EXHIBIT 10.18
Roll-Over Option
ASSOCIATED MATERIALS HOLDINGS INC.
STOCK OPTION AWARD AGREEMENT
This Stock Option Award Agreement (this "Agreement"), dated
September 4, 2002, is made between Associated Materials Holdings Inc. (the
"Company") and Michael J. Caporale, Jr. (the "Optionee"). All capitalized
terms used herein that are not defined herein shall have the respective
meanings given to such terms in the Associated Materials Holdings Inc. 2002
Stock Option Plan (the "Plan").
W I T N E S S E T H :
1. Grant of Option. (a) Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company all or any part of an aggregate of
18,063 shares of the Class A common stock of the Company, $0.01 par value per
share ("Common Stock"), and 23,194 shares of 8% cumulative redeemable preferred
stock of the Company, $0.01 par value per share ("Preferred Stock" and
collectively with Common Stock shall be referred to as "Stock"), provided that
such purchase shall be made only in a unit or units with each unit comprising
0.7788 shares of Common Stock and one (1) share of Preferred Stock (a "Unit") at
a purchase price equal to $29.91 for each Unit (the "Option"). Such Option shall
be exercisable as hereinafter provided. The Option shall not be treated as an
"incentive stock option," as defined in Section 422 of the Code.
(b) Pursuant to Section 6(k) of the Plan, the Option shall be
credited with additional shares of Preferred Stock based on the amount of cash
dividends that would accrue on the shares of Preferred Stock (including Dividend
Preferred Stock (as defined below)) subject to the outstanding but unexercised
Option if such shares were held by the Optionee (any such additional shares of
Preferred Stock shall be referred to as the "Dividend Preferred Stock"). Subject
to the availability of shares of Preferred Stock issuable under the Plan, upon
the exercise of the Option by the Optionee pursuant to the terms set forth
herein and in the Plan, the Optionee shall be entitled to receive an additional
number of whole shares of Preferred Stock equal to the product of (i) the total
number of shares of Dividend Preferred Stock covered by the unexercised Option
immediately prior to such exercise and (ii) a fraction, the numerator of which
is the number of shares of Preferred Stock (excluding any Dividend Preferred
Stock) that is purchased by the Optionee at the time of such exercise and the
denominator of which is the total number of shares of Preferred Stock (excluding
any Dividend Preferred Stock) covered by the Option outstanding at the time
immediately prior to such exercise. Any fractional shares of Dividend Preferred
Stock resulting from the calculation set forth in the immediately preceding
sentence shall be rounded down to the nearest whole share of Dividend Preferred
Stock. For purposes of the remaining Sections of this Agreement, other than
Section 2(b) or (c), references to "Stock" shall include any shares of Dividend
Preferred Stock delivered or deliverable to the Optionee pursuant to this
Section 1(b).
2. Terms and Conditions. It is understood and agreed that the Option
evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire March 1, 2010.
(b) Exercise of Option. (i) Subject to the other terms of this
Agreement and the Plan, the Option may be exercised on or after the date of this
Agreement with respect to all or any portion of the full number of shares of
Stock covered by the Option; provided, however, that in any exercise of all or
any portion of the Option, shares of Common Stock and Preferred Stock must be
purchased in a Unit or Units.
(ii) Any exercise of all or any part of the Option shall be
accompanied by Notice to the Company specifying the number and type of
shares of Stock as to which the Option is being exercised. Notation of any
partial exercise shall be made by the Company on Schedule I attached
hereto. Upon the valid exercise of all or any part of the Option, a
certificate (or certificates) for the number of shares of Stock with
respect to which the Option is exercised shall be issued in the name of
the Optionee, subject to the other terms and conditions of this Agreement
and the Plan. Notwithstanding any provisions herein to the contrary, if
the exercise of the Option shall result in a fractional share after
aggregating all of the same type of Stock affected by such exercise, then
the Optionee shall receive a cash payment in lieu of receiving any
fractional share of Stock.
