EMPLOYMENT AGREEMENT
Exhibit 10.16
EXECUTION COPY
THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of October 13, 2010 (the
“Commencement Date”), is made by and between Associated Materials LLC, a Delaware limited
liability company (the “Company”), and Xxxxxx X. Xxxxxxx (“Executive”).
WHEREAS, pursuant to the Agreement and Plan of Merger by and among AMH Holdings II, Inc., a
Delaware corporation (“AMH II”), Xxxxx Investment Holdings Corp., a Delaware corporation
(“Parent”), Xxxxx Intermediate Holdings Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent (“Intermediate”), and Xxxxx Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Intermediate (“Merger Sub”), dated as of September 8, 2010
(as amended, amended and restated, supplemented or otherwise modified from time to time, the
“Merger Agreement”), Merger Sub has agreed, subject to the terms and conditions of the
Merger Agreement, to merge with and into AMH II, whereby Merger Sub will cease to exist and AMH II
will become a wholly-owned subsidiary of Parent (the “Merger”);
WHEREAS, Executive previously entered into an employment agreement, dated as of April 15,
2010, with the Company (as amended or amended and restated from time to time, the “Prior
Employment Agreement”);
WHEREAS, Executive currently serves as President and Chief Executive Officer of the Company;
and
WHEREAS, upon the consummation of the Merger, the Company desires to secure for itself and its
affiliates the continuing services of Executive, and Executive desires to provide such continuing
services, in each case, pursuant to the terms and conditions hereof.
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 to this
Agreement hereby agree as follows:
1. Employment. On the terms and subject to the conditions set forth herein, the
Company hereby employs Executive as the President and Chief Executive Officer of the Company, and
Executive accepts such employment, for the Employment Term (as defined in Section 3). During the
Employment Term, Executive shall report solely to the Board of Directors of Parent (the
“Board”), performing such duties as shall be reasonably required of a president and chief
executive officer of a corporation of a similar size and nature to the Company, and shall have such
other powers and perform such other duties as may from time to time be assigned to him by the
Board. Promptly following the commencement of the Employment Term, Parent shall take all action
necessary to appoint Executive as a director of Parent, and, thereafter, for so long as Executive
remains the President and Chief Executive Officer of the Company, Parent shall use reasonable
efforts to cause Executive to be a director of Parent, and Executive agrees to serve as such a
director. To the extent requested by the Board, Executive shall also serve on any 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 (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”). 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. 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, that it shall not be a violation of this Agreement for
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 Executive’s performance of his duties hereunder.
3. Employment Term. Subject to earlier termination pursuant to Section 6, Executive’s
term of employment hereunder shall begin upon the Commencement Date and continue through the date
which is three years following the Commencement Date; provided, that beginning on the third
anniversary of the Commencement Date, and on each subsequent anniversary of the Commencement Date,
such term shall be automatically extended by an additional one year beyond the end of the
then-current term, unless, at least 90 days before such second anniversary of the Commencement
Date, or 90 days before any such subsequent anniversary of the Commencement Date, the Board gives
written notice to Executive that the Company does not desire to extend the term of this Agreement,
in which case, the term of employment hereunder shall terminate as of the third anniversary of the
Commencement Date or the end of the then-current term, as applicable (the term of employment
hereunder, including any extensions, in accordance with this Section 3, shall be referred to herein
as the “Employment Term”).
4. Compensation and Benefits.
(a) Salary. As compensation for his services hereunder and in consideration of
Executive’s other agreements hereunder, during the Employment Term, the Company shall pay Executive
a base salary, payable in equal installments in accordance with the Company’s payroll procedures,
at an annual rate of $600,000, subject to annual review by the Board (or its compensation
committee), which may increase but not decrease Executive’s base salary. Executive’s annual rate
of base salary shall increase to $625,000 effective April 1, 2011 and will be further increased to
$650,000 effective April 1, 2012.
(b) Annual Incentive Bonus; Stock Option Plan and Special Retention Incentive Bonus.
(1) Commencing on the Commencement Date, 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. Any
annual incentive bonus to which Executive is entitled under this Agreement for any
calendar year shall be paid in a cash lump-sum within 30 days following the close of
Intermediate’s books and completion of Intermediate’s annual audit by its external
accountants for such calendar year but in any event shall not be paid later than
March 15th of the calendar year immediately following the calendar year
to which the bonus relates.
(2) Executive shall also be entitled to participate in the stock option plan
established by Parent.
