<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of
the Commission Only (as
[X] Definitive Proxy Statement permitted by Rule 14a-6(e)
[ ] Definitive Additional Materials (2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ASSOCIATED MATERIALS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its Charter and Person Filing
Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6
(i)(1) and 0-11
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
ASSOCIATED MATERIALS INCORPORATED
April 13, 1999
Dear Stockholders:
You are cordially invited to attend our annual stockholder meeting to be held at
2:00 p.m. on Thursday, May 20, 1999, in the Keystone Room, 40th Floor Skylobby
in the Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201. This will be our
first annual meeting since completing our initial public offering in March 1998.
The proposals to be acted upon at the annual meeting include the election of
directors, the approval of an Employee Stock Purchase Plan, the approval of an
Incentive Bonus Plan and the ratification of the appointment of Ernst & Young
LLP as the Company's independent auditors for 1999. I hope you will carefully
read these proposals, which are described in the accompanying proxy statement,
and vote your shares in favor of each proposal.
It is important that your shares be represented at the annual meeting.
Accordingly, even if you plan to attend, please sign, date and promptly mail the
enclosed proxy card in the postage-prepaid envelope.
Sincerely,
/s/ WILLIAM W. WINSPEAR
William W. Winspear
Chairman, President and Chief
Executive Officer
- --------------------------------------------------------------------------------
2200 ROSS AVENUE SUITE 4100-EAST DALLAS, TEXAS 75201
<PAGE> 3
PROXY STATEMENT
ASSOCIATED MATERIALS INCORPORATED
2200 ROSS AVENUE, SUITE 4100 EAST
DALLAS, TEXAS 75201
SOLICITATION AND VOTING OF PROXIES
This proxy statement is being provided to you in connection with the
solicitation of proxies to be voted at the Annual Meeting of Stockholders of
Associated Materials Incorporated. Proxies are being solicited on behalf of the
Board of Directors of Associated Materials. The meeting will be held on
Thursday, May 20, 1999, starting at 2:00 p.m., in the Keystone Room, 40th Floor
Skylobby in the Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201. This proxy
statement and the enclosed proxy card are first being mailed on or about April
15, 1999, to holders of the Company's common stock entitled to vote at the
Annual Meeting.
A Proxy Committee will vote the shares of common stock represented by each
proxy returned to Associated Materials. William W. Winspear and Robert L.
Winspear are the members of the Proxy Committee. Any stockholder giving a proxy
may change his or her vote at any time before it is voted at the Annual Meeting
by notifying the Secretary of Associated Materials in writing, by submitting a
new proxy card dated after the date of the proxy being revoked or by attending
the Annual Meeting and voting in person. Where a stockholder's proxy specifies a
choice with respect to a matter, the shares will be voted accordingly. If no
such specification is made, the shares will be voted FOR the nominees for
director identified below, FOR the approval of the Associated Materials
Incorporated Employee Stock Purchase Plan, FOR the approval of the Associated
Materials Incorporated Incentive Bonus Plan and FOR the ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors.
RECORD DATE AND VOTING STOCK
April 1, 1999 has been set as the record date for the purpose of
determining stockholders entitled to notice of, and to vote at, the Annual
Meeting. As of the record date there were 6,618,351 shares of common stock
outstanding. Each outstanding share of common stock is entitled to one vote.
Only recordholders of common stock at the close of business on the record date
are entitled to vote at the Annual Meeting or any adjournment or postponement of
the Annual Meeting.
A plurality of the votes of common stock cast at the Annual Meeting is
required to elect directors. A majority of the votes cast at the Annual Meeting
is required to approve the other actions proposed to be taken at the Annual
Meeting. Abstentions and broker non-votes will be included in determining the
number of shares of common stock present or represented at the Annual Meeting
for purposes of determining whether a quorum exists. However, abstentions with
respect to any proposal brought to a vote at the Annual Meeting will have the
same effect as a vote against the proposal. Broker non-votes are treated as
shares not present for the purposes of the vote with respect to a specific
proposal and therefore will have no effect on the outcome of the vote on any
proposal.
<PAGE> 4
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
INTRODUCTION
Associated Materials has three classes of directors serving staggered
three-year terms. James F. Leary and A. A. Meitz are currently serving terms
that expire at the Annual Meeting. The Board has nominated Mr. Leary and Mr.
Meitz to continue to serve as directors for terms expiring at Associated
Materials' annual stockholders meeting in 2002.
Unless a proxy specifies otherwise, the Proxy Committee will vote the
shares of common stock covered by the proxy for the election of Mr. Leary and
Mr. Meitz.
DIRECTOR NOMINEES
JAMES F. LEARY, AGE 69. Mr. Leary became a director of the Company in 1984
and serves as a member of the Audit and Compensation Committees. From 1995 to
1998, Mr. Leary was Vice Chairman -- Finance and a director of Search Financial
Services Inc., a consumer finance company, as well as serving as President of
Sunwestern Management Inc., an investment management company, since 1982. Mr.
Leary is also a director of Capstone Growth Fund and Capstone Fixed Income Fund,
and Quest Products, Inc., a consumer product marketing company. In March 1998,
Search Financial filed a voluntary petition for reorganization under Chapter 11
of the Bankruptcy Code.
A.A. MEITZ, AGE 61. Mr. Meitz became a director of the Company in 1993 and
serves as a member of the Audit and Compensation Committees. Mr. Meitz retired
as Senior Vice President of the consulting firm of Booz, Allen & Hamilton, Inc.
in 1994 where he was employed since 1965. Mr. Meitz is also a director of
Banctec, Inc., a computer systems development and support services company.
CONTINUING DIRECTORS
WILLIAM W. WINSPEAR, AGE 65. Mr. Winspear has been Chairman of the Board,
President and Chief Executive Officer of the Company since its inception in
1983. Mr. Winspear is also the Chairman of the Board of Amercord Inc., a 50%
owned affiliate of the Company. Mr. Winspear was President and Chief Executive
Officer of Chaparral Steel Company from 1975 to 1982. Mr. Winspear is Chairman
of the Board of Amercord Inc. Mr. Winspear is the father of Robert L. Winspear,
the Company's Vice President and Chief Financial Officer. Mr. Winspear serves in
the class of directors whose term of office expires at Associated Materials'
annual stockholders meeting in 2000.
