AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this “Agreement”), originally dated as of August 21, 2006,
amended and restated in its entirety, as of April 1, 2008, and further amended and restated in its
entirety as of February 17, 2010 (the “Restatement Date”), by and between ASSOCIATED
MATERIALS LLC, a Delaware limited liability company (as successor to Associated Materials
Incorporated, a Delaware corporation) (the “Company”), and a wholly owned indirect
subsidiary of AMH Holdings II, Inc., a Delaware corporation (“AMH II”), and XXXXXX XXXXXXX,
an individual residing in the State of Ohio (the “Executive”).
WITNESSETH:
WHEREAS, the Company desires to continue to retain the services and employment of the
Executive on behalf of the Company, and the Executive desires to continue such employment with the
Company, upon the terms and conditions hereinafter set forth; and
WHEREAS, pursuant to Section 12(g) of this Agreement, this Agreement may be amended in writing
by the parties hereto; and
WHEREAS, the Company and the Executive mutually desire to amend and restate this Agreement as
set forth herein.
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 and Chief Executive Officer of the Company,
and the Executive accepts such employment, for the Employment Term (as defined in Section 3).
During the Employment Term, the Executive shall serve as the President and Chief Executive Officer
of the Company and shall report solely to the Board of Directors of AMH II (the “Board”),
performing such duties as shall be reasonably required of a president and chief executive officer,
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, AMH II shall take
all action necessary to appoint the Executive as a director of AMH II, and, thereafter, for so long
as the Executive remains the President and Chief Executive Officer of the Company, AMH II shall use
reasonable efforts to cause the Executive to be a director of AMH II, and the Executive agrees to
serve as such a director. To the extent requested by the Board, the Executive shall also serve on
any committees of the Board and/or as a director, officer or employee of AMH II or any other person
or entity which, from time to time, is a direct or indirect subsidiary of AMH II (AMH II 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. The Company and the Executive understand and agree that the Executive is
obliged under the terms of a consulting agreement between the Executive and another company to
devote, and that the Executive may so devote, from time to time prior to October 5, 2007, a portion
of his business time and attention to such other company and its affiliates pursuant to such
consulting agreement, but only to the extent the Executive’s business time and attention to such
other company and its affiliates does not interfere with the 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 April 1, 2008 (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 second 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 second 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 Five Hundred Fifty Thousand Dollars ($550,000), subject to annual
review by the Board or its Compensation Committee, which may increase but not decrease the
Executive’s base salary.
(b) Annual Incentive Bonus; Stock Option Plan and Special Retention Incentive Bonus.
(1) Commencing with calendar year 2006, 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.
(2) The Executive shall also be entitled to participate in the stock option plan
established by AMH II.
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(3) The Executive shall also be entitled to receive a Special Retention Incentive Bonus
payable in three equal installments of $500,000 each on (or within thirty (30) days after)
October 1, 2008, October 1, 2009, and October 1, 2010, so long as the 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
the 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; provided, however, that, if
a Liquidity Event that does not constitute a Qualified Change in Control (as defined below)
occurs during calendar year 2008, all unpaid installments will be payable no later than
March 15, 2009, so long as the Executive is continuously actively employed by the Company
through such date, or such continuous active employment is terminated by the Company without
Cause or by the Executive for Good Reason or due to disability (as determined in the good
faith discretion of the Board) or death; and provided further that, if a Liquidity Event
that does not constitute a Qualified Change in Control occurs during calendar year 2009, the
third installment will be payable no later than March 15, 2010, so long as the Executive is
continuously actively employed by the Company through such date, or such continuous active
employment is terminated by the Company without Cause or by the Executive for Good Reason or
due to disability (as determined in the good faith discretion of the Board) or death.
“Qualified Change in Control” means a “change in the ownership or effective control”
of AMH II, or “change in the ownership of a substantial portion of the assets” of AMH II, as
such terms are used in Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as
amended (the “Code”).
(4) For purposes of this Agreement, “Liquidity Event” shall mean the occurrence
of either of the following events: (A) a transaction or series of transactions (whether
structured as a stock sale, merger, consolidation, reorganization, asset sale or otherwise)
which results in the sale or transfer of more than a majority of the assets of AMH II and
its subsidiaries (determined based on value) or of a majority of the capital stock of AMH II
to a person other than the Investors or their affiliates; or (B) a widely distributed sale
of the common stock of AMH II in an underwritten public offering pursuant to an effective
registration statement filed with the Securities and Exchange Commission which yields at
least $150,000,000 of net proceeds to AMH II. For purposes of the immediately preceding
sentence, “Investors” shall mean all of the following persons collectively: Harvest
Partners III, L.P., Harvest Partners III Beteiligungsgesellschaft Bürgerlichen Rechts (mit
Haftungsbeschränkung), Harvest Partners IV, L.P., Harvest Partners IV GmbH & Co. KG, AM
Holdings Limited, AM Equity Limited, AM Investments Limited, Associated Equity Limited and
Associated Investments Limited.
