabilities Act or any other applicable law or statute
relating to disabilities or handicaps.
(b) Cause or Without Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause
or without Cause. For purposes of this Agreement, "Cause"
shall mean (i) a breach by the Executive of the Executive's
obligations under Section 2(a) (other than as a result of
physical or mental incapacity) which constitutes a continued
material nonperformance by the Executive of his obligations
and duties thereunder, and which is not remedied within 30
days after receipt of written notice from the Company
specifying such breach, (ii) commission by the Executive of an
act of fraud, embezzlement, misappropriation, willful
misconduct or breach of fiduciary duty against the Company;
(iii) a material breach by the Executive of Sections 7, 8, 10
or 11; (iv) the Executive's conviction, plea of no contest or
nolo contendere, or unadjudicated probation for any felony or
crime involving moral turpitude; (v) the failure of the
Executive to carry out, or comply with, in any material
respect any lawful and reasonable directive of the Board
consistent with the terms of this Agreement, which is not
remedied within 30 days after receipt of written notice from
the Company specifying such failure; or (vi) the Executive's
unlawful use (including being under the influence) or
possession of illegal drugs on the Company's premises or while
performing the Executive's duties and responsibilities under
this Agreement. For purposes of this Agreement, "without
Cause" shall mean a termination by the Company of the
Executive's employment during the Employment Period for any
reason other than a termination based upon Cause, death,
Disability or upon a Change of Control, as defined below.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason
or without Good Reason; provided, however, that the Executive
agrees not to terminate his employment for Good Reason unless
(x) the Executive has given the Company at least 30 days'
prior written notice of his intent to terminate his employment
for Good Reason, which notice shall specify the facts and
circumstances constituting Good Reason, and (y) the Company
has not remedied such facts and circumstances constituting
Good Reason within such 30-day period. For purposes of this
Agreement, "Good Reason" shall mean:
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(i) any significant reduction, without the Executive's
consent, in the Executive's position, authority,
duties or responsibilities as contemplated in Section
2(a) or any other action by the Company which results
in a material diminution in such position, authority,
duties or responsibilities, including but not limited
to, the failure of the Executive to be elected or
re-elected as Chairman of the Board as contemplated
by Section 2, but excluding for this purpose an
inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of
written notice thereof given by the Executive;
(ii) any instance in which the Company or ACI becomes a
subsidiary of any entity of which the Executive is
not the Chairman, Chief Executive Officer and
President (other than an instance which would not
constitute a Change of Control (as defined in
paragraph (d) below), provided, that the Company and
ACI will not be considered to be a subsidiary of the
LLC or KAT Holdings L.P. for this purpose;
(iii) any termination or material reduction of a material
benefit under any Investment Plan or Welfare Plan in
which the Executive participates unless (A) there is
substituted a comparable benefit that is economically
substantially equivalent to the terminated or reduced
benefit prior to such termination or reduction or (B)
benefits under such Investment Plan or Welfare Plan
are terminated or reduced with respect to all
Executives previously granted benefits thereunder;
(iv) any failure by the Company to comply with any of the
provisions of Section 2(b), other than an inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
written notice thereof given by the Executive;
(v) relocation of the Company's principal executive
offices, or any event that causes Executive to have
his principal place of work changed, to any location
that is more than 35 miles outside of Dallas, Texas;
(vi) without limiting the generality of the foregoing, any
material breach (after 30 days' notice and
opportunity to cure) by the Company or any of its
subsidiaries or other affiliates (as defined below)
of (A) this Agreement or (B) any other agreement
between the Executive and the Company or any such
subsidiary or other affiliate.
As used in this Agreement, "affiliate" means, with respect to
a person, any other person controlling, controlled by or under
common control with the
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first person; the term "control," and correlative terms, means
the power, whether by contract, equity ownership or otherwise,
to direct the policies or management of a person; and "person"
means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
(d) Change of Control. If a Change of Control (as defined below)
occurs during the Employment Period and the Board determines
in good faith that it is in the Company's best interest to
terminate the Executive's employment with the Company, then,
within one year of such Change of Control, the Company may
terminate the Executive's employment by giving the Executive
written notice in accordance with Section 13(b) of its
intention to terminate the Executive's employment. Any such
termination by the Company as contemplated in this Section
3(d) is referred to herein as a termination "upon a Change of
Control."
