EXHIBIT 10.15
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of August 21,
2002, by and between ASSOCIATED MATERIALS INCORPORATED, a Delaware corporation
(the "Company"), and D. XXXXX XXXXXXXX, an individual residing in the State of
Ohio (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive currently serves as Vice President -- Chief
Financial Officer and Secretary of the Alside Division of the Company;
WHEREAS, pursuant to that certain Agreement and Plan of Merger,
dated as of March 16, 2002, among Associated Materials Holdings Inc. (formerly
known as Harvest/AMI Holdings Inc.) ("Parent"), Simon Acquisition Corp. and the
Company (the "Merger Agreement"), the Company will become a wholly-owned
subsidiary of Parent upon consummation of the transactions contemplated by the
Merger Agreement; and
WHEREAS, the Company desires to retain the services and employment
of the Executive on behalf of the Company following the Offer Completion Date,
as such term is defined in the Merger Agreement, and the Executive desires to
continue his employment with the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto, each intending to be
legally bound hereby, agree as follows:
1. Employment. On the terms and subject to the conditions set forth
herein, the Company hereby employs the Executive as the Vice President -- Chief
Financial Officer and Secretary 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 Vice President -- Chief
Financial Officer and Secretary of the Company and shall report to the President
and Chief Executive Officer of the Company, performing such duties as shall be
reasonably required of a vice president, chief financial officer and secretary,
and shall have such other powers and perform such other duties as may from time
to time be assigned to him by the President and Chief Executive Officer of the
Company and the Board of Directors of the Company (the "Board"). To the extent
requested by the Company's President and Chief Executive Officer or the Board,
the Executive shall also serve on the Board or any committee of the Board,
and/or as a director, officer or employee of Parent or any other person or
entity which, from time to time, is a direct or indirect subsidiary of Parent
(Parent and each such subsidiary, person or entity, other than the Company, are
hereinafter referred to collectively as the "Affiliates," and individually as an
"Affiliate"). The Executive's service as a director of the Company or as a
director, officer or employee of any Affiliate shall be without additional
compensation.
2. Performance. The Executive will serve the Company faithfully and to the
best of his ability and will devote his full business time, energy, experience
and talents to the business of the Company and the Affiliates; provided,
however, that it shall not be a violation of this Agreement for the Executive to
manage his personal investments and business affairs, or to engage in or serve
such civic, community, charitable, educational, or religious organizations as he
may reasonably select so long as such service does not interfere with the
Executive's performance of his duties hereunder.
3. Employment Term. Subject to earlier termination pursuant to Section 6,
the Executive's term of employment hereunder shall begin on the Offer Completion
Date (hereinafter referred to as the "Commencement Date") and continue through
the date which is two (2) years following the Commencement Date; provided,
however, that beginning on the first anniversary of the Commencement Date, and
on each subsequent anniversary of the Commencement Date, such term shall be
automatically extended by an additional one (1) year beyond the end of the
then-current term, unless, at least thirty (30) days before such first
anniversary of the Commencement Date, or thirty (30) days before any such
subsequent anniversary of the Commencement Date, the Company gives written
notice to the Executive that the Company does not desire to extend the term of
this Agreement, in which case, the term of employment hereunder shall terminate
as of the second anniversary of the Commencement Date or the end of the
then-current term, as applicable (the term of employment hereunder, including
any extensions, in accordance with this Section 3, shall be referred to herein
as the "Employment Term").
4. Compensation and Benefits.
(a) Salary. As compensation for his services hereunder and in
consideration of the Executive's other agreements hereunder, during the
Employment Term, the Company shall pay the Executive a base salary, payable in
equal installments in accordance with the Company's payroll procedures, at an
annual rate of Two Hundred 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 period to which the
annual incentive bonus arrangement described in the immediately preceding
sentence applies. The Executive shall also be entitled to participate in the
stock option plan established by Parent.
(c) Retirement, Medical, Dental and Other Benefits. During the
Employment Term, the Executive shall, in accordance with the terms and
conditions of the applicable plan documents and all applicable laws, be eligible
to participate in the various retirement, medical, dental and other employee
benefit plans made available by the Company, from time to time, for its
executives.
