EMPLOYMENT AGREEMENT
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AGREEMENT, dated the 21st day of November, 1992, between THE PGVA
CORPORATION, a Delaware corporation, having an office at 315 Shoreland Drive,
Walton, Kentucky (the "Employer"), and MICHAEL VAGEDES, residing at 677
Sunnybrook Drive, Florence, KY 41042, (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has been employed by the predecessor of the
Employer, and the Employer and the Employee desire to have his employment
continue with the Employer on the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the Employer and the Employee agree as follows:
1. Employment. Subject to the terms and conditions hereinafter set
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forth, the Employer hereby employs the Employee as an executive of the Employer,
and the Employee hereby accepts such employment.
2. Term. The term of the employment of the Employee by the Employer
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pursuant to this Agreement (the "Employment Term") shall commence on the date
hereof and shall terminate upon the earliest of (i) December 31, 1998; or (ii)
the date on which the Employment Term is terminated pursuant to any of the other
provisions of this Agreement.
3. Employment Services. During the Employment Term, the Employee
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shall render his services to the Employer in such
capacities as the Board of Directors of the Employer may, from time to time,
designate. The Employee shall hold, without additional compensation therefor,
such offices or membership of the Board of Directors, or Committees thereof, of
the Employer, from time to time during the Employment Term. During the
Employment Term, the Employee shall devote his full business time, efforts and
his entire energy and skill to the business of the Employer in accordance with
the reasonable directions and orders of the Board of Directors, and will use his
best efforts to promote the interests thereof and will not engage in any other
business or business activity. The Employee shall render his services with due
regard for the prompt, efficient and economical operation of the business of the
Employer to the end of maximizing the profitability of the Employer.
4. Compensation. In consideration of the services to be rendered by
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the Employee as an employee of the Employer pursuant to this Agreement,
including, without limitation, any services which may be rendered by the
Employee as an officer or member of any Board of Directors, or Committees
thereof, of the Employer, the Employer shall pay or cause to be paid to the
Employee during the Employment Term, and the Employee shall accept, a minimum
compensation at the rate of $75,000 per annum with a minimum annual increase of
$5,000 per annum. The foregoing salary (including subsequent increases) shall
commence on the date hereof and shall be payable in semi-monthly installments
during the Employment Term in accordance with the normal payroll practices of
the Employer. The Employee shall receive such other
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annual increases in salary as the Board of Directors may direct. In the event of
the termination of the Employment Term, the unpaid portion of the salary payable
to the Employee on account of periods prior to the date of termination shall be
computed and paid to the Employee. The Employee's salary shall be subject to all
applicable withholding and other taxes.
5. Employee shall receive as additional payments for his employment
contemplated by this agreement and in consideration for the non-competition
provisions as set forth in paragraph 11 herein each year for the five calendar
years commencing January 1, 1994 an amount equal to 12.5% of each year's income
before management fee ("IBMF") (as it is computed in the internal financial
statements currently prepared by subsidiaries of Ply Gem Industries, Inc. ("Ply
Gem")) of the Employer in excess of $276,335.00 per year (the "Profitability
Minimum") earned during such calendar year. Any and all payments under this
Paragraph are payable on April 1 of the following year, beginning April 1, 1995.
However, in the event that IBMF for the calendar year 1993 ("1993 IBMF") does
not exceed $300,000, the Profitability Minimum for each calendar year will be
increased for all calculations under this Paragraph by the difference between
1993 IBMF and $300,000.
Additionally, in the event that Employer's IBMF in any calendar year
during the period 1994 through 1998, inclusive, is less than the Profitability
Minimum, the difference between IBMF in such year and the Profitability Minimum
shall be defined as a "Deficiency". In the event that a Deficiency occurs, the
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subsequent year's IBMF shall be reduced by the amount of the Deficiency for
purposes of any calculations under this Paragraph. Any portion of the
Deficiency not offset by IBMF in a given year shall be carried over as the
Deficiency for the following year.