RICHARD I. GALLAND, AGE 82. Mr. Galland became a director of the Company in
1984 and is the Chairman of the Audit and Compensation Committees. Mr. Galland
was formerly Chairman of the Board and Chief Executive Officer of American
Petrofina Incorporated, an energy exploration and production company and
formerly Of Counsel to the law firm of Jones, Day, Reavis & Pogue. Mr. Galland
is also a director of D. R. Horton, Inc., a homebuilding company, and Texas
Industries, Inc., a steel and construction materials production company. Mr.
Galland serves in the class of directors whose term of office expires at
Associated Materials' annual stockholders meeting in 2001.
JOHN T. GRAY, AGE 63. Mr. Gray became a director of the Company in August
1998. Mr. Gray is a General Partner in Brynwood Partners, a private equity
investment fund. From 1982 to 1995, Mr. Gray was President and Chief Executive
Officer of the Genie Company, a manufacturer of automatic garage door openers.
Mr. Gray serves in the class of directors whose term of office expires at
Associated Materials' annual stockholders meeting in 2001.
DONALD L. KAUFMAN, AGE 67. Mr. Kaufman has been President of the Company's
Alside division since 1974 and has been Chief Executive Officer of Alside since
1982. Mr. Kaufman joined Alside in 1955 and became a director and a Vice
President of the Company in 1984. Mr. Kaufman serves in the class of directors
whose term of office expires at Associated Materials' annual stockholders
meeting in 2000.
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<PAGE> 5
ALAN B. LERNER, AGE 68. Mr. Lerner became a director of the Company in May
1997 and serves as a member of the Audit and Compensation Committees. Mr. Lerner
retired as Senior Executive Vice President from Associates Corporation of North
America, a consumer and commercial finance company in 1993, where he had been
employed since 1981. Mr. Lerner serves in the class of directors whose term of
office expires at Associated Materials' annual stockholders meeting stockholders
in 2000.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
BOARD OF DIRECTORS. The Board currently consists of seven members. During
1998, the Board of Directors held seven meetings. The Board has established
standing Audit and Compensation Committees to assist the Board in the discharge
of its responsibilities. The Board may also appoint other committees for
specialized functions as appropriate. In 1998, each current Director attended
all Board and applicable committee meetings held during the period he was a
director.
AUDIT COMMITTEE. The members of the Audit Committee are Mr. Galland
(Chairman), Mr. Meitz, Mr. Leary and Mr. Lerner. The Audit Committee met once in
1998. The Audit Committee is responsible for recommending an accounting firm to
serve as Associated Materials' independent auditors, reviewing the annual audit
of Associated Materials, reviewing audit and any nonaudit fees paid to
Associated Materials' independent auditors and reviewing the scope and results
of internal audit activities. The Audit Committee reports its findings and
recommendations to the Board for appropriate action.
COMPENSATION COMMITTEE. The members of the Compensation Committee are Mr.
Galland (Chairman), Mr. Meitz, Mr. Leary and Mr. Lerner. During 1998, the
Compensation Committee met twice. The Compensation Committee supervises
Associated Materials' compensation policies, administers incentive plans,
reviews officers' salaries and bonuses, approves significant changes in employee
benefits and recommends to the Board other forms of compensation as it deems
appropriate. The report by the Compensation Committee discussing compensation
for executive officers of Associated Materials appears elsewhere in this Proxy
Statement.
DIRECTOR NOMINATIONS. The Company does not have a nominating committee. The
functions customarily performed by a nominating committee are performed by the
Board as a whole. Written nominations by stockholders for directors will be
considered, provided they are received by the Secretary of Associated Materials
at its principal executive offices pursuant to timely advance written notice in
accordance with Associated Materials' By-Laws. The Company's By-Laws require
that notice be given not less than 50 days in advance of the annual meeting,
subject to certain exceptions. The By-Laws also require that the certain
information be provided, including the identity and address of the nominating
stockholder, a representation that the stockholder is a holder of record and
entitled to vote for the election of directors as well as the information
regarding the proposed nominee that would be required to be included in a proxy
statement soliciting proxies for the proposed nominee.
DIRECTOR COMPENSATION
Directors, including directors who are employees of the Company, receive an
annual retainer of $16,000 plus $2,500 for each Board meeting attended.
Directors are also reimbursed for reasonable travel expenses incurred in
attending Board meetings. Directors do not receive any additional compensation
for serving on Board committees.
Mr. Gray was granted options to purchase 15,000 shares of common stock at
$9.00 per share in August 1998 upon first being elected to the Board. The
exercise price was the fair market value of the Company's common stock on the
grant date. The options became 50% vested on the date of grant. The balance of
the options will vest on the second anniversary of the grant date.
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<PAGE> 6
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of April 1, 1999, the beneficial
ownership of common stock by each director of the Company, each of the Company's
executive officers and all directors and executive officers of the Company as a
group. Unless otherwise indicated below, to the knowledge of the Company, all
persons listed below have sole voting and investment power with respect to their
shares of common stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED PERCENTAGE
- ------------------------ ------------ ----------
<S> <C> <C>
William W. Winspear(1)(2)................................... 3,827,242 57.8%
Richard I. Galland.......................................... 35,000 *
John T. Gray(3)............................................. 7,500 *
Donald L. Kaufman(4)........................................ 466,900 6.9%
James F. Leary.............................................. 2,000 *
Alan B. Lerner(3)........................................... 45,000 *
A.A. Meitz(3)............................................... 40,000 *
Robert F. Hogan, Jr.(3)..................................... 86,000 1.3%
Robert L. Winspear(2)(3).................................... 24,000 *
All directors and executive officers as a group (9
persons).................................................. 4,523,642 66.2%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 3,319,725 shares held of record by the Winspear Family Limited
Partnership. Mr. William W. Winspear is the trustee of a trust that is the
general partner of this partnership. Also includes 220,957 shares of common
stock held by Mr. Winspear's spouse. Mr. Winspear disclaims beneficial
ownership of the shares owned by his spouse. The address of Mr. Winspear and
the Winspear Family Limited Partnership is 2200 Ross Avenue, Suite 4100
East, Dallas, Texas 75201.