(3) Subject to Section 9, Executive shall also be entitled to receive a Special
Retention Incentive Bonus payable in four equal installments of $500,000 each on (or
within 30 days after) October 1, 2010, October 1, 2011, October 1, 2012, and October
1, 2013, so long as Executive is continuously actively employed by the Company
through each such date, or such continuous active employment is terminated by the
Company without Cause (as defined in Section 6) or by Executive for Good Reason (as
defined in Section 7(b)) or due to disability (as determined in the good faith
discretion of the Board) or death. Executive acknowledges that the first
installment of the Special Retention Incentive Bonus was paid to him on October 1,
2010.
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(4) Executive shall not be entitled to participate in any bonus plan, program
or arrangement of the Company or an Affiliate, other than as specifically provided
in this Section 4(b).
(c) Retirement, Medical, Dental and Other Benefits. During the Employment Term,
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, Executive shall be entitled to
not less than four weeks of vacation during each calendar year and sick leave in accordance with
the Company’s policies and practices with respect to its executive officers.
(e) Business Expenses. The Company shall reimburse or advance payment to 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.
5. Covenants of Executive. 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 Executive mutually agree that it is in the interest of both
parties for 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 Executive’s duties and the
nature of the Company’s business.
(a) Noncompetition. During the Employment Term and for the two-year period following
termination of the Employment Term (the “Restricted Period”), 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 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 (including, without limitation, any
business in which the Company or any Affiliate has specific plans to conduct in the future and as
to which Executive was aware of such planning at or prior to the time Executive’s employment is
terminated).
(b) Nonsolicitation. During the Employment Term and the Restricted Period, Executive
shall not, directly or indirectly, (i) hire or employ, solicit for employment or otherwise contract
for the services of any individual who is or was an employee or consultant of the Company or any
Affiliate; (ii) otherwise induce or attempt to induce any employee or consultant of the Company or
an Affiliate to leave the employ or service of the Company or such Affiliate, or in any way
interfere with the relationship between the Company or any Affiliate and any employee or consultant
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 at all times thereafter,
(i) 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, including, without limitation, any know-how, research and
development, software, databases, inventions, processes, formulae, technology, designs and other
intellectual property, information concerning finances, investments, profits, pricing, costs,
products, services, vendors, customers, clients, partners, investors, personnel, compensation,
recruiting, training, advertising, sales, marketing, promotions, government and regulatory
activities and approvals concerning the past, current or future business, activities and operations
of the Company and the Affiliates (all of the foregoing collectively hereinafter referred to as
“Confidential Information”), and (ii) Executive will not use, directly or indirectly, any
Confidential Information for the benefit of anyone other than the Company and the Affiliates;
provided, that 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 Executive. All Confidential Information,
new processes, techniques, know-how, methods, inventions, plans, products, patents and devices
developed, made or invented by 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 Executive hereby assigns any
and all rights therein or thereto to the Company.
(d) Nondisparagement. During the Employment Term and at all times thereafter,
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 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 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 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. 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, 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 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 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.
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6. Termination. The employment of Executive hereunder shall automatically terminate
at the end of the Employment Term. The employment of 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, except as otherwise provided in Section 8, “Cause” shall mean: (i) embezzlement,
theft or misappropriation by Executive of any property of the Company or an Affiliate; (ii) any
breach by Executive of Executive’s covenants under Section 5; (iii) any breach by Executive of any
other material provision of this Agreement which breach is not cured, to the extent susceptible to
cure, within 30 days after the Company has given written notice to Executive describing such
breach;(iv) willful failure by Executive to perform the duties of his employment hereunder which
continues for a period of 14 days following written notice thereof by the Company to 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 or an Affiliate
involving theft, dishonesty, misrepresentation or moral turpitude; (vi) gross negligence or willful
misconduct on the part of Executive in the performance of his duties as an employee, officer or
director of the Company or an Affiliate;(vii) Executive’s breach of his fiduciary obligations to
the Company or an Affiliate; (viii) Executive’s commission of intentional, wrongful damage to
property of the Company or an Affiliate; (ix) any chemical dependence of Executive which adversely
affects the performance of his duties and responsibilities to the Company or an Affiliate; or (x)
Executive’s violation of the Company’s or an Affiliate’s code of ethics, code of business conduct
or similar policies applicable to Executive. The existence or non-existence of Cause shall be
determined in good faith by the Board. The employment of Executive may also be terminated at any
time by Executive by notice of resignation delivered to the Company not less than 90 days prior to
the effective date of such resignation.
