Exhibit 10.16
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), originally dated as of
August 21, 2002, and hereby amended and restated in its entirety, as of July 27,
2004 (the "Restatement Date"), by and between ASSOCIATED MATERIALS INCORPORATED,
a Delaware corporation (the "Company"), and XXXXXXX X. XXXXX, an individual
residing in the State of Ohio (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive previously served as President of Alside
Siding and Window Company, 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 became a wholly-owned subsidiary
of Parent upon consummation of the transactions contemplated by the Merger
Agreement (the "Merger");
WHEREAS, since the Merger, the Executive has served as President of
Alside Siding and Window Company;
WHEREAS, on March 4, 2004, all of the stock of Parent was exchanged
for stock of AMH Holdings, Inc. ("AMH") as part of a series of corporate
reorganization transactions, and Parent became a wholly-owned subsidiary of AMH;
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 his employment with the Company, upon the terms and conditions
hereinafter set forth;
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 of Alside
Siding and Window 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 of Alside Siding and Window Company 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 AMH or any other person
or entity which, from time to time, is a direct or indirect subsidiary of AMH
(AMH 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 Seventy Five Thousand Dollars ($275,000), 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
-2-
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 or AMH.
(c) Retirement, Medical, Dental and Other Benefits. During the
Employment Term, the Executive shall, in accordance with the terms and
conditions of the applicable plan documents and all applicable laws, be eligible
to participate in the various retirement, medical, dental and other employee
benefit plans made available by the Company, from time to time, for its
executives.
(d) Vacation; Sick Leave. During the Employment Term, the Executive
shall be entitled to not less than three (3) weeks of vacation during each
calendar year and sick leave in accordance with the Company's policies and
practices with respect to its executives.
(e) Business Expenses. (1) The Company shall reimburse or advance
payment to the Executive for all reasonable expenses actually incurred by him in
connection with the performance of his duties hereunder in accordance with
policies established by the Company from time to time and subject to receipt by
the Company of appropriate documentation.
(2) During the Employment Term, the Executive shall be paid an
automobile allowance in the amount of $900 per month. Such allowance shall
be paid by the Company to the Executive on the last business day of each
month or otherwise in accordance with Company policy.
5. Covenants of the Executive. The Executive acknowledges that in the
course of his employment with the Company he has and will become familiar with
the Company's and the Affiliates' trade secrets and with other confidential
information concerning the Company and the Affiliates, and that his services are
of special, unique and extraordinary value to the Company and the Affiliates.
Therefore, the Company and the Executive mutually agree that it is in the
interest of both parties for the Executive to enter into the restrictive
covenants set forth in this Section 5 and that such restrictions and covenants
are reasonable given the nature of the Executive's duties and the nature of the
Company's business.
(a) Noncompetition. During the Employment Term and for the
Restricted Period (as hereinafter defined) following termination of the
Employment Term, the Executive shall not, within any jurisdiction or marketing
area in which the Company or any Affiliate is doing or is qualified to do
business, directly or indirectly, own, manage, operate, control, be employed by
or participate in the ownership, management, operation or control of, or be
connected in any manner with, any Business (as hereinafter defined), provided
that the Executive's ownership of securities of two percent (2%) or less of any
class of securities of a public company shall not, by itself, be considered to
be competition with the Company or any Affiliate. For purposes of this
Agreement, "Business" shall mean the manufacturing, production, distribution or
sale of exterior residential building products, including, without limitation,
vinyl siding, windows, fencing, decking, railings and garage doors, or any other
business of a type and character engaged in by the Company or an Affiliate
during the Employment Term. For purposes of this Agreement, the "Restricted
Period" shall be two (2) years.
-3-
(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.
(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.
-4-
(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 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 material provision of
this Agreement which breach is not cured, to the extent susceptible to cure,
within thirty (30) days after the Company has given notice to the Executive
describing such breach; (iv) willful failure by the Executive to perform the
duties of his employment hereunder which continues for a period of fourteen (14)
days following written notice thereof by the Company to the Executive; (v) the
conviction of, or a plea of nolo contendere (or a similar plea) to, any criminal
offense that is a felony or involves fraud, or any other criminal offense
punishable by imprisonment of at least one year or materially injurious to the
business or reputation of the Company involving theft, dishonesty,
misrepresentation or moral turpitude; (vi) gross negligence or willful
misconduct on the part of the Executive in the performance of his duties as an
employee, officer or director of the Company or an Affiliate; (vii) the
Executive's breach of his fiduciary obligations to the Company or an Affiliate;
(viii) the Executive's commission of intentional, wrongful damage to property of
the Company or an Affiliate; (ix) any chemical dependence of the Executive which
adversely affects the performance of his duties and responsibilities to the
Company or an Affiliate; or (x) 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. 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.