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(d) Vacation; Sick Leave. During the Employment Term, the Executive
shall be entitled to not less than four (4) weeks of vacation during each
calendar year and sick leave in accordance with the Company's policies and
practices with respect to its executives.
(e) Business Expenses. (1) The Company shall reimburse or advance
payment to the Executive for all reasonable expenses actually incurred by him in
connection with the performance of his duties hereunder in accordance with
policies established by the Company from time to time and subject to receipt by
the Company of appropriate documentation.
(2) During the Employment Term, the Executive shall be paid an
automobile allowance in the amount of $900 per month. Such allowance shall
be paid by the Company to the Executive on the last business day of each
month or otherwise in accordance with Company policy.
5. Covenants of the Executive. The Executive acknowledges that in the
course of his employment with the Company he has and will become familiar with
the Company's and the Affiliates' trade secrets and with other confidential
information concerning the Company and the Affiliates, and that his services are
of special, unique and extraordinary value to the Company and the Affiliates.
Therefore, the Company and the Executive mutually agree that it is in the
interest of both parties for the Executive to enter into the restrictive
covenants set forth in this Section 5 and that such restrictions and covenants
are reasonable given the nature of the Executive's duties and the nature of the
Company's business.
(a) Noncompetition. During the Employment Term and for the
Restricted Period (as hereinafter defined) following termination of the
Employment Term, the Executive shall not, within any jurisdiction or marketing
area in which the Company or any Affiliate is doing or is qualified to do
business, directly or indirectly, own, manage, operate, control, be employed by
or participate in the ownership, management, operation or control of, or be
connected in any manner with, any Business (as hereinafter defined), provided
that the Executive's ownership of securities of two percent (2%) or less of any
class of securities of a public company shall not, by itself, be considered to
be competition with the Company or any Affiliate. For purposes of this
Agreement, "Business" shall mean the manufacturing, production, distribution or
sale of exterior residential building products, including, without limitation,
vinyl siding, windows, fencing, decking, railings and garage doors, or any other
business of a type and character engaged in by the Company or an Affiliate
during the Employment Term. For purposes of this Agreement, the "Restricted
Period" shall be two (2) years.
(b) Nonsolicitation. During the Employment Term and for the
Restricted Period following termination of the Employment Term, the Executive
shall not, directly or indirectly, (i) employ, solicit for employment or
otherwise contract for the services of any individual who is or was an employee
of the Company or any Affiliate during the Employment Term; (ii) otherwise
induce or attempt to induce any employee of the Company or an Affiliate to leave
the employ of the Company or such Affiliate, or in any way knowingly interfere
with the relationship between the Company or any Affiliate and any employee
respectively thereof; or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company or any Affiliate to
cease doing business with the Company or such Affiliate, or interfere in any way
with the relationship between any such customer, supplier, licensee or business
relation and the Company or any Affiliate.
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(c) Nondisclosure; Inventions. For the Employment Term and
thereafter, (i) the Executive shall not divulge, transmit or otherwise disclose
(except as legally compelled by court order, and then only to the extent
required, after prompt notice to the Board of any such order), directly or
indirectly, other than in the regular and proper course of business of the
Company and the Affiliates, any customer lists, trade secrets or other
confidential knowledge or information with respect to the operations or finances
of the Company or any Affiliates or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
or the Affiliates (all of the foregoing collectively hereinafter referred to as,
"Confidential Information"), and (ii) the Executive will not use, directly or
indirectly, any Confidential Information for the benefit of anyone other than
the Company and the Affiliates; provided, however, that the Executive has no
obligation, express or implied, to refrain from using or disclosing to others
any such knowledge or information which is or hereafter shall become available
to the general public other than through disclosure by the Executive. All
Confidential Information, new processes, techniques, know-how, methods,
inventions, plans, products, patents and devices developed, made or invented by
the Executive, alone or with others, while an employee of the Company which are
related to the business of the Company and the Affiliates shall be and become
the sole property of the Company, unless released in writing by the Board, and
the Executive hereby assigns any and all rights therein or thereto to the
Company.