(c) Consideration. At the time of any exercise of the Option, the
purchase price of the shares of Stock as to which the Option shall be exercised
shall be paid to the Company (i) in United States dollars by personal check,
bank draft or money order; (ii) if permitted by applicable law and approved by
the Committee, with Common Stock already owned by the Optionee, and purchased or
held for the requisite period of time as necessary to avoid a charge to the
Company's or any Affiliate's earnings for financial reporting purposes, having a
total Fair Market Value on the date of such exercise of the Option equal to such
purchase price of the shares of Stock for which the Option is so exercised; or
(iii) a combination of the consideration provided for in the foregoing clauses
(i) through (ii).
(d) Exercise Upon Death, Disability or Termination of Employment.
The Option shall terminate upon the termination, for any reason, of the
Optionee's employment with the Company or an Affiliate, and no shares of Stock
may thereafter be purchased under the Option except as follows:
(i) In the event of the death of the Optionee while an employee of
the Company or an Affiliate, the Option, to the extent the Option would be
exercisable in accordance with Section 2(b) hereof as of the date of his
death, may be exercised after his death by his designated beneficiary, his
heir, the legal representative of the Optionee's estate or by the legatee
of the Optionee under his last will for a period of one (1) year from the
date of his death or until the expiration of the stated period of the
Option, whichever period is the shorter.
(ii) If the Optionee's employment with the Company or an Affiliate
shall terminate by reason of Disability, the Option, to the extent
exercisable in accordance with Section 2(b) hereof as of the date of such
termination of employment, may be exercised after such termination but may
not be exercised after the expiration of the period of one
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(1) year from the date of such termination of employment or of the stated
period of the Option, whichever period is the shorter.
(iii) If the Optionee's employment with the Company or an Affiliate
terminates for any reason other than the Optionee's death or Disability or
as described in paragraph (iv) below, the Option, to the extent
exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may thereafter be exercised but may not be exercised after
the expiration of the period of thirty (30) calendar days from the date of
such termination of employment or of the stated period of the Option,
whichever period is the shorter.
(iv) If the Optionee's employment with the Company or an Affiliate
is terminated (A) under circumstances determined by the Committee to be
for the convenience of the Company or (B) by reason of the Optionee's
retirement under a retirement plan of the Company or an Affiliate, as
applicable, at or after the earliest voluntary retirement age provided in
such retirement plan (or retirement at an earlier age with the written
consent of the Committee), the Option, to the extent exercisable in
accordance with Section 2(b) hereof as of the date of such termination,
may be exercised after such termination of employment, but may not be
exercised after the expiration of the period of ninety (90) days from the
date of such termination of employment or of the stated period of the
Option, whichever period is the shorter.
(v) If the Optionee dies after termination of his employment with
the Company and/or an Affiliate under paragraph (ii), (iii) or (iv) of
this Section 2(d) during the one-year, thirty-day or ninety-day period
following such termination specified in such applicable paragraph, the
Option, to the extent the Option would have been exercisable in accordance
with such applicable paragraph as of the date of the Optionee's death, may
be exercised after his death by his designated beneficiary, his heir, the
legal representative of his estate or by the legatee of the Optionee under
his last will until the expiration of the period of one (1) year from the
date of his death or of the stated period of the Option, whichever period
is the shorter.
(e) Nontransferability. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable, during the lifetime of the Optionee, only by him; provided that the
Option may be exercised after the Optionee's death by the beneficiary most
recently named by the Optionee in a written designation thereof filed by the
Optionee with the Company, in accordance with the Plan.
(f) Withholding Taxes. At the time of receipt of Stock upon the
exercise of all or any part of the Option, the Optionee shall be required to pay
to the Company in cash (or make other arrangements, in accordance with Section 9
of the Plan, for the satisfaction of) any taxes of any kind required by law to
be withheld with respect to such Stock; provided, however, such tax withholding
obligations may be met, in whole or in part, pursuant to procedures, if any,
approved by the Committee in its discretion and in accordance with applicable
law, by (i) the withholding by the Company of Stock otherwise deliverable to the
Optionee pursuant to the Option with a Fair Market Value on the date of such
exercise equal to such tax liability (provided, however, that the amount of any
Stock so withheld shall not exceed the amount
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necessary to satisfy required Federal, state and local tax withholding
obligations using the minimum statutory withholding rates that are applicable to
supplemental taxable income) and/or (ii) tendering to the Company Stock, duly
endorsed for transfer to the Company, owned by the Optionee (or by the Optionee
and his spouse jointly), and purchased or held for the requisite period of time
as necessary to avoid a charge to the Company's or any Affiliate's earnings for
financial reporting purposes, with a Fair Market Value on the date of such
exercise equal to such tax liability. In no event shall Stock be delivered to
the Optionee until the Optionee has paid to the Company in cash, or made
arrangements satisfactory to the Company regarding the payment of, the amount of
any taxes of any kind required by law to be withheld with respect to the Stock
subject to the Option, and the Company shall have the right to deduct any such
taxes from any payment of any kind otherwise due to the Optionee.