As used in this Agreement, "Change of Control" means the first
to occur of: (i) any sale, lease, exchange or other transfer
(in one or a series of related transactions) of all or
substantially all of the assets of the Company or Parent
(including capital stock or assets of operating subsidiaries)
to any person or group of related persons for purposes of
Section 13(d) of the Securities Exchange Act, (a "Group")
other than if any one or more of the Permitted Holders have
both the beneficial economic ownership of common equity
securities and the power to vote or direct the voting of such
securities having more than 50% of the ordinary voting power
for the election of directors or managers of the transferee
person or Group, (ii) prior to the consummation of an initial
public offering, the consummation of any transaction or series
of related transactions (including a merger or consolidation)
the result of which is that any Person other than a Permitted
Holder or a combination of the Permitted Holders beneficially
owns (within the meaning of Rules 13d-3 and 13d-5 of the
Exchange Act) at least a majority of the total voting power of
the outstanding voting stock of the Company or (iii) the sale
or transfer by the Kenner Group of such amount of shares
and/or interests in relation to the Company such that they
lose, relinquish or forfeit their director and corporate
governance rights under the LLC Agreement and/or the
Stockholders Agreement. For purposes of the Change of Control,
Permitted Holders will exclude Masco Corporation and its
Affiliates.
As used in this Agreement, (A) the "Permitted Holders" means
(i) KAT Holdings, L.P. and any other investment partnership or
entity managed or controlled by Kenner & Company, Inc. and/or
its affiliates, (ii) UBS Capital Americas II, LLC and/or its
Affiliates, (iii) ML IBK Positions, Inc. and/or its
affiliates, (iv) any partners, members or investors (either
directly or indirectly through any investment partnerships or
entities) in the entities described in clauses (i), (ii) and
(iii) above who are distributees of investments held by the
entities described in clauses (i), (ii) and (iii)
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above, (v) any immediate family members or lineal descendents,
or trusts or other entities for their benefit in respect of
the Persons described in clauses (i), (ii), (iii) and (iv)
above, and (vi) any affiliates in respect of the persons
described in clauses (i), (ii), (iii) and (iv) above; (B)
"Exchange Act" means the Securities and Exchange Act of 1934,
as amended; and (C) "Kenner Group" means the entities and
individuals identified in clauses (i), (iv), (v) and (vi) of
the definition of "Permitted Holders" above.
As used in this Agreement, "LLC Agreement" means the Amended
and Restated Limited Liability Company Agreement, dated as of
December 10, 2003, of ATR Acquisition, LLC as in effect at
that date.
As used in this Agreement, "Stockholders Agreement" means the
Stockholders Agreement dated as of December 10, 2003, by and
among the Company and the other signatories party thereto as
in effect at that date.
(e) Notice of Termination. Any termination by the Company for
Cause or without Cause or upon a Change of Control, or by the
Executive for Good Reason or without Good Reason, shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 13(b). For purposes of
this Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable,
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date
of receipt of such notice, specifies the termination date
(which date, if specified, shall not be less than 10 nor more
than 15 days after the giving of such notice). The failure by
the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause or a termination upon a Change
of Control shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause
or upon a Change of Control, or by the Executive for Good
Reason or without Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein
pursuant to Section 3(e), as the case may be, (ii) if the
Executive's employment is terminated by the Company other than
for Cause or upon a Change of Control, the date on which the
Company notifies the Executive of such termination and (iii)
if the Executive's employment is terminated
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by reason of death or Disability, the date of death of the
Executive or the Disability Effective Date, as the case may
be.
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) For Cause; Without Good Reason; Other Than for Death,
Disability or Upon a Change of Control. If, during the
Employment Period, the Company shall terminate the Executive's
employment for Cause or the Executive shall terminate his
employment without Good Reason, and the termination of the
Executive's employment in any case is not due to death or
Disability, without Cause, for Good Reason or upon a Change of
Control, the Executive shall forfeit all rights to the
Incentive Bonus otherwise due to him or to which he may be
entitled. If the termination is for Cause or if the Executive
terminates his employment without Good Reason, all unvested
stock options held by the Executive shall lapse and expire and
any remaining vested but unexercised stock options shall
remain exercisable for a period of ninety (90) days from the
Date of Termination and shall thereafter lapse and expire if
not exercised. In each of these circumstances, the Company
shall have no further payment obligations to the Executive or
his legal representatives, other than for the payment of: (i)
(A) in cash within ten (10) days after the Date of Termination
the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2)
any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and
(3) any accrued vacation pay, and (B) in cash within ten (10)
days after the Date of Termination any earned but unpaid
Incentive Bonus payable in respect of any completed fiscal
year that has not been paid in full for that completed year as
of the Date of Termination (collectively, the "Accrued
Obligations"); and (ii) any amount arising from the
Executive's participation in, or benefits under, any
Investment Plans (the "Accrued Investments"), which amounts
shall be payable in accordance with the terms and conditions
of such Investment Plans.