(d) Nondisparagement. During the Employment Term and thereafter, the
Executive shall not take any action to disparage or criticize the Company or any
Affiliate or their respective employees, directors, owners or customers or to
engage in any other action that injures or hinders the business relationships of
the Company or any Affiliate. Nothing contained in this Section 5(d) shall
preclude the Executive from enforcing his rights under this Agreement.
(e) Return of Company Property. All Confidential Information, files,
records, correspondence, memoranda, notes or other documents (including, without
limitation, those in computer-readable form) or property relating or belonging
to the Company or an Affiliate, whether prepared by the Executive or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of the Company and shall
be delivered to the Company, and not retained by the Executive (including,
without limitations, any copies thereof), promptly upon request by the Company
and, in any event, promptly upon termination of the Employment Term.
(f) Enforcement. The Executive acknowledges that a breach of his
covenants contained in this Section 5 may cause irreparable damage to the
Company and the Affiliates, the exact amount of which would be difficult to
ascertain, and that the remedies at law for any such breach or threatened breach
would be inadequate. Accordingly, the Executive agrees that if he breaches or
threatens to breach any of the covenants contained in this Section 5, in
addition to any other remedy which may be available at law or in equity, the
Company and the Affiliates shall be entitled to specific performance and
injunctive relief to prevent the breach or any threatened breach thereof without
bond or other security or a showing that monetary damages will not provide an
adequate remedy.
(g) Scope of Covenants. The Company and the Executive further
acknowledge that the time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated commercial parties
and agree that all such provisions are reasonable
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under the circumstances of the activities contemplated by this Agreement. In the
event that the agreements in this Section 5 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of their extending for too
great a period of time or over too great a geographical area or by reason of
their being too extensive in any other respect, they shall be interpreted to
extend only over the maximum period of time for which they may be enforceable
and/or over the maximum geographical area as to which they may be enforceable
and/or to the maximum extent in all other respects as to which they may be
enforceable, all as determined by such court in such action.
6. Termination. The employment of the Executive hereunder shall
automatically terminate at the end of the Employment Term. The employment of the
Executive hereunder and the Employment Term may also be terminated at any time
by the Company with or without Cause. For purposes of this Agreement, "Cause"
shall mean: (i) embezzlement, theft or misappropriation by the Executive of any
property of the Company or an Affiliate; (ii) any breach by the Executive of the
Executive's covenants under Section 5; (iii) any breach by the Executive of any
other material provision of this Agreement which breach is not cured, to the
extent susceptible to cure, within thirty (30) days after the Company has given
notice to the Executive describing such breach; (iv) willful failure by the
Executive to perform the duties of his employment hereunder which continues for
a period of fourteen (14) days following written notice thereof by the Company
to the Executive; (v) the conviction of, or a plea of nolo contendere (or a
similar plea) to, any criminal offense that is a felony or involves fraud, or
any other criminal offense punishable by imprisonment of at least one year or
materially injurious to the business or reputation of the Company involving
theft, dishonesty, misrepresentation or moral turpitude; (vi) gross negligence
or willful misconduct on the part of the Executive in the performance of his
duties as an employee, officer or director of the Company or an Affiliate; (vii)
the Executive's breach of his fiduciary obligations to the Company or its
Affiliates; (viii) the Executive's commission of intentional, wrongful damage to
property of the Company or an Affiliate; or (ix) any chemical dependence of the
Executive which adversely affects the performance of his duties and
responsibilities to the Company or an Affiliate. The existence or non-existence
of Cause shall be determined in good faith by the Board. The employment of the
Executive may also be terminated at any time by the Executive by notice of
resignation delivered to the Company not less than ninety (90) days prior to the
effective date of such resignation.