(g) No Rights as Stockholder. Neither the Optionee nor any other
person shall become the beneficial owner of the shares of Stock subject to the
Option, nor have any rights to dividends or other rights as a stockholder with
respect to any such shares, until the Optionee has exercised the Option in
accordance with the provisions hereof and of the Plan.
(h) No Right to Continued Employment. Neither the Option nor any
terms contained in this Agreement shall confer upon the Optionee any express or
implied right to be retained in the service of the Company or an Affiliate for
any period or at all, nor restrict in any way the right of the Company or any
Affiliate, which right is hereby expressly reserved, to terminate his employment
at any time with or without cause. The Optionee acknowledges and agrees that any
right to exercise the Option is earned only by continuing as an employee of the
Company and the Affiliates, or satisfaction of any other applicable terms and
conditions contained in this Agreement and the Plan, and not through the act of
being hired, being granted the Option or acquiring shares of Stock hereunder.
(i) Inconsistency with Plan. Notwithstanding any provision herein to
the contrary, the Option provides the Optionee with no greater rights or claims
than are specifically provided for under the Plan. If and to the extent that any
provision contained in this Agreement conflicts with the Plan, the Plan shall
govern.
(j) Compliance with Laws, Regulations and Stockholders Agreement.
The Option and the obligation of the Company to sell and deliver shares of Stock
hereunder shall be subject in all respects to (i) all applicable Federal and
state laws, rules and regulations; (ii) any registration, qualification,
approvals or other requirements imposed by any government or regulatory agency
or body which the Committee shall, in its sole discretion, determine to be
necessary or applicable; and (iii) the terms, conditions and limitations of the
Stockholders Agreement, dated as of March 22, 2002, by and among the Company,
Harvest Partners III, L.P., Harvest Partners III Beteiligungsgesellschaft
Burgerlichen Rechts (mit Haftungsbeschrankung), Harvest Partners IV, L.P., and
Harvest Partners IV GmbH & Co. KG (collectively, the "Harvest Funds"), and
certain financial investors (as such agreement may be amended from time to time,
the "Stockholders Agreement"). Moreover, the Option may not be exercised if its
exercise, or the receipt of shares of Stock pursuant thereto, would be contrary
to applicable law. If at any time the Company shall determine, in its
discretion, that the listing, registration or qualification of shares of Stock
upon any national securities exchange or under any state or Federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable, the
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Company shall not be required to deliver any certificates for shares of Stock to
the Optionee or any other person unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Company.
3. Investment Representation. If at the time of exercise of all or part of
the Option the Stock is not registered under the Securities Act and/or there is
no current prospectus in effect under the Securities Act with respect to the
Stock, the Optionee shall execute, prior to the issuance of any shares of Stock
to the Optionee by the Company, an agreement (in such form as the Committee may
specify) in which the Optionee, among other things, represents, warrants and
agrees that the Optionee is purchasing or acquiring the shares acquired under
this Agreement for the Optionee's own account, for investment only and not with
a view to the resale or distribution thereof, that the Optionee has knowledge
and experience in financial and business matters, that the Optionee is capable
of evaluating the merits and risks of owning any shares of Stock purchased or
acquired under this Agreement, that the Optionee is a person who is able to bear
the economic risk of such ownership and that any subsequent offer for sale or
distribution of any of such shares shall be made only pursuant to (i) a
registration statement on an appropriate form under the Securities Act, which
registration statement has become effective and is current with regard to the
shares being offered or sold, or (ii) a specific exemption from the registration
requirements of the Securities Act, it being understood that to the extent any
such exemption is claimed, the Optionee shall, prior to any offer for sale or
sale of such shares, obtain a prior favorable written opinion, in form and
substance satisfactory to the Committee, from counsel for or approved by the
Committee, as to the applicability of such exemption thereto.