(5) The 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, 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. 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.
5. Covenants of the Executive. The Executive acknowledges that in the course of his
employment with the Company he has and will become familiar with the Company’s and the Affiliates’
trade secrets and with other confidential information concerning the Company and the Affiliates,
and that his services are of special, unique and extraordinary value to the Company and the
Affiliates. Therefore, the Company and the Executive mutually agree that it is in the interest of
both parties for the Executive to enter into the restrictive covenants set forth in this Section 5
and that such restrictions and covenants are reasonable given the nature of the Executive’s duties
and the nature of the Company’s business.
(a) Noncompetition. During the Employment Term and for the two (2)-year period (the
“Restricted Period”) 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.
(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; (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 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.
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(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 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, except as otherwise provided in Section 8, “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 provision of this Agreement which breach is not cured, to the
extent susceptible to cure, within fourteen (14) days after the Company has given written notice to
the Executive describing such breach; (iv) failure or refusal by the Executive to perform any
directive of the Board or the duties of his employment hereunder which continues for a period of
fourteen (14) days following notice thereof by the Company to the Executive; (v) any act by the
Executive constituting a felony or otherwise involving theft, fraud, dishonesty, misrepresentation
or moral turpitude; (vi) conviction of, or plea of nolo contendere (or a similar plea) to, any
criminal offense; (vii) 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;
(viii) the Executive’s breach of his fiduciary obligations, or disloyalty, to the Company or an
Affiliate; (ix) any act or omission to act of the Executive intended to harm or damage the
business, property, operations, financial condition or reputation of the Company or any Affiliate;
(x) any chemical dependence of the Executive which adversely affects the performance of his duties
and responsibilities to the Company or an Affiliate; or (xi) the Executive’s violation of the
Company’s or an Affiliate’s code of ethics, code of business conduct or similar policies applicable
to the Executive, including but not limited to, the Company’s Code of Ethics for the Chief
Executive Officer and the Senior Financial Officers. 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. (a) Except as otherwise provided in Section 8, if the Executive’s
employment hereunder is terminated during the Employment Term (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 the Executive for Good Reason, the Executive shall be
entitled to receive as severance (subject to Section 9): (i) 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 period of twenty-four (24) months, payable, commencing no later than sixty (60) days
following such termination, in equal installments in accordance with the Company’s payroll
procedures during the twenty-four (24) month period following the date
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of the Executive’s termination (such twenty-four (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 the 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 the Executive’s employment, payable no earlier than the date on which
such bonus, if any, would have been paid under the applicable plan or policy of the Company absent
such termination of employment, but no later than March 15 of the 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 the
Executive is eligible, (I) if the Company cannot continue such benefits, the Company shall pay the
Executive for the cost of such benefits; (II) such benefits shall be discontinued in the event the
Executive becomes eligible for similar benefits from a successor employer (and the Executive’s
eligibility for any such benefits shall be reported by the Executive to the Company); and (III) the
Executive’s period of “continuation coverage” for purposes of Section 4980B of the Code shall be
deemed to commence on the date of the Executive’s termination of employment.
(b) For purposes of this Agreement, except as otherwise provided in Section 8, “Good
Reason” shall mean the occurrence, without the Executive’s consent, of any of the following
events: (i) an action by the Company resulting in a material adverse change in the Executive’s
reporting responsibilities or a material diminution in the 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 the Executive’s employment for Cause or due to the Executive’s
Disability); provided, however, 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 thirty (30) days after receipt by the Company of written notice
thereof from the Executive.
8. Change in Control. This Section 8 will be binding upon the Restatement Date, but
notwithstanding anything in this Agreement to the contrary, this Section 8 will not be operative
unless and until a Change in Control occurs. Upon the occurrence of a Change in Control at any
time during the Employment Term, this Section 8 shall become immediately operative without further
action; provided, however, that if, prior to a Change in Control, the Executive ceases for any
reason to be an employee of the Company and any Affiliate, the effectiveness of this Section 8 will
immediately terminate without further action and be of no further effect. Certain capitalized
terms used in this Section 8 are defined for purposes of this Section 8 in Section 8(e).