7. Severance for Terminations Other Than During the Post-Change Period.
(a) Except as otherwise provided in Section 8 and subject to Section 9, if Executive’s
employment hereunder is terminated during the Employment Term (other than during the Post-Change
Period) (1) by the Company other than for Cause and not due to disability (as determined in the
good faith discretion of the Board), death or expiration of the Employment Term following notice by
the Company not to extend the Employment Term in accordance with Section 3, or (2) by Executive for
Good Reason, Executive shall be entitled to receive as severance: (i) an amount equal to two times
Executive’s base salary pursuant to Section 4(a) (at the rate in effect immediately prior to the
Termination Date), which amount shall be payable, commencing no earlier than the sixty-first day
following such termination, in 24 equal monthly installments (other than the first such
installment, which shall include all amounts that would otherwise have been paid to Executive if
payment had commenced immediately following such termination of employment) in accordance with the
Company’s payroll procedures over the 24-month period following the date of Executive’s termination
(such 24-month period, the “Severance Period”); (ii) continued medical and dental benefits
described in Section 4(c) for the Severance Period, at the same rate of employee and Company shared
costs of such coverage as in effect from time to time for active employees of the Company; and
(iii) a pro rata portion (based on the number of days Executive was employed by the Company during
the calendar year of termination) of any annual incentive bonus otherwise payable in accordance
with Section 4(b)(1) for the year of termination of 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, but no later than March 15th of the
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calendar year immediately following the calendar year of such termination. With
respect to any such continued medical and dental benefits described in clause (ii) of the
first sentence of this Section 7 for which Executive is eligible, (I) if the Company cannot
continue such benefits without adverse tax consequences to Executive or the Company or for any
other reason, the Company shall pay Executive for the cost of such benefits; (II) such benefits
shall be discontinued in the event Executive becomes eligible for similar benefits from a successor
employer (and Executive’s eligibility for any such benefits shall be reported by Executive to the
Company); and (III) Executive’s period of “continuation coverage” for purposes of Section 4980B of
the Internal Revenue Code of 1986, as amended (the “Code”), shall be deemed to commence on
the date of Executive’s termination of employment.
(b) For purposes of this Agreement (except during the Post-Change Period, where the definition
of “Good Leaver Termination” (as defined in Section 8(b) below) shall instead be applicable in
accordance with the terms of Section 8), “Good Reason” shall mean the occurrence, without
Executive’s consent, of any of the following events: (i) an action by the Company resulting in a
material adverse change in Executive’s reporting responsibilities or a material diminution in
Executive’s duties or direct reports; or (ii) a material breach of any material provision of this
Agreement by the Company (which is not in connection with the termination of Executive’s employment
for Cause or due to Executive’s disability (as determined in the good faith discretion of the
Board)); provided, that the occurrence of any event described in clause (i) or (ii) of this
Section 7(b) may only constitute Good Reason if the relevant circumstances or conditions are not
remedied by the Company within 30 days after receipt by the Company of written notice thereof from
Executive.
8. Post-Change Period.
(a) Termination During the Post-Change Period. If Executive’s employment is
terminated by the Company or an Affiliate during the “Post-Change Period” (as defined below), then,
subject to Section 9, Executive shall be entitled to the benefits provided by Section 8(c) unless
such termination is the result of the occurrence of one or more of the following events:
(i) Executive’s death;
(ii) Executive’s employment is terminated by the Company or an Affiliate due to
disability (as determined in the good faith discretion of the Board); or
(iii) Cause (as defined in Section 8(e)(i)).
If, during the Post-Change Period, Executive’s employment is terminated by the Company or an
Affiliate as described in clause (i), (ii) or (iii) of this Section 8(a), Executive will not be
entitled to the benefits provided by Section 8(c).