4. Lock-Up Period. In the event and to the extent requested by the
managing underwriter or, if the securities of the Company are not being disposed
of in an underwritten public offering pursuant to an effective registration
statement filed with the Securities and Exchange Commission, if requested by the
Company, the Optionee agrees not to offer, pledge, lend, sell, contract to sell,
make any short sale of, grant any option, right or warrant for the purchase of,
enter into any swap, hedging or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of, or otherwise
transfer or dispose, directly or indirectly, of any securities of the Company
(each such action, a "Transfer"), other than those securities included in such
registration pursuant to Section 3.1(a), 3.1(b) or 3.2(a) of the Stockholders
Agreement for the thirty (30) days prior to and the ninety days (90) days (one
hundred and eighty (180) days in the case of the initial public offering of the
common stock of the Company pursuant to an effective registration statement
filed with the Securities Exchange Commission) after the effectiveness of the
registration statement pursuant to which such public offering shall be made (or
such shorter period of time as is sufficient and appropriate, in the opinion of
the managing underwriter or, as the case may be, the Company in order to
complete the sale and distribution of the securities included in such public
offering; provided that in no event shall such shorter period of time with
respect to the Optionee be shorter than any such period for any other
stockholder of the Company); provided that the limitations contained in this
Section 4 shall not apply to the extent the Optionee is prohibited by applicable
law from so withholding such securities from sale during such period.
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5. Company's Right to Purchase Stock. (a) (i) Upon termination under any
circumstances of the Optionee's employment with the Company or an Affiliate, the
Company shall have the right, but not the obligation, to purchase any or all of
the shares of Stock which have been purchased by the Optionee, or any person
permitted to exercise the Option under Section 2(d) hereof, pursuant to exercise
of the Option ("Option Stock"), and which the Optionee, such other person, or
any permitted donee of such Stock, under Section 6 hereof, then holds by
delivering written notice (the "Repurchase Notice") to the Optionee and/or such
donee of Option Stock or other person permitted to exercise the Option, as
applicable, within sixty (60) calendar days after the last date on which the
Option may be exercised in accordance with Section 2(d) hereof at the purchase
price determined in accordance with subparagraph (ii) or (iii), as applicable,
of this Section 5(a); provided, however, that if any Option Stock has been held
by the Optionee or such donee or other person, as the case may be, for six (6)
months or less at any time the Company is entitled to exercise its right to
purchase such Option Stock under this Section 5(a)(i) but for this proviso, the
Company may exercise such right to purchase such Option Stock within sixty (60)
calendar days after such Option Stock has first been held by the Optionee or
such donee or other person for greater than six (6) months.
(ii) If such termination of the Optionee's employment is by the
Company or an Affiliate other than for "Cause" (within the meaning of that
certain Employment Agreement, dated July 1, 2002, by and between
Associated Materials Incorporated, a wholly-owned subsidiary of the
Company, and the Optionee (the "Employment Agreement")), or by the
Optionee for "Good Reason" (as defined in the Employment Agreement), the
purchase price to be paid by the Company for any shares of Option Stock to
be purchased by the Company pursuant to this Section 5(a) shall be the
fair market value of such shares of Option Stock as of the date the
Company purchases such shares in accordance with this Section 5, as
determined in good faith by the Committee in accordance with Section 5(e)
hereof, based upon a customary appraisal prepared by an independent
appraisal company, or such other reasonable valuation method as the
Committee shall select and apply as of the given date.
(iii) If such termination of the Optionee's employment is by the
Company or an Affiliate for Cause, or is by the Optionee other than for
Good Reason, the purchase price to be paid by the Company for any shares
of Option Stock to be purchased by the Company pursuant to this Section
5(a) shall be the lesser of: (A) the fair market value (as determined by
the Committee in accordance with subparagraph (ii) of this Section 5(a))
of such shares of Option Stock as of the date the Company purchases such
shares in accordance with this Section 5, and (B) the purchase price set
forth in Section 1(a) hereof for such shares of Option Stock.