(2) William W. Winspear is the father of Robert L. Winspear.
(3) Includes options to purchase common stock held by Mr. Gray (7,500 shares),
Mr. Hogan (6,000 shares), Mr. Lerner (40,000 shares), Mr. Meitz (40,000
shares) and Mr. R.L. Winspear (24,000 shares).
(4) Includes options exercisable for 100,000 shares. Also includes 146,000
shares of common stock held by trusts for the benefit of certain members of
Mr. Kaufman's family, as to which Mr. Kaufman disclaims beneficial
ownership. Excludes 6,000 shares held by a charitable foundation of which
Mr. Kaufman is trustee, as to which Mr. Kaufman disclaims beneficial
ownership.
The following table sets forth information regarding the number and
percentage of shares of common stock beneficially owned by all persons and
entities who are known by the Company to beneficially own five percent or more
of the outstanding common stock, other than directors and executive officers of
the Company, whose share ownership is reflected in the table above.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED PERCENTAGE
- ------------------------ ------------ ----------
<S> <C> <C>
The Prudential Insurance Company of America(1).............. 1,550,000 19.0%
Alliance Capital Management L.P.(2)......................... 754,000 11.4%
</TABLE>
- ---------------
(1) Prudential owns of record 1,550,000 shares of Class B common stock, or 100%
of all outstanding shares of the Company's Class B common stock. Shares of
Class B common stock may be converted at any time into common stock on a one
to one basis. The holder of shares of Class B common stock has rights and
privileges identical to the rights and privileges of holders of common
stock, except that the holder of shares of Class B common stock may vote
(with the holders of common stock) only on (a) any amendment to the
Company's Certificate of Incorporation, (b) any sale or other disposition of
all or substantially all of the Company's assets, (c) any merger or
consolidation of the Company, and (d) any liquidation, dissolution or
winding up of the Company. Prudential's address is Four Gateway Center, 100
Mulberry Street, Newark, New Jersey 07104.
(2) Based on a Schedule 13G filed on February 16, 1999 by (a) AXA Conseil Vie
Assurance Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, AXA Courtage Assurance Mutuelle, as a group, (b) AXA and (c) The
Equitable Companies Incorporated. According to the Schedule 13G, Alliance
Capital Management L.P., a subsidiary of The Equitable Companies
Incorporated, has sole voting power with respect to 16,700 shares, shared
voting power with respect to 737,300 shares and sole dispositive power with
respect to 754,000 shares. The address of AXA Conseil Vie Assurance Mutuelle
is 100-101 Terrasse Boieldieu 92042 Paris La Defense France, the address of
AXA Assurances I.A.R.D. Mutuelle and AXA Asurances View Mutuelle
(footnotes continued on following page)
4
<PAGE> 7
is 21, rue de Chateaudun, 75009 Paris France, the address of AXA Courtage
Assurance Mutuelle is 26, rue Louis le Grand 75002 Paris France, the address
of AXA is 9 Place Vendome 75001 Paris France and the address of The
Equitable Companies Incorporated is 1290 Avenue of the Americas, New York,
New York 10104. The information regarding beneficial ownership of common
stock by this group is included in reliance upon a report filed with the SEC
by this group, except that the percentage of common stock beneficially owned
is based upon the Company's calculations made in reliance upon the number of
shares of common stock outstanding on April 1, 1999.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee has responsibility for the Company's executive
compensation practices and policies. The Committee is currently composed of four
outside directors who are not officers or employees of the Company.
EXECUTIVE PAY POLICY
The Company's compensation programs are intended to attract, retain and
motivate the key people necessary to lead Associated Materials to achieve its
strategic objective of increased stockholder value over the long term,
reflecting the Committee's belief that executive compensation should seek to
align the interests of the Company's executives with those of its stockholders.
The program utilizes three components: base salary, short-term incentives and
long-term compensation in the form of stock options.
During 1998, the Compensation Committee reviewed survey data prepared by an
outside consulting firm regarding compensation practices of companies in similar
businesses and of similar size. In connection with its review, compensation for
the Company's chief executive officer, as well as its other executive officers,
was assessed against the practices of the survey group. In establishing base
salaries, the Compensation Committee has adopted a strategy of setting executive
salaries between the median salary and the 75th percentile of those shown in the
survey data. However, the Compensation Committee also considered other
subjective factors, such as experience and the prior performance of the
executives in making its salary determinations for 1998. The Compensation
Committee set the salary ranges in this manner to ensure that Company's base
salary practices do not put it at a competitive disadvantage in retaining and
attracting key executives while ensuring an appropriate cost structure for the
Company.
The Company has incentive compensation programs for virtually all employees
of the Company. For officers, this program provides for incentive compensation
opportunities based upon pre-tax profit of the Company or the division in which
they are employed. For other employees, incentive compensation is based upon the
profitability of their particular business unit; for example, a manufacturing
plant or supply center. The Compensation Committee believes that this program
provides a direct incentive to the Company's employees that should result in an
increase in long-term stockholder value.
BASE SALARY
The Compensation Committee increased Mr. Winspear's annual base salary from
$440,000 to $470,000 in February 1998. Mr. Winspear's base salary was determined
by reference to the median salary of chief executive officers of similar
companies, as reflected in the survey data described above. The base salaries of
the other executive officers were also adjusted based on the Committee's review
of the survey data.
SHORT-TERM INCENTIVE PROGRAM
Consistent with its historical practice, under the Company's 1998
short-term incentive program, Mr. Winspear was eligible to receive a cash bonus
award based upon the Company's pre-tax profit before extraordinary items. Under
this program, Mr. Winspear's bonus varies proportionately with the Company's
profits.
Because the Company's chief executive officer beneficially owns a
significant percentage of the Company's common stock, the Compensation Committee
does not believe that stock-based compensation is
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<PAGE> 8
an appropriate incentive arrangement for him. The Compensation Committee took
this into consideration in determining Mr. Winspear's cash bonus opportunity.
Based on the Company's financial performance in 1998, the Company's chief
executive officer earned a cash bonus of $429,561.