(b) Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, all
unvested stock options held by Executive shall immediately
vest (in his legal representatives) and become exercisable in
accordance with their terms and the Company shall have no
further payment obligations to the Executive or his legal
representatives, other than for payment of: (i) in a lump sum
in cash within ten (10) days after the Date of Termination,
the Accrued Obligations; (ii) the Accrued Investments, which
shall be payable in accordance with the terms and conditions
of the Investment Plans; and (iii) the Incentive Bonus for the
year of termination prorated from the first day of the
Company's then current fiscal year to the Date of Termination
(the "Prorated Incentive Bonus"), payable following
calculation of the
12
Incentive Bonus in accordance with Section 2(b)(ii) hereof and
Schedule A hereto.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment
Period, all unvested stock options held by Executive shall
immediately vest and become exercisable in accordance with
their terms and the Company shall have no further payment
obligations to the Executive or his legal representatives,
other than for payment of: (i) in a lump sum in cash within
ten (10) days after the Date of Termination, the Accrued
Obligations; (ii) the Accrued Investments, which shall be
payable in accordance with the terms and conditions of the
Investment Plans; and (iii) the Prorated Incentive Bonus,
payable following calculation of the Incentive Bonus in
accordance with Section 2(b)(ii) hereof and Schedule A hereto.
(d) Without Cause or for Good Reason. If the Executive's
employment is terminated by the Company without Cause or by
the Executive for Good Reason, all unvested stock options held
by Executive (the "Unvested Options") shall immediately vest
and become exercisable for a period of one hundred eighty
(180) days from the Date of Termination (the "Exercise
Period") and the Company shall have no further payment
obligations to the Executive or his legal representatives,
other than for: (i) payment of, in a lump sum in cash within
ten (10) days after the Date of Termination, the Accrued
Obligations; (ii) payment of the Accrued Investments, which
shall be payable in accordance with the terms and conditions
of the Investment Plans; (iii) payment of the Prorated
Incentive Bonus, calculated as of the end of the fiscal year
applicable to such Incentive Bonus, and payable following
calculation of the Incentive Bonus in accordance with Section
2(b)(ii) hereof and Schedule A hereto; and (iv) an amount
equal to one-twelfth of the sum of the Executive's Annual Base
Salary and 80% of the target Incentive Bonus applicable to the
period in which the Date of Termination occurs and set forth
on Schedule A hereto multiplied by 24 (the "Severance
Payment"), and (v) the Company will arrange for a third party
insurer to provide health and welfare benefits comparable to
those described in Sections 2(b)(iv) and 2(b)(v) (the
"Severance Benefits") for a period of 24 months (the
"Severance Period"), but only if and to the extent that the
premium cost per annum to the Company in respect of such
coverage does not exceed $50,000 per annum (the "Benefits
Premium"). Such Severance Payment will be paid 50% in a lump
sum as of, or within 10 days following, the Date of
Termination and 50% in equal bi-weekly amounts over the 24
months following the Date of Termination.
(e) Change of Control. If the Executive's employment is terminated
upon a Change of Control as contemplated in Section 3(d), all
unvested stock options held by Executive shall immediately
vest and become exercisable in accordance with their terms and
the Company shall have no further
13
payment obligations to the Executive or his legal
representatives, other than for (i) payment of, in a lump sum
in cash within ten (10) days after the Date of Termination,
the Accrued Obligations; (ii) payment of the Accrued
Investments, which shall be payable in accordance with the
terms and conditions of the Investment Plans; (iii) within ten
(10) days after the Date of Termination, payment of the
Prorated Incentive Bonus, payable following calculation of the
Incentive Bonus in accordance with Section 2(b)(ii) hereto and
Schedule A hereto; (iv) within ten (10) days after the Date of
Termination, the Severance Payment and (v) the Company will
arrange for the provision of the continuation of Severance
Benefits for the Severance Period as described in clause (v)
of Section 4(d) above.
As used in this Section 4, "stock options" shall mean options, warrants
or similar stock purchase rights, including those described in Schedule
B hereto.
With respect to any such continued health and welfare benefits
described in Section 4 (d) or (e) above for which the Executive is
eligible, if the Company is unable to arrange for the provision of such
benefits, the Company shall pay, in a lump sum, the Executive for the
cost of such benefits not to exceed the amount of the Benefit Premium;
and the Executive's period of "continuation coverage" for purposes of
Section 4980B of the Internal Revenue Code of 1986, as amended
("COBRA"), shall be deemed to commence on the Date of Termination.
