EXHIBIT 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of July 1,
2002, by and between ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation
(the "Company"), and XXXXXXX XXXXXXXX, XX., an individual residing in the State
of Ohio (the "Executive").
W I T N E S S E T H :
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WHEREAS, the Executive and the Company are currently parties
to that certain Amended and Restated Agreement, dated February 5, 2002, by and
between the Company and the Executive (the "Predecessor Agreement");
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; and
WHEREAS, the Executive and the Company, mutually desire to
cancel the Predecessor Agreement, and, in connection therewith, for the Company
and the Executive to enter into this Agreement; and
WHEREAS, the Company desires to retain the services and
employment of the Executive on behalf of the Company following the Offer
Completion Date, as such term is defined in the Merger Agreement, and the
Executive desires to continue his employment with the Company, upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto, each intending to be
legally bound hereby, agree as follows:
1. Employment. On the terms and subject to the conditions set forth
herein, the Company hereby employs the Executive as the President 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 the Company (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. The
Executive's principal place of employment hereunder shall be the Company's
current headquarters in Cuyahoga Falls, Ohio, or at any place of business of the
Company that is within a fifty (50)-mile radius of the Company's current
headquarters (unless otherwise consented to by the Executive), subject to
ordinary travel required by his employment. Promptly following the commencement
of the Employment Term, the Company shall take all action necessary to appoint
the Executive as a director of the Company, and thereafter, for so long as the
Executive remains the President and Chief Executive Officer of the Company, (a)
Parent shall vote the common stock of the Company owned by Parent for the
election of the Executive as a director of the
Company, and the Executive agrees to serve as such a director, and (b) while the
Executive is a director of the Company, the Executive shall be a member of any
Executive Committee or substantially similar committee of the Board, if such a
committee exists at any time. To the extent requested by the Board, the
Executive shall also serve on any other committees of the Board and/or as a
director, officer or employee of Parent or any other person or entity which,
from time to time, is a direct or indirect subsidiary of Parent (Parent and each
such subsidiary, person or entity, other than the Company, are hereinafter
referred to collectively as the "Affiliates," and individually as an
"Affiliate"). 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 three (3) 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 third anniversary of the Commencement Date or the end of the
then-current term, as applicable (the term of employment hereunder, including
any extensions, in accordance with this Section 3, shall be referred to herein
as the "Employment Term").
4. Compensation and Benefits.
(a) Salary. As compensation for his services hereunder and in
consideration of 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 Thousand Dollars ($500,000), subject to annual
review by the Board, which may increase, but not decrease, the Executive's base
salary.
(b) Annual Incentive Bonus; Stock Options. (1) 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
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period to which the annual incentive bonus arrangement described in the
immediately preceding sentence applies.
(2) The Executive shall also be entitled to participate in the
stock option plan established by Parent. With respect to all
immediately exercisable options covering capital stock of Parent
granted to the Executive by Parent in exchange for his options covering
common stock of the Company granted prior to the Company becoming a
wholly-owned subsidiary of Parent (such Parent stock options are
referred to herein as the "Roll-Over Options"), if the Executive's
employment hereunder shall be terminated during the period ending
December 31, 2003, either (i) by the Company other than for Cause or
due to Disability (as defined in Section 7(b)(2)) or death, or (ii) by
the Executive for Good Reason, Parent shall repurchase any of the
then-outstanding Roll-Over Options held by the Executive together with
any shares of capital stock of Parent previously purchased by the
Executive under the Roll-Over Options and then held by the Executive,
at a purchase price equal to the then-current fair market value of such
Roll-Over Options and such capital stock, respectively (as determined
in good faith by the Board of Directors of Parent in accordance with
this Section 4(b)(2)). If Parent fails to repurchase any Roll-Over
Options or Parent stock purchased thereunder pursuant to the foregoing
conditions, Harvest Partners, Inc. or its designee shall purchase such
Roll-Over Options or Parent stock, in accordance with and pursuant to
the foregoing conditions. For purposes of this Section 4(b)(2), (A) the
fair market value of the Roll-Over Options and any shares of capital
stock of Parent previously purchased by the Executive under the
Roll-Over Options shall not be adjusted for any discount due to any
lack of marketability or ownership of a minority interest of such
capital stock; (B) the fair market value of a share of such capital
stock or Roll-Over Option to purchase a share of such stock shall be