In 1998, each of the Company's other executive officers received a cash
bonus award based upon pre-tax profit before extraordinary items of either the
Company or the executive's operating division.
STOCK OPTIONS
The Company's stock incentive plan is administered by the Committee and is
designed to provide incentive compensation to the Company's executive officers
and other key management personnel. The grants are long-term incentives for
future performance, which is designed to align the interests of management with
those of the Company's stockholders.
At its August 1998 meeting, the Committee approved grants of stock options
to two executive officers and certain other key employees. For the reasons
described above, no grants were made in 1998 to the Company's chief executive
officer. The number of options granted to specific individuals was dependent on
the individual's current performance and expected impact on the future
performance of the Company. All grants were made at fair market value at the
time of grant. Twenty percent of these options vested on the date of grant, with
an additional twenty percent vesting each year commencing on the first
anniversary of the grant date.
OTHER MATTERS
The Committee has reviewed the potential impact of the $1 million deduction
limitation on executive compensation which was implemented as part of the
Omnibus Budget Reconciliation Act of 1993. Based on that review, the
Compensation Committee recommended to the Board that the Company submit for
stockholder approval of the Incentive Bonus Plan. If approved by the Company's
stockholders this Plan (a copy of which is attached to this Proxy Statement as
Annex B) would permit the Company to continue its historical incentive
compensation program while maximizing the deductibility of the payments under
this Plan.
This report is submitted by the members of the Compensation Committee of
the Board.
THE COMPENSATION COMMITTEE OF THE BOARD
<TABLE>
<S> <C> <C> <C>
Richard I. Galland James F. Leary Alan B. Lerner A.A. Meitz
Chairman
</TABLE>
6
<PAGE> 9
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation paid by the Company
for services rendered in 1998, 1997 and 1996 by the chief executive officer and
each of the other executive officers of the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) ---------------
---------------------------- SHARES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS(2) COMPENSATION
- --------------------------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
William W. Winspear................. 1998 $467,500 $429,561 0 $ 39,100(3)
Chairman of the Board, 1997 436,667 342,930 0 31,600
President and Chief 1996 400,000 214,362 0 30,250
Executive Officer
Donald L. Kaufman................... 1998 $407,917 $242,031 0 $ 33,500(4)
President and Chief 1997 378,333 209,529 100,000 26,000
Executive Officer of the 1996 345,000 181,666 0 102,742
Company's Alside division
Robert F. Hogan, Jr. ............... 1998 $220,833 $266,300 30,000 $ 5,600(5)
President and Chief 1997 172,917 206,654 0 5,600
Executive Officer of the 1996 150,000 -- 0 5,250
Company's AmerCable division
Robert L. Winspear.................. 1998 $141,458 $ 42,956 20,000 $ 4,951(5)
Vice President and Chief 1997 100,816 34,293 0 3,529
Financial Officer 1996 82,292 21,436 0 2,880
</TABLE>
- ---------------
(1) Perquisites and other personal benefits received by the Company's executive
officers are not included in the Summary Compensation Table because the
aggregate amount of such compensation, if any, did not meet disclosure
thresholds established under current regulations of the SEC.
(2) In August 1998, Mr. Hogan and Mr. Robert Winspear were granted options to
purchase 30,000 and 20,000 shares of common stock, respectively, at $9.00
per share, the fair market value on the date of grant. These options vested
20% on the date of grant and the balance vests 20% on each anniversary of
the grant date. In February 1997, Mr. Kaufman was granted options to
purchase 100,000 shares of common stock at $12.00 per share, the fair market
value of the common stock on the date of grant. These options vested 50% on
the date of grant and the balance vested on the second anniversary of the
grant date.
(3) Represents directors fees of $33,500 and amounts accrued or allocated under
AmerCable's retirement plan of $5,600.
(4) Represents directors fees.
(5) Represents amounts accrued or allocated under AmerCable's retirement plan.
COMPENSATION AND INCENTIVE PROGRAMS
PROFIT SHARING PLAN. The Company maintains a profit sharing plan providing
for annual bonus awards to certain key employees, including each of the
executive officers of the Company. Such bonus amounts are based on pre-tax
profits of the Company or, in the cases of Alside and AmerCable personnel, the
pre-tax profits of these divisions. This plan is administered by the
Compensation Committee, none of the members of which is eligible for a bonus
award pursuant to this plan. Bonus payments under the profit sharing plan are
not guaranteed. Cash bonuses accrued under this profit sharing plan in 1998,
1997 and 1996 to each of the Company's executive officers are set forth in the
Summary Compensation Table.
ALSIDE RETIREMENT PLAN. Prior to January 1, 1999, the Company maintained a
defined benefit pension plan. This plan covered all Alside employees who had
completed one year of service, except for various designated groups of hourly
and union employees. Mr. Kaufman is the only executive officer of the Company
entitled to receive benefits pursuant to this plan. Mr. Kaufman, who is age 67,
would be eligible to receive a monthly pension amount of approximately $14,000
when he retires.
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<PAGE> 10
EXECUTIVE AGREEMENT. Pursuant to an agreement with the Company, Mr. Kaufman
is entitled to receive severance pay in an amount equal to his total earnings
for the twelve-month period prior to the termination of his employment for any
reason.
OPTION/SAR GRANTS IN 1998
The following table provides information regarding the grant of stock
options to the Company's executive officers in 1998. In addition, hypothetical
gains of 5% and 10% are shown for these stock options. These hypothetical gains
are based on assumed rate of annual compound stock price appreciation of 5% and
10% from the date the stock options were granted over the full option term of
ten years. The Company has not granted stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENTAGE OF ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS/ OF STOCK PRICE APPRECIATION
UNDERLYING SARS GRANTED EXERCISE FOR OPTION TERM(2)
OPTIONS/SARS TO EMPLOYEES PRICE PER EXPIRATION ------------------------------
NAME GRANTED IN 1998 SHARE(1) DATE 5% 10%
- ---- ------------ -------------- --------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William W. Winspear..... 0 0% -- -- $ 0 $ 0
Donald L. Kaufman....... 0 0% -- -- $ 0 $ 0
Robert F. Hogan......... 30,000 10.9% $9.00 August 26, 2008 $169,802 $430,310
Robert L. Winspear...... 20,000 7.3% $9.00 August 26, 2008 $113,201 $286,874
</TABLE>
- ---------------
(1) The exercise price was equal to the fair market value of the common stock on
the date of grant. The options vested 20% on the grant date. An additional
20% vests on each anniversary of the grant date.