5. RETENTION BONUS
Following a "Change of Control" (for avoidance of doubt, it shall
include the Change of Control contemplated by the Merger Agreement), if
the Executive is employed by the Company on the 12-month anniversary of
the Change of Control, the Company shall pay the Executive a retention
bonus in an amount equal to the Executive's Annual Base Salary in
effect at the time the Change of Control takes place. Nothing in this
Section 5 shall be deemed to give the Executive the right to be
retained in the employ of the Company or to restrict the right of the
Company to terminate the Executive at any time and for any reason,
without Cause or for Cause or upon a Change of Control. Nothing in this
Section 5 shall be deemed to give the Company the right to require the
Executive to remain in the employ of the Company or to restrict the
Executive's right to terminate his employment at any time and for any
reason, without Good Reason or for Good Reason.
6. FULL SETTLEMENT; MITIGATION; RELEASE
In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment. Neither the Executive nor the Company shall be liable to
the other party for any damages in addition to the amounts payable
under Section 4 arising out of the termination of the
14
Executive's employment prior to the end of the Employment Period;
provided, however, that the Company shall be entitled to seek damages
from the Executive for any breach of Sections 7, 8, 10 or 11 by the
Executive and either party shall be entitled to seek damages for
criminal misconduct.
In the event of a termination of the Executive by the Company without
Cause, by the Executive for Good Reason, by the Company upon a Change
of Control and simultaneous with the receipt by the Executive of any
Severance Benefits from the Company in accordance with the terms of
this Agreement or pursuant to any other agreement entered into by the
Company and the Executive, the Executive will release the Company from
and against any claims, damages, lawsuits and liabilities (a "Claim")
arising in relation to such termination or any other acts arising under
this Agreement in relation to such termination or any other acts,
omissions or circumstances in relation to the Company prior to the date
of termination excepting any claim based on an event that would
constitute a termination of the Executive by the Company for Cause in
accordance with Sections 3(b)(ii) and 3(b)(iv) of this Agreement.
Notwithstanding anything herein to the contrary, the Executive retains
any and all rights it has under any other written agreements entered
into by the Company and the Executive.
In the event of a termination of the Executive by the Company without
Cause, by the Executive for Good Reason, by the Company upon a Change
of Control and upon the performance by the Executive of his obligations
and covenants under this Section 6, then the Company will release the
Executive from and against any Claim arising under this Agreement in
relation to such termination or any other acts, omissions or
circumstances in relation to the Company prior to the date of
termination. Notwithstanding anything herein to the contrary, the
Company retains any and all rights it has under any other written
agreements entered into by the Company and the Executive.
7. CONFIDENTIAL INFORMATION
(a) The Executive acknowledges that the Company and its affiliates
have trade, business and financial secrets and other
confidential and proprietary information (collectively, the
"Confidential Information"). "Confidential Information"
includes sales materials, technical information, processes and
compilations of information, records, specifications and
information concerning customers or vendors, manuals relating
to suppliers' products, customer lists, information regarding
methods of doing business, and the identity of suppliers.
"Confidential Information" shall not include (i) information
that is generally known to other persons or entities who can
obtain economic value from its disclosure or use and (ii)
information required to be disclosed by the Executive pursuant
to a subpoena or court order, or pursuant to a requirement of
a governmental agency or law of the United States of America
or a state thereof or any governmental or political
subdivision; provided, however, that the Executive shall take
all reasonable steps to prohibit disclosure pursuant to
subsection (ii) above.
15
(b) Each of the Executive and the Company has divulged, and herein
promises to continue to divulge during Executive's employment
with the Company, appropriate Confidential Information to one
another as of the effective date of this Agreement, and from
time to time thereafter as such appropriate Confidential
Information arises.
(c) During and following the Executive's employment by the
Company, the Executive shall hold in confidence and not
directly or indirectly disclose or use or copy or make lists
of any Confidential Information or proprietary data of the
Company or its affiliates except to the extent authorized in
writing by the Board or required by any court or
administrative agency, other than to an Executive of the
Company or its affiliates or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an employee of
the Company.
(d) The Executive further agrees not to use any Confidential
Information for the benefit of any person or entity other than
the Company or its affiliates.
(e) As used in this Section 7, "Company" shall include Atrium
Corporation and any of its direct or indirect subsidiaries,
including ACI.