(a) Termination Following a Change in Control. In the event of a Change in Control,
if the Executive’s employment is terminated by the Company or an Affiliate during the Post-Change
Period, the 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) | The Executive’s death; |
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| (ii) | If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits under, the long-term
disability plan applicable to the Executive immediately prior to the
Change in Control; or |
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| (iii) | Cause (as defined in Section 8(e)(i)). |
If, during the Post-Change Period, the Executive’s employment is terminated by the Company
or an Affiliate as described in clause (i), (ii) or (iii) of this Section 8(a), the
Executive will not be entitled to the benefits provided by Section 8(c).
(b) Termination by Executive. In the event of a Change in Control, the 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
(regardless of whether any other reason, other than death, permanent disability or Cause, for such
termination has occurred, including other employment):
| (i) | the failure to maintain the 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 the Executive held
immediately prior to the Change in Control, which is not remedied by the
Company within 10 calendar days after receipt by the Company of notice from the
Executive of such failure; |
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| (ii) | (A) a reduction in the Executive’s base salary pursuant to
Section 4(a) hereof or (B) the termination or significant reduction in the
aggregate of the Executive’s right to participate in employee benefit plans or
programs of the Company as in effect prior to the Change in Control (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 the Executive of such reduction or termination; |
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| (iii) | a reduction or elimination of the Executive’s opportunity to
earn Incentive Pay pursuant to any plan or program in effect immediately prior
to the Change in Control which is not remedied by the Company within 10
calendar days after receipt by the Company of notice from the 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
Change in Control shall not be considered a reduction or elimination of the
Executive’s opportunity to earn Incentive Pay); or |
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| (iv) | the Company requires the Executive to have his principal place
of work changed to any location that is more than 35 miles from the location
thereof immediately prior to the Change in Control, without his prior written
consent. |
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(c) Change in Control Severance. If, following the occurrence of a Change in Control,
the Company or an Affiliate terminates the Executive’s employment during the Post-Change Period
other than as described in clause (i), (ii) or (iii) of Section 8(a), or if the Executive
terminates his employment pursuant to Section 8(b), the Executive shall not be entitled to the
severance compensation described in Section 7, and, subject to Section 9, the Company will (i) pay
or cause to be paid to the Executive the amounts described in Sections 8(c)(1), 8(c)(2), 8(c)(3)
and 8(c)(6) in a lump-sum no later than sixty (60) days after the Termination Date; (ii) pay or
cause to be paid to the Executive the amount described in Section 8(c)(4), such amount to 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 15 of the calendar year immediately following the calendar year of the Termination Date;
and (iii) provide the Executive the benefits described in Section 8(c)(5) for the period described
therein. The foregoing to the contrary notwithstanding, if the Executive is entitled to payments
under this Section 8(c) following a Change in Control that does not constitute a “change in the
ownership or effective control” of the relevant company or a “change in the ownership of a
substantial portion of the assets” of the relevant company, as such terms are used in Code Section
409A(a)(2)(A)(v), then an amount equal to the amount that would have been paid under Section
7(a)(i) had a Change in Control not occurred shall be paid in installments during the twenty-four
(24) month period following the Termination Date, and the remaining amounts described in clause (i)
of this Section 8(c) above (reduced by the amount so paid in installments) shall be paid in a
lump-sum.
| (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 the Executive for periods on or prior to the Termination
Date. |
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| (2) | A lump sum payment in an amount equal to two times the
Executive’s base salary pursuant to Section 4(a) (at the rate in effect
immediately prior to the Termination Date). |
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| (3) | A lump sum payment equal to two times Incentive Pay (in an
amount equal to the highest amount of Incentive Pay earned by the Executive in
any calendar year during the three calendar years immediately preceding the
calendar year in which the Change in Control occurred). |
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| (4) | In the event that the Termination Date occurs after June 30 in
any calendar year, a lump sum payment equal to one times Incentive Pay for such
calendar year, multiplied by a fraction, the numerator of which is the number
of days between (and including) January 1 of the calendar year in which the
Termination Date occurs and the Termination Date, and the denominator of which
is 365. |
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| (5) | For a period of 24 months following the Termination Date (the
“Continuation Period”), the Company will provide the 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)(5) is not or cannot be paid or provided under any Company plan or program,
then the Company will pay or provide for the payment to the Executive, his
dependants and beneficiaries, of such employee benefits. Without otherwise
limiting the purposes of Section 8(d), |
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employee benefits otherwise receivable by the Executive pursuant to this
Section 8(c)(5) will be reduced to the extent comparable welfare benefits
are actually received by the Executive from another employer during the
Continuation Period following the Executive’s Termination Date, and any such
benefits actually received by the Executive shall be reported by the
