EXHIBIT 10.12
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") is made and entered into as
of January 1, 2003, by and between Atrium Corporation (f/k/a D and W Holdings,
Inc.), a Delaware corporation (together with its successors and assigns
permitted hereunder, the "Company"), Atrium Companies, Inc., a Delaware
corporation ("ACI"), and Xxxx X. Xxxx (the "Executive").
RECITALS
A. The Board of Directors of the Company (the "Board") determined that it is in
the best interest of the Company, its subsidiaries and its stockholders for
the Company to enter into this Agreement for purposes of the Company
establishing a bonus for the Executive upon the occurrence of a change of
control of the Company on the terms and conditions set forth herein.
B. The Company has simultaneously entered into an Employment Agreement dated as
of January 1, 2003 ("Employment Agreement") with the Executive, which
provides for the Executive's employment with the Company. This Change of
Control Agreement provides additional compensation to the Executive. All
capitalized terms not defined herein shall have the meanings ascribed to
them in the Employment Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the respective agreements and covenants set
forth herein and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. CONTINUED EMPLOYMENT FOLLOWING A CHANGE OF CONTROL IF REQUESTED BY THE
COMPANY
In the event a Change of Control occurs, the Executive agrees, if so
requested by the Company, to remain employed with the Company after the
Change of Control for a period not to exceed the remaining term of the
Employment Agreement. if the remaining term of the Employment Agreement is
less than twenty-four (24) months, the Executive agrees to enter into a new
employment agreement on reasonably substantially equivalent terms as those
contained in the Employment Agreement for a period not to exceed twenty-four
(24) months.
2. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Change of Control. Except as provided in clause (b) or (c) of this
Section 2, upon the occurrence of a Change of Control (including,
without limitation, if the Executive's employment under the Employment
Agreement is terminated by the Company without Cause or by the
Executive for Good Reason on or after the date that is 24 months prior
to the date of the occurrence of the Change of Control), the Company
shall pay, in a lump sum in cash within ten (10) days after the
occurrence of the Change of Control, the Change of Control Payment in
the amount provided in (and as defined in) Schedule A hereto plus any
amount required under clause (d) of this Section 2.
(b) Termination Without Cause or For Good Reason. If the Executive's
employment under the Employment Agreement is terminated more than 24
months prior to the occurrence of a Change of Control by the Company
without Cause or by the Executive for Good Reason, then no amount shall
be payable by the Company under this Agreement.
(c) With Cause or Without Good Reason. If upon or at any time prior to the
occurrence of a Change of Control, the Executive's employment under the
Employment Agreement is terminated by the Company with Cause or by the
Executive without Good Reason, then no amount shall be payable by the
Company under this Agreement.
(d) Gross-up Payment. In the event that any payments or benefits either
under this agreement or otherwise (together, the "Payments") to which
the Executive is entitled from his employment with the Company, will be
subject to the excise tax imposed by section 4999 of the Internal
Revenue Code or any successor provision ("section 4999"), the Company
will, prior to the date on which any amount of the excise tax must be
paid or withheld, make an additional lump-sum payment (the "gross-up
payment") to the Executive as described in the immediately succeeding
sentence; provided that the Executive shall not be entitled to this
gross-up payment if a reduction in the Payments (the "section 4999
Reduction Amount") to the largest amount that would not be subject to
excise taxes under section 4999 would provide the Executive with an
amount (net of federal, state, and local income taxes) greater than or
equivalent to the amount of the unreduced Payments (net of all federal,
state and local income taxes, and excise taxes); provided, however,
that the immediately preceding proviso shall not apply if the section
4999 Reduction Amount would exceed 10% of the unreduced Payments. If
payable, the gross-up payment will be sufficient, after giving effect
to all federal, state and other taxes and other charges (including
interest and penalties, if any) with respect to the gross-up payment,
to make the Executive whole for all taxes (including withholding taxes)
and any associated interest and penalties imposed under or as a result
of section 4999. Any tax determinations required under this paragraph
shall be computed at the highest applicable marginal tax rate, and
shall be made in writing by the Company's
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independent accountants, whose determination shall be conclusive and
binding for all purposes on the parties and their successors. The
Company shall provide the Executive with a detailed accounting of the
underlying assumptions and calculations.