7. Severance. If the Executive's employment hereunder is terminated during
the Employment Term by the Company or is terminated due to expiration of the
Employment Term following notice by the Company not to extend the Employment
Term in accordance with Section 3, in each case other than for Cause or due to
disability (as determined in the good faith discretion of the Board) or death,
the Executive shall be entitled to receive as severance: (i) if such termination
occurs prior to expiration of the two (2) year period following the Commencement
Date, the severance pay and benefits payable under the terms of Sections 3(b),
3(c), 3(d), 3(e), 3(f) and 3(g) of the severance agreement attached as Exhibit B
hereto (pursuant to which, the calendar year in which the "Change in Control"
occurred, for purposes of Sections 3(d) and 3(e) thereunder, shall be 2002), or
(ii) if such termination occurs other than as described in clause (i)
immediately preceding, 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
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during the applicable period described immediately above in this clause (ii)
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. If the Executive's employment is terminated otherwise
than as described in this Section 7, the Executive shall not be entitled to any
severance, termination pay or similar compensation or benefits, provided that
the Executive shall be entitled to any benefits then due or accrued in
accordance with the applicable employee benefit plans of the Company or
applicable law, including "continuation coverage" under the Company's group
health plans for purposes of Section 4980B of the Internal Revenue Code of 1986,
as amended ("COBRA"). As a condition of receiving any severance for which he
otherwise qualifies under this Section 7, the Executive agrees to execute a
general release of the Company and the Affiliates and their respective officers,
directors and employees from any and all claims, obligations and liabilities of
any kind whatsoever arising from or in connection with the Executive's
employment or termination of employment with the Company or this Agreement
(including, without limitation, civil rights claims), in such form as is
requested by the Company. The Executive acknowledges and agrees that, except as
specifically described in this Section 7, all of the Executive's rights to any
compensation, benefits (other than base salary earned through the date of
termination of employment and any benefits due or accrued prior to termination
of employment in accordance with the applicable employee benefit plans of the
Company or applicable law), bonuses or severance from the Company or any
Affiliate after termination of the Employment Term shall cease upon such
termination.
8. Notice. Any notices required or permitted hereunder shall be in writing
and shall be deemed to have been given when personally delivered or when mailed,
certified or registered mail, or sent by reputable overnight courier, postage
prepaid, to the addresses set forth as follows:
If to the Company: Associated Materials Incorporated
0000 Xxxxx Xxxx
Xxxxxxxx Xxxxx, Xxxx 00000
With copies to: Harvest Partners, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxx
and
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Executive: D. Xxxxx XxXxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
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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.
9. General.
(a) Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York applicable to contracts executed and to be performed entirely within said
State.
(b) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties undertake
to implement all efforts which are necessary, desirable and sufficient to amend,
supplement or substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as nearly
as may be possible the result previously intended by the parties without
renegotiation of any material terms and conditions stipulated herein.
(c) Assignability. The Executive may not assign his interest in or
delegate his duties under this Agreement. This Agreement is for the employment
of the Executive, personally, and the services to be rendered by him under this
Agreement must be rendered by him and no other person. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the Company and
its successors and assigns. Without limiting the foregoing and notwithstanding
anything else in this Agreement to the contrary, the Company may assign this
Agreement to, and all rights hereunder shall inure to the benefit of, any
subsidiary of the Company or any person, firm or corporation resulting from the
reorganization of the Company or succeeding to the business or assets of the
Company by purchase, merger, consolidation or otherwise.
(d) Warranty by the Executive. The Executive represents and warrants
to the Company that the Executive is not subject to any contract, agreement,
judgment, order or decree of any kind, or any restrictive agreement of any
character, that restricts the Executive's ability to perform his obligations
under this Agreement or that would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
(e) Compliance with Rules and Policies. The Executive shall perform
all services in accordance with the lawful policies, procedures and rules
established by the Company and the Board. In addition, the Executive shall
comply with all laws, rules and regulations that are generally applicable to the
Company or its subsidiaries and their respective employees, directors and
officers.
(f) Withholding Taxes. All amounts payable hereunder shall be
subject to the withholding of all applicable taxes and deductions required by
any applicable law.
(g) Entire Agreement; Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof, supersedes all prior
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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 attached hereto as Exhibit B shall be cancelled
and be of no further force or effect, except to the extent provided pursuant to
Section 7, 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.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have hereunto executed this Agreement as of the day and year first
written above.