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 the Executive’s “separation from service”
within the meaning of Section 409A of the Code. |
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| (6) | The Company will pay to the Executive the cost of employee
outplacement services for the Executive in the amount of $30,000. |
(d) No Mitigation Obligation; Effect on Other Rights. The payment of the severance
compensation by the Company to the Executive in accordance with the terms of this Section 8 is
hereby acknowledged by the Company to be reasonable, and the 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 last sentence of Section 8(c)(5). This Section 8
will not affect any rights (other than any rights to severance, termination, retention or similar
compensation or benefits) that the 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, prior to any termination pursuant
to Section 8(b), the Executive shall have: |
| (1) | been convicted of a criminal violation
involving fraud, embezzlement or theft; |
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| (2) | committed intentional wrongful damage to
property of the Company or any Affiliate; or |
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| (3) | committed intentional wrongful disclosure of
confidential information of the Company or any Affiliate. |
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Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity of any determination by the
Company to terminate the Executive for Cause. |
| (ii) | “Change in Control” means (A) a stock sale, merger,
consolidation, combination, reorganization or other transaction involving the
Company resulting in less than fifty percent (50%) of the combined voting power
of the surviving or resulting entity being owned by the owner or owners of |
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the Company immediately prior to such transaction; (B) a stock sale, merger,
consolidation, combination, reorganization or other transaction involving
AMH II, AMH Holdings, Inc. (“AMH”) or Associated Materials Holdings,
LLC (“Parent”) resulting in less than fifty percent (50%) of the
combined voting power of the surviving or resulting entity being owned by
the shareholders or owners of AMH II, AMH or Parent, as applicable,
immediately prior to such transaction or (C) the liquidation or dissolution
of the Company, AMH II, AMH or Parent or the sale or other disposition of
all or substantially all of the assets or business of the Company, AMH II,
AMH or Parent (other than, in the case of either clause (A), (B) or (C)
above, in connection with any employee benefit plan of the Company or an
Affiliate). |
|||
| (iii) | “Incentive Pay” means an annual cash bonus or annual
cash incentive compensation, in addition to base salary, made or to be made in
regard to services rendered in any year or other period pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the Company or
an Affiliate, or any successor thereto; provided that the Incentive Pay
shall not include any stock options or other stock-based compensation or any
special management bonuses paid in connection with any debt offering or
recapitalization of AMH II and/or another Affiliate. For the avoidance of
doubt, as of the date hereof, Incentive Pay shall mean the annual incentive
bonus arrangement described in Section 4(b). |
||
| (iv) | “Post-Change Period” means the period of time
commencing on the date of the first occurrence of a Change in Control and
continuing until the second anniversary of the occurrence of such Change in
Control. |
||
| (v) | “Termination Date” means the date on which the
Executive’s employment with the Company or an Affiliate is terminated. |
9. Termination of Compensation and Benefits; Execution of Release; Coordination of
Provisions. If the Executive’s employment terminates otherwise than in a termination entitling
him to severance pay and benefits pursuant to Section 7 or Section 8, 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 Code. As a condition of
receiving any severance compensation for which the Executive otherwise qualifies under Section 7 or
Section 8, or any payment under Section 4(b)(3), the Executive agrees to execute within sixty (60)
days following the date of the Executive’s termination of employment 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, including, without limitation, those
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,
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such release to be delivered, and to have become fully irrevocable, on or before the end of
such sixty (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 sixty (60)-day period,
no amounts or benefits under Section 7 or 8 shall be or become payable (except that any continued
medical, dental or life insurance benefits may be provided during such sixty (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 the Executive may be entitled under
Section 8 shall be in lieu of any severance compensation or benefits to which the Executive may be
entitled under Section 7. The Executive acknowledges and agrees that, except as specifically
described in Section 7 and Section 8, 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.
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 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 the 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 the Executive would be subject to
such excise tax) shall be made at the expense of the Company, if requested by either the Executive
or the Company, by a firm of independent accountants or a law firm selected by the Company and
reasonably acceptable to the Executive. The Company and the Executive shall cooperate to submit
for approval by the shareholders of the Company, AMH II or another applicable Affiliate, in
accordance with Section 280G(b)(5) of the Code, payments and benefits that may be made or provided
to the 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 Executive shall be entitled to 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 the Executive is not subject to the excise tax imposed by Section 4999 of the Code).
The Company shall provide the Executive with all information reasonably requested by the Executive
to permit the Executive to make such designation. In the event that the Executive fails to make
such designation within ten (10) business days after the date his employment with the Company or an
Affiliate terminates, the Company may effect such reduction in any manner it deems appropriate
(beginning with cash payments).