For purposes of this Paragraph, Employer's IBMF will be determined in
conformity with generally accepted accounting principles applied consistently
with the manner applied in the Employer's financial statements for the period
ended September 30, 1992. No charge or benefit in computing IBMF shall be made
for (1) amortization of any goodwill occasioned by the transaction pursuant to
which the Employer acquired certain assets and its business from Vagedes
Industries, Inc. on November 21, 1992 (2) any other effects of push down
accounting which may result from the aforementioned transaction (3) overhead,
management or similar charges of Ply Gem of its Subsidiaries other than the
Employer's allocable share of professional fees, audit charges, insurance,
compensation (exclusive of management fees), employee benefits and all other
expenses which are paid by Ply Gem or its Subsidiaries for the account of the
Employer for the benefit of the Employer or its employees and (4) gain or loss
on sale of capital assets, including without limitation real property and
equipment. Depreciation and amortization on capital assets shall be computed
using the method and lives used by Vagedes Industries, Inc. for the period ended
September 30, 1992.
6. Employment Benefits. The Employee shall be entitled during the
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Employment Term to receive the benefits from
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and to participate in any life insurance, accident, medical, hospital, bonus,
vacation, sick leave, pension, profit sharing or other similar programs
maintained by the Employer for senior executive employees. The Employee's
benefits shall be of substantially similar value to the benefits provided to the
Employee by Vagedes Industries, Inc. immediately prior to November 21, 1992.
During the Employment Term, the Employee shall cooperate with the
Employer in obtaining any insurance on the life of the Employee which the
Employer may desire to obtain for its own benefit and shall undergo such
physical and other examinations as the Employer may request in connection with
the issuance of one or more of such policies of insurance.
7. Expenses. During the Employment Term, the Employer shall
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reimburse the Employee, upon presentation of proper vouchers, for all actual
travel, entertainment and other out-of-pocket expenses which are reasonably and
necessarily incurred by the Employee in the performance of his duties hereunder
in accordance with the Employer's policy for reimbursement of expenses
applicable to all employees.
8. Termination. If the Employee shall die during the Employment
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Period, this Agreement and the Employment Period shall terminate, and the
Employer shall pay to the Employee's estate any unpaid compensation (as provided
in paragraph 4 above) to the date of termination at the rate of compensation
then in effect. Notwithstanding the foregoing, the Employee's estate shall be
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entitled to receive the additional compensation payments in accordance with
Paragraph 5 above.
The Employer may at any time, and in its sole discretion, immediately
terminate this Agreement and the Employment Period for cause by written notice
to the Employee specifying the nature of such cause. For purposes of this
Agreement, "cause" shall include, without limitation, breach of any of the terms
of this Agreement, breach of any of the provisions of the Agreement (as therein
defined) with respect to the purchase of certain assets of the business by the
Employer from Vagedes Industries, Inc. on November 21, 1992, fraud, conviction
of a felony, habitual drunkenness, use of illegal substances, gross
incompetence, malfeasance, misappropriation, dishonesty, embezzlement or similar
misconduct by the Employee, willful failure of the Employee to perform the
duties of his employment, failure of the Employee to follow the directions of
the Board of Directors of the Employer, other willful misconduct, or similar
conduct or activities by or on the part of the Employee. Notwithstanding the
aforesaid, in the event that the breach upon which the termination of this
Agreement and the Employment Term is based is curable, then this Agreement and
the Employment Term shall be terminable only upon thirty-days notice to the
Employee, during which time the Employee shall have the opportunity to cure in
all respects the subject default and avoid termination of employment during this
period.
In the event that at any time during the Employment Period, the
Employee, due to physical or mental injury, illness,
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disability or incapacity, shall fail to render satisfactorily the services to be
performed by the Employee pursuant to this Agreement for a non-consecutive
period of six (6) months within any twelve month period, the Employer may, at
its option terminate this Agreement and the Employment Period upon not less than
thirty (30) days' written notice to the Employee. Notwithstanding the foregoing,
the Employee shall be entitled to receive the additional compensation payments
in accordance with Paragraph 5 above in the event of a termination of employment
in accordance with this paragraph.