(2) The potential realizable value portion of the table above illustrates the
value that would be realized upon exercise of the option immediately prior
to the expiration of its term, assuming the specified compounded rates of
appreciation on the common stock over the term of the option. The use of the
assumed 5% and 10% annual rates to stock price appreciation are established
by the SEC and is not intended by the Company to forecast possible future
appreciation of the price of its common stock.
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION/SAR VALUES
The following table provides information, for each of the Company's
executive officers, regarding the exercise of options during 1998 and
unexercised options held as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT DECEMBER 31, 1998(1) DECEMBER 31, 1998(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William W. Winspear........... 0 $0 0 0 $ 0 $ 0
Donald L. Kaufman............. 0 0 50,000 50,000 $ 0 $ 0
Robert F. Hogan............... 0 0 6,000 24,000 $ 16,500 $66,000
Robert L. Winspear............ 0 0 24,000 16,000 $187,500 $44,000
</TABLE>
- ---------------
(1) The Company has not granted stock appreciation rights.
(2) Based on a price of $11.75 per share of common stock, the closing sale price
on December 31, 1998, multiplied by the number of shares of common stock of
the Company issuable upon exercise of these options.
8
<PAGE> 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS' AGREEMENT
Prudential, the Winspear Family Limited Partnership ("Winspear
Partnership") and Associated Materials are parties to a Stockholders' Agreement.
Pursuant to the Stockholders' Agreement, Prudential and the Winspear Partnership
have agreed that (a) if the Winspear Partnership, or any subsequent holder of
its shares of common stock, intends to sell any of its shares (other than in a
public offering), to permit Prudential to participate in such sale on a pro rata
basis and (b) if the Winspear Partnership, or any subsequent holder of its
shares of common stock, elects to sell shares of common stock, to require
Prudential and subsequent holders of its shares to participate in the sale on a
pro rata basis, but only if the total number of shares of common stock to be
sold exceeds 50% of the outstanding shares of common stock and Class B common
stock on a fully diluted basis. The Stockholders' Agreement also requires, so
long as Prudential and certain Prudential affiliates beneficially own at least
15% of the outstanding common stock on a fully diluted basis, all shares of
common stock subject to the Stockholders' Agreement to be voted to elect two or
three persons designated by Prudential to the Company's Board of Directors
(depending on the number of directors making up the Board), or if Prudential and
certain Prudential affiliates beneficially own at least 5% (but less than 15%)
of the common stock, to elect to the Board one person designated by Prudential.
Unless terminated earlier, the Stockholders' Agreement expires on August 19,
2003.
Prudential currently has the right to nominate three directors to the
Company's Board of Directors. Prudential has informed the Company that it does
not presently intend to exercise its right under the Stockholders' Agreement to
nominate persons to serve as directors.
REGISTRATION RIGHTS AGREEMENT
Under the terms of a Registration Rights Agreement among the Company,
Prudential and certain other stockholders, upon the request of either Prudential
or the Winspear Partnership and its private transferees the Company shall,
subject to certain exceptions, be required to effect two registrations of the
common stock, provided that certain minimum and maximum numbers of shares are
included in the request. The Registration Rights Agreement also grants secondary
offering rights ("piggy-back" rights) to Prudential, the Winspear Partnership
and certain other stockholders in connection with these requested registrations
and any other Company registration of common stock or common stock equivalents.
The registration rights may not be transferred, with certain exceptions, to
persons who, after such transfer, would hold less than 100,000 shares of common
stock or Class B common stock.
The Registration Rights Agreement also provides that the Company will bear
all expenses associated with the Company's obligation to effect these
registrations, other than underwriting discounts, commissions and transfer
taxes, if any. The Company's obligation to pay such expenses includes the
out-of-pocket expenses (including legal and accounting expenses) for the first
registration of common stock by Prudential or its private transferees, up to
$100,000, and for the first registration of common stock by the Winspear
Partnership or its private transferees, up to $100,000. The Company has
reimbursed Prudential $100,000 for expenses incurred in connection with a prior
offering of common stock. Therefore, the Company has no obligation to reimburse
Prudential for any future expenses under this Agreement.
9
<PAGE> 12
STOCK PERFORMANCE
The following graph compares the cumulative stockholder return on the
Company's common stock with the Standard & Poor's SmallCap 600 Index and the
Building Materials Sector of the Standard & Poor's SmallCap 600 Index. The
comparison assumes $100 was invested as of February 26, 1998 (the date on which
shares of the Company's common stock began trading on a "when issued" basis) and
the reinvestment of all dividends.
COMPARISON OF CUMULATIVE STOCKHOLDER RETURN
[GRAPH]
<TABLE>
<CAPTION>
S&P
S&P SMALLCAP
MEASUREMENT PERIOD ASSOCIATED SMALLCAP 600/BUILDING
(FISCAL YEAR COVERED) MATERIALS 600 INDEX MATERIALS
<S> <C> <C> <C>
26-FEB-98 100 100 100
31-MAR-98 125.00 103.50 101.70
30-JUN-98 83.59 98.89 103.03
30-SEP-98 48.44 78.21 80.06
31-DEC-98 73.44 91.97 94.40
</TABLE>
APPROVAL OF THE ASSOCIATED MATERIALS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL NO. 2)
INTRODUCTION
The Employee Stock Purchase Plan provides a method for employees of the
Company to purchase shares of common stock. The purpose of the Purchase Plan is
to promote the interests of the Company by aligning the interests of employees
and the Company's stockholders through the ownership of common stock. Management
believes the Purchase Plan will be an important factor in attracting and
retaining qualified employees essential to the continued success of the Company.