determined by assuming (I) the full exercise of all outstanding
employee or director options covering such capital stock which are
scheduled to become exercisable subject to the lapse of time and the
option holder's continued employment, if on the date of termination of
the Executive's employment hereunder the fair market value of the stock
covered by such options exceeds the exercise price of such options,
whether or not such options are in fact then exercisable; (II) the full
exercise of all outstanding employee or director options covering such
capital stock the exercise of which is conditioned on the achievement
of specified performance conditions, if the Harvest Equity Value (as
determined pursuant to Exhibit A hereto as of the end of the calendar
year immediately preceding the date of termination of the Executive's
employment hereunder) would result in such performance-based options
becoming fully exercisable; and (III) the full exercise or conversion
of any other options, warrants and conversion privileges issued or
issuable by Parent relating to such capital stock if the relevant
option, warrant or conversion privilege is, at the time the Executive's
employment hereunder terminates, by its terms exercisable and, if
applicable, the then-current fair market value of the stock covered by
such options, warrants or conversion privileges exceeds the exercise or
conversion price of such option, warrant or conversion privilege,
respectively; and (C) notwithstanding clauses (A) and (B), in the event
that an arms'-length, third-party sales transaction with respect to any
such capital stock has occurred within three (3) months prior to the
date of termination of the Executive's employment hereunder, the fair
market value of the Roll-Over Options and such capital stock shall be
determined on the basis of the price per share paid in such third-party
sales transaction (unless the Board of Directors of Parent
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determines in good faith that the occurrence of a significant event
during such three-month period makes determination of such fair market
value on this basis inappropriate). The terms and conditions of the
Roll-Over Options and Parent's rights and obligations concerning any
stock purchased thereunder shall be governed by the applicable stock
option award agreement between Parent and the Executive and Parent's
stock option plan.
(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 four (4) weeks of vacation during
each calendar year and sick leave in accordance with the Company's policies and
practices with respect to its executives.
(e) Business Expenses. (1) The Company shall reimburse or
advance payment to the Executive for all reasonable expenses actually incurred
by him in connection with the performance of his duties hereunder in accordance
with policies established by the Company from time to time and subject to
receipt by the Company of appropriate documentation.
(2) During the Employment Term, the Executive shall be paid an
automobile allowance in the amount of $1,000 per month and such
additional amount as necessary to reimburse the Executive for the use
and maintenance of such automobile in the performance of his duties on
behalf of the Company, in accordance with Company policies and upon
receipt by the Company of such appropriate documentation as it may
require. 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.
(3) During the Employment Term, the Company shall reimburse
the Executive for monthly dues for one country-club membership and
business-related expenses in connection with such country club
membership in accordance with policies established by the Company from
time to time and upon 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
Restricted Period (as hereinafter defined) following termination of the
Employment Term, the Executive shall not,
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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 (1) in the case
of termination of the Executive's employment as a result of termination by the
Company for Cause (as defined in Section 6) or the Executive's resignation
without Good Reason (as defined in Section 7(b)), the remaining Employment Term;
and (2) in the case of termination of employment under any other circumstances,
the Severance Period (as defined in Section 7) with respect to which the
Executive receives cash severance payments, whether paid in installments or a
lump-sum, pursuant to Section 7.
(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 any individual who is or was an
employee of the Company or any Affiliate during the Employment Term and who is
or was granted options to purchase stock of an Affiliate or the Company or who
is or was a party to an employment or severance agreement with the Company; (ii)
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; (iii) 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 (iv) 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.
(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
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shall be and become the sole property of the Company, unless released in writing
by the Board, and the Executive hereby assigns any and all rights therein or
thereto to the Company.
(d) Nondisparagement. During the Employment Term and
thereafter, the Executive shall not take any action to disparage or criticize
the Company or any Affiliate or their respective employees, directors, owners or
customers or to engage in any other action that injures or hinders the business
relationships of the Company or any Affiliate. Nothing contained in this Section
5(d) shall preclude the Executive from enforcing his rights under this
Agreement.