9. Conflicting Agreements. The Employee hereby represents and
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warrants to the Employer that (a) neither the execution of this Agreement by the
Employee nor the performance by the Employee of any of the obligations or duties
of the Employee under this Agreement will conflict with or violate or constitute
a breach of the terms of any employment or other agreement to which the Employee
is a party or by which the Employee is bound, and (b) the Employee is not
required to obtain the consent of any person, firm, corporation or other entity
in order to enter into this Agreement or to perform any of the obligations or
duties of the Employee hereunder.
10. Inventions, Discoveries, Etc. The Employee hereby assigns, and
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shall promptly and fully disclose and assign to the Employer, any and all
inventions, discoveries, improvements, developments, concepts and ideas which
relate to any activities of the Employer or which relate to building materials,
whether or not patentable and whether or not conceived, developed or reduced to
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practice by the Employee alone or by himself and others, or both, during the
period of his employment with the Employer or with any affiliate or subsidiary
of the Employer. For purposes of this paragraph "building materials" shall be
deemed to mean any object which may constitute a component of a structure.
11. Non-Competition and Confidentiality.
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(a) The Employee covenants and agrees that, during the Employment
Period, and (except as otherwise set forth herein) for a period of three (3)
years thereafter, the Employee:
(i) shall not in the United States or Canada, directly or
indirectly, engage in the Employer Business for his own account; enter the
employ of, or render any services to, any Person engaged in such
activities; or become interested in any such Person in any capacity,
including, without limitation, as an individual, partner, shareholder,
lender, officer, director, employee, principal, agent or trustee; provided,
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that the Employee may own, directly or indirectly, solely as an investment,
securities of any such Person traded on any national securities exchange or
listed on the National Association of Securities Dealers Automated
Quotation System if the Employee is not a controlling Person of, or a
member of a group which controls, such Person and the Employee does not,
directly or indirectly, own one percent (1%) or more of any class of
securities of such Person;
(ii) shall not disclose to any Person not employed by, or not
engaged to render services to, any of the Employer
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or its parent or Subsidiaries (the "Companies"), and will not use for the
benefit of himself or others, any Confidential Information obtained by him
by reason of his association with the Companies or otherwise;
(iii) shall return, upon request, upon termination of employment
all memoranda, notes, lists, records and other documents or papers (and all
copies thereof), including such items stored in computer memories, or
microfiche or by any other means, made or compiled by or on behalf of the
Employee, or made available to the Employee, relating to either or any of
the Companies;
(iv) for a period of two years from the date hereof shall not,
directly or indirectly, hire, solicit or encourage to leave the employment
of either of the Companies, any of its employees, or hire any such employee
who has left the employment of the Employer within the one year period
preceding the date hereof;
(v) shall not, directly or indirectly, hire, solicit or cause
others to hire or solicit, or conduct a business with any consultant or
advisor then under contract, or under contract during the one-year period
prior to the date hereof, with either of the Companies or any successor
thereto unless the engagement is unrelated to the Employer Business or
encourage such consultant or advisor to terminate its relationship with
either of the Companies.
(vi) shall not directly or indirectly, request or advise a
customer or supplier of either of the Companies or
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any successor thereto to curtail or cancel such customer's or supplier's
business relationship with either of the Companies or any successor
thereto.
(b) The Employer shall be entitled, in addition to any other right
and remedy it may have at law or at equity, the right to require the
Employee to account for and pay over to the Employer all compensation,
profits, monies, accruals, increments or other benefits (collectively,
"Benefits") derived or received by the Employee as the result of any
transactions constituting a breach of any of the covenants contained in
this Section 11. If any of the restrictions contained in this Section 11
shall be deemed unenforceable, by reason of extent or geographical scope or
otherwise, then the court making such determination shall have the right to
reduce such extent, geographical scope, or other provisions hereof, and in
its reduced form this Section 11 shall then be enforceable in the manner
contemplated hereby.
(c) Employee acknowledges that Employee's services to Employer are of
a unique character which gives them a special value to the Employer. Employee
further acknowledges that any breach by Employee of any of the provisions of
Section 11 hereof will result in irreparable and continuing harm to Employer for
which the Employer would have no adequate remedy at law. Therefore, in addition
to any other remedy which the Employer may have at law or in equity, the
Employer shall be entitled to injunctive relief for a breach of this Agreement
by Employee.