8. RESPONSIBILITIES UPON TERMINATION
Upon the termination of his employment by the Company for whatever
reason and irrespective of whether or not such termination is voluntary
on his part:
(a) The Executive shall advise the Company of the identity of his
new employer within ten (10) days after accepting new
employment and further agrees to keep the Company so advised
of any change in employment during the term of Non-Competition
set forth in Section 10 hereof;
(b) The Company in its sole discretion may notify any new employer
of the Executive that he has an obligation not to compete with
the Company during such term;
(c) The Executive shall deliver to the Company any and all
records, forms, contracts, memoranda, work papers, customer
data and any other documents which have come into his
possession by reason of his employment with the Company
(including the Company's direct and indirect subsidiaries),
irrespective of whether or not any of said documents were
prepared for him, and he shall not retain memoranda in respect
of or copies of any of said documents; and
(d) The Executive shall participate in an exit interview with the
Company.
16
9. SUCCESSORS
The Company may assign its rights and obligations under this Agreement
to any successor to all or substantially all the assets of the Company,
by merger or otherwise, subject, however, to the Executive's right to
terminate this Agreement for Good Reason as provided in Section 3(c),
and may assign or encumber this Agreement and its rights hereunder as
security for indebtedness of the Company and its affiliates. All
representations, warranties, covenants, terms, conditions and
provisions of this Agreement shall be binding upon and inure to the
benefit of, and be enforceable by the respective heirs, legal
representatives, successors and permitted assigns of the Company and
Executive. Neither this Agreement nor any rights, interests or
obligations hereunder may be assigned by the Executive without the
prior written consent of the Company.
10. NON-COMPETITION
The provisions of this Section 10 are in consideration for (i) the
Company's promise in Section 7 to continue to make appropriate
Confidential Information available to the Executive during the term of
Executive's employment by the Company and (ii) the amounts paid to
Executive by the Company on or prior to the date hereof including in
connection with the transactions described in the Merger Agreement.
(a) The term of Non-Competition (herein so called) shall be for a
term beginning on the Effective Date hereof and continuing
until (i) the first anniversary of the Date of Termination if
the Executive's employment is terminated by the Company for
Cause or due to Disability or by the Executive without Good
Reason or termination or non-renewal by the Company at the end
of the Additional Term, or (ii) the last day of the Severance
Period if the Executive's employment is terminated by the
Company without Cause (and not due to Disability) or upon a
Change of Control or by the Executive for Good Reason.
(b) During the term of Non-Competition, the Executive shall not
(other than for the benefit of the Company or its affiliates
pursuant to this Agreement) directly or indirectly, render
services to, assist, participate in the affairs of, or
otherwise be connected with, any person or enterprise (other
than the Company), which person or enterprise is engaged in,
or is planning to engage in, and shall not personally engage
in, any business that is in any respect competitive with the
Company Business, with respect to any products of the Company
that were within the Executive's management responsibility at
any time within the twelve-month period immediately prior to
the termination of the Executive's employment with the Company
or any New Product (as defined herein), in any capacity which
would (i) utilize the Executive's services with respect to
such business within any state of the United States, or any
substantially comparable political subdivision of any other
country, wherein the Company sold or actively attempted to
sell such products within the twelve-month period immediately
prior to the termination of the Executive's employment with
the Company; or (ii) utilize the Executive's services in
selling any products similar to such products of the Company
to any person or entity to which the Company sold or actively
17
attempted to sell such products within the twelve-month period
immediately prior to the termination of the Executive's
employment with the Company (a "Competing Business").
Notwithstanding the foregoing, the Company agrees that the
Executive may own less than five percent of the outstanding
voting securities of any publicly traded company that is a
Competing Business so long as the Executive does not otherwise
participate in such Competing Business in any way prohibited
by the preceding clause.
(c) During the term of Non-Competition, Executive will not, and
will not permit any of his affiliates to, directly or
indirectly, recruit or otherwise solicit or induce any
employee, customer, subscriber or supplier of the Company to
terminate its employment or arrangement with the Company,
otherwise change its relationship with the Company or
establish any relationship with the Executive or any of his
affiliates for any business purpose deemed competitive with
the business of the Company.
(d) The Executive acknowledges that the geographic boundaries,
scope of prohibited activities, and time duration of the
preceding paragraphs are reasonable in nature and are no
broader than are necessary to maintain the goodwill of the
Company and its affiliates and the confidentiality of their
Confidential Information, and to protect the other legitimate
business interests of the Company and its affiliates.