(b) If the Company shall elect to exercise its right to purchase any
Option Stock under this Section 5, the closing of such purchase by the Company
shall take place no later than forty-five (45) days after the exercise of such
right, which time in the case of the death of the Optionee may be extended to
provide for probate of the Optionee's estate. On the date scheduled for such
closing, the price for the shares of Option Stock to be purchased by the
Company, determined in accordance with paragraph (a) or paragraph (d), as
applicable, of this Section 5, shall be paid by the Company by check or checks
to the record holder of such shares
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against delivery of a certificate or certificates representing the purchased
shares in proper form for transfer. Notwithstanding the immediately preceding
sentence to the contrary, the Company may pay such price for the shares of
Option Stock to be purchased by the Company, in whole or in part, by offsetting
amounts outstanding under any indebtedness or obligations owed by the Optionee
or any other person permitted to exercise the Option under Section 2(d) hereof
to the Company or any Affiliate. In connection with such closing, such record
holder shall warrant in writing to the Company good and marketable title to
Option Stock, free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever except those under this Agreement.
Notwithstanding anything to the contrary contained herein, all repurchases of
Option Stock by the Company will be subject to applicable restrictions contained
under Delaware law and in the Company's and any Affiliate's debt and equity
financing agreements. If any such restrictions prohibit the Company's purchase
of Option Stock pursuant to this Section 5 which the Company is otherwise
entitled to make, the Company may make such purchases as soon as it is permitted
to do so under such restrictions, and all restrictions on the transfer of Option
Stock in effect on the date such Company purchase right arose shall remain in
effect until fifteen (15) days after the end of the period in which the Company
is permitted to make such purchases. The Company's obligation to make such
purchases shall be evidenced by a junior subordinated note in a principal amount
equal to the applicable purchase price for such shares of Option Stock to be
purchased by the Company bearing interest at a rate of 8% per annum and payable
to the record holder upon the terms and conditions set forth therein; provided
that such note shall be in form and substance satisfactory to the Company and
the Company's lenders, if applicable.
(c) None of the shares of Option Stock shall be transferred on the
Company's books nor shall the Company recognize any such purported Transfer of
any such shares or any interest therein unless and until all applicable
provisions of Sections 4, 5, 6 and 7 of this Agreement have been complied with
in all respects. The certificates evidencing shares of Option Stock shall bear
legends to the following effect:
"The shares represented by this certificate are subject to certain
restrictions against transfer set forth in a Stock Option Award Agreement
between the stockholder to whom the shares were originally issued and
Associated Materials Holdings Inc. (the "Company"), dated September 4,
2002, as may be amended from time to time. Such shares are also subject to
a call option of the Company as described in Section 5 and certain
drag-along rights as described in Section 7, in each case of such Stock
Option Award Agreement.
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and such
shares may not be offered, sold, pledged or otherwise transferred except
(1) pursuant to an exemption from, or in a transaction not subject to, the
registration requirements under the Securities Act or (2) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any State of the United
States."
(d) In the event the Optionee's employment under the Employment
Agreement shall be terminated on or prior to December 31, 2003, either (1) by
Associated Materials Incorporated other than (x) for Cause or (y) due to
Disability (as defined in the
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Employment Agreement) or death, or (2) by the Executive for Good Reason, the
Company shall repurchase any shares of Stock previously purchased by the
Optionee under the Option and then held by the Optionee, at a purchase price
equal to the then-current fair market value of such Stock, as determined in good
faith by the Committee in accordance with Section 5(e) hereof, based upon a
customary appraisal prepared by an independent appraisal company, or such other
reasonable valuation method as the Committee shall select and apply as of the
given date. Such repurchase of such shares of Stock shall otherwise be in
accordance with Section 5(b) hereof; provided, however, that if any such shares
Stock have been held by the Optionee or any permitted donee or other person
permitted to exercise the Option, as the case may be, for six (6) months or less
at the time the Company is required to purchase such Stock under this Section
5(d) but for this proviso, the Company shall purchase such Stock within sixty
(60) calendar days after such Stock has first been held by the Optionee or such
donee or other person for greater than six (6) months.