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(d) The parties acknowledge that the laws and public policies of the
various states of the United States and the District of Columbia may differ as
to the validity and enforceability of the covenants contained in this Paragraph.
It is the intention of the parties that activities of Employee be restricted
only to the extent necessary for the protection of legitimate business interests
of Employer, that the provisions of this paragraph shall, to the fullest extent
permissible under the law and public policy, be enforced by the courts of each
state and jurisdiction in which enforcement is sought, and that the
unenforceable (or the modification necessary to conform the covenants contained
in this Paragraph with such law and public policy) part of this Paragraph shall
be adjudicated to be invalid or unenforceable without affecting any other part
of this Paragraph. Accordingly, if any part of Paragraph 11 shall be
adjudicated to be invalid or unenforceable in any action or proceeding in which
Employee, or Employee's heirs, executors or administrators and the Employer, its
successors or assigns, are parties, whether in its entirety or as modified as to
duration, territory or to otherwise, then such part shall be deemed modified so
as to be enforceable or, if required, deleted from the Agreement or amended, as
the case may be, in order to render the remainder of Paragraph 11 valid and
enforceable. Any such deletion or amendment shall apply only where the court
rendering the same has jurisdiction. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in
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all respects as if such invalid or unenforceable provision were omitted. The
provisions of this Paragraph 11 shall survive the termination or expiration of
the Employment Term.
12. Miscellaneous Provisions.
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(a) As used herein, the following terms shall be defined as follows:
"Employer Business" means (i) during the Employment Term the
manufacture and distribution of products similar to those which were
manufactured or distributed by the Employer or by any subsidiary or of the
Employer or entities under common control during the Employment Term; and (ii)
during the three years subsequent to the Employment Term the manufacturer and
distributor of products similar to those which were manufactured or distributed
by the Employer or by any subsidiary of the Employer, or by Variform, Inc. or
were in the development phase during the Employment Term or within the one year
subsequent thereto.
"Confidential Information" means information relating to costs, sales,
profits, products, markets, key personnel, customers (including, without
limitation, the identity of existing and prospective customers), pricing
policies, operational methods, technical processes and other business methods,
and acquisition plans, development plans and other business plans as to which
the Employer takes reasonable precautions to assert and maintain confidentiality
and which are not known or disclosed to persons outside Employer.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock
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company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Subsidiary" of a corporation, person or entity shall mean any
corporation, partnership, firm or other entity in which such corporation, person
or entity holds an equity ownership interest of fifty percent (50%) or more; an
"affiliate" of a corporation, person or entity shall mean any corporation,
partnership, firm or other entity which controls, is controlled by, or is under
common control with, such corporation, person or entity.
(b) The provisions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns.
(c) All notices required or permitted to be given hereunder shall be
in writing and shall be deemed given when delivered in person or sent by
confirmed facsimile, or when received if given by Federal Express or other
nationally recognized overnight courier service, or five (5) business days after
being deposited in the United States mail, postage prepaid, registered or
certified mail, addressed to the applicable party as follows:
(i) If to the Employer:
The PGVA Corporation
315 Shoreland Drive
Walton, Kentucky 41094
Attn: President
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Copies to:
Elihu H. Modlin
EAB Plaza
12th Floor/West Tower
Uniondale, NY ll556-0132
(ii) If to the Employee, at:
Michael Vagedes
677 Sunnybrook Drive
Florence, KY 41042
with a copy to:
Stephen A. Kappers
Cors & Bassett
1200 Carew Tower
Cincinnati, Ohio 45202
(d) This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof, and all prior negotiations,
agreements or understandings relating to the Employee's employment by the
Employer, written or oral. This agreement may not be changed, modified,
extended, renewed or supplemented, except in a writing signed by the parties
hereto and specifying that it affects this Agreement. No provision hereof may
be waived, except by an instrument in writing signed by the party against whom
enforcement of any waiver is sought.
(e) This Agreement shall be governed and construed in accordance with
the laws of the State of Kentucky applicable to agreements made and to be
performed entirely within such State.
(f) In the event any one or more provisions of this Agreement is held
to be invalid or unenforceable, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other
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provisions shall remain in full force and effect, unaffected by such invalidity
or unenforceability.