ASSOCIATED MATERIALS INCORPORATED
Date: August 21, 2002 By: /s/ Xxxxxxx Xxxxxxxx, Xx.
---------------------- ---------------------------------------------
Name: Xxxxxxx Xxxxxxxx, Xx.
Title: President and Chief Financial Officer
D. XXXXX XXXXXXXX
Date: August 21, 2002 /s/ D. Xxxxx XxXxxxxx
---------------------- ------------------------------------------------
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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% 50.00%
30.00% or greater 100.00%
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 100.00%
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 cause such
aggregate value to equal the sum of the cost of the Harvest Funds' initial
investment in Parent plus any additional amounts invested by the Harvest
Funds in Parent (taking into account the
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amount of any such additional investment from the day on
which the Harvest Fund made such additional investment).
4. Harvest Equity Value, at any time, shall be determined as follows:
(A) by multiplying Parent's trailing 12-month EBITDA at such time by
6.5, and adding to the resulting product cash and cash equivalents
of Parent and its subsidiaries at such time (the "Enterprise
Value"); and
(B) by deducting from the Enterprise Value (a) indebtedness of Parent
and its subsidiaries (including, without limitation, any capitalized
leases) and (b) the aggregate liquidation preference of all
outstanding preferred stock of Parent (plus accrued but unpaid
dividends thereon) at such time (the Enterprise Value less the
amounts described in clause (a) and (b) is referred to as the
"Common Equity Value"); and
(C) by multiplying the Common Equity Value by a fraction the numerator
of which is the number of shares of Parent's common stock owned by
the Harvest Funds and the denominator of which is the total number
of shares of Parent's common stock outstanding (the "Harvest Common
Equity Value"); and
(D) by adding to the Harvest Common Equity Value the aggregate
liquidation preference of all outstanding preferred stock of Parent
owned by the Harvest Funds (plus accrued but unpaid dividends
thereon) at such time (all of the foregoing computations in clauses
(B), (C) and (D) shall be made by assuming the full exercise of all
outstanding employee and director options covering capital stock of
Parent and that all shares of such stock held by employees and
directors of Parent and its subsidiaries that are subject to
restrictions on transfer or forfeiture are outstanding and fully
vested).
5. EBITDA shall mean Parent's consolidated net income adjusted to exclude
deduction of interest expense (net of interest income), income taxes,
depreciation and amortization and the Harvest Fee pursuant to the
Management Agreement, dated as of April 19, 2002, between Harvest
Partners, Inc. and Associated Materials Incorporated, as amended from time
to time, and to exclude gain or loss from sale of capital assets, and
including deduction of all bonuses paid or accrued with respect to the
Executive and all other officers and employees of Parent and its
subsidiaries (including, without limitation, the Executive's bonus
hereunder), for the relevant calendar year, calculated otherwise in
accordance with generally accepted accounting principles, subject to any
adjustments made in good faith by the Board. EBITDA shall be determined by
the Company's management, subject to audit or review by Parent's external
accountants and approval, in good faith, by the Board. EBITDA shall
exclude any transaction- or merger-related costs which are expensed rather
than capitalized and the effect of inventory write-ups made due to
purchase accounting.
6. Any annual incentive bonus to which the Executive is entitled under this
Agreement for any calendar year shall be paid in a cash lump-sum within
thirty days following the close
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of Parent's books and completion of Parent's annual audit by its external
accountants for such calendar year.
The Executive's entitlement to an annual incentive bonus shall be determined by
the Board in good faith in accordance with this Exhibit A.
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Exhibit B
To Employment Agreement
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of October
29th, 2001 (the "Effective Date"), is entered into between Associated Materials
Incorporated, a Delaware corporation (the "Company"), and D. XXXXX XXXXXXXX (the
"Employee"). Certain terms used in this Agreement with initial capital letters
are defined in Section 8.