(b) Good Leaver Termination by Executive. Executive may terminate employment with the
Company during the Post-Change Period with the right to severance compensation as provided in
Section 8(c) upon the occurrence of one or more of the following events without Executive’s prior
written consent (regardless of whether any other reason, other than death, disability (as
determined in the good faith discretion of the Board) or Cause, for such termination has occurred,
including other employment) and any termination following the occurrence of one or more of such
events shall hereafter be referred to as a “Good Leaver Termination”:
(i) the failure to maintain Executive in the position, or a substantially equivalent or
superior position, with the Company and/or with a direct or indirect parent company of the
Company that Executive held immediately prior to the Commencement Date, which is not
remedied by the Company within 10 calendar days after receipt by the Company of notice
from Executive of such failure;
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(ii) (A) a reduction in Executive’s base salary pursuant to Section 4(a) hereof or (B)
the termination or significant reduction in the aggregate of Executive’s right to
participate in employee benefit plans or programs of the Company as in effect on the date
hereof (other than Incentive Pay (as hereinafter defined) or any other bonus, incentive or
stock or equity-based compensation or benefits), in either case which is not remedied by the
Company within 10 calendar days after receipt by the Company of notice from Executive of
such reduction or termination;
(iii) a reduction or elimination of Executive’s opportunity to earn Incentive Pay
pursuant to any plan or program in effect on the date hereof which is not remedied by the
Company within 10 calendar days after receipt by the Company of notice from Executive of
such reduction or elimination (for the avoidance of doubt, changes in the value or
performance of the Company or an Affiliate or successor of either following the Commencement
Date shall not be considered a reduction or elimination of Executive’s opportunity to earn
Incentive Pay); or
(iv) the Company requires Executive to have his principal place of work changed to any
location that is more than 35 miles from the location thereof on the date hereof.
(c) Post-Change Period Severance. If the Company or an Affiliate terminates
Executive’s employment during the Post-Change Period other than as described in clause (i), (ii) or
(iii) of Section 8(a), or if Executive terminates his employment pursuant to a Good Leaver
Termination, Executive shall not be entitled to the severance compensation described in Section 7,
and, subject to Section 9, the Company will instead pay or provide to Executive the following
payments and benefits:
(1) A lump sum payment in an amount equal to all Base Pay and Incentive Pay (other than
for the calendar year of such termination of employment) owed to Executive for periods on or
prior to the Termination Date, which payment shall be made no later than the first regularly
scheduled payroll period following the Termination Date.
(2) An amount equal to the sum of (x) two times Executive’s base salary pursuant to
Section 4(a) (at the rate in effect immediately prior to the Termination Date) and (y) two
times Incentive Pay (in an amount equal to the highest amount of Incentive Pay earned by
Executive in any calendar year during the three calendar years immediately preceding the
year in which the Commencement Date occurred), which amount shall be payable, commencing no
earlier than the sixty-first day following such termination, in twenty-four (24) equal
monthly installments (other than the first such installment, which shall include all amounts
that would otherwise have been paid to Executive if payment had commenced immediately
following such termination of employment) in accordance with the Company’s payroll
procedures over the 24-month period following the date of Executive’s termination.
(3) In the event that the Termination Date occurs after June 30th in any
calendar year, a lump sum payment equal to one times Incentive Pay for such calendar year,
multiplied by a fraction, the numerator of which is the number of days between (and
including) January 1st of the calendar year in which the Termination Date occurs
and the Termination Date, and the denominator of which is 365, which amount shall be payable
no earlier than the date on which such Incentive Pay, if any, would have been paid under the
applicable plan or policy of the Company absent such termination of employment, but no later
than March 15th of the calendar year immediately following the calendar year of
such termination.
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(4) For a period of 24 months following the Termination Date (the “Continuation
Period”), the Company will provide Executive with medical, dental and life insurance
benefits consistent with the terms in effect for such benefits for active employees of the
Company during the Continuation Period. If and to the extent that any benefit described in
this Section 8(c)(4) is not or cannot be paid or provided under any Company plan or program
without adverse tax consequences to Executive or the Company or for any other reason, then
the Company shall pay Executive for the cost of such benefits. Without otherwise limiting
the purposes of Section 8(d), employee benefits otherwise receivable by Executive pursuant
to this Section 8(c)(4) will be reduced to the extent comparable welfare benefits are
actually received by Executive from another employer during the Continuation Period
following Executive’s Termination Date, and any such benefits actually received by Executive
shall be reported by Executive to the Company. The foregoing to the contrary
notwithstanding, to the extent required in order to comply with Section 409A of the Code, in
no event shall any such benefits be provided beyond the end of the second calendar year that
begins after Executive’s “separation from service” within the meaning of Section 409A of the
Code.
(5) The Company will provide Executive outplacement services in the amount of $30,000.