(e) Return of Company Property. All Confidential Information,
files, records, correspondence, memoranda, notes or other documents (including,
without limitation, those in computer-readable form) or property relating or
belonging to the Company or an Affiliate, whether prepared by the Executive or
otherwise coming into his possession in the course of the performance of his
services under this Agreement, shall be the exclusive property of the Company
and shall be delivered to the Company, and not retained by the Executive
(including, without limitations, any copies thereof), promptly upon request by
the Company and, in any event, promptly upon termination of the Employment Term.
(f) Enforcement. The Executive acknowledges that a breach of
his covenants contained in this Section 5 may cause irreparable damage to the
Company and the Affiliates, the exact amount of which would be difficult to
ascertain, and that the remedies at law for any such breach or threatened breach
would be inadequate. Accordingly, the Executive agrees that if he breaches or
threatens to breach any of the covenants contained in this Section 5, in
addition to any other remedy which may be available at law or in equity, the
Company and the Affiliates shall be entitled to specific performance and
injunctive relief to prevent the breach or any threatened breach thereof without
bond or other security or a showing that monetary damages will not provide an
adequate remedy.
(g) Scope of Covenants. The Company and the Executive further
acknowledge that the time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated commercial parties
and agree that all such provisions are reasonable under the circumstances of the
activities contemplated by this Agreement. In the event that the agreements in
this Section 5 shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of time or
over too great a geographical area or by reason of their being too extensive in
any other respect, they shall be interpreted to extend only over the maximum
period of time for which they may be enforceable and/or over the maximum
geographical area as to which they may be enforceable and/or to the maximum
extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
6. Termination. The employment of the Executive hereunder shall
automatically terminate at the end of the Employment Term. The employment of the
Executive hereunder and the Employment Term may also be terminated at any time
by the Company with or without Cause. For purposes of this Agreement, "Cause"
shall mean: (i) embezzlement, theft or misappropriation by the Executive of any
material property of the Company or an Affiliate; (ii) any material 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
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cured, to the extent susceptible to cure, within thirty (30) days after the
Company has given written 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 material duties as an employee, officer or director of the
Company or an Affiliate; (vii) the Executive's commission of intentional,
wrongful material damage to material property of the Company or an Affiliate; or
(viii) any chemical dependence of the Executive which materially adversely
affects the performance of his duties and responsibilities to the Company or an
Affiliate (excluding any legal drug prescribed for the Executive by a physician
not resulting in or related to Disability of the Executive). The existence or
non-existence of Cause shall be determined in good faith by the Board pursuant
to a vote of at least two-thirds of the members of the Board (other than the
Executive). 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) If the Executive's employment hereunder is terminated
during the Employment Term (1) by the Company other than for Cause or due to
Disability, 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: (i) an amount equal to $1,000,000 per year for two (2) years
(payable, at the Company's option, in a lump-sum or in equal installments in
accordance with the Company's payroll procedures during the two-year period
following the date of the Executive's termination) (such two-year 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 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. With respect to any such continued medical and dental benefits
described in clause (ii) of the immediately preceding sentence 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 Internal Revenue Code of 1986, as amended ("COBRA"), shall be deemed to
commence on the date of the Executive's termination of employment. If the
Executive's employment is terminated otherwise than as described in this Section
7, the Executive shall not be entitled to any severance, termination pay or
similar compensation or benefits, provided that the Executive shall be entitled
to any benefits then due or accrued in accordance with the applicable employee
benefit plans of
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the Company or applicable law, including COBRA. As a condition of receiving any
severance for which he otherwise qualifies under this Section 7, the Executive
agrees to execute a general release of the Company and the Affiliates and their
respective officers, directors and employees from any and all claims,
obligations and liabilities of any kind whatsoever arising from or in connection
with the Executive's employment or termination of employment with the Company or
this Agreement (including, without limitation, civil rights claims), in such
form as is reasonably requested by the Company. The Executive acknowledges and
agrees that, except as specifically described in this Section 7, all of the
Executive's rights to any compensation, benefits (other than base salary earned
through the date of termination of employment and any benefits due or accrued
prior to termination of employment in accordance with the applicable employee
benefit plans of the Company or applicable law), bonuses or severance from the
Company or any Affiliate after termination of the Employment Term shall cease
upon such termination. In the event of any termination of the Executive's
employment, the Executive shall have no duty to mitigate the amount of any
severance to which he may be entitled pursuant to this Section 7(a) by seeking
other employment or otherwise, and any severance to which the Executive is
entitled pursuant to this Section 7(a) shall be determined without regard to
whether the Executive obtains any other employment (subject to clause (II) of
the second sentence of this Section 7(a), relating to discontinuation of Company
medical and dental benefits, and the Executive's obligations under Section 5).