PURCHASE PLAN SUMMARY
THE FOLLOWING SUMMARY OF THE PURCHASE PLAN IS QUALIFIED IN ITS ENTIRETY BY
THE FULL TEXT OF THE PURCHASE PLAN, A COPY OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT AS ANNEX A. STOCKHOLDERS ARE URGED TO CAREFULLY READ THE PURCHASE
PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS PORTION OF THE
PROXY STATEMENT HAVE THE MEANINGS GIVEN THESE TERMS IN THE PURCHASE PLAN.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). Shares of common stock will be offered under the
10
<PAGE> 13
Purchase Plan through a series of six-month periods, each referred to as a
Purchase Period, until the maximum number of shares authorized to be issued
under the Purchase Plan have been purchased or the Purchase Plan is terminated.
Any employee of the Company is eligible to participate in the Purchase Plan
if that employee customarily works 20 hours or more each week for more than five
months each calendar year. A participant will be granted a purchase right on the
first day of each Purchase Period in which he or she elects to participate. The
purchase right provides the participant with the right to purchase shares of
common stock on the Purchase Date. Purchase rights will not be granted to an
employee if immediately after the grant the individual would own (within the
meaning of Section 424(d) of the Code) or hold outstanding options or other
rights to purchase stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company.
A maximum of 250,000 shares of common stock may be issued under the
Purchase Plan. However, should any change be made to the Company's common stock
by reason of a stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding common
stock as a class without the Company's receipt of consideration, appropriate
adjustments will be made in the number of shares issuable under the Purchase
Plan.
Payroll deductions will begin on the first pay day of each Purchase Period
and will continue through the pay day ending on or immediately prior to the last
day of the Purchase Period, unless sooner terminated by the participant. The
amounts collected will be credited to an account established for each
participant by the plan administrator under the Purchase Plan.
Purchase Periods will run from January 1 to June 30 and from July 1 to
December 31. However, the first Purchase Period began on October 1, 1998, and
ended on December 31, 1998. The last business day of each Purchase Period is the
"Purchase Date" on which shares are actually purchased under the Purchase Plan.
During each Purchase Period, a participant may authorize payroll deductions in
(a) any whole multiple of 1% of the participant's Eligible Compensation during
the Purchase Period or (b) any whole dollar amount of the Eligible Compensation
paid to the participant during each Purchase Period, provided the payroll
deduction does not exceed a maximum of 25% of the participant's Eligible
Compensation.
The purchase price per share will be 85% of the lower of (a) the Fair
Market Value per share of common stock on the first day of the Purchase Period
or (b) the Fair Market Value per share of common stock on the last day of each
Purchase Period. The closing price of the Company's common stock as reported on
NASDAQ on April 1, 1999 was $10.50.
The Purchase Plan is administered by a plan administrator. The plan
administrator is appointed by the Board and has the full authority and
discretion to interpret any provision of the Purchase Plan and the rules and
regulations as necessary to comply with the requirements of Section 423 of the
Code. The plan administrator also has the full authority and discretion to
retain third-party firms (such as brokerage and record keeping firms) from time
to time as he or she deems appropriate. Decisions of the plan administrator and
the Board are final and binding on all parties having an interest in the
Purchase Plan. The current plan administrator is Robert L. Winspear, an officer
and employee of the Company. The Board has the full authority and discretion to
decide any questions relating to the administration of the Purchase Plan that
are referred to it by the plan administrator and to amend the Purchase Plan.
The Purchase Plan may be amended from time to time by the Board or any duly
authorized Board committee. All purchase rights outstanding at the effective
date of any such amendment will be subject to its terms and provisions. However,
the Board may not, without the approval of the Company's stockholders, increase
the number of shares issuable under the Purchase Plan, except to the extent
permitted in connection with changes in the Company's capital structure. The
Board is authorized to terminate the Purchase Plan at any time, provided that no
termination will adversely affect the terms of any outstanding purchase rights.
11
<PAGE> 14
The effective date of the Purchase Plan was October 1, 1998. Unless sooner
terminated by the Board, the Purchase Plan will terminate upon the earliest of:
- the last business day in December, 2008;
- the date on which all shares of common stock available for issuance under
the Purchase Plan have been sold; or
- the date on which all purchase rights are exercised in connection with a
"Corporate Transaction," which is defined under the Purchase Plan to mean
generally any merger, consolidation or reorganization of the Company, or
a sale of all or substantially all of the assets of the Company, in which
less than 50% of the voting securities of the surviving or successor
corporation or other legal entity are owned by the holders of the
Company's voting securities immediately prior to such transaction.
The Purchase Plan provides that in the event of a Corporate Transaction each
participant's right to purchase common stock will be automatically exercised.
SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES UNDER THE PURCHASE PLAN
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Purchase Plan and does not attempt to describe all possible federal or any
foreign, state, local or other tax consequences of such participation or tax
consequences based on particular circumstances.
Assuming the Purchase Plan is qualified under Section 423 of the Code, the
grant of the right to purchase and the purchase of shares of common stock under
the Purchase Plan are not taxable. All tax consequences are deferred until the
participant sells or otherwise disposes of shares or dies. The tax consequences
of a disposition of shares vary depending on the time period such shares are
held before their disposition. If a participant disposes of shares within two
years after the first day of a Purchase Period in which such shares are acquired
(a "disqualifying disposition"), the participant recognizes ordinary income in
the year of disposition in an amount equal to the difference between the Fair
Market Value of the shares on the Purchase Date and the purchase price paid for
such shares. Any additional resulting gain or loss recognized by the participant
from the disposition of the shares is generally treated as a capital gain or
loss. If the participant disposes of shares more than two years after the first
day of a Purchase Period in which such shares were acquired, the participant
recognizes ordinary income in the year of disposition in an amount equal to the
lesser of (a) the difference between the Fair Market Value of the shares on the
date of disposition and the purchase price or (b) 15% of the Fair Market Value
of the shares on the first day of a Purchase Period in which such shares are
acquired. Any additional gain or loss recognized by the participant on the
disposition of the shares generally is a capital gain.
If the participant disposes of shares in a disqualifying disposition, the
Company generally is entitled to a federal income tax deduction in an amount
equal to the ordinary income recognized by the participant as a result of the
disposition, except to the extent such deduction is limited by applicable
provisions of the Code. In all other cases, no federal income tax deduction is
allowed the Company. Under generally accepted accounting principles, the Company
should not be required to recognize any compensation expense in connection with
the purchase or sale of shares by participants pursuant to the Purchase Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE EMPLOYEE STOCK PURCHASE
PLAN.
