EXHIBIT 10.19
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of August
21, 2002, by and between ASSOCIATED MATERIALS INCORPORATED, a Delaware
corporation (the "Company"), and XXXX X. XXXXXXXXX, an individual residing in
the State of Ohio (the "Executive").
WITNESSETH:
WHEREAS, the Executive currently serves as the Vice President
of Human Resources of the Alside Division of the Company;
WHEREAS, pursuant to that certain Agreement and Plan of
Merger, dated as of March 16, 2002, among Associated Materials Holdings Inc.
(formerly known as Harvest/AMI Holdings Inc.) ("Parent"), Simon Acquisition
Corp. and the Company (the "Merger Agreement"), the Company will become a
wholly-owned subsidiary of Parent upon consummation of the transactions
contemplated by the Merger Agreement; and
WHEREAS, the Company desires to retain the services and
employment of the Executive on behalf of the Company following the Offer
Completion Date, as such term is defined in the Merger Agreement, and the
Executive desires to continue his employment with the Company, upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto, each intending to be
legally bound hereby, agree as follows:
1. Employment. On the terms and subject to the conditions set forth
herein, the Company hereby employs the Executive as the Vice President of the
Alside Division of the Company, and the Executive accepts such employment, for
the Employment Term (as defined in Section 3). During the Employment Term, the
Executive shall serve as the Vice President of the Alside Division of the
Company and shall report to the President and Chief Executive Officer of the
Company, performing such duties as shall be reasonably required of a vice
president, and shall have such other powers and perform such other duties as may
from time to time be assigned to him by the President and Chief Executive
Officer of the Company and the Board of Directors of the Company (the "Board").
To the extent requested by the Company's President and Chief Executive Officer
or the Board, the Executive shall also serve on the Board or any committee 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 (Parent and each such subsidiary, person or entity, other than the
Company, are hereinafter referred to collectively as the "Affiliates," and
individually as an "Affiliate"). The Executive's service as a director of the
Company or as a director, officer or employee of any Affiliate shall be without
additional compensation.
2. Performance. The Executive will serve the Company faithfully and to
the best of his ability and will devote his full business time, energy,
experience and talents to the business of the Company and the Affiliates;
provided, however, that it shall not be a violation of this Agreement for the
Executive to manage his personal investments and business affairs, or to engage
in or serve such civic, community, charitable, educational, or religious
organizations as he may reasonably select so long as such service does not
interfere with the Executive's performance of his duties hereunder.
3. Employment Term. Unless earlier terminated pursuant to Section 6,
the Executive's term of employment hereunder shall begin on the Offer Completion
Date (hereinafter referred to as the "Commencement Date"), and continue through
the date which is one (1) year following the Commencement Date (the "Initial
Term"); provided that such term shall be automatically extended for additional
one (1) year periods commencing on the first day immediately following the
expiration date of the Initial Term and successively thereafter on the first day
immediately following the expiration of each such one-year period (each such
period an "Additional Term") unless the Company shall have given notice to the
Executive that the Company does not desire to extend the term of this Agreement,
such notice to be given at least thirty (30) days prior to the end of the
Initial Term or the applicable Additional Term (the Initial Term and any
Additional Terms, if applicable, collectively, the "Employment Term").
4. Compensation and Benefits.
(a) Salary. As compensation for his services hereunder and in
consideration of the Executive's other agreements hereunder, during the
Employment Term, the Company shall pay the Executive a base salary, payable in
equal installments in accordance with the Company's payroll procedures, at an
annual rate of One Hundred Sixty Thousand Dollars ($160,000), subject to annual
review by the Board, which may increase, but not decrease, the Executive's base
salary.
(b) Annual Incentive Bonus; Stock Options. The Executive shall
be entitled to participate in an annual incentive bonus arrangement established
by the Company on terms and conditions substantially as set forth in Exhibit A
hereto. The Executive shall not be entitled to participate in any other annual
cash bonus plan, program or arrangement with respect to any period to which the
annual incentive bonus arrangement described in the immediately preceding
sentence applies. The Executive shall also be entitled to participate in the
stock option plan established by Parent.
(c) Retirement, Medical, Dental and Other Benefits. During the
Employment Term, the Executive shall, in accordance with the terms and
conditions of the applicable plan documents and all applicable laws, be eligible
to participate in the various retirement, medical, dental and other employee
benefit plans made available by the Company, from time to time, for its
executives.
(d) Vacation; Sick Leave. During the Employment Term, the
Executive shall be entitled to not less than three (3) weeks of vacation during
each calendar year and sick leave in accordance with the Company's policies and
practices with respect to its executives.
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(e) Business Expenses. (1) The Company shall reimburse or
advance payment to the Executive for all reasonable expenses actually incurred
by him in connection with the performance of his duties hereunder in accordance
with policies established by the Company from time to time and subject to
receipt by the Company of appropriate documentation.
(2) During the Employment Term, the Executive shall be paid an
automobile allowance in the amount of $900 per month. Such allowance
shall be paid by the Company to the Executive on the last business day
of each month or otherwise in accordance with Company policy.
5. Covenants of the Executive. The Executive acknowledges that in the
course of his employment with the Company he has and will become familiar with
the Company's and the Affiliates' trade secrets and with other confidential
information concerning the Company and the Affiliates, and that his services are
of special, unique and extraordinary value to the Company and the Affiliates.
Therefore, the Company and the Executive mutually agree that it is in the
interest of both parties for the Executive to enter into the restrictive
covenants set forth in this Section 5 and that such restrictions and covenants
are reasonable given the nature of the Executive's duties and the nature of the
Company's business.
(a) Noncompetition. During the Employment Term and for the
Restricted Period (as hereinafter defined) following termination of the
Employment Term, the Executive shall not, within any jurisdiction or marketing
area in which the Company or any Affiliate is doing or is qualified to do
business, directly or indirectly, own, manage, operate, control, be employed by
or participate in the ownership, management, operation or control of, or be
connected in any manner with, any Business (as hereinafter defined), provided
that the Executive's ownership of securities of two percent (2%) or less of any
class of securities of a public company shall not, by itself, be considered to
be competition with the Company or any Affiliate. For purposes of this
Agreement, "Business" shall mean the manufacturing, production, distribution or
sale of exterior residential building products, including, without limitation,
vinyl siding, windows, fencing, decking, railings and garage doors, or any other
business of a type and character engaged in by the Company or an Affiliate
during the Employment Term. For purposes of this Agreement, the "Restricted
Period" shall be (1) twenty-four (24) months if such termination occurs during
the two-year period following the Commencement Date; or (2) one (1) year if such
termination occurs after such two-year period following the Commencement Date.
(b) Nonsolicitation. During the Employment Term and for the
Restricted Period following termination of the Employment Term, the Executive
shall not, directly or indirectly, (i) employ, solicit for employment or
otherwise contract for the services of any individual who is or was an employee
of the Company or any Affiliate during the Employment Term; (ii) otherwise
induce or attempt to induce any employee of the Company or an Affiliate to leave
the employ of the Company or such Affiliate, or in any way knowingly interfere
with the relationship between the Company or any Affiliate and any employee
respectively thereof; or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company or any Affiliate to
cease doing business with the Company or such Affiliate, or interfere in any way
with the relationship between any such customer, supplier, licensee or business
relation and the Company or any Affiliate.
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(c) Nondisclosure; Inventions. For the Employment Term and
thereafter, (i) the Executive shall not divulge, transmit or otherwise disclose
(except as legally compelled by court order, and then only to the extent
required, after prompt notice to the Board of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company and the Affiliates, any customer lists, trade secrets or other
confidential knowledge or information with respect to the operations or finances
of the Company or any Affiliates or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
or the Affiliates (all of the foregoing collectively hereinafter referred to as,
"Confidential Information"), and (ii) the Executive will not use, directly or
indirectly, any Confidential Information for the benefit of anyone other than
the Company and the Affiliates; provided, however, that the Executive has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the general public other than through disclosure by the Executive. All
Confidential Information, new processes, techniques, know-how, methods,
inventions, plans, products, patents and devices developed, made or invented by
the Executive, alone or with others, while an employee of the Company which are
related to the business of the Company and the Affiliates shall be and become
the sole property of the Company, unless released in writing by the Board, and
the Executive hereby assigns any and all rights therein or thereto to the
Company.
(d) Nondisparagement. During the Employment Term and
thereafter, the Executive shall not take any action to disparage or criticize
the Company or any Affiliate or their respective employees, directors, owners or
customers or to engage in any other action that injures or hinders the business
relationships of the Company or any Affiliate. Nothing contained in this Section
5(d) shall preclude the Executive from enforcing his rights under this
Agreement.
(e) Return of Company Property. All Confidential Information,
files, records, correspondence, memoranda, notes or other documents (including,
without limitation, those in computer-readable form) or property relating or
belonging to the Company or an Affiliate, whether prepared by the Executive or
otherwise coming into his possession in the course of the performance of his
services under this Agreement, shall be the exclusive property of the Company
and shall be delivered to the Company, and not retained by the Executive
(including, without limitations, any copies thereof), promptly upon request by
the Company and, in any event, promptly upon termination of the Employment Term.
(f) Enforcement. The Executive acknowledges that a breach of
his covenants contained in this Section 5 may cause irreparable damage to the
Company and the Affiliates, the exact amount of which would be difficult to
ascertain, and that the remedies at law for any such breach or threatened breach
would be inadequate. Accordingly, the Executive agrees that if he breaches or
threatens to breach any of the covenants contained in this Section 5, in
addition to any other remedy which may be available at law or in equity, the
Company and the Affiliates shall be entitled to specific performance and
injunctive relief to prevent the breach or any threatened breach thereof without
bond or other security or a showing that monetary damages will not provide an
adequate remedy.
(g) Scope of Covenants. The Company and the Executive further
acknowledge that the time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated commercial parties
and agree that all such provisions are reasonable
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under the circumstances of the activities contemplated by this Agreement. In the
event that the agreements in this Section 5 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of their extending for too
great a period of time or over too great a geographical area or by reason of
their being too extensive in any other respect, they shall be interpreted to
extend only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be enforceable
and/or to the maximum extent in all other respects as to which they may be
enforceable, all as determined by such court in such action.
6. Termination. The employment of the Executive hereunder shall
automatically terminate at the end of the Employment Term. The employment of the
Executive hereunder and the Employment Term may also be terminated at any time
by the Company with or without Cause. For purposes of this Agreement, "Cause"
shall mean: (i) embezzlement, theft or misappropriation by the Executive of any
property of the Company or an Affiliate; (ii) any breach by the Executive of the
Executive's covenants under Section 5; (iii) any breach by the Executive of any
other material provision of this Agreement which breach is not cured, to the
extent susceptible to cure, within thirty (30) days after the Company has given
notice to the Executive describing such breach; (iv) willful failure by the
Executive to perform the duties of his employment hereunder which continues for
a period of fourteen (14) days following written notice thereof by the Company
to the Executive; (v) the conviction of, or a plea of nolo contendere (or a
similar plea) to, any criminal offense that is a felony or involves fraud, or
any other criminal offense punishable by imprisonment of at least one year or
materially injurious to the business or reputation of the Company involving
theft, dishonesty, misrepresentation or moral turpitude; (vi) gross negligence
or willful misconduct on the part of the Executive in the performance of his
duties as an employee, officer or director of the Company or an Affiliate; (vii)
the Executive's breach of his fiduciary obligations to the Company or an
Affiliate; (viii) the Executive's commission of intentional, wrongful damage to
property of the Company or an Affiliate; or (ix) any chemical dependence of the
Executive which adversely affects the performance of his duties and
responsibilities to the Company or an Affiliate. The existence or non-existence
of Cause shall be determined in good faith by the Board. The employment of the
Executive may also be terminated at any time by the Executive by notice of
resignation delivered to the Company not less than ninety (90) days prior to the
effective date of such resignation.
7. Severance. If the Executive's employment hereunder is terminated
during the Employment Term by the Company or is terminated due to expiration of
the Employment Term following notice by the Company not to extend the Employment
Term in accordance with Section 3, in each case other than for Cause or due to
disability (as determined in the good faith discretion of the Board) or death,
the Executive shall be entitled to receive as severance: (i) if such termination
occurs during the two (2) year period following the Commencement Date, the
severance pay and benefits payable under the terms of Sections 3(b), 3(c), 3(d),
3(e), 3(f) and 3(g) of the severance agreement attached as Exhibit B hereto
(pursuant to which, the calendar year in which the "Change in Control" occurred,
for purposes of Sections 3(d) and 3(e) thereunder, shall be 2002), or (ii) if
such termination occurs other than as described in clause (i) immediately
preceding, an amount equal to the Executive's base salary as in effect
immediately prior to the date of the Executive's termination of employment for
twelve (12) months (payable, at the Company's option, in a lump-sum or in equal
installments in accordance with the Company's payroll procedures during the
twelve months following the date of the Executive's
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termination), and a pro rata portion (based on the number of days the Executive
was employed by the Company during the calendar year of termination) of any
incentive bonus otherwise payable in accordance with Section 4(b) for the year
of termination of the Executive's employment, payable no earlier than the date
on which such bonus, if any, would have been paid under the applicable plan or
policy of the Company absent such termination of employment. If the Executive's
employment is terminated otherwise than as described in this Section 7, the
Executive shall not be entitled to any severance, termination pay or similar
compensation or benefits, provided that the Executive shall be entitled to any
benefits then due or accrued in accordance with the applicable employee benefit
plans of the Company or applicable law, including "continuation coverage" under
the Company's group health plans for purposes of Section 4980B of the Internal
Revenue Code of 1986, as amended ("COBRA"). As a condition of receiving any
severance for which he otherwise qualifies under this Section 7, the Executive
agrees to execute a general release of the Company and the Affiliates and their
respective officers, directors and employees from any and all claims,
obligations and liabilities of any kind whatsoever arising from or in connection
with the Executive's employment or termination of employment with the Company or
this Agreement (including, without limitation, civil rights claims), in such
form as is requested by the Company. The Executive acknowledges and agrees that,
except as specifically described in this Section 7, all of the Executive's
rights to any compensation, benefits (other than base salary earned through the
date of termination of employment and any benefits due or accrued prior to
termination of employment in accordance with the applicable employee benefit
plans of the Company or applicable law), bonuses or severance from the Company
or any Affiliate after termination of the Employment Term shall cease upon such
termination.
8. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, or sent by reputable overnight courier,
postage prepaid, to the addresses set forth as follows:
If to the Company: Associated Materials Incorporated
0000 Xxxxx Xxxx
Xxxxxxxx Xxxxx, Xxxx 00000
With copies to: Harvest Partners, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxx
and
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Executive: Xxxx X. Xxxxxxxxx
____________________
____________________
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or to such other address as shall be furnished in writing by either party to the
other party; provided that such notice or change in address shall be effective
only when actually received by the other party.
9. General.
(a) Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to contracts executed and to be performed entirely within
said State.
(b) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties undertake
to implement all efforts which are necessary, desirable and sufficient to amend,
supplement or substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as nearly
as may be possible the result previously intended by the parties without
renegotiation of any material terms and conditions stipulated herein.
(c) Assignability. The Executive may not assign his interest
in or delegate his duties under this Agreement. This Agreement is for the
employment of the Executive, personally, and the services to be rendered by him
under this Agreement must be rendered by him and no other person. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
Company and its successors and assigns. Without limiting the foregoing and
notwithstanding anything else in this Agreement to the contrary, the Company may
assign this Agreement to, and all rights hereunder shall inure to the benefit
of, any subsidiary of the Company or any person, firm or corporation resulting
from the reorganization of the Company or succeeding to the business or assets
of the Company by purchase, merger, consolidation or otherwise.
(d) Warranty by the Executive. The Executive represents and
warrants to the Company that the Executive is not subject to any contract,
agreement, judgment, order or decree of any kind, or any restrictive agreement
of any character, that restricts the Executive's ability to perform his
obligations under this Agreement or that would be breached by the Executive upon
his performance of his duties pursuant to this Agreement.
(e) Compliance with Rules and Policies. The Executive shall
perform all services in accordance with the lawful policies, procedures and
rules established by the Company and the Board. In addition, the Executive shall
comply with all laws, rules and regulations that are generally applicable to the
Company or its subsidiaries and their respective employees, directors and
officers.
(f) Withholding Taxes. All amounts payable hereunder shall be
subject to the withholding of all applicable taxes and deductions required by
any applicable law.
(g) Entire Agreement; Modification. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof, supersedes all prior agreements and undertakings, both written and oral,
and may not be modified or amended in any
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way except in writing by the parties hereto. As of the date hereof, the
severance agreement attached hereto as Exhibit B shall be cancelled and be of no
further force or effect, except to the extent provided pursuant to Section 7,
without the payment of any additional consideration by or to either of the
parties thereto.
(h) Duration. Notwithstanding the Employment Term hereunder,
this Agreement shall continue for so long as any obligations remain under this
Agreement.
(i) Survival. The covenants set forth in Section 5 of this
Agreement shall survive and shall continue to be binding upon the Executive
notwithstanding the termination of this Agreement for any reason whatsoever.
(j) Waiver. No waiver by either party hereto of any of the
requirements imposed by this Agreement on, or any breach of any condition or
provision of this Agreement to be performed by, the other party shall be deemed
a waiver of a similar or dissimilar requirement, provision or condition of this
Agreement at the same or any prior or subsequent time. Any such waiver shall be
express and in writing, and there shall be no waiver by conduct. Pursuit by
either party of any available remedy, either in law or equity, or any action of
any kind, does not constitute waiver of any other remedy or action. Such
remedies are cumulative and not exclusive.
(k) Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
(l) Section References. The words Section and paragraph herein
shall refer to provisions of this Agreement unless expressly indicated
otherwise.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have hereunto executed this Agreement as of the day and year
first written above.
ASSOCIATED MATERIALS INCORPORATED
Date: August 21, 2002 By:/s/ Xxxxxxx Xxxxxxxx, Xx.
Name: Xxxxxxx Xxxxxxxx, Xx.
Title: President and Chief Executive Officer
XXXX X. XXXXXXXXX
Date: August 25, 2002 /s/ Xxxx X. Xxxxxxxxx
--------------------------------
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Exhibit A
Annual Incentive Bonus
The Executive's annual incentive bonus for each calendar year during the
Employment Term shall be an amount based upon the Year Over Year Growth in
Harvest Equity Value or Compounded IRR, whichever is greater (the "Growth Rate")
as follows:
Growth Rate Hurdles Bonus
------------------- -----
Less than 15.00% $ 0.00
15.00% $ 16,000
25.00% $ 80,000
30.00% or greater $120,000
If the actual Growth Rate for a particular calendar year is
between two Growth Rate Hurdles, the applicable amount of bonus shall be
determined by linear interpolation based on the difference between such Growth
Rate Hurdles. Notwithstanding the foregoing, if the actual Year Over Year Growth
in Harvest Equity Value is less than 15.00% the bonus shall be zero, and if the
actual Growth Rate is equal to or greater than 30.00% the bonus shall be
$120,000. Notwithstanding the foregoing, the Growth Rate for the calendar year
ending December 31, 2002 shall be based solely on the Compounded IRR.
For purposes of the Executive's annual incentive bonus and the
computation thereof:
1. Year Over Year Growth in Harvest Equity Value between December 31 of
two successive calendar years shall be the excess of the Harvest Equity
Value as of December 31 of the second such calendar year over the
Harvest Equity Value as of December 31 of the first such calendar year
divided by the Harvest Equity Value as of December 31 of the first such
calendar year.
2. Compounded IRR shall mean, at any time, the annual discount rate which,
if applied at such time to the aggregate value of all cash proceeds
from the investments of the Harvest Funds (as defined in the Amended
and Restated Stockholders Agreement by and among Parent and the
stockholders of Parent, dated as of April 19, 2002, as amended from
time to time) in Parent (taking into account the time such proceeds are
received by the Harvest Funds) and the Harvest Equity Value at such
time, would cause such aggregate value to equal the sum of the cost of
the Harvest Funds' initial investment in Parent plus any additional
amounts invested by the Harvest Funds in Parent (taking into account
the amount of any such additional investment from the day on which the
Harvest Fund made such additional investment).
3. Harvest Equity Value, at any time, shall be determined as follows:
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(A) by multiplying Parent's trailing 12-month EBITDA at such time
by 6.5, and adding to the resulting product cash and cash
equivalents of Parent and its subsidiaries at such time (the
"Enterprise Value"); and
(B) by deducting from the Enterprise Value (a) indebtedness of
Parent and its subsidiaries (including, without limitation,
any capitalized leases) and (b) the aggregate liquidation
preference of all outstanding preferred stock of Parent (plus
accrued but unpaid dividends thereon) at such time (the
Enterprise Value less the amounts described in clause (a) and
(b) is referred to as the "Common Equity Value"); and
(C) by multiplying the Common Equity Value by a fraction the
numerator of which is the number of shares of Parent's common
stock owned by the Harvest Funds and the denominator of which
is the total number of shares of Parent's common stock
outstanding (the "Harvest Common Equity Value"); and
(D) by adding to the Harvest Common Equity Value the aggregate
liquidation preference of all outstanding preferred stock of
Parent owned by the Harvest Funds (plus accrued but unpaid
dividends thereon) at such time (all of the foregoing
computations in clauses (B), (C) and (D) shall be made by
assuming the full exercise of all outstanding employee and
director options covering capital stock of Parent and that all
shares of such stock held by employees and directors of Parent
and its subsidiaries that are subject to restrictions on
transfer or forfeiture are outstanding and fully vested).
4. EBITDA shall mean Parent's consolidated net income adjusted to exclude
deduction of interest expense (net of interest income), income taxes,
depreciation and amortization and the Harvest Fee pursuant to the
Management Agreement, dated as of April 19, 2002, between Harvest
Partners, Inc. and Associated Materials Incorporated, as amended from
time to time, and to exclude gain or loss from sale of capital assets,
and including deduction of all bonuses paid or accrued with respect to
the Executive and all other officers and employees of Parent and its
subsidiaries (including, without limitation, the Executive's bonus
hereunder), for the relevant calendar year, calculated otherwise in
accordance with generally accepted accounting principles, subject to
any adjustments made in good faith by the Board. EBITDA shall be
determined by the Company's management, subject to audit or review by
Parent's external accountants and approval, in good faith, by the
Board. EBITDA shall exclude any transaction- or merger-related costs
which are expensed rather than capitalized and the effect of inventory
write-ups made due to purchase accounting.
5. Any annual incentive bonus to which the Executive is entitled under
this Agreement for any calendar year shall be paid in a cash lump-sum
within thirty days following the close of Parent's books and completion
of Parent's annual audit by its external accountants for such calendar
year.
The Executive's entitlement to an annual incentive bonus shall be determined by
the Board in good faith in accordance with this Exhibit A.
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Exhibit B
AMENDED AND RESTATED SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this
"Agreement"), dated as of December 27, 2001 (the "Effective Date"), is entered
into between Associated Materials Incorporated, a Delaware corporation (the
"Company"), and Xxxx X. Xxxxxxxxx (the "Employee"). Certain terms used in this
Agreement with initial capital letters are defined in Section 9.
RECITALS:
1. The Company and the Employee are parties to a
Severance Agreement, dated October 19, 2001 (the "Prior Agreement"), setting
forth the terms and conditions of severance benefits for the Employee in the
event of a Change in Control.
2. The Company and the Employee each desire to amend and
restate in its entirety the Prior Agreement as set forth in this Agreement.
NOW, THEREFORE, the Company and the Employee agree as follows:
1. Operation of Agreement. This Agreement will be
binding upon its execution, but, notwithstanding anything in this Agreement to
the contrary, this Agreement will not be operative unless and until a Change in
Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, this Agreement shall become immediately operative without further
action.
2. Termination Following a Change in Control. (a) In the
event of a Change in Control, if the Employee's employment is terminated by the
Company or a Subsidiary during the Severance Period, the Employee shall be
entitled to the benefits provided by Section 3 unless such termination is the
result of the occurrence of one or more of the following events:
(i) The Employee's death;
(ii) If the Employee becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits under, the long-term disability plan applicable to the
Employee immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Employee's employment is terminated by the
Company or any Subsidiary other than pursuant to Section 2(a), the-Employee will
be entitled to the benefits provided by Section 3.
(b) In the event of a Change in Control, the Employee may
terminate employment with the Company and any Subsidiary during the Severance
Period with the right to severance compensation as provided in Section 3 upon
the occurrence of one or more of the following events (regardless of whether any
other reason, other than Cause, for such termination has occurred, including
other employment):
(i) the failure to maintain the Employee in the
position, or a substantially equivalent position, with the Company
and/or a Subsidiary that the Employee held immediately prior to a
Change in Control;
(ii) (A) a reduction in the Employee's Base Pay
or (B) the termination or reduction of the Employee's rights to
Employee Benefits (including any reduction or termination of the
Employee's opportunity to earn Incentive Pay pursuant to any plan or
program in effect immediately prior to the Change in Control), in
either case which is not remedied by the Company within 10 calendar
days after receipt by the Company of notice from the Employee of such
reduction or termination; or
(iii) the Company requires the Employee to have
his principal place of work changed to any location that is more than
35 miles from the location thereof immediately prior to the Change in
Control, without his prior written consent.
(c) A termination by the Company or a Subsidiary pursuant
to Section 2(a) or by the Employee pursuant to Section 2(b) will not affect any
rights that the Employee may have pursuant to any agreement, plan or policy of
the Company or a Subsidiary providing Employee Benefits, which rights shall be
governed by the terms thereof.
3. Severance Compensation. (a) If, following the
occurrence of a Change in Control, the Company or a Subsidiary terminates the
Employee's employment during the Severance Period other than pursuant to Section
2(a), or if the Employee terminates his employment pursuant to Section 2(b), the
Company will (1) pay or cause to be paid to the Employee the amounts described
in Sections 3(b), 3(c), 3(d) and 3(e) within five business days after the
Termination Date, (2) continue to provide to the Employee the benefits described
in Section 3(f) for the period described therein, and (3) provide the Employee
the benefits described in Section 3(g) for the period described therein.
(b) A lump sum payment in an amount equal to all Base Pay
and Incentive Pay owed to the Employee for periods on or prior to the
Termination Date.
(c) A lump sum payment in an amount equal to two times
the Base Pay (at the highest rate in effect for any period prior to the
Termination Date).
(d) A lump sum payment equal to two times Incentive Pay
(in an amount equal to the highest amount of Incentive Pay earned by the
Employee in any calendar year during the three calendar years immediately
preceding the calendar year in which the Change in Control occurred).
(e) In the event that the Termination Date occurs after
June 30 in any calendar year, a lump sum payment equal to one times Incentive
Pay (in an amount equal to the highest amount of Incentive Pay earned by the
Employee in any calendar year during the three calendar years immediately
preceding the calendar year in which the Change in Control occurred), multiplied
by a fraction, the numerator of which is the number of days between (and
including) January 1 of the calendar year in which the Termination Date occurs
and the Termination Date, and the denominator of which is 365.
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(f) For a period of 24 months following the Termination
Date (the "Continuation Period"), the Company will provide or arrange to provide
the Employee with Employee Benefits that are welfare benefits (but not stock
option, stock purchase or similar stock-based benefits) substantially similar to
those that the Employee was receiving or entitled to receive immediately prior
to the Termination Date (or, if greater, immediately prior to the reduction,
termination, or denial described in Section 2(b)(ii)). If and to the extent that
any benefit described in this Section 3(f) is not or cannot be paid or provided
under any Company plan or program, then the Company will pay or provide for the
payment to the Employee, his dependents and beneficiaries, of such Employee
Benefits. Without otherwise limiting the purposes of Section 4, Employee
Benefits otherwise receivable by the Employee pursuant to this Section 3(f) will
be reduced to the extent comparable welfare benefits are actually received by
the Employee from another employer during the Continuation Period following the
Employee's Termination Date, and any such benefits actually received by the
Employee shall be reported by the Employee to the Company.
(g) For the Continuation Period, the Company will pay (or
promptly reimburse the Employee for) the cost of Employee outplacement services
selected by the Employee; provided that the cost thereof paid by the Company
shall not exceed $30,000.
(h) Notwithstanding any provision of this Agreement to
the contrary, the parties' respective rights and obligations under this Section
3 will survive any termination or expiration of this Agreement or the
termination of the Employee's employment following a Change in Control for any
reason whatsoever.
4. No Mitigation Obligation. The payment of the
severance compensation by the Company to the Employee in accordance with the
terms of this Agreement is hereby acknowledged by the Company to be reasonable,
and the Employee will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, except
as expressly provided in the last sentence of Section 3(f).
5. Employment Rights. Nothing in this Agreement will
create any right or duty on the part of the Company or the Employee to have the
Employee remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control.
6. Withholding of Taxes. The Company or a Subsidiary may
withhold from any amounts payable under this Agreement all federal, state, city
or other taxes as the Company or a Subsidiary is required to withhold pursuant
to any applicable law, regulation or ruling.
7. Legal Fees and Expenses. It is the intent of the
Company that the Employee not be required to incur legal fees and the related
expenses associated with the interpretation, enforcement or defense of the
Employee's rights under this Agreement by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Employee under this Agreement. Accordingly, if it should
appear to the Employee that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Employee the benefits
3
provided or intended to be provided to the Employee hereunder, the Company
irrevocably authorizes the Employee from time to time to retain counsel of
Employee's choice, at the expense of the Company as hereafter provided, to
advise and represent the Employee in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Director, officer, stockholder or other person affiliated with the Company,
in any jurisdiction. Without respect to whether the Employee prevails, in whole
or in part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Employee in connection with any of the foregoing;
provided that, in regard to such matters, the Employee has not acted in bad
faith or with no colorable claim of success. The fees and expenses of counsel
solicited from time to time by the Employee shall be paid, or reimbursed to the
Employee if paid as promptly as practicable (and in any event within 15 calendar
days) upon presentation of a statement or statements prepared by such counsel in
accordance with its customary practices.
8. Limitation on Payments and Benefits. Notwithstanding
any provision of this Agreement to the contrary, if any amount or benefit to be
paid or provided under this Agreement (or any other agreement to which the
Employee is a party, including any stock option agreement) would be an "Excess
Parachute Payment," within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), or any successor provision thereto, but
for the application of this sentence, then the payments and benefits to be paid
or provided under this Agreement shall be reduced to the minimum extent
necessary (but in no event to less than zero) so that no portion of any such
payment or benefit, as so reduced, constitutes an Excess Parachute Payment. The
determination of whether any reduction in such payments or benefits to be
provided under this Agreement or otherwise is required pursuant to the preceding
sentence shall be made at the expense of the Company, if requested by either the
Employee or the Company, by a firm of independent accountants or a law firm
selected by the Company and reasonably acceptable to the Employee. The fact that
the Employee's right to payments or benefits may be reduced by reason of the
limitations contained in this Section 8 shall not of itself limit or otherwise
affect any other rights of the Employee other than pursuant to this Agreement.
In the event that any payment or benefit intended to be provided under this
Agreement or otherwise is required to be reduced pursuant to this Section 8, the
Employee shall be entitled to designate the payments and/or benefits to be so
reduced in order to give effect to this Section 8. The Company shall provide the
Employee with all information reasonably requested by the Employee to permit the
Employee to make such designation. In the event that the Employee fails to make
such designation within 10 business days of the Termination Date, the Company
may effect such reduction in any manner it deems appropriate.
9. Certain Defined Terms. In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Employee's annual base salary,
at the rate as in effect from time to time.
(b) "Cause" means that, prior to any termination pursuant
to Section 2(b), the Employee shall have:
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(i) been convicted of a criminal violation involving
fraud, embezzlement or theft;
(ii) committed intentional wrongful damage to property of
the Company or any Subsidiary; or
(iii) committed intentional wrongful disclosure of
confidential information of the Company or any Subsidiary;
and any such act shall have been materially harmful to the Company. For purposes
of this Agreement, no act or failure to act on the part of the Employee shall be
deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional' only if done or omitted to be done
by the Employee not in good faith and without reasonable belief that the
Employee's action or omission was in the best interest of the Company. Nothing
herein will limit the right of the Employee or his beneficiaries to contest the
validity of any determination by the Company to terminate the Employee for
Cause.
(c) "Change in Control" means any transaction or series
of transactions, the result of which causes any person (as the term "person" is
used in Section 13(d)(3) of the Securities Exchange Act (any such person being
hereafter referred to as a "Person"), other than one or more members of the
Winspear Family, to become the beneficial owner (as the term "beneficial owner"
is defined in Rule 13d-3 or any successor rule or regulation promulgated under
the Securities Exchange Act) of securities representing more than 50% of the
combined voting power of the then-outstanding Voting Stock of the Company. For
the purpose of this Agreement, any Person (including any member of the Winspear
Family) shall be deemed to beneficially own shares of Voting Stock of the
Company held directly or indirectly in accordance with Rule 13d-3.
(d) "Employee Benefits" means the benefits provided under
the employee benefit plans and programs in which Employee is entitled to
participate, including any retirement income or welfare benefit, incentive
compensation, life, health or other insurance (whether funded by actual
insurance or self insured by the Company or any Subsidiary), disability,
automobile allowance and other employee benefit policies, plans or programs that
may now exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by the Company or a Subsidiary,
providing benefits at least as great in the aggregate as are payable thereunder
prior to a Change in Control.
(e) "Incentive Pay" means an annual bonus, incentive or
other payment of compensation, in addition to Base Pay, made or to be made in
regard to services rendered in any year or other period pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the Company or a
Subsidiary, or any successor thereto; provided that the Incentive Pay shall not
include any stock options or other stock-based compensation.
(f) "Severance Period" means the period of time
commencing on the date of the first occurrence of a Change in Control and
continuing until the second anniversary of the occurrence of the Change in
Control.
5
(g) "Subsidiary" means an entity in which the Company
directly or indirectly beneficially owns 50% or more of the outstanding Voting
Stock, including AMC Management Company, a Delaware business trust.
(h) "Term" means the period commencing as of the
Effective Date and expiring as of the later of (i) the close of business on
December 31, 2003 or (ii) the expiration of the Severance Period; provided,
however, that if, prior to a Change in Control, the Employee ceases for any
reason to be an employee of the Company and any Subsidiary, the Term shall be
deemed to have expired and this Agreement will immediately terminate without
further action and be of no further effect.
(i) "Termination Date" means the date on which the
Employee's employment with the Company or a Subsidiary is terminated.
(j) "Voting Stock" means securities entitled to vote
generally in the election of directors or the equivalent.
(k) "Winspear Family" means Xxxxxxx X. Xxxxxxxx, his
affiliates (including the Winspear Family Limited Partnership and Winspear
Family Investments Ltd.), the members of his immediate family (as the term
"immediate family" is defined in Rule 16a-l(e) or any successor rule under the
Securities Exchange Act), any trust established for the benefit of Xxxxxxx X.
Xxxxxxxx or members of his immediate family and any private charitable
foundation controlled by Xxxxxxx X. Xxxxxxxx or members of his immediate family.
10. Successors and Binding Agreement. (a) This Agreement
is binding upon the Company and any successor to the Company (and such successor
shall thereafter be deemed the "Company" for the purposes of this Agreement),
but will not otherwise be assignable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature, and neither
party shall, without the consent of the other, assign this Agreement or any
rights or obligations hereunder except as provided in this Section 10.
11. Notices. For all purposes of this Agreement, all
notices required or permitted to be given hereunder will be in writing and will
be deemed to have been given when hand delivered or five business days after
having been mailed by certified mail, return receipt requested, addressed to the
Company (to the attention of the Secretary of the Company) at its principal
Employee office and to the Employee at his principal residence, or to such other
address as any party may have furnished to the other in writing, except that
notices of changes of address shall be effective only upon receipt.
12. Governing Law. This Agreement will be governed by and
construed in accordance with the substantive laws of the State of Delaware,
without giving effect to the principles of conflict of laws of such State.
6
13. Validity. If any provision of this Agreement is held
invalid or otherwise unenforceable, the remainder of this Agreement will not be
affected, and the provision so held to be invalid or otherwise unenforceable
will be reformed to the extent (and only to the extent) necessary to make it
valid or enforceable.
14. Certain Matters. Without limiting the rights of the
Employee at law or in equity, if the Company or a Subsidiary fails to make any
payment or provide any benefit required to be made or provided hereunder on a
timely basis, the Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime rate" as
quoted from time to time during the relevant period in The Wall Street Journal.
Such interest will be payable as it accrues on demand. Any change in such prime
rate will be effective on and as of the date of such change.
15. Amendments. No provision of this Agreement may be
modified unless such modification is agreed to in writing and signed by the
Employee and the Company.
16. Prior Agreement. This Agreement supercedes the Prior
Agreement, which Prior Agreement shall, without further action, be terminated as
of the date hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the Effective Date.
ASSOCIATED MATERIALS INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxx, Vice President and
Chief Financial Officer
/s/ Xxxx X. Xxxxxxxxx
------------------------------------------
Xxxx X. Xxxxxxxxx
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