RECITALS:
1. The Employee is a key employee of the Company or a Subsidiary.
2. The Company desires to establish certain minimum severance
benefits for certain of the employees of the Company and its Subsidiaries,
including the Employee, applicable in the event of a Change in Control.
3. The Company desires to provide an incentive for the Employee to
remain in the employ of the Company and/or its Subsidiaries.
NOW, THEREFORE, the Company and the Employee agree as follows:
1. Operation of Agreement. This Agreement will be binding upon its
execution, but, notwithstanding anything in this Agreement to the contrary, this
Agreement 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 Term, this
Agreement shall become immediately operative without further action.
2. Termination Following a Change in Control. (a) In the event of a
Change in Control, if the Employee's employment is terminated by the Company or
a Subsidiary during the Severance Period, the Employee shall be entitled to the
benefits provided by Section 3 unless such termination is the result of the
occurrence of one or more of the following events:
(i) The Employee's death;
(ii) If the Employee becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits under, the
long-term disability plan applicable to the Employee immediately prior to
the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Employee's employment is terminated by the
Company or any Subsidiary other than pursuant to Section 2(a), the Executive
will be entitled to the benefits provided by Section 3.
(b) In the event of a Change in Control, the Employee may terminate
employment with the Company and any Subsidiary during the Severance Period with
the right to severance compensation as provided in Section 3 upon the occurrence
of one or more of the following events (regardless of whether any other reason,
other than Cause, for such termination has occurred, including other
employment):
(i) the failure to maintain the Employee in the position, or a
substantially equivalent position, with the Company and/or a Subsidiary
that the Employee held immediately prior to a Change in Control;
(ii) (A) a reduction in the Employee's Base Pay or (B) the
termination or reduction of the Employee's rights to Employee Benefits
(including any reduction or termination of the Executives opportunity to
earn Incentive Pay pursuant to any plan or program in effect immediately
prior to the Change in Control), in either case which is not remedied by
the Company within 10 calendar days after receipt by the Company of notice
from the Employee of such reduction or termination; or
(iii) the Company requires the Employee 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) A termination by the Company or a Subsidiary pursuant to Section
2(a) or by the Employee pursuant to Section 2(b) will not affect any rights that
the Employee may have pursuant to any agreement, plan or policy of the Company
or a Subsidiary providing Employee Benefits, which rights shall be governed by
the terms thereof.
3. Severance Compensation. (a) If, following the occurrence of a
Change in Control, the Company or a Subsidiary terminates the Employee's
employment during the Severance Period other than pursuant to Section 2(a), or
if the Employee terminates his employment pursuant to Section 2(b), the Company
will (1) pay or cause to be paid to the Employee the amounts described in
Sections 3(b), 3(c), 3(d) and 3(e) within five business days after the
Termination Date, (2) continue to provide to the Employee the benefits described
in Section 3(f) for the period described therein, and (3) provide the Employee
the benefits described in Section 3(g) for the period described therein.
(b) A lump sum payment in an amount equal to all Base Pay and
Incentive Pay owed to the Employee for periods on or prior to the Termination
Date.
(c) A lump sum payment in an amount equal to two times the Base Pay
(at the highest rate in effect for any period prior to the Termination Date).
(d) A lump sum payment equal to two times Incentive Pay (in an
amount equal to the highest amount of Incentive Pay earned by the Employee in
any calendar year during the three calendar years immediately preceding the
calendar year in which the Change in Control occurred).
(e) 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 (in an
amount equal to the highest amount of Incentive Pay earned by the Employee in
any calendar year during the three calendar years immediately preceding the
calendar year in which the Change in Control occurred), 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.
(f) For a period of 24 months following the Termination Date (the
"Continuation Period"), the Company will provide or arrange to provide the
Employee with Employee Benefits that are welfare benefits (but not stock option,
stock purchase or similar stock-based benefits) substantially similar to those
that the Employee was receiving or entitled to
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receive immediately prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in Section 2(b)(ii)).