12
<PAGE> 15
APPROVAL OF THE ASSOCIATED MATERIALS INCORPORATED
INCENTIVE BONUS PLAN
(PROPOSAL NO. 3)
INTRODUCTION
Historically, the Company has provided its officers, as well as other
employees, with a cash incentive compensation program. The Company believes that
this program promotes the attainment of the Company's performance goals by
linking incentive compensation awards to the achievement of their objectives.
The Company's Board of Directors approved the Incentive Bonus Plan in order to
formalize this compensation program and to permit the Company to maintain the
deductibility of awards under the Plan for federal income tax purposes.
INCENTIVE PLAN SUMMARY
THE FOLLOWING SUMMARY OF THE INCENTIVE PLAN IS QUALIFIED IN ITS ENTIRETY BY
THE FULL TEXT OF THE INCENTIVE PLAN, A COPY OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT AS ANNEX B. STOCKHOLDERS ARE URGED TO CAREFULLY READ THE INCENTIVE
PLAN. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS PORTION OF THE
PROXY STATEMENT HAVE THE MEANINGS GIVEN THESE TERMS IN THE INCENTIVE PLAN.
The Incentive Plan provides for both annual incentive awards and long-term
incentive awards. Officers and other key employees of the Company who have been
designated by the Board are eligible to participate in the Incentive Plan.
Non-employee directors are not entitled to participate in the Incentive Plan.
The annual incentive awards will be based on one fiscal year of the Company and
the long-term incentive awards will be based on a period determined by the
Board, but not longer than five consecutive fiscal years of the Company.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1.0 million accrued with
respect to the chief executive officer and each of the Company's four other most
highly compensated executive officers at the end of the applicable year.
Participants in the Incentive Plan who are determined by the Board to be
"covered employees" (within the meaning of Section 162(m)) will receive
qualifying performance-based compensation that will not be subject to the
deduction limit if certain requirements are met. In the case of the Incentive
Plan, one requirement is that it be approved by the Company's stockholders.
The Board will establish target levels of performance for each performance
period for the Company as a whole and for each operating unit of the Company.
The performance goals applicable to any annual incentive award or long-term
incentive award made to a "covered employee" will be based on one or more of the
following: total sales, comparable supply center sales, gross margin, pre-tax
profit, operating or other expenses, earnings before interest and taxes (EBIT),
earnings before interest, taxes, depreciation and amortization, net income,
earnings per share, cash flow, return on investment and stock price
appreciation. Such performance goals may be expressed with respect to the
Company or one or more other operating units and may be expressed in terms of
absolute levels or percentages or ratios expressing relationships between two or
more of the foregoing measures of performances (e.g., EBIT as a percentage of
total sales), period to period changes relative to business plans or budgets, or
relative to one or more other companies or one or more indices. The performance
goals established by the Board will not be adjusted during a performance period,
except to prevent dilution or enlargement of any award as a result of specific
occurrences. Prior to each performance period, the Board will notify each
selected participant of the minimum, maximum and target performance goals
applicable and the corresponding minimum, maximum, and target levels of annual
incentive and long term incentive awards for performance by the participant with
respect to the established performance goals.
The amount of annual incentive award and long-term incentive award paid to
each participant, if any, will depend on the actual performance of the
participant's operating unit or the Company as a whole. If the actual
performance for a performance period (1) is below the minimum applicable
performance goal, no incentive award will be paid to the participants, (2) is
equal to its minimum performance goal established, the minimum level of
incentive awards will be paid to participants, (3) is equal to its target
performance goal, the target level of incentive award will be paid to
participants, (4) is equal to or greater than its maximum
13
<PAGE> 16
performance goal, the maximum level of incentive awards will be paid to
participants. If the actual performance is between any of these levels, the
level of incentive awards paid to participants will be interpolated by the Board
between the corresponding levels of incentive awards.
In no event will an annual incentive award paid to a participant for a
fiscal year exceed $2.0 million or will a long-term incentive award paid to a
participant for a performance period exceed $3.0 million. Annual incentive
awards and long-term incentive awards will be paid in cash on the date set by
the Board for the particular performance period.
The Incentive Plan will be administered by the Board, which has delegated
its authority under the Incentive Plan to the Compensation Committee. The Board
may interpret, amend or terminate the Incentive Plan.
The Incentive Plan will become effective as of January 1, 1999, provided
that no award will be paid under the Incentive Plan unless, prior to payment,
the holders of a majority of the shares of common stock of the Company vote to
approve the Incentive Plan.
AWARDS UNDER THE INCENTIVE PLAN
For 1999, the Compensation Committee has established incentive compensation
award opportunities for each of the Company's executive officers based upon
pre-tax profit of the Company or the division in which they are employed. The
amount of any awards payable for 1999 will be determined after the end of the
year. Each of the Company's executive officers was eligible to earn a cash bonus
on substantially similar terms in 1998. Bonus amounts paid under this program
are reflected in the Summary Compensation Table under the caption "Executive
Officer Compensation" in this Proxy Statement.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE INCENTIVE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 4)
On February 22, 1999, upon recommendation of the Audit Committee, the Board
unanimously selected, subject to ratification by Associated Materials'
stockholders, Ernst & Young LLP to continue to serve as independent auditors for
Associated Materials for the fiscal year ending December 31, 1999. Ernst & Young
has served as Associated Materials' independent auditors since 1984.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting. They will have the opportunity to make statements and to respond to
appropriate questions raised at the Annual Meeting.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG AS INDEPENDENT AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Company's common stock, to file with the SEC initial
reports of ownership and reports of changes in ownership of the common stock
beneficially owned by them. Directors, executive officers and greater than 10%
stockholders are required to furnish the Company with copies of all Section
16(a) reports that they file with the SEC.
To the Company's knowledge, based solely on review of copies of such
reports furnished to the Company or written representations from certain
reporting persons, during the year ended December 31, 1998, all Section 16(a)
filing requirements applicable to the directors, executive officers and greater
than 10% stockholders were complied with by such persons, except that one report
filed by Robert L. Winspear relating to the sale of 60,800 shares of common
stock was filed 17 days late.