(e) If any court determines that any portion of this Section 10 is
invalid or unenforceable, the remainder of this Section 10
shall not thereby be affected and shall be given full effect
without regard to the invalid provisions. If any court
construes any of the provisions of this Section 10, or any
part thereof, to be unreasonable because of the duration or
scope of such provision, such court shall have the power to
reduce the duration or scope of such provision and to enforce
such provision as so reduced.
(f) As used in this Section 10, (i) "Company" shall include Atrium
Corporation and any of its direct or indirect subsidiaries,
and (ii) "Company Business" shall refer to the window and
patio door business of the Company together with any other
business, product or service that is or was subject to active
consideration or review by the Board prior to the Date of
Termination (such other business product or service (a "New
Product") provided that, any such New Product that is not
implemented or developed into an actual product or service
during the 12 month period following the Date of Termination
shall cease to be a New Product following such 12 month
period.
18
11. INVENTIONS; ASSIGNMENT
All rights to discoveries, inventions, improvements and innovations
(including all data and records pertaining thereto) related to the
Company's business, whether or not patentable, copyrightable,
registrable as a trademark, or reduced to writing, that the Executive
may discover, invent or originate during the Employment Period, and for
a period of twelve (12) months thereafter, either alone or with others
and whether or not during working hours or by the use of the facilities
of the Company ("Inventions"), shall be the exclusive property of the
Company. The Executive shall promptly disclose all Inventions to the
Company, shall execute at the request of the Company any assignments or
other documents the Company may deem necessary to protect or perfect
its rights therein, and shall assist the Company, at the Company's
expense, in obtaining, defending and enforcing the Company's rights
therein. The Executive hereby appoints the Company, as his
attorney-in-fact to execute on his behalf any assignments or other
documents deemed necessary by the Company to protect or perfect its
rights to any Inventions.
12. ACI
At any time during the Employment Period, any of the obligations of the
Company to make payments hereunder, including the obligation to pay any
compensation to Executive under Section 2(b), may, at the sole
discretion of the Company (subject to the approval of the Board), be
discharged and satisfied by ACI.
13. MISCELLANEOUS
(a) Construction. This Agreement shall be deemed drafted equally
by both the parties. Its language shall be construed as a
whole and according to its fair meaning. Any presumption or
principle that the language is to be construed against any
party shall not apply. The headings in this Agreement are only
for convenience and are not intended to affect construction or
interpretation. Any references to paragraphs, subparagraphs,
sections or subsections are to those parts of this Agreement,
unless the context clearly indicates to the contrary. Also,
unless the context clearly indicates to the contrary, (a) the
plural includes the singular and the singular includes the
plural; (b) "and" and "or" are each used both conjunctively
and disjunctively; (c) "any," "all," "each," or "every" means
"any and all," and "each and every"; (d) "includes" and
"including" are each "without limitation"; (e) "herein,"
"hereof," "hereunder" and other similar compounds of the word
"here" refer to the entire Agreement and not to any particular
paragraph, subparagraph, section or subsection; and (f) all
pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the
identity of the entities or persons referred to may require.
19
(b) Notices. Any notice, demand, request or other communication
given hereunder to any party, shall be deemed to be sufficient
if contained in a written instrument delivered in person or
duly sent by first class registered, certified or overnight
mail, postage prepaid, or telecopied with a confirmation copy
by regular, certified or overnight mail, addressed or
telecopied, as the case may be, as follows:
If to the Executive to: Xxxx X. Xxxx
000 Xxxxx Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
If to the Company: Atrium Corporation
0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxx 0000X, Xxxxxx Xxxxx 00000
Attention: Xxxxxx Xxxxxx,
General Counsel
Fax: (000) 000 0000
With copies to:
Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx
Xxxxx Xxxxxxxxxx
Fax: (000) 000-0000
or to such other address as the addressee may have designated
by notice to the addressor. All such notices, requests,
demands and other communications shall be deemed to have been
received: (i) in the case of personal delivery, on the date of
such delivery; (ii) if mailed, three (3) days after being
mailed as described above; or (iii) in the case of facsimile
transmission, when confirmed by facsimile machine report..
(c) Enforcement. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision
shall be fully severable; this Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable
provision had never comprised a portion of this Agreement; and
the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such
illegal, invalid or unenforceable provision there shall be
added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and
enforceable.
20
(d) Withholding. The Company shall be entitled to withhold from
any amounts payable under this Agreement any federal, state,
local or foreign withholding or other taxes or charges, which
it is from time to time, required to withhold. The Company
shall be entitled to rely on an opinion of counsel if any
questions as to the amount or requirement of such withholding
shall arise.
(e) No Waiver. No waiver by either party at any time of any breach
by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by the other party
shall be deemed a waiver of similar or dissimilar provisions
or conditions at any time.
