EXHIBIT 10.17
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of August
21, 2002, by and between ASSOCIATED MATERIALS INCORPORATED, a Delaware
corporation (the "Company"), and XXXXXX X. XXXXXX, an individual residing in the
State of Ohio (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive currently serves as President of Alside
Supply Centers, a 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 President of Alside
Supply Centers, 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 President of Alside Supply Centers and shall report to the
President and Chief Executive Officer of the Company, performing such duties as
shall be reasonably required of a 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. Subject to earlier termination 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 two (2) years following the Commencement
Date; provided, however, that beginning on the first anniversary of the
Commencement Date, and on each subsequent anniversary of the Commencement Date,
such term shall be automatically extended by an additional one (1) year beyond
the end of the then-current term, unless, at least thirty (30) days before such
first anniversary of the Commencement Date, or thirty (30) days before any such
subsequent anniversary of the Commencement Date, the Company gives written
notice to the 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 second 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 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 Two Hundred Fifty Thousand Dollars ($250,000), 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.
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(d) Vacation; Sick Leave. During the Employment Term, the
Executive shall be entitled to not less than four (4) weeks of vacation during
each calendar year and sick leave in accordance with the Company's policies and
practices with respect to its executives.
(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 its 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 two (2) years.
(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 its
Affiliates; (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 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 the longer period of twelve (12)
months or the remaining Employment Term (payable, at the Company's option, in a
lump-sum or in equal installments in accordance with the Company's payroll
procedures during such applicable period following the date of the Executive's
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
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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: Xxxxxx X. Xxxxxx
0000 Xxxx Xxx Xxxxxxxxx
Xxxxxxxx, Xxxx 00000
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.
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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 way except in writing by the parties
hereto.
(h) Duration. Notwithstanding the Employment Term hereunder,
this Agreement shall continue for so long as any obligations remain under this
Agreement.
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(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
XXXXXX X. XXXXXX
Date: August 21, 2002 /s/ XXXXXX X. XXXXXX
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EXHIBIT A
TO EXHIBIT 10.20
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% Zero
15.00% $22,000
25.00% $110,000
30.00% or greater $165,000
If the actual Growth Rate for a particular calendar year is
between two Growth Rate Hurdles, the applicable percentage of base salary 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
$165,000. 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. Base salary shall mean the annual rate of base salary in effect under
the Employment Agreement as of the commencement of the calendar year to
which the bonus relates.
2. 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.
3. 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
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amount of any such additional investment from the day on which the
Harvest Fund made such additional investment).
4. Harvest Equity Value, at any time, shall be determined as follows:
(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).
5. 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.
6. 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
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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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