If and to the extent that any benefit described in this Section 3(f) 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 Employee, his dependents and
beneficiaries, of such Employee Benefits. Without otherwise limiting the
purposes of Section 4, Employee Benefits otherwise receivable by the Employee
pursuant to this Section 3(f) will be reduced to the extent comparable welfare
benefits are actually received by the Employee from another employer during the
Continuation Period following the Employee's Termination Date, and any such
benefits actually received by the Employee shall be reported by the Employee to
the Company.
(g) For the Continuation Period, the Company will pay (or promptly
reimburse the Employee for) the cost of executive outplacement services selected
by the Employee; provided that the cost thereof paid by the Company shall not
exceed $30,000.
(h) Notwithstanding any provision of this Agreement to the contrary,
the parties' respective rights and obligations under this Section 3 will survive
any termination or expiration of this Agreement or the termination of the
Employee's employment following a Change in Control for any reason whatsoever.
4. No Mitigation Obligation. The payment of the severance
compensation by the Company to the Employee in accordance with the terms of this
Agreement is hereby acknowledged by the Company to be reasonable, and the
Employee will not be required to mitigate the amount of any payment provided for
in this Agreement by seeking other employment or otherwise, except as expressly
provided in the last sentence of Section 3(e).
5. Employment Rights. Nothing in this Agreement will create any
right or duty on the part of the Company or the Employee to have the Employee
remain in the employment of the Company or any Subsidiary prior to or following
any Change in Control.
6. Withholding of Taxes. The Company or a Subsidiary may withhold
from any amounts payable under this Agreement all federal, state, city or other
taxes as the Company or a Subsidiary is required to withhold pursuant to any
applicable law, regulation or ruling.
7. Legal Fees and Expenses. It is the intent of the Company that the
Employee not be required to incur legal fees and the related expenses associated
with the interpretation, enforcement or defense of the Employee's rights under
this Agreement by litigation or otherwise because the cost and expense thereof
would substantially detract from the benefits intended to be extended to the
Employee under this Agreement. Accordingly, if it should appear to the Employee
that the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Employee the benefits provided or intended to be provided to
the Employee hereunder, the Company irrevocably authorizes the Employee from
time to time to retain counsel of Employee's choice, at the expense of the
Company as hereafter provided, to advise and represent the Employee in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction. Without
respect to whether the Employee prevails, in whole or in part, in
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connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and expenses
incurred by the Employee in connection with any of the foregoing; provided that,
in regard to such matters, the Employee has not acted in bad faith or with no
colorable claim of success. The fees and expenses of counsel solicited from time
to time by the Employee shall be paid, or reimbursed to the Employee if paid as
promptly as practicable (and in any event within 15 calendar days) upon
presentation of a statement or statements prepared by such counsel in accordance
with its customary practices.
8. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Employee's annual salary, at the rate as in
effect from time to time.
(b) "Cause" means that, prior to any termination pursuant to Section
2(b), the Employee shall have:
(i) been convicted of a criminal violation involving fraud,
embezzlement or theft;
(ii) committed intentional wrongful damage to property of the
Company or any Subsidiary; or
(iii) committed intentional wrongful disclosure of
confidential information of the Company or any Subsidiary;
and any such act shall have been materially harmful to the Company. For purposes
of this Agreement, no act or failure to act on the part of the Employee shall be
deemed "intentional" if it was due primarily to an error in judgment or
negligence, but shall be deemed "intentional" only if done or omitted to be done
by the Employee not in good faith and without reasonable belief that the
Employee's action or omission was in the best interest of the Company. Nothing
herein will limit the right of the Employee or his beneficiaries to contest the
validity of any determination by the Company to terminate the Employee for
Cause.
(c) "Change in Control" means any transaction or series of
transactions, the result of which causes any person (as the term "person" is
used in Section 13(d)(3) of the Securities Exchange Act (any such person being
hereafter referred to as a "Person"), other than one or more members of the
Winspear Family, to become the beneficial owner (as the term "beneficial owner"
is defined in Rule 13d-3 or any successor rule or regulation promulgated under
the Securities Exchange Act) of securities representing more than 50% of the
combined voting power of the then-outstanding Voting Stock of the Company. For
the purpose of this Agreement, any Person (including any member of the Winspear
Family) shall be deemed to beneficially own shares of Voting Stock of the
Company held directly or indirectly in accordance with Rule 13d-3.