(d) No Mitigation Obligation; Effect on Other Rights. The payment of the severance
compensation by the Company to Executive in accordance with the terms of this Section 8 is hereby
acknowledged by the Company to be reasonable, and Executive will not be required to mitigate the
amount of any payment provided for in this Section 8 by seeking other employment or otherwise,
except as expressly provided in the penultimate sentence of Section 8(c)(4). This Section 8 will
not affect any rights (other than any rights to severance, termination, retention or similar
compensation or benefits) that Executive may have pursuant to any agreement, plan or policy of the
Company or a subsidiary thereof providing employee benefits, which rights shall be governed by the
terms thereof.
(e) Certain Defined Terms. The following terms have the following meanings when used
in this Section 8:
(i) “Cause” means that Executive shall have:
(1) been convicted of a criminal violation involving fraud, embezzlement or
theft;
(2) committed intentional wrongful damage to property of the Company or any
Affiliate; or
(3) committed intentional wrongful disclosure of confidential information of
the Company or any Affiliate.
Nothing herein will limit the right of Executive or his beneficiaries to contest the validity of
any determination by the Company to terminate Executive for Cause.
(ii) “Incentive Pay” means the annual incentive bonus arrangement described in
Section 4(b)(1).
(iii) “Post-Change Period” means the period of time commencing on the
Commencement Date and continuing until the second anniversary of the Commencement Date.
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(iv) “Termination Date” means the date on which Executive’s employment with the
Company and its Affiliates is terminated.
9. Termination of Compensation and Benefits; Execution of Release; Coordination of
Provisions. If Executive’s employment terminates otherwise than in a termination entitling him
to severance pay and benefits pursuant to Section 7 or Section 8, Executive shall not be entitled
to any severance, termination pay or similar compensation or benefits, provided that
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 Code and any payments under
Section 4(b)(3) to which Executive may be entitled following such termination. As a condition of
receiving any severance compensation for which Executive otherwise qualifies under Section 7 or
Section 8, or any payment under Section 4(b)(3), Executive agrees to execute within sixty (60) days
following the date of Executive’s termination of employment a general release in favor of the
Company in substantially the form set forth hereto as Exhibit B, such release to be
delivered, and to have become fully irrevocable, on or before the end of such 60-day period. It is
expressly agreed and understood that if such a release has not been executed and delivered and
become fully irrevocable by the end of such 60-day period, no amounts or benefits under Sections
4(b)(3), 7 or 8 shall be or become payable (except that any continued medical, dental or life
insurance benefits may be provided during such 60-day period pursuant to Section 7 or 8, as the
case may be, but will cease to be provided on the last day of such period). Any severance
compensation and benefits to which Executive may be entitled under Section 8 shall be in lieu of
any severance compensation or benefits to which Executive may be entitled under Section 7.
Executive acknowledges and agrees that, except as specifically described in Sections 4(b)(3), 7 and
8, all of 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.
10. Limitation on Payments and Benefits. Notwithstanding any provision of this
Agreement to the contrary, no amount or benefit shall be paid or provided under this Agreement or
otherwise to an extent or in a manner that would result in payments or benefits (or other
compensation) not being fully deductible by the Company or an Affiliate for federal income tax
purposes because of Section 280G of the Code, or any successor provision thereto (or that would
result in Executive being subject to the excise tax imposed by Section 4999 of the Code, or any
successor provision thereto). The determination of whether any such payments or benefits to be
provided under this Agreement or otherwise would not be so deductible (or whether Executive would
be subject to such excise tax) shall be made at the expense of the Company, if requested by either
Executive or the Company, by a firm of independent accountants or a law firm selected by the
Company and reasonably acceptable to Executive. The Company and Executive shall cooperate to
submit for approval by the shareholders of the Company, Parent or another applicable Affiliate, in
accordance with Section 280G(b)(5) of the Code, payments and benefits that may be made or provided
to Executive that may otherwise be considered “parachute payments,” as defined in Section
280G(b)(2) of the Code. In the event that any payment or benefit intended to be provided under this
Agreement or otherwise would constitute a “parachute payment,” as defined in Section 280G of the
Code, the Company shall designate the payments and/or benefits (beginning with cash payments) to be
reduced or modified so that the Company or an Affiliate is not denied any federal income tax
deductions for any such parachute payment because of Section 280G of the Code (or so that Executive
is not subject to the excise tax imposed by Section 4999 of the Code).
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11. 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 LLC
0000 Xxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
0000 Xxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
With copies, which shall not constitute notice, to:
Xxxxx Investment Holdings Corp.
c/x Xxxxxxx & Xxxxxxxx LLC
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx and Xxxxx Xxxx, Esq.
c/x Xxxxxxx & Xxxxxxxx LLC
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx and Xxxxx Xxxx, Esq.