-5-
7. Severance. Except as otherwise provided in Section 8, 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 such termination of employment.
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 or 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;
(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
(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 other than as described in
clause (i), (ii) or (iii) of this Section 8(a), the Executive will 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):
-6-
(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;
(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;
(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
(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.
(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 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), 8(c)(6) and 8(c)(7) within five business 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; and (iii) provide
the Executive the benefits described in Section 8(c)(5) for the period described
therein.
(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.
-7-
(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).
(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).
(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.
(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),
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.
(6) The Company will pay to the Executive the cost of
employee outplacement services for the Executive in the
amount of $30,000.
(7) The Company will pay the Executive a two-year automobile
allowance in the amount provided to the Executive
immediately prior to the Termination Date.
(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
-8-
agreement, plan or policy of the Company or a Subsidiary 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;
(2) committed intentional wrongful damage to property of the
Company or any Affiliate; or
(3) committed intentional wrongful disclosure of
confidential information of the Company or any
Affiliate.
Nothing herein will limit the right of 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 shareholders of the
Company immediately prior to such transaction; (B) a stock
sale, merger, consolidation, combination, reorganization or
other transaction involving AMH or Parent resulting in less
than fifty percent (50%) of the combined voting power of the
surviving or resulting entity being owned by the shareholders
of AMH or Parent, as applicable, immediately prior to such
transaction or (C) the liquidation or dissolution of the
Company, AMH or Parent or the sale or other disposition of all
or substantially all of the assets or business of the Company,
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 the debt offering or
recapitalization of AMH and/or another Affiliate during
calendar year 2004. For the avoidance of doubt, as of the date
-9-
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 Internal Revenue Code of 1986, as amended (the "Code"). As
a condition of receiving any severance compensation for which the Executive
otherwise qualifies under Section 7 or Section 8, 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. 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. 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 to be
reduced or modified so that the Company or an Affiliate is not
-10-
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 10 business days of the Termination Date, the
Company may effect such reduction in any manner it deems appropriate.
11. Notice. Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, or sent by reputable overnight courier,
postage prepaid, to the addresses set forth as follows:
If to the Company: Associated Materials 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: Xxxxxxx X. Xxxxx
0000 Xxxxxx Xxxx
Xxxxx, XX 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.
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.
-11-
(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. As of the date hereof, the Severance Agreement, dated as of December 2,
2001, between the Company and the Executive shall be cancelled and be of no
further force or effect, without the payment of any additional consideration by
or to either of the parties thereto.
(h) Duration. Notwithstanding the Employment Term hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(i) Survival. The covenants set forth in Section 5 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
-12-
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: July 28, 2004 By: /s/ Xxxxxxx Xxxxxxxx, Xx.
-------------------------------------
Name: Xxxxxxx Xxxxxxxx, Xx.
Title: President and Chief Executive
Officer
XXXXXXX X. XXXXX
Date: July 28, 2004 /s/ Xxxxxxx X. Xxxxx
----------------------------------------
-13-
Exhibit A
Annual Incentive Bonus
The Executive's annual incentive bonus for each calendar year during
the Employment Term, beginning with calendar year 2004, shall be an amount based
upon the year over year growth in EBITDA stated as a percentage change in EBITDA
(the "Growth Rate") as follows:
Growth Rate Hurdles Bonus
------------------- -----
Less than 5.00% Zero
5.00% $28,000
10.00% $140,000
15.00% or greater $210,000
If the actual Growth Rate for a particular calendar year is between
two Growth Rate Hurdles, the applicable amount of bonus shall be determined by
linear interpolation based on the difference between such Growth Rate Hurdles.
Notwithstanding the foregoing, if the actual Growth Rate is less than 5.00% the
bonus shall be zero, and if the actual Growth Rate is equal to or greater than
15.00% the bonus shall be $210,000. For purposes of the Executive's annual
incentive bonus and the computation thereof:
1. EBITDA shall mean the consolidated net income of AMH, 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 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 AMH's external accountants and
approval, in good faith, by the Board. 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; any special
management bonuses paid in connection with the debt offering or
recapitalization of AMH and/or another Affiliate during calendar year
2004; and any other non-recurring, extraordinary items subject to
approval, in good faith, by the Board.
2. 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
-14-
of AMH's books and completion of AMH'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.
-15-