(d) "Employee Benefits" means the benefits provided under the
employee benefit plans and programs in which Employee is entitled to
participate, including any retirement income or welfare benefit, incentive
compensation, life, health or other insurance (whether funded by actual
insurance or self insured by the Company or any Subsidiary), disability,
automobile allowance and other employee benefit policies, plans or programs that
may now exist
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or any equivalent successor policies, plans, programs or arrangements that may
be adopted hereafter by the Company or a Subsidiary, providing benefits at least
as great in the aggregate as are payable thereunder prior to a Change in
Control.
(e) "Incentive Pay" means an annual bonus, incentive or other
payment of compensation, in addition to Base Pay, 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 a
Subsidiary, or any successor thereto; provided that the Incentive Pay shall not
include any stock options or other stock-based compensation.
(f) "Severance 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 the Change in Control.
(g) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock,
including AMC Management Company, a Delaware business trust.
(h) "Term" means the period commencing as of the Effective Date and
expiring as of the later of (i) the close of business on December 31, 2003 or
(ii) the expiration of the Severance Period; provided, however, that if, prior
to a Change in Control, the Employee ceases for any reason to be an employee of
the Company and any Subsidiary, the Term shall be deemed to have expired and
this Agreement will immediately terminate without further action and be of no
further effect.
(i) "Termination Date" means the date on which the Employee's
employment with the Company or a Subsidiary is terminated.
(j) "Voting Stock" means securities entitled to vote generally in
the election of directors or the equivalent.
(k) "Winspear Family" means Xxxxxxx X. Xxxxxxxx, his affiliates
(including the Winspear Family Limited Partnership and Winspear Family
Investments Ltd.), the members of his immediate family (as the term "immediate
family" is defined in Rule 16a-1(e) or any successor rule under the Securities
Exchange Act), any trust established for the benefit of Xxxxxxx X. Xxxxxxxx or
members of his immediate family and any private charitable foundation controlled
by Xxxxxxx X. Xxxxxxxx or members of his immediate family.
9. Successors and Binding Agreement. (a) This Agreement is binding
upon the Company and any successor to the Company (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable
by the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature, and neither party shall,
without the consent of the other, assign this Agreement or any rights or
obligations hereunder except as provided in this Section 9.
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10. Notices. For all purposes of this Agreement, all notices
required or permitted to be given hereunder will be in writing and will be
deemed to have been given when hand delivered or five business days after having
been mailed by certified mail, return receipt requested, addressed to the
Company (to the attention of the Secretary of the Company) at its principal
executive office and to the Employee at his principal residence, or to such
other address as any party may have furnished to the other in writing, except
that notices of changes of address shall be effective only upon receipt.
11. Governing Law. This Agreement will be governed by and construed
in accordance with the substantive laws of the State of Delaware, without giving
effect to the principles of conflict of laws of such State.
12. Validity. If any provision of this Agreement is held invalid or
otherwise unenforceable, the remainder of this Agreement will not be affected,
and the provision so held to be invalid or otherwise unenforceable will be
reformed to the extent (and only to the extent) necessary to make it valid or
enforceable.
13. Certain Matters. Without limiting the rights of the Employee at
law or in equity, if the Company or a Subsidiary fails to make any payment or
provide any benefit required to be made or provided hereunder on a timely basis,
the Company will pay interest on the amount or value thereof at an annualized
rate of interest equal to the so-called composite "prime rate" as quoted from
time to time during the relevant period in The Wall Street Journal. Such
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
14. Amendments. No provision of this Agreement may be modified
unless such modification is agreed to in writing and signed by the Employee and
the Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the Effective Date.
ASSOCIATED MATERIALS INCORPORATED
By: /s/ Xxxxxxx Xxxxxxxx, Xx.
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Xxxxxxx Xxxxxxxx, Xx.
/s/ D. Xxxxx XxXxxxxx
-------------------------------------
D. Xxxxx XxXxxxxx
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