-and-
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq. and Xxxxxxx Xxxxx, Esq.
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq. and Xxxxxxx Xxxxx, Esq.
If to Executive, to such address as shall most currently appear on the records of
the Company.
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.
12. General.
(a) GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE
APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL
THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF
LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY. ANY ACTION TO ENFORCE THIS AGREEMENT AND/OR THE EXHIBITS HERETO MUST BE BROUGHT IN, AND THE
PARTIES HEREBY CONSENT TO THE JURISDICTION OF, A COURT SITUATED IN THE CITY OF WILMINGTON,
DELAWARE. EACH PARTY HEREBY WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT
FORUM FOR THE RESOLUTION OF ANY SUCH ACTION. EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE
MATTERS CONTEMPLATED HEREBY.
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(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. Executive may not assign his interest in or delegate his duties
under this Agreement. This Agreement is for the employment of 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 Executive. Executive represents and warrants to the Company that
Executive is not subject to any contract, agreement, judgment, order or decree of any kind, or any
restrictive agreement of any character, that restricts Executive’s ability to perform his
obligations under this Agreement or that would be breached by Executive upon his performance of his
duties pursuant to this Agreement, and Executive shall indemnify and hold harmless the Company and
the Affiliates from and against any and all liabilities, losses, claims, obligations or the like
arising from or in connection with any breach of, or inaccuracy in, Executive’s representations and
warranties contained in this sentence.
(e) Compliance with Rules and Policies. Executive shall perform all services in
accordance with the lawful policies, procedures and rules established by the Company and the Board.
In addition, 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; Effectiveness of Agreement. This Agreement
constitutes the entire agreement of the parties hereto with respect to the subject matter hereof,
supersedes all prior agreements and undertakings (including, without limitation, the Prior
Employment Agreement), both written and oral, and may not be modified or amended in any way except
in writing by the parties hereto. Notwithstanding anything to the contrary herein, this Agreement
shall not become effective until the Commencement Date. If the Merger does not occur, then this
Agreement shall be of no force or effect.
(h) Duration. Notwithstanding the Employment Term hereunder, this Agreement shall
continue for so long as any obligations remain under this Agreement.
(i) Termination On or After Expiration of the Employment Term. Unless the Company and
Executive otherwise agree in writing, any continuation of Executive’s employment with the Company
and its Affiliates beyond the expiration of the Employment Term shall be deemed an employment “at
will” and shall not be deemed to extend any of the provisions of this Agreement (other than as
provided in Section 12(j) below), and Executive’s employment may thereafter be terminated “at will”
by Executive or the Company.
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(j) Survival. The covenants set forth in Section 5 and the parties’ respective rights
and obligations under Section 8 shall survive and shall continue to be binding upon Executive and
the
Company, as the case may be, in accordance with their terms, notwithstanding the termination
or expiration of this Agreement or the termination of Executive’s employment for any reason
whatsoever.
(k) 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.
(l) Counterparts. This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.
(m) Section References. The words Section and paragraph herein shall refer to
provisions of this Agreement unless expressly indicated otherwise.
[Signature page follows]
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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 LLC | ||||
| /s/ Xxxxxxx X. Xxxxxx | ||||
| By: | Xxxxxxx X. Xxxxxx | |||
| Its: | Vice President—Chief Financial Officer, Treasurer and Secretary |
|||
| EXECUTIVE | ||||
| /s/ Xxxxxx X. Xxxxxxx | ||||
| Xxxxxx X. Xxxxxxx | ||||
Signature Page to Employment Agreement
EXHIBIT A
Annual Incentive Bonus
Annual Incentive Bonus
Executive is eligible to receive an annual bonus, with a target bonus equal to 100% of base salary.
With respect to each fiscal year, the amount of annual bonus payable will be based upon the
achievement of both (i) an Adjusted EBITDA goal (the “EBITDA Bonus”) and (ii) other
operating metrics (the “OM Bonus”). The EBITDA Bonus will constitute at least 50% of the
annual bonus. For the 2010 fiscal year, Executive’s annual bonus will be calculated and paid in
accordance with Exhibit A to the Prior Employment Agreement and consistent with the Company’s past
practices with respect to Executive. For the 2011 fiscal year, (x) the EBITDA Bonus will
constitute 70% of the annual target bonus and the OM Bonus will constitute the remaining 30% of the
annual target bonus, and (y) the table below shows the applicable bonus ranges for the EBITDA
Bonus. For the OM Bonus, the applicable operating metrics for each fiscal year, as well as the
bonus ranges for these metrics, will be mutually agreed by the Company and Executive within the
first 90 days of each such fiscal year.
Fiscal Year 2011 Bonus Ranges
| Threshold | Target | Target+ | Superior | Excellence | Excellence+ | |||||||||||||||||||
Percentage of
Adjusted EBITDA
Goal of $180
Million Achieved |
92 | % | 100 | % | 105 | % | 110 | % | 115 | % | 120 | % | ||||||||||||
Percentage of
EBITDA Bonus
Payable |
20 | % | 100 | % | 150 | % | 200 | % | 250 | % | 300 | % | ||||||||||||
For purposes of Executive’s annual incentive bonus and the computation thereof:
| 1. | Base salary shall mean the annual rate of base salary in effect under this Agreement as of December 31 of the calendar year to which the bonus relates. |
| 2. | “Adjusted EBITDA” means the “EBITDA” of Intermediate for the applicable fiscal year, as such term is as defined in the Indenture, except that clause (1)(i) of such definition shall not apply for purposes of this Agreement. “Indenture” means the Indenture dated as of October 13, 2010 among the Xxxxx Acquisition Corp., Xxxxx New Finance, Inc., Associated Materials, LLC, Xxxxx Fargo Bank, National Association and the other parties thereto, as amended from time to time. |
| 3. | For purposes of illustration, if Executive’s target annual bonus is $625,000 (100% of salary in 2011), the target EBITDA Bonus for 2011 will equal $437,500 (70% of Executive’s base salary) and the target OM Bonus for 2011 will equal $187,500 (30% of Executive’s base salary). If 120% of the Adjusted EBITDA goal is achieved in 2011, the EBITDA Bonus would be $1,312,500 (300% times $437,500). In addition, if 100% of the goal for the other operating metrics is achieved, Executive’s OM Bonus would be $187,500 for a total annual bonus of $1,500,000. |
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| 4. | The Adjusted EBITDA targets as set forth in this Exhibit A will be adjusted by the Board (or its compensation committee) in good faith to reflect each acquisition or disposition by the Company or any of its Affiliates subsequent to the Commencement Date of any business, operation, entity (including the acquisition of only a portion of an entity whose results will be consolidated by the Company in accordance with generally accepted accounting principles), division of any entity or any assets outside the ordinary course of business. If the Company or any Affiliate makes such an acquisition or disposition in a given fiscal year, the Adjusted EBITDA target for such fiscal year and subsequent fiscal years, if applicable, shall be proportionately adjusted, fairly and appropriately, and only to the extent deemed necessary by the Board (or its compensation committee) (after consultation with the Company’s accountants), in the exercise of its good faith judgment, in order to accurately reflect the direct and measurable effect such acquisition or disposition has or is reasonably expected to have on such Adjusted EBITDA target(s). In addition, to the extent applicable, Adjusted EBITDA target(s) will be adjusted by the Board (or its compensation committee) (after consultation with the Company’s accountants) in good faith to reflect any changes in generally accepted accounting principles promulgated by accounting standard setters in order to accurately reflect the effect of such changes on such Adjusted EBITDA target(s). The intent of such adjustments is to keep the probability of achieving the Adjusted EBITDA targets the same as if the event triggering such adjustment had not occurred. The Board’s (or its compensation committee’s) determination of such necessary adjustment(s) shall be made within 90 days following the completion or closing of such event, as applicable, and shall be based on the Company’s accounting as set forth in its books and records and on the Company’s financial plan pursuant to which the Adjusted EBITDA targets were originally established. Any such adjustment(s) made in good faith shall be final and binding on all persons. |
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EXHIBIT B
GENERAL RELEASE
THIS AGREEMENT AND RELEASE, dated as of , 201 (this “Agreement”), is entered
into by and between Xxxxxx X. Xxxxxxx (“Executive”) and Associated Materials LLC (the
“Company”).
WHEREAS, Executive is currently employed with the Company; and
WHEREAS, Executive’s employment with the Company will terminate effective as of , 20 ;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, Executive and the Company hereby agree as
follows:
1. Executive shall be provided severance pay and other benefits (the “Severance
Benefits”) in accordance with the terms and conditions of [Section 7/Section 8] of the
employment agreement by and between Executive and the Company, dated as of October 13, 2010 (the
“Employment Agreement”); provided that, no such Severance Benefits shall be
paid or provided if Executive revokes this Agreement pursuant to Section 5 below.