(e) Full Settlement; Mitigation. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under Clause (a) of
this Section 2 and such amounts shall not be reduced whether or not the
Executive obtains other employment.
3. SUCCESSORS
The Company may assign its rights and obligations under this Agreement to
any successor to all or substantially all the assets of the Company, by
merger or otherwise, and may assign or encumber this Agreement and its
rights hereunder as security for indebtedness of the Company and its
affiliates. All covenants, terms, conditions and provisions of this
Agreement shall be binding upon and inure to the benefit of, and be
enforceable by the respective heirs, legal representatives, successors and
permitted assigns of the Company and Executive. Neither this Agreement nor
any rights, interests or obligations hereunder may be assigned by the
Executive without the prior written consent of the Company.
4. ACI
At any time during the Employment Period, any of the obligations of the
Company to make payments under Section 2(a) of this Agreement may, at the
sole discretion of the Company (subject to the approval of the Board), be
discharged and satisfied by ACI.
5. MISCELLANEOUS
(a) Construction. This Agreement shall be deemed drafted equally by both
the parties. Its language shall be construed as a whole and according
to its fair meaning. Any presumption or principle that the language is
to be construed against any party shall not apply. The headings in this
Agreement are only for convenience and are not intended to affect
construction or interpretation. Any references to paragraphs,
subparagraphs, sections or subsections are to those parts of this
Agreement, unless the context clearly indicates to the contrary. Also,
unless the context clearly indicates to the contrary, (a) the plural
includes the singular and the singular includes the plural; (b) "and"
and "or" are each used both conjunctively and disjunctively; (c) "any,"
"all," "each," or "every" means "any and all," and "each and every";
(d) "includes" and "including" are each "without limitation"; (e)
"herein," "hereof,"
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"hereunder" and other similar compounds of the word "here" refer to the
entire Agreement and not to any particular paragraph, subparagraph,
section or subsection; and (f) all pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the entities or persons referred to may
require.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Xxxx X. Xxxx
000 Xxxxxxxxxx
Xxxxxxx, Xxxxx 00000
If to the Company: Atrium Corporation
0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxx 0000X, Xxxxxx Xxxxx 00000
Attention: Xxxx X. Xxxx
Fax: (000) 000 0000
with copies to:
Ardshiel, Inc.
0 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
and to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx
Xxxxx Xxxxxxxxxx
Fax: (000) 000-0000
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) Enforcement. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during
the
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term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a portion of this
Agreement; and the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as part of
this Agreement a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
(d) Withholding. The Company shall be entitled to withhold from any amounts
payable under this Agreement any federal, state, local or foreign
withholding or other taxes or charges, which it is from time to time,
required to withhold. The Company shall be entitled to rely on an
opinion of counsel if any questions as to the amount or requirement of
such withholding shall arise.
(e) No Waiver. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at any time.
(f) Termination. Upon the occurrence and completion of the events described
in Section 2(a), 2(b) or 2(c) hereof, this Agreement shall terminate.
(g) Complete Agreement. This Agreement constitutes the entire and complete
understanding and agreement between the parties with respect to the
subject matter hereof, and supersedes all prior and contemporaneous
oral and written agreements, representations and understandings between
the Executive and the Company, or its affiliates and subsidiaries
(except for the Employment Agreement), which are hereby terminated.
Other than as expressly set forth herein, the Executive and the Company
acknowledge and represent that there are no other promises, terms,
conditions or representations (oral or written) regarding any matter
relevant hereto. This Agreement may be executed in two or more
counterparts.
(h) Mediation; Arbitration
(i) The Company and the Executive shall mediate any claim or
controversy arising out of or relating to this Agreement or any
breach thereof if either of them requests mediation and gives
written notice to the other (the "Mediation Notice"). Any notice
given pursuant to the preceding sentence shall include a brief
statement of the claim or controversy. If the Company and the
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Executive do not resolve the claim or controversy within five (5)
days after the date of the Mediation Notice, the Company and the
Executive shall then use reasonable efforts to agree upon an
independent mediator. If the Company and the Executive do not
agree upon an independent mediator within ten (10) days after the
date of the Mediation Notice, either party may request that
JAMS/Endispute ("JAMS"), or a similar mediation service of a
similar national scope if JAMS no longer then exists, appoint an
independent mediator. The Company and the Executive shall share
the costs of mediation equally and shall pay such costs in
advance upon the request of the mediator or any party. Within ten
(10) days after selection of the mediator, the mediator shall set
the mediation. If the Company and the Executive do not resolve
the dispute within thirty (30) days after the date of the
Mediation Notice, the dispute shall be decided by arbitration as
set forth below.