(f) Equitable Relief. The Executive acknowledges that money
damages would be both incalculable and an insufficient remedy
for a breach of Section 7, 8, 9, 10 or 11 by the Executive and
that any such breach would cause the Company irreparable harm.
Accordingly, the Company, in addition to any other remedies at
law or in equity it may have, shall be entitled, without the
requirement of posting of bond or other security, to equitable
relief, including injunctive relief and specific performance,
in connection with a breach of Section 7, 8, 9, 10 or 11 by
the Executive.
(g) Complete Agreement. This Agreement, together with any
applicable agreements and instruments evidencing the stock
purchase rights described in Schedule B hereto and any Buy
Sell Agreement between the Executive and the Company,
constitutes the entire and complete understanding and
agreement between the parties with respect to the subject
matter hereof, and supersedes all prior and contemporaneous
oral and written agreements (including the January 1, 2003
Agreement), representations and understandings between the
Executive and the Company, or its affiliates and subsidiaries,
which are hereby terminated. Other than as expressly set forth
herein, the Executive and the Company acknowledge and
represent that there are no other promises, terms, conditions
or representations (oral or written) regarding any matter
relevant hereto. This Agreement may be executed in two or more
counterparts.
(h) Mediation; Arbitration
(i) The Company and the Executive shall mediate any claim
or controversy arising out of or relating to this
Agreement or any breach thereof if either of them
requests mediation and gives written notice to the
other (the "Mediation Notice"). Any notice given
pursuant to the preceding sentence shall include a
brief statement of the claim or controversy. If the
Company and the Executive do not resolve the claim or
controversy within five (5) days after the date of
the Mediation Notice, the Company and the Executive
shall then use reasonable efforts to agree upon an
21
independent mediator. If the Company and the
Executive do not agree upon an independent mediator
within ten (10) days after the date of the Mediation
Notice, either party may request that JAMS/Endispute
("JAMS"), or a similar mediation service of a similar
national scope if JAMS no longer then exists, appoint
an independent mediator. The Company and the
Executive shall share the costs of mediation equally
and shall pay such costs in advance upon the request
of the mediator or any party. Within ten (10) days
after selection of the mediator, the mediator shall
set the mediation. If the Company and the Executive
do not resolve the dispute within thirty (30) days
after the date of the Mediation Notice, the dispute
shall be decided by arbitration as set forth below.
(ii) Any claim or controversy arising out of or relating
to this Agreement or any breach thereof shall be
settled by arbitration if such claim or controversy
is not settled pursuant to mediation as set forth
above. The venue for any such arbitration shall be
Dallas, Texas, or such other location as the parties
may mutually agree. Except as expressly set forth
herein, all arbitration proceedings under this
Section 13(h)(ii) shall be undertaken in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") then in force.
Only individuals who are (i) lawyers engaged
full-time in the practice of law and (ii) on the AAA
register of arbitrators shall be selected as an
arbitrator. There shall be one arbitrator who shall
be chosen in accordance with the rules of the AAA.
Within twenty (20) days of the conclusion of the
arbitration hearing, the arbitrator shall prepare
written findings of fact and conclusions of law.
Judgment on the written award may be entered and
enforced in any court of competent jurisdiction. It
is mutually agreed that the written decision of the
arbitrator shall be valid, binding, final and
non-appealable; provided however, that the parties
hereto agree that the arbitrator shall not be
empowered to award punitive damages against any party
to such arbitration. The arbitrator shall require the
non-prevailing party to pay the arbitrator's full
fees and expenses or, if in the arbitrator's opinion
there is no prevailing party, the arbitrator's fees
and expenses will be borne equally by the parties
thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this
Section 13(h)(ii), the non-prevailing parties shall
be required to pay the reasonable attorneys' fees and
expenses of the prevailing parties, except that if in
the opinion of the court or arbitrator deciding such
action there is no prevailing party, each party shall
pay its own attorneys' fees and expenses.
22
(i) Survival. Sections 4, 6, 7, 8, 9, 10, 11, 12 and 13
of this Agreement shall survive the termination of
this Agreement.
(j) Choice of Law. This Agreement and the rights and
obligations hereunder shall be governed by and
construed in accordance with the laws of the State of
Texas without reference to principles of conflicts of
law of Texas or any other jurisdiction, and, where
applicable, the laws of the United States.
(k) Amendment. This Agreement may not be amended or
modified at any time except by a written instrument
approved by the Board and executed by the Company and
the Executive.