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:
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If to the Company:
|
Associated Materials LLC | |
| 0000 Xxxxx Xxxx | ||
| Xxxxxxxx Xxxxx, Xxxx 00000 | ||
With copies to:
|
Harvest Partners, LLC | |
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
| Attention: Xxx X. Xxxxxxxx | ||
and
|
Investcorp International Inc. | |
| 000 Xxxx Xxxxxx, 00xx Xxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
| Attention: Xxxx Xxxxx | ||
and |
Gibson, Dunn, & Xxxxxxxx, LLP | |
| 000 Xxxx Xxxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 | ||
If to the Executive:
|
Xxxxxx Xxxxxxx | |
| 0000 Xxxxxxxxx Xxx | ||
| Xxxxxxx Xxxxx, Xxxx 00000 | ||
With a copy to:
|
XxXxxxxx, Xxxxxx and Toumert | |
| 000 Xxxx Xxxxxxxxxx Xxxxxx | ||
| Xxxxxxx Xxxxx, Xxxx 00000 | ||
| Attention: Xxxx Xx Xxxxxxx-Toumert, Esq. |
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. 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.
-13-
(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, and the 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, the
Executive’s representations and warranties contained in this sentence.
(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.
(i) 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 the Executive
and the Company as the case may be, notwithstanding the termination or expiration of this Agreement
or the termination of the Executive’s employment following a Change in Control 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.
-14-
(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 LLC |
||||
| Date: February 17, 2010 | By: | /s/ Xxxxxxx X. Xxxxxx | ||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Vice President - Chief Financial Officer, Treasurer and Secretary | |||
| XXXXXX XXXXXXX |
||||
| Date: February 17, 2010 | /s/ Xxxxxx Xxxxxxx | |||
-15-
EXHIBIT A
Annual Incentive Bonus
The Executive’s annual incentive bonus for each calendar year during the Employment Term,
commencing with calendar year 2006, shall be a percentage of the Executive’s base salary based upon
achievement by AMH II of annual EBITDA Hurdles, or such other financial measures as may be
established by the Board or its Compensation Committee , with respect to the applicable calendar
year, as follows:
| Achievement of EBITDA Hurdles | Percentage of Base Salary | |
Less than threshold |
Zero | |
Threshold |
20.00% | |
Target |
100.00% | |
Maximum |
150.00% |
If the actual EBITDA for a particular calendar year is between two EBITDA Hurdles, the
applicable percentage of base salary shall be determined by linear interpolation based on the
difference between such EBITDA Hurdles. For the avoidance of doubt, in no event shall the annual
incentive bonus exceed 150% of base salary.
Notwithstanding the foregoing to the contrary:
(a) the Executive’s annual incentive bonus for calendar year 2006 shall be $250,000, and
(b) the Executive’s annual incentive bonus for calendar year 2007 shall be not less than 50%
of base salary.
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 this Agreement as of
December 31 of the calendar year to which the bonus relates. |
|
| 2. | “EBITDA Hurdle” shall mean threshold, target and maximum amounts of EBITDA with
respect to a calendar year, as determined in good faith by the Board or its Compensation
Committee. EBITDA Hurdles shall be adjusted consistent with the definition of EBITDA, in the
discretion of the Board or its Compensation Committee. |
EXHIBIT A
Page 2
Page 2
| 3. | “EBITDA” shall mean the consolidated net income of AMH II, 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 AMH II and its subsidiaries (including, without limitation, the
Executive’s bonuses under this Agreement), 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 or its Compensation Committee. EBITDA shall be
determined by the Company’s management, subject to audit or review by AMH II’s external
accountants and approval, in good faith, by the Board or its Compensation Committee. EBITDA
shall exclude, without duplication, any transaction- or merger-related costs which are
expensed rather than capitalized; any revenue, expense, gain or loss from operations
divested during the relevant calendar year; the effect of inventory write-ups made due to
purchase accounting; and any other non-recurring, extraordinary items subject to approval,
in good faith, by the Board or its Compensation Committee. EBITDA shall be adjusted to
reflect acquisitions, divestitures and other similar transactions involving AMH II or its
subsidiaries, in the discretion of the Board or its Compensation Committee . |
|
| 4. | Any annual incentive bonus to which the Executive is entitled under Exhibit A of this
Agreement for any calendar year shall be paid in a cash lump-sum within thirty days following
the close of AMH II’s books and completion of AMH’s annual audit by its external accountants
for such calendar year but in any event shall not be paid later than March 15 of the calendar
year immediately following the calendar year to which the bonus relates. |
The Executive’s entitlement to an annual incentive bonus shall be determined by the Board or its
Compensation Committee in good faith in accordance with this Exhibit A.
-2-