(ii) Any claim or controversy arising out of or relating to this
Agreement or any breach thereof shall be settled by arbitration
if such claim or controversy is not settled pursuant to mediation
as set forth above. The venue for any such arbitration shall be
Dallas, Texas, or such other location as the parties may mutually
agree. Except as expressly set forth herein, all arbitration
proceedings under this Section 6(h)(ii) shall be undertaken in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") then in force. Only
individuals who are (i) lawyers engaged full-time in the practice
of law and (ii) on the AAA register of arbitrators shall be
selected as an arbitrator. There shall be one arbitrator who
shall be chosen in accordance with the rules of the AAA. Within
twenty (20) days of the conclusion of the arbitration hearing,
the arbitrator shall prepare written findings of fact and
conclusions of law. Judgment on the written award may be entered
and enforced in any court of competent jurisdiction. It is
mutually agreed that the written decision of the arbitrator shall
be valid, binding, final and non-appealable; provided however,
that the parties hereto agree that the arbitrator shall not be
empowered to award punitive damages against any party to such
arbitration. The arbitrator shall require the non-prevailing
party to pay the arbitrator's full fees and expenses or, if in
the arbitrator's opinion there is no prevailing party, the
arbitrator's fees and expenses will be borne equally by the
parties thereto. In the event action is brought to enforce the
provisions of this Agreement pursuant to this Section 16(h)(ii),
the non-prevailing parties shall be required to pay the
reasonable attorneys'
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fees and expenses of the prevailing parties, except that if in
the opinion of the court or arbitrator deciding such action there
is no prevailing party, each party shall pay its own attorneys'
fees and expenses.
(i) Choice of Law. This Agreement and the rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the
State of Texas without reference to principles of conflicts of law of
Texas or any other jurisdiction, and, where applicable, the laws of the
United States.
(j) Amendment. This Agreement may not be amended or modified at any time
except by a written instrument approved by the Board and executed by
the Company and the Executive.
(k) Executive Acknowledgment. Executive acknowledges that he has read and
understands this Agreement, is fully aware of its legal effect, has not
acted in reliance upon any representations or promises made by the
Company other than those contained in writing herein, and has entered
into this Agreement freely based on his own judgment.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed in its name on its behalf, as of the 1st day of January
2003.
EXECUTIVE
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Xxxx X. Xxxx
ATRIUM CORPORATION
By:
--------------------------------
Name:
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Title:
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ATRIUM COMPANIES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
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SCHEDULE A
TO XXXX X. XXXX'X CHANGE OF CONTROL AGREEMENT
(a) Executive shall be entitled to a change of control payment (the "Change
of Control Payment") computed as follows:
(b) The Executive's Change of Control Payment shall be payable based upon
achievement of the following targets:
(i) If the stockholders of the Company receive net proceeds per share
of $850 or less for each share of common stock of the Company
owned by them, the Executive shall receive a Change of Control
Payment of $100,000.
(ii) If the stockholders of the Company receive net proceeds per share
of greater than $850 but less than $992 for each share of common
stock of the Company owned by them, the Executive shall receive a
Change of Control Payment of $100,000 plus the product of .56% of
the net proceeds per share exceeding $850 multiplied by the
number of shares outstanding immediately prior to the Change of
Control.
(iii) If the stockholders of the Company receive net proceeds per share
of equal to or greater than $992 for each share of common stock
of the Company owned by them, the Executive shall receive a
Change of Control Payment of $250,000 plus .37% of the net
proceeds per share exceeding $992 multiplied by the number of
shares outstanding immediately prior to the Change of Control.
(iv) For purposes of this Schedule A, (a) "net proceeds per share"
shall mean the amount of cash and /or fair market value of any
equity securities actually received by the stockholders of the
Company or any of their respective affiliates or designees for
each share of common stock of the Company owned by them and (b)
references to "the number of shares outstanding immediately prior
to the Change of Control" shall give effect to the exercise of
all warrants and options to acquire shares that are in-the-money
at such time.