(e) For purposes of this Section 5, (A) the fair market value of the
Option and any shares of Stock previously purchased by the Optionee under the
Option shall not be adjusted for any discount due to any lack of marketability
or ownership of a minority interest of the Stock; (B) the fair market value of a
share of Stock or the Option to purchase a share of Stock shall be determined by
assuming (I) the full exercise of all outstanding employee or director options
covering the capital stock of the Company 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 Optionee's employment under the
Employment Agreement 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 the capital stock of the Company the exercise of which
is conditioned on the achievement of specified performance conditions, if the
equity value of the Company (as determined pursuant to Exhibit A of the
Employment Agreement as of the end of the calendar year immediately preceding
the date of termination of the Optionee's employment under the Employment
Agreement) 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 the Company relating to
the capital stock of the Company if the relevant option, warrant or conversion
privilege is, at the time the Optionee's employment under the Employment
Agreement 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 capital stock of the Company has occurred within three (3)
months prior to the date of termination of the Optionee's employment under the
Employment Agreement, the fair market value of the Option and the Stock shall be
determined on the basis of the price per share paid in such third-party sales
transaction (unless the Board 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).
6. Restrictions on Transfer of Stock. The Optionee shall not Transfer
shares of Option Stock received by the Optionee (or any interest or right in
such shares) except: (a) to the
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Company; (b) pursuant to a registration statement filed pursuant to the
Securities Act or, at any time after an initial public offering of the Company,
pursuant to Rule 144 under the Securities Act in an unsolicited brokerage
transaction to the public; (c) following his death, by will or intestacy to the
Optionee's beneficiary, legal representative, heir or legatee; (d) as a gift or
gifts during the Optionee's lifetime to the Optionee's spouse, children or
grandchildren, or to a trust, partnership or other legal entity for the benefit
of, or in which the only partners or members are, the Optionee and/or any of the
foregoing, provided that the donee of such shares agrees to be bound by the
provisions of Sections 4, 5, 6, 7, 8 and 9 of this Agreement; or (e) pursuant to
Section 7 or 8 of this Agreement. Additionally, any shares of Stock received by
the Optionee or any other person entitled to exercise the Option under Section
2(d) hereof upon exercise of the Option (or any interest or right in such
shares) cannot be Transferred in any manner except as permitted by the
Stockholder's Agreement.
7. Drag-Along Rights. (a) At any time, at the written request of any
Harvest Fund, the Optionee agrees to vote all of its Stock, at a special or
annual meeting of stockholders or by written consent in lieu of a meeting, in
favor of and, if applicable, shall sell its pro rata portion of the amount of
any type of securities of the Company to be transferred in connection with, a
"Sale of the Business" (as defined in the Stockholders Agreement). In order to
effect the foregoing covenant, the Optionee hereby grants to each Harvest Fund
with respect to all of Optionee's Stock an irrevocable proxy (which is deemed to
be coupled with an interest) with respect to any stockholder vote or action by
written consent solely to effect such Sale of the Business in compliance with
this Section 7.
(b) The Company and the Optionee each hereby agree to cooperate
fully (including by waiving any other appraisal rights to which the Optionee may
be entitled under applicable law and the Optionee does hereby waive all such
appraisal rights) with the Harvest Fund and the purchaser in any such Sale of
the Business and, to execute and deliver all documents (including purchase
agreements) and instruments as the applicable Harvest Fund and such purchaser
request to effect such Sale of the Business including, without limitation, the
making of representations and warranties as to due incorporation, existence and
good standing, power and authority of the Optionee, and ownership of Stock and
the granting of all indemnifications and the execution of all agreements
(including, without limitation, participating in any escrow arrangements to the
extent of their respective pro rata portion) and similar arrangements which the
applicable Harvest Funds is making or executing, provided that the
indemnification obligation of the Optionee to proposed purchaser with respect to
the breach of any representation or warranty concerning the Company shall be
limited to the lesser of the pro rata portion of the obligation and the net
proceeds to be received by the Optionee in connection with such Sale of the
Business. The Harvest Funds agree that upon such Sale of the Business the
Optionee shall receive its pro rata portion of the net proceeds (taking into
account transaction costs and expenses incurred by the Harvest Funds in
connection with such Sale of the Business, reasonable transaction costs and
expenses incurred by each other stockholder of the Company in connection with
such Sale of the Business and the costs and expenses described in Section 7(c)
below) and such sale shall be on the same terms and conditions as afforded to
the Harvest Funds. For purposes of Section 7(a) and 7(b) hereof, "pro rata
portion" shall mean with respect to the Optionee and each type of equity
securities to be transferred in such Sale of the Business a fraction, the
numerator of which is the number of such equity securities held by the Optionee
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immediately prior to such Sale of the Business and the denominator of which is
the total number of such equity securities outstanding immediately prior to such
Sale of the Business.