(b) For purposes of this Agreement:
(1) "Good Reason" shall mean the occurrence, without the
Executive's consent, of any of the following events: (i) a reduction in
the Executive's rate of base salary stated in Section 4(a); (ii) an
action by the Company to materially change the terms and conditions of
the Executive's annual incentive bonus in a manner which
disproportionately adversely affects the Executive in relation to other
employees of the Company or any Affiliate who at such time are or may
be entitled to an annual incentive bonus from the Company or such
Affiliate (for the avoidance of doubt, changes in the value or
performance of the Company or an Affiliate that have the effect of
reducing such bonus in accordance with the terms of the bonus
arrangement shall not be deemed to constitute Good Reason pursuant to
this clause (ii) of Section 7(b)(1)); (iii) 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; (iv) the reassignment by the Company of the Executive
to a principal place of employment outside a fifty (50)-mile radius of
the Company's current headquarters located in Cuyahoga Falls, Ohio
(other than ordinary travel requirements); (v) the failure of the
Executive to be elected or re-elected to the Board as contemplated by
Section 1; or (vi) 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 (iii) or (iv) of this Section 7(b)(1) 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.
(2) "Disability" shall mean "total disability" within the
meaning of, and pursuant to which the Executive has commenced the
receipt of benefits under, the Company's
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long-term disability plan applicable to the Executive, or, in the
absence thereof, an inability to perform duties and services as an
employee of the Company by reason of a medically determinable physical
or mental impairment, supported by medical evidence, which can be
expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than six (6) months, as
determined by the Board in its good faith discretion.
8. Limitation on Payments and Benefits. Notwithstanding any provision
of this Agreement to the contrary, if any amount or benefit to be paid or
provided under this Agreement (or any other agreement, plan or arrangement,
including, without limitation, any stock option agreement, covering the
Executive) would be an "excess parachute payment," within the meaning of Section
280G of the Internal Revenue of 1986, as amended (the "Code"), or any successor
provision thereto, but for the application of this sentence, then the payments
and benefits to be paid or provided under this Agreement shall be reduced to the
minimum extent necessary (but in no event less than zero) so that no portion of
any such payment or benefit, as so reduced, constitutes an excess parachute
payment, but only if and to the extent that such reduction will also result in,
after taking into account all state, local and Federal taxes applicable to the
Executive (computed at the highest applicable marginal rate), including any
taxes payable pursuant to Section 4999 of the Code (and any similar tax that may
hereafter be imposed under any successor provision or by any taxing authority),
greater after-tax proceeds to the Executive than the after-tax proceeds to the
Executive computed without regard to any such reduction. The determination of
whether any reduction in such payments or benefits to be provided under this
Agreement or otherwise is required pursuant to the immediately preceding
sentence shall be made at the expense of the Company, if requested by the
Executive or the Company, by a firm of independent certified public 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 is required to be reduced pursuant to this
Section 8, the Executive shall be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this Section 8. 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 of
the date of his termination of employment with the Company, the Company may
effect such reduction in any manner it deems appropriate.
9. 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
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and
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Executive: Xxxxxxx Xxxxxxxx, Xx.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
With copies to: Day, Xxxxx & Xxxxxx LLP
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx III, 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.
10. General.
(a) Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to contracts executed and to be performed entirely within
said State.