14
<PAGE> 17
COST OF SOLICITING PROXIES
The cost of soliciting of proxies, including expenses to prepare and mail
this Proxy Statement, will be paid by Associated Materials. Associated Materials
has retained ChaseMellon Shareholder Services, L.L.C. to assist in soliciting
proxies. For its services, ChaseMellon will receive a fee of $4,500. ChaseMellon
will also be reimbursed its reasonable out-of-pocket expenses. Associated
Materials does not otherwise expect to pay for the solicitation of proxies, but
will reimburse brokers and nominees for their reasonable expenses for sending
proxy materials to principals and obtaining their proxies. In addition to
soliciting proxies by mail, directors, officers and employees of Associated
Materials may solicit proxies in person, by telephone or by other means.
STOCKHOLDER PROPOSALS
In order to be included in the Company's Proxy Statement for its Annual
Meeting of Stockholders in 2000, stockholder proposals must be received at the
Company's principal office, 2200 Ross Avenue, Suite 4100 East, Dallas, Texas
75201, Attention: Secretary, no later than December 18, 1999, as well as meet
all other SEC requirements. In addition, Associated Materials' By-Laws provide
that any stockholder who desires either to bring a stockholder proposal before
an annual meeting must give advance notice to Associated Materials' Secretary
regarding the proposal. The By-Laws generally require that written notice be
delivered to the Secretary not less than 80 days prior to the date of the
meeting and contain certain information regarding the stockholder desiring to
present a proposal. A copy of the By-Laws is available upon request from the
Secretary of Associated Materials.
ASSOCIATED MATERIALS INCORPORATED
/s/ ROBERT L. WINSPEAR
Robert L. Winspear
Secretary
Dallas, Texas
April 13, 1999
15
<PAGE> 18
ANNEX A
ASSOCIATED MATERIALS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests of
Associated Materials Incorporated by providing eligible employees with the
opportunity to acquire a proprietary interest in the Company through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such terms in
the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall administer the Plan and shall have full
authority and discretion to interpret and construe any provision of the Plan and
to adopt such rules and regulations for administering the Plan as it may deem
necessary, and to take any action it may deem necessary in order to comply with
the requirements of Section 423 of the Code. Decisions of the Plan Administrator
and the Board shall be final and binding on all parties having an interest in
the Plan. The Plan Administrator shall have full authority and discretion to
retain and engage such third party firms (including, without limitation,
brokerage and record keeping firms) as it shall from time to time deem advisable
or appropriate.
B. The Board shall have the full authority and discretion to designate
Corporate Affiliates as Participating Companies from time to time and to
terminate any such designation; to decide any questions relating to the
administration of the Plan that are referred to the Board by the Plan
Administrator; and to amend the Plan as provided in Section X.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized but
unissued Common Stock or shares of Common Stock held in the Company's treasury.
The maximum number of shares of Common Stock which may be issued over the term
of the Plan shall not exceed 250,000 shares.
B. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Company's receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and class of securities issuable under the Plan, (ii) the
maximum number and class of securities purchasable per Participant on any one
Purchase Date and (iii) the number and class of securities and the price per
share in effect under each outstanding purchase right in order to prevent the
dilution or enlargement of benefits thereunder.
IV. PURCHASE PERIODS
Shares of Common Stock shall be offered for purchase under the Plan through
a series of successive Purchase Periods until such time as (i) the maximum
number of shares of Common Stock available for issuance under the Plan shall
have been purchased or (ii) the Plan shall have been sooner terminated.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the Effective Date shall
be eligible to participate in the Plan on the first day of any Purchase Period
under the Plan, provided such individual remains an Eligible Employee on such
day. Eligibility to participate in the Plan shall be limited to Eligible
Employees employed by the Company or by a Corporate Affiliate that is a U.S.
subsidiary of the Company.
A-1
<PAGE> 19
B. Each individual who becomes an Eligible Employee after the Effective
Date shall be eligible to participate in the Plan on the first day of any
Purchase Period commencing thereafter, provided such individual remains an
Eligible Employee on such day.
C. To participate in the Plan for a particular Purchase Period, an Eligible
Employee must complete the enrollment forms prescribed by the Plan Administrator
and file such forms with the Plan Administrator (or its designee) before the
first day of such Purchase Period. An Eligible Employee's enrollment in the Plan
for a Purchase Period will remain in effect for all subsequent Purchase Periods
until modified or terminated by the Eligible Employee or until he or she no
longer qualifies as an Eligible Employee.
VI. PAYROLL DEDUCTIONS; SHORTFALL CONTRIBUTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock under the Plan may be (i) any whole multiple of
one percent (1%) of the Eligible Compensation paid to the Participant during
each Purchase Period or (ii) any whole dollar amount of the Eligible
Compensation paid to the Participant during each Purchase Period, provided that
the Participant's payroll deduction for any Purchase Period shall not exceed a
maximum of twenty-five percent (25%) of such Eligible Compensation. The
deduction rate so authorized shall continue in effect for the entire Purchase
Period. The Participant may not increase his or her rate of payroll deduction
during a Purchase Period. However, the Participant may, at any time prior to the
tenth (10th) Business Day immediately preceding the Purchase Date for the
Purchase Period, reduce his or her rate of payroll deduction to any whole
percentage or whole dollar amount or to zero, such reduction to become effective
prospectively as soon as administratively feasible after filing the appropriate
form with the Plan Administrator. The Participant may not, however, effect more
than one (1) such reduction per Purchase Period. If a Participant reduces his or
her payroll deductions to zero, the Participant's previous payroll deductions
for the Purchase Period will still be applied to the purchase of shares of
Common Stock on the Purchase Date, unless the Participant elects to terminate
his or her purchase rights for the Purchase Period in accordance with Section
VII.E.
B. Payroll deductions shall begin on the first pay day of each Purchase
Period and shall (unless sooner terminated) continue through the pay day ending
on or immediately prior to the last day of the Purchase Period. The amounts so
collected shall be credited to the Participant's Account under the Plan. Payroll
deduction amounts need not be held in any segregated account or trust fund and
may be commingled with the general assets of the Company and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the termination of the
Participant's purchase right in accordance with the provisions