(c) It is understood and agreed that in consideration of investment
banking services provided by any Person (including the Harvest Funds or any of
their respective Affiliates) a reasonable fee may be paid in an amount that is
customary and equivalent to a fee arrangement negotiated on an "arms-length"
basis; provided that, if any such fee is payable to any Harvest Fund or any of
its Affiliates, such fee shall be consistent with the terms of the management
agreement by and between Harvest Partners, Inc. and Associated Materials
Incorporated.
8. Certain Other Representations and Covenants of the Optionee. The
Optionee hereby acknowledges receipt of a copy of the Plan and the Stockholders
Agreement, and represents that he is familiar with the terms and provisions
thereof. The Optionee hereby represents and acknowledges that he has reviewed
the Plan, this Agreement and the Stockholders Agreement in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and the Stockholders Agreement, and fully understands all provisions
of the Plan, this Agreement and the Stockholders Agreement. The Optionee hereby
agrees to be bound by all of the terms and provisions of the Plan, this
Agreement and the Stockholders Agreement, including the terms and provisions
adopted after the granting of the Option but prior to the complete exercise
hereof, subject to the last paragraph of Section 13 of the Plan as in effect on
the date hereof. The Optionee hereby agrees to accept as binding, conclusive and
final all decisions and interpretations of the Committee or the Board made in
good faith upon any questions arising under the Plan, this Agreement, the
Stockholders Agreement or otherwise relating to the Option.
9. Forfeiture. Notwithstanding any other provisions of this Agreement to
the contrary, in the event of a breach by the Optionee of any of the Optionee's
covenants set forth in the Employment Agreement or the Committee determines that
the Optionee has intentionally committed an act materially inimical to the
interests of the Company or any Affiliate, or in the event that the Optionee's
employment is terminated by the Company or an Affiliate for Cause, then the
Option shall thereupon automatically terminate and cease to thereafter be
exercisable with respect to any shares of Stock without any further action
required by the Company.
10. Notices. Any Notice or other communication required or permitted
hereunder shall be in writing and in accordance with the Plan, and, if to the
Company, may be sent to the Company, c/o Harvest Partners, Inc., attention: Ira
D. Kleinman, by facsimile at (212) 812-0100, or delivered in person, or sent by
certified or registered mail or overnight courier, prepaid, addressed as
follows: Associated Materials Holdings Inc., c/o Harvest Partners, Inc., 280
Park Avenue, 33rd Floor, New York, NY 10017, attention: Ira D. Kleinman, and, if
to the Optionee, shall be addressed to him at the address set forth below his
signature hereon, subject to the right of either party to designate at any time
hereafter in writing some other address.
11. 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
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executed and to be performed entirely within such state, without regard to the
conflict of law provisions thereof.
12. Severability. If any of the provisions of this Agreement should be
deemed unenforceable, the remaining provisions shall remain in full force and
effect.
13. Modification. Except as otherwise permitted by the Plan, this
Agreement may not be modified or amended, nor may any provision hereof be
waived, in any way except in writing signed by the parties hereto.
14. Counterparts. This Agreement has been executed in two counterparts,
each of which shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Associated Materials Holdings Inc. has caused
this Agreement to be executed by a duly authorized officer and the Optionee has
executed this Agreement, both as of the day and year first written above.
ASSOCIATED MATERIALS HOLDINGS INC.
Date: 9/10/02 By /s/ IRA D. KLEINMAN
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Name: Ira D. Kleinman
Title: Chairman
Date: 9/12/02 /s/ MICHAEL J. CAPORALE, JR.
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MICHAEL J. CAPORALE, JR.
3668 Shetland Trail
Richfield, Ohio 44286
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SCHEDULE I
NOTATIONS AS TO PARTIAL EXERCISE
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Date of Number of Units Balance of Shares Authorized Notation
Exercise Purchased of Stock on Option Signature Date
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