1
EXHIBIT 10.1
STOCK DISPOSITION AGREEMENT, dated as of April 29, 2001, between
Associated Materials Incorporated, a Delaware corporation (the "Company"), The
Prudential Insurance Company of America, a mutual insurance company organized
under the laws of the State of New Jersey ("Prudential") and PCG Finance Company
II, LLC, a Delaware limited liability company ("PCG" and, together with
Prudential, the "Sellers").
WITNESSETH:
WHEREAS, the Sellers own an aggregate of 1,550,000 shares of Class B
common stock, par value $.0025 per share, of the Company ("Class B Common
Stock");
WHEREAS, Prudential and PCG desire to sell and transfer to the Company,
and the Company desires to purchase from Prudential and PCG, 382,000 and
618,000, respectively, shares of Class B Common Stock (collectively, the
"Purchase Shares");
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and on the terms and subject to the conditions
set forth herein, the parties hereto, each representing to the others that its
execution, delivery and performance of this Agreement has been fully and duly
authorized, agree as follows:
ARTICLE I.
DEFINITIONS AND TERMS
Section 1.1 Specific Definitions. As used in this Agreement,
the following terms shall have the meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common
control with, such other Person at any time during the period for which
the determination of affiliation is being made.
"Common Stock" shall mean common stock, par value $.0025 per
share, of the Company and Class B Common Stock, collectively.
"Governmental Entity" shall mean any supranational, national,
federal, state or local judicial, legislative, executive or regulatory
authority.
"Person" shall mean any natural person, firm, partnership,
association, corporation, company, trust, business trust, Governmental
Entity or other entity.
2
"Transaction" shall mean after the Closing Date the sale,
transfer or other disposition of all or substantially all of the assets
of the Company and its subsidiaries or any transaction (including,
without limitation, any merger, consolidation, tender offer or exchange
offer) the result of which is that any Person or group becomes the
beneficial owner of more than 50% of the then outstanding shares of
Common Stock.
"Transaction Value" shall mean the sum of the cash, the value
of publicly traded securities (which shall be deemed to be the closing
price of such securities on the last full trading day immediately prior
to the consummation of a Transaction) and the fair value of any other
securities, rights or other assets received per share by holders of
Common Stock in a Transaction (with the fair value of any non-publicly
traded securities, rights or other assets received being determined by
an investment banking firm of recognized stature designated in good
faith by the Company's Board of Directors or, if the Sellers do not
agree with such determination, as determined by agreement by such firm
and another investment banking firm of recognized stature designated in
good faith by the Sellers, or failing such agreement, by a third
investment banking firm of recognized stature designated by such two
firms).
Section 1.2 Other Terms. Other terms are defined elsewhere in
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
ARTICLE II.
PURCHASE SHARES
Section 2.1 Purchase and Sale of Purchase Shares. On the terms
and subject to the conditions set forth herein, at the closing of the
transactions described herein (the "Closing"), the Sellers agree to sell and
transfer to the Company, and the Company agrees to purchase from the Sellers,
the Purchase Shares of each Seller at a purchase price of $19.50 per share (the
"Purchase Price"). The aggregate Purchase Price for the Purchase Shares is
$19,500,000, of which $7,449,000 shall be paid to Prudential and $12,051,000
shall be paid to PCG. The Sellers represent and warrant that the Purchase Shares
are free of any liens, charges or encumbrances.
Section 2.2 Closing; Delivery and Payment.
(a) The Closing shall take place at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, on the date hereof (the "Closing
Date").
2
3
(b) On the Closing Date, each Seller shall deliver to the
Company certificates representing its Purchase Shares duly endorsed and in form
for transfer to the Company and, prior to 11:00 a.m. New York City time on April
30, 2001, the Company shall pay to the Sellers the aggregate Purchase Price for
the Purchase Shares in immediately available funds to an account designated by
the Sellers in writing.
ARTICLE III.