(g) This Agreement is personal to the Employee and the Employee may
not assign any of his rights or delegate any of its duties under this Agreement.
(h) The Employer may only assign this Agreement to any subsidiary or
affiliate of the Employer.
(i) The headings in this Agreement are for reference only and shall
not affect the interpretation of this Agreement.
(j) This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above-written.
THE PGVA CORPORATION
By:_______________________
__________________________
MICHAEL VAGEDES
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March 11, 1997
Mr. Michael Vagedes
Richwood Building Products, Inc.
Richwood Industrial Park
315 Shorland Drive
Richwood, Kentucky 41094
Dear Mr. Vagedes:
Reference is made to the Employment Agreement (the "Employment
Agreement") dated November 21, 1992 between yourself and Richwood Building
Products, Inc., formerly known as The PGVA Corporation (the "Corporation").
This letter shall constitute a modification and clarification of the
Employment Agreement as follows:
a. The compensation to be paid to you during the year ending
November 22, 1997 in accordance with the provisions of paragraph 4 of the
Employment Agreement shall be at the rate of $105,000 per annum. During the
subsequent year (commencing November 23, 1997), you shall be paid at a minimum
rate of $110,000 per annum.
b. A new sentence is added at the end of paragraph 5 of the
Employment Agreement as follows:
For calendar years 1996, 1997 and 1998, depreciation and amortization
on capital assets shall be computed using the average of the following two
methods:
(a) The tax method (MACRS) which under Code Sec. 168 uses (1) the
applicable depreciation method, (2) the applicable recovery period,
and (3) the applicable convention. The adjusted basis of the property
is multiplied by the declining balance
rate. The half-year convention is applied in computing depreciation
the first year.
(b) The book method of depreciation currently used by the Corporation for
calculation of depreciation expense for financial statement purposes
in accordance with the Corporation's depreciation policy.
c. For 1997 only, in the event that the IBIT (Income Before Income
Taxes) for 1997 exceeds the IBIT for 1996 by more than 10%, you shall receive an
additional bonus payment in the amount of $30,000 by April 1, 1998. For
purposes of this paragraph, IBIT shall be shown on the financial statements of
the Corporation, and shall be computed pursuant to generally accepted accounting
principles (GAAP) consistently applied in all cases after deducting both the
accrual for the additional payment in paragraph 5 of the Employment Agreement
and the accrual for the bonus payable pursuant to this paragraph C (See
Exhibit A).
d. In consideration of the agreement set forth in this letter, it is
understood and agreed that the changes provided for herein are in lieu of the
reference to any "bonus" to be paid pursuant to paragraph 6 of the Employment
Agreement and that paragraph 6 shall be modified and amended effective November
21, 1992 to provide for the deletion of any reference to "bonus" therein,
provided, however, the other employment benefits described in paragraph 6 shall
not be modified.
e. Anything to the contrary notwithstanding, the signing and
delivery of this agreement by you, and by these presents, constitutes a general
release by you to the Companies (as defined in the Employment Agreement) for any
claims that you may have pursuant to the Employment Agreement with respect to
the subject matter specifically addressed in this letter to and through the date
hereof.
Anything to the contrary notwithstanding, the signing and delivery of
this agreement by the Corporation, and by these presents, constitutes a general
release by the Companies to you for any claims that the Companies may have
pursuant to the Employment Agreement with respect to the subject matter
specifically addressed in this letter to and through the date hereof.
Except as modified by this letter, the Employment Agreement as
aforesaid is hereby ratified and confirmed and shall be deemed in full force and
effect.
Please sign a copy of this letter indicating your agreement to the
aforesaid.
Sincerely yours,
Paul Bogutsky
Assistant Secretary
ACCEPTED AND AGREED TO:
______________________________
Michael Vagedes
March 11, 1997
EXHIBIT A TO PARAGRAPH C
Example:
1996 1997 Increase
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IBIT Pre Officer Bonus $2,358,300 $2,624,228
Less: Earn Out Accrual 504,221 554,741
Less: Additional Bonus (Paragraph C) 30,000
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IBIT $1,854,079 $2,039,487 10% Therefore Bonus would be paid.
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1997 Earn Out is an estimate