(b) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties undertake
to implement all efforts which are necessary, desirable and sufficient to amend,
supplement or substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as nearly
as may be possible the result previously intended by the parties without
renegotiation of any material terms and conditions stipulated herein.
(c) Assignability. The Executive may not assign his interest
in or delegate his duties under this Agreement. This Agreement is for the
employment of the Executive, personally, and the services to be rendered by him
under this Agreement must be rendered by him and no other person. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
Company and its successors and assigns. Without limiting the foregoing and
notwithstanding anything else in this Agreement to the contrary, the Company may
assign this Agreement to, and all rights hereunder shall inure to the benefit
of, any subsidiary of the Company or any person, firm or corporation resulting
from the reorganization of the Company or succeeding to the business or assets
of the Company by purchase, merger, consolidation or otherwise.
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(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, together
with the Indemnification Agreement between the Company and the Executive, dated
August 25, 2000, and any other written agreements between the Company or Parent
and the Executive expressly contemplated by this Agreement, constitute 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. To the extent that any provision of this Agreement conflicts with a
provision of any other written agreement between the Company or Parent and the
Executive (without regard to when such other agreement was executed), the
provisions of this Agreement shall govern. As of the date hereof, the
Predecessor Agreement 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 of this
Agreement shall survive and shall continue to be binding upon the Executive
notwithstanding the termination of this Agreement for any reason whatsoever.
(j) Waiver. No waiver by either party hereto of any of the
requirements imposed by this Agreement on, or any breach of any condition or
provision of this Agreement to be performed by, the other party shall be deemed
a waiver of a similar or dissimilar requirement, provision or condition of this
Agreement at the same or any prior or subsequent time. Any such waiver shall be
express and in writing, and there shall be no waiver by conduct. Pursuit by
either party of any available remedy, either in law or equity, or any action of
any kind, does not constitute waiver of any other remedy or action. Such
remedies are cumulative and not exclusive.
(k) Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
(l) Section References. The words Section and paragraph herein
shall refer to provisions of this Agreement unless expressly indicated
otherwise.
-11-
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: 7/1/02 By: /s/ D. Xxxxx XxXxxxxx
---------------------- -----------------------------------
Name: D. Xxxxx XxXxxxxx
Title: Vice President and
Chief Financial Officer
XXXXXXX XXXXXXXX, XX.
Date: 7/1/02 /s/ XXXXXXX XXXXXXXX, XX.
---------------------- -------------------------
For the sole and limited purpose of evidencing its agreement with and consent to
the matters stated in clause (a) of the fourth sentence of Section 1 and in
Section 4(b)(2) of this Agreement:
ASSOCIATED MATERIALS HOLDINGS INC.
Date: 7/22/02 By: /s/ Xxxxxx Xxxxx
---------------------- ------------------------------------------
Name: Xxxxxx Xxxxx
Title: Treasurer and Assistant Secretary
For the sole and limited purpose of evidencing its agreement with and consent to
the matters stated in the third sentence of Section 4(b)(2) of this Agreement:
HARVEST PARTNERS, INC.
Date: 7/22/02 By: /s/ Xxxxxx Xxxxx
----------------------- --------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Managing Director
-12-
Exhibit A
to Employment Agreement
Annual Incentive Bonus
The Executive's annual incentive bonus for each calendar year during the
Employment Term shall be a percentage of the Executive's base salary based upon
the Year Over Year Growth in Harvest Equity Value or Compounded IRR, whichever
is greater (the "Growth Rate") as follows:
Growth Rate Hurdles Percentage of Base Salary
------------------- -------------------------
Less than 15.00% Zero
15.00% 20.00%
25.00% 100.00%
30.00% or greater 200.00%
If the actual Growth Rate for a particular calendar year is
between two Growth Rate Hurdles, the applicable percentage of base salary shall
be determined by linear interpolation based on the difference between such
Growth Rate Hurdles. Notwithstanding the foregoing, if the actual Year Over Year
Growth in Harvest Equity Value is less than 15.00% the bonus shall be zero, and
if the actual Growth Rate is equal to or greater than 30.00% the bonus shall be
200.00% of base salary. Notwithstanding the foregoing, the Growth Rate for the
calendar year ending December 31, 2002 shall be based solely on the Compounded
IRR.