OTHER AGREEMENTS
Section 3.1 Transaction Payment. If on or prior to April 30,
2002 the Company consummates a Transaction that was proposed on or prior to July
31, 2001 either non-publicly in writing to the Company or orally to the Company
and discussed by the Board of Directors of the Company, or publicly, the Company
shall make or cause to be made a payment, in cash and/or Acquiror Stock (as
hereinafter provided), to each Seller equal in value to the number of Purchase
Shares sold by such Seller pursuant to this Agreement multiplied by the excess,
if any, of the Transaction Value over the Purchase Price (each, a "Transaction
Payment"); provided that if only a portion of the shares of Common Stock are
entitled to participate in such Transaction pursuant to the express terms of
such Transaction, the number of Purchase Shares used in the foregoing
calculation shall be adjusted by multiplying the relevant number of Purchase
Shares by a fraction the numerator of which is the number of shares of Common
Stock so entitled to participate in the Transaction and the denominator of which
is the total number of shares of Common Stock outstanding as of the close of
business on the record date for determining which shares are so entitled to
participate or, if there is no such record date, as of the close of business on
the day immediately prior to the consummation of such Transaction. If the
consideration for such Transaction consists solely of shares of publicly traded
common stock of the acquiring Person ("Acquiror Stock"), the Company shall be
entitled to make or cause to be made all or any portion of the Transaction
Payment to each Seller in the form of Acquiror Stock. If the consideration for
such Transaction consists partially of Acquiror Stock, the Company shall be
entitled to make or cause to be made a portion of the Transaction Payment to
each Seller in the form of Acquiror Stock equal in value up to an amount
determined by multiplying such Seller's Transaction Payment by a fraction the
numerator of which is the value of Acquiror Stock received per share by holders
of Common Stock in such Transaction (as determined in accordance with the
definition of Transaction Value in Section 1.1) and the denominator of which is
the Transaction Value. It shall be a condition to the delivery of Acquiror Stock
in accordance with either of the two foregoing sentences that the Sellers
receive (or as third party beneficiaries in respect of any Transaction
agreement, are entitled to the benefit of) customary representations and
warranties relating to the due authorization, issuance and delivery of such
shares of Acquiror Stock, in form and substance reasonably satisfactory to the
Sellers. In the event that subsequent to the Closing there is a change in the
number of shares of Common Stock issued and outstanding as a result of a
3
4
reclassification, stock split (including a reverse split), stock dividend or
distribution or other similar transaction, the number of Purchase Shares and the
Purchase Price used in the foregoing determination of the payment to the Sellers
shall be equitably adjusted to eliminate any dilutive or accretive effects of
such event or transaction. Such payment of cash and/or Acquiror Stock shall be
made at the time of consummation of such Transaction and any cash payment shall
be made in immediately available funds to an account designated by the Sellers
in writing. The Company agrees that it will not intentionally delay the receipt
of any proposal or the consummation of any Transaction for the purpose of
avoiding a payment under this Section 3.1.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as to itself to each
Seller, and each Seller represents and warrants as to itself to the Company, as
follows:
Section 4.1 Authorization, etc. It has duly obtained all
necessary authority for the execution, delivery and performance of this
Agreement by it; it has duly executed and delivered this Agreement; and this
Agreement is a valid and legally binding agreement, enforceable against it in
accordance with its terms, assuming it has been duly executed and delivered by
the other party.
Section 4.2 No Conflicts, Consents. Performance of this
Agreement by it will not violate or conflict with any law, regulation, order or
agreement to which it is subject or to which it is a party, its certificate of
incorporation or by-laws, and it requires no governmental approvals or third
party consents to enter into and perform its obligations pursuant to this
Agreement, except for such consents or approvals that have been obtained or such
other consents or approvals that may be required to be obtained in connection
with the making of any Transaction Payment. Such execution and performance does
not and will not constitute a default under any agreement or obligation binding
on it or result in the forfeiture or loss of any rights or assets by it except
as specifically provided for in this Agreement.
ARTICLE V.
INDEMNIFICATION
Section 5.1 Indemnity. The Company shall indemnify and hold
harmless, each of the Sellers and its officers, employees, representatives,
outside advisors, agents and Affiliates (each, an "indemnified party") from and
against any and all losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), including reasonable fees and expenses of
counsel incurred in investigation or defense of any of the same or in
successfully asserting any of their respective rights hereunder,
4
5
which arise, directly or indirectly, out of claims or charges made by any Person
(other than any claim or charge by any indemnified party against any other
indemnified party) against any of them resulting from the entering into or
performance by each of the Sellers of this Agreement or the transactions
contemplated hereby or from any action or inaction as a stockholder of the
Company in connection with the transactions contemplated by this Agreement,
other than claims or charges (i) by the Company for breach in any material
respect of any representation, warranty or covenant of the Sellers contained in
this Agreement or (ii) that are finally judicially determined to have resulted
primarily from the gross negligence, bad faith or willful misconduct of any
indemnified party. This indemnity shall not apply, however, to amounts paid in
settlement of any such loss, claim, damage, liability, action or proceeding if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld). The Company agrees that no indemnified
party shall have any liability to the Company for or in connection with the
entering into and performance of this Agreement or the transactions contemplated
hereby, except for losses, claims, damages or liabilities incurred by the
Company that are finally judicially determined to have resulted primarily from
the gross negligence, bad faith or willful misconduct of such indemnified party.