(l) Executive Acknowledgment. Executive acknowledges that
he has read and understands this Agreement, is fully
aware of its legal effect, has not acted in reliance
upon any representations or promises made by the
Company other than those contained in writing herein,
and has entered into this Agreement freely based on
his own judgment.
(m) Termination of January 1, 2003 Agreement. Except for
the payment of the 2003 incentive bonus as described
in Section 2(b)(ii), effective upon the Effective
Date, the January 1, 2003 Agreement shall
automatically be terminated and of no further force
or effect, the parties thereto shall have no further
obligations or liabilities thereunder and Executive's
employment by the Company and its subsidiaries shall
solely be governed by this Agreement.
23
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed in its name on its behalf, as of the day of December ,
2003.
EXECUTIVE
----------------------------------------
Xxxx X. Xxxx
ATRIUM CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ATRIUM COMPANIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
KAT HOLDINGS, L.P.
(Only for purposes of Section 2(a))
By: KAT GROUP, L.P., its general partner
By: JLK Operations, Inc., its general partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
24
SCHEDULE A
TO XXXX X. XXXX'X EMPLOYMENT AGREEMENT
Executive shall be entitled to a target bonus (the "Incentive Bonus") of (a)
during the period beginning January 1, 2003 and ending on December 31, 2003, in
an amount equal to $400,000 per annum (reduced by any amounts paid as a
performance bonus on or prior to the date hereof), (b) during the period
beginning on January 1, 2004 and ending on December 31, 2004, in an amount equal
to $450,000 per annum, (c) during the period beginning on January 1, 2005 and
ending on December 31, 2005, in an amount equal to $500,000 per annum, and (d)
during the period beginning on January 1, 2006 and ending on December 31, 2006,
in an amount equal to $600,000 per annum, computed as follows:
(a) 50% of the Executive's Incentive Bonus ("EBITDA Bonus") shall
be payable based upon achievement of the following targets:
(i) If the Company achieves 80% of its Budgeted EBITDA,
the Executive shall receive 50% of the EBITDA Bonus.
(ii) If the Company achieves 90% of its Budgeted EBITDA,
the Executive shall receive 75% of the EBITDA Bonus.
(iii) If the Company achieves 100% of its Budgeted EBITDA,
the Executive shall receive 100% of the EBITDA Bonus.
(iv) If the Company achieves 110% of its Budgeted EBITDA,
the Executive shall receive 125% of the EBITDA Bonus.
(v) The EBITDA Bonus will be paid on a sliding scale on a
pro rated basis. For example, if 95% of budgeted
EBITDA is achieved, the Executive is entitled to
87.5% of the EBITDA Bonus. No EBITDA Bonus will be
paid if the Company achieves less than 80% of the
budgeted EBITDA and in no event will the Company pay
in excess of 125% of the EBITDA Bonus.
(vi) For purposes of the EBITDA Bonus, EBITDA shall be
defined as earnings before interest, taxes,
depreciation and amortization of the Company and all
of its subsidiaries on a consolidated basis. EBITDA
shall exclude any extraordinary gains or losses,
special charges, any compensation expense
attributable to the Company's equity securities,
management fees paid to the Company's equity sponsor,
any accounts receivable securitization expense, any
transaction or merger-related costs that are expensed
rather than
25
capitalized including any effect of fair market value
adjustments made pursuant to purchase accounting and
any other non-cash items. The EBITDA will be adjusted
for all acquisitions and/or divestitures by the Board
in good faith.
(vii) Budgeted EBITDA ("Budgeted EBITDA") shall be such
amount as is set by the Board annually as adjusted by
the Board in good faith for a particular fiscal year
from time to time to reflect acquisitions and/or
divestitures by the Company or its subsidiaries.
(b) The remaining 50% of the Executive's Incentive Bonus shall be
based upon the achievement of management objectives to be set
from year to year by the Board of Directors.
2
SCHEDULE B
STOCK PURCHASE RIGHTS:
On or prior to the Effective Date, the Executive will be granted warrants to
purchase 7,750 (which is based on the shares outstanding having a value of
$1,000 per share) shares of the common stock (the "Common Stock") of the Company
pursuant to a warrant agreement to be dated as of the Effective Date. The shares
shall vest and exercise prices will be set according to the following schedule:
4,000 shares, with an exercise price of $.01 per share, will vest 100% on
February 1, 2004;
3,750 shares with an exercise price of $1,000 per share, vest ratably from the
Effective Date on a monthly basis over a five-year period.
VESTING:
Each of the types of warrants described in Schedule B will be deemed fully
vested as set forth in accordance with this Agreement.