For purposes of the Executive's annual incentive bonus and the
computation thereof:
1. Base salary shall mean the annual rate of base salary in effect under
the Employment Agreement as of the commencement of the calendar year to
which the bonus relates.
2. Year Over Year Growth in Harvest Equity Value between December 31 of
two successive calendar years shall be the excess of the Harvest Equity
Value as of December 31 of the second such calendar year over the
Harvest Equity Value as of December 31 of the first such calendar year
divided by the Harvest Equity Value as of December 31 of the first such
calendar year.
3. Compounded IRR shall mean, at any time, the annual discount rate which,
if applied at such time to the aggregate value of all cash proceeds
from the investments of the Harvest Funds (as defined in the Amended
and Restated Stockholders Agreement by and among Parent and the
stockholders of Parent, dated as of April 19, 2002, as amended from
time to time) in Parent (taking into account the time such proceeds are
received by the Harvest Funds) and the Harvest Equity Value at such
time would equal the sum of the cost of the Harvest Funds' initial
investment in Parent plus any additional amounts invested by the
Harvest Funds in Parent (taking into account the amount of any such
additional investment from the day on which the Harvest Fund made such
additional investment).
13
Exhibit A
to Employment Agreement
4. Harvest Equity Value, at any time, shall be determined as follows:
(A) by multiplying Parent's trailing 12-month EBITDA at such time
by 6.5, and adding to the resulting product cash and cash
equivalents of Parent and its subsidiaries at such time (the
"Enterprise Value"); and
(B) by deducting from the Enterprise Value (a) indebtedness of
Parent and its subsidiaries (including, without limitation,
any capitalized leases) and (b) the aggregate liquidation
preference of all outstanding preferred stock of Parent (plus
accrued but unpaid dividends thereon) at such time (the
Enterprise Value less the amounts described in clause (a) and
(b) is referred to as the "Common Equity Value"); and
(C) by multiplying the Common Equity Value by a fraction the
numerator of which is the number of shares of Parent's common
stock owned by the Harvest Funds and the denominator of which
is the total number of shares of Parent's common stock
outstanding (the "Harvest Common Equity Value"); and
(D) by adding to the Harvest Common Equity Value the aggregate
liquidation preference of all outstanding preferred stock of
Parent owned by the Harvest Funds (plus accrued but unpaid
dividends thereon) at such time (all of the foregoing
computations in clauses (B), (C) and (D) shall be made by
assuming the full exercise of all outstanding employee and
director options covering capital stock of Parent and that all
shares of such stock held by employees and directors of Parent
and its subsidiaries that are subject to restrictions on
transfer or forfeiture are outstanding and fully vested).
5. EBITDA shall mean Parent's consolidated net income adjusted to exclude
deduction of interest expense (net of interest income), income taxes,
depreciation and amortization and the Harvest Fee pursuant to the
Management Agreement, dated as of April 19, 2002, between Harvest
Partners, Inc. and Associated Materials Incorporated, as amended from
time to time, and to exclude gain or loss from sale of capital assets,
and including deduction of all bonuses paid or accrued with respect to
the Executive and all other officers and employees of Parent and its
subsidiaries (including, without limitation, the Executive's bonus
hereunder), for the relevant calendar year, calculated otherwise in
accordance with generally accepted accounting principles, subject to
any adjustments made in good faith by the Board. EBITDA shall be
determined by the Company's management, subject to audit or review by
Parent's external accountants and approval, in good faith, by the
Board. EBITDA shall exclude any transaction- or merger-related costs
which are expensed rather than capitalized and the effect of inventory
write-ups made due to purchase accounting.
6. Any annual incentive bonus to which the Executive is entitled under
this Agreement for any calendar year shall be paid in a cash lump-sum
within thirty days following the close of Parent's books and completion
of Parent's annual audit by its external accountants for such calendar
year.
-14-
Exhibit A
to Employment Agreement
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-