Section 5.2 Indemnification Procedures. Promptly after receipt
by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding paragraph, such
indemnified party will, if a claim in respect thereof is to be made against the
Company, give written notice to the Company of the commencement of such action
or proceeding, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the Company of its obligations under the
preceding paragraph except to the extent that the Company is prejudiced by such
failure to give notice. Such notice shall describe the claim in reasonable
detail and include copies of all correspondence or other documentation in the
possession of, or reasonably available to, the indemnified party. In case any
such action is brought against an indemnified party, the Company will be
entitled to participate therein and to assume the defense thereof, to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the Company to such indemnified party of its
election so to assume the defense thereof, the Company will not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof. If the Company
does assume the defense of any claim, the indemnified party shall use reasonable
efforts to cooperate with the Company in such defense. Notwithstanding the
foregoing, if such indemnified party and the Company reasonably determine, based
upon advice of their respective independent counsel, that a conflict of interest
may exist between the indemnified party and the Company with respect to such
action and that it is advisable for such indemnified party to be represented by
separate counsel, such indemnified party may retain other counsel, reasonably
satisfactory to the Company, to represent such indemnified party, and the
Company shall pay all reasonable fees and expenses of such counsel. The Company,
in the defense of any such claim or litigation,
5
6
shall not, except with the consent of such indemnified party, which consent
shall not be unreasonably withheld, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation.
Section 5.3 Payment. Any indemnification required to be made
by the Company pursuant hereto shall be made by periodic payments to the
indemnified party during the course of the action or proceeding, as and when
bills (with reasonable and customary supporting documentation) are received by
the Company with respect to an indemnifiable loss, claim, damage, liability or
expense incurred by such indemnified party, provided that the Company receives
an undertaking by Prudential to repay amounts so advanced if it shall ultimately
be determined that such indemnified party is not entitled to be indemnified
hereunder.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Notices. All notices or other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended, if delivered
registered or certified mail, return receipt requested, or by a national courier
service, if sent by facsimile transmission, provided that the facsimile
transmission is promptly confirmed by telephone confirmation thereof, or on the
fifth day after posting in the United States postage prepaid if sent by
registered or certified mail, return receipt requested, to the person at the
address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
To the Company:
Associated Materials Incorporated
2200 Ross Avenue
Suite 4100 East
Dallas, Texas 75201
Attention: Robert L. Winspear,
Vice President and Chief Financial
Officer
Tel: (214) 220-4600
Fax: (214) 220-4607
6
7
With a copy to:
Jones, Day, Reavis & Pogue
2727 North Harwood Street
Dallas, Texas 75201
Attention: James E. O'Bannon
Tel: (214) 220-3939
Fax: (214) 969-5100
To the Sellers:
The Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-3777
Attention: Jack Pfeilsticker
Tel: (201) 802-9200
Fax: (201) 802-3853
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Peter J. Loughran, Esq.
Tel: (212) 909-6000
Fax: (212) 909-6836
Section 6.2 Amendment; Waiver. Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Company and the Sellers, or in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and, except as otherwise provided herein, shall not be
exclusive of any rights or remedies provided by law.
7
8
Section 6.3 Assignment. No party to this Agreement may assign
any of its rights or obligations under this Agreement without the prior written
consent of each party hereto, except that either of the Sellers may make such
assignments of its rights (but not its obligations) hereunder to its Affiliates
with notice to the Company but without the need for the Company's consent, and
the Company may assign or transfer its rights and obligations hereunder to any
successor entity in connection with a merger of the Company or sale of all, or
substantially all, of the assets of the Company.
Section 6.4 Entire Agreement. This Agreement contains the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
among them with respect to such matters, and any written agreement of the
parties that expressly provides that it is not superseded by this Agreement.
Section 6.5 Parties in Interest. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than the Company and the Sellers,
and their successors or permitted assigns, any rights or remedies under or by
reason of this Agreement.
Section 6.6 Governing Law; Submission to Jurisdiction;
Selection of Forum. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK. Each party hereto agrees that it shall bring any action or proceeding
in respect of any claim arising out of or related to this Agreement or the
transactions contained in or contemplated by this Agreement, whether in tort or
contract or at law or in equity, exclusively in the United States District Court
for the Southern District of New York or the Supreme Court of the state of New
York for the county of New York, and solely in connection with claims arising
under this Agreement or the transactions contained in or contemplated by this
Agreement (i) irrevocably submits to the exclusive jurisdiction of such courts,
(ii) waives any objection to laying venue in any such action or proceeding in
such courts, (iii) waives any objection that such courts are an inconvenient
forum or do not have jurisdiction over any party hereto and (iv) agrees that
service of process upon such party in any such action or proceeding shall be
effective if notice is given in accordance with section 6.1 of this Agreement.
Section 6.7 Further Assurances. Each party hereto shall
execute and deliver all further documents or instruments reasonably requested by
the other party in order to effect the intent and purposes of this Agreement and
obtain the full benefit of this Agreement.
Section 6.8 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Agreement.
8
9
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
ASSOCIATED MATERIALS INCORPORATED
By: /s/ Robert L. Winspear
--------------------------------------
Name: Robert L. Winspear
Title: Vice President and Chief
Financial Officer
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Paul G. Price
--------------------------------------
Name: Paul G. Price
Title: Vice President
PCG FINANCE COMPANY II, LLC
By: /s/ B. Ross Smead
--------------------------------------
Name: B. Ross Smead
Title: Vice President
9