2. Executive, for and on behalf of himself and Executive’s heirs, successors, agents,
representatives, executors and assigns, hereby waives and releases any common law, statutory or
other complaints, claims, demands, expenses, damages, liabilities, charges or causes of action
(each, a “Claim”) arising out of or relating to Executive’s employment or termination of
employment with, Executive’s serving in any capacity in respect of, or Executive’s status at any
time as a holder of any securities of, any of the Company and any of its affiliates (collectively,
the “Company Group”), both known and unknown, in law or in equity, which Executive may now
have or ever had against any member of the Company Group or any equityholder, agent,
representative, administrator, trustee, attorney, insurer, fiduciary, employee, director or officer
of any member of the Company Group, including their successors and assigns (collectively, the
“Company Releasees”), including, without limitation, any claim for any severance benefit
which might have been due Executive under any previous agreement executed by and between any member
of the Company Group and Executive, and any complaint, charge or cause of action arising out of his
employment with the Company Group under the Age Discrimination in Employment Act of 1967
(“ADEA,” a law which prohibits discrimination on the basis of age against individuals who
are age 40 or older), the National Labor Relations Act, the Civil Rights Act of 1991, the Americans
with Disabilities Act of 1990, Title VII of the Civil Rights Act of 1964, the Employee Retirement
Income Security Act of 1974, the Family Medical Leave Act, the Equal Pay Act, the Securities Act of
1933, the Securities Exchange Act of 1934, the Rehabilitation Act of 1973, the Worker Adjustment
and Retraining Notification Act, and the New York State Human Rights Law, all as amended; and all
other federal, state and local statutes, ordinances and regulations. By signing this Agreement,
Executive acknowledges that Executive intends to waive and release any rights known or unknown
Executive may have against the Company Releasees under these and any other laws; provided
that, Executive does not waive or release Claims (i) with respect to the right to enforce
this Agreement or those provisions of the Employment Agreement that expressly survive the
termination of Executive’s employment with the Company, (ii) with respect to any vested right
Executive may have under any employee pension or welfare benefit plan of the Company Group, or
(iii) any rights to indemnification preserved by Section 5 of the Employment Agreement or under any
applicable indemnification agreement, any D&O insurance policy applicable to
Executive and/or the Company’s certificates of incorporation, charter and by-laws, or (iv)
with respect to any claims that cannot legally be waived.
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3. Executive acknowledges that Executive has been given twenty-one (21) days from the date of
receipt of this Agreement to consider all of the provisions of the Agreement and, to the extent he
has not used the entire 21-day period prior to executing the Agreement, he does hereby knowingly
and voluntarily waive the remainder of said 21-day period. EXECUTIVE FURTHER ACKNOWLEDGES THAT HE
HAS READ THIS AGREEMENT CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO CONSULT AN ATTORNEY, AND
FULLY UNDERSTANDS THAT BY SIGNING BELOW HE IS GIVING UP CERTAIN RIGHTS WHICH HE MAY HAVE TO XXX OR
ASSERT A CLAIM AGAINST ANY OF THE COMPANY RELEASEES, AS DESCRIBED HEREIN AND THE OTHER PROVISIONS
HEREOF. EXECUTIVE ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED OR PRESSURED IN ANY MANNER WHATSOEVER
TO SIGN THIS AGREEMENT AND EXECUTIVE AGREES TO ALL OF ITS TERMS VOLUNTARILY.
4. Executive shall have seven (7) days from the date of Executive’s execution of this
Agreement to revoke the release, including with respect to all claims referred to herein
(including, without limitation, any and all claims arising under ADEA). If Executive revokes the
Agreement, Executive will be deemed not to have accepted the terms of this Agreement.
5. Executive hereby agrees not to defame or disparage any member of the Company Group or any
executive, manager, director, or officer of any member of the Company Group in any medium to any
person without limitation in time. The Company hereby agrees that its board of directors and the
executives, managers and officers of the members of the Company Group shall not defame or disparage
Executive in any medium to any person without limitation in time. Notwithstanding this provision,
either party may confer in confidence with his or its legal representatives and make truthful
statements as required by law.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
| ASSOCIATED MATERIALS LLC | ||||
| Its: | ||||
| EXECUTIVE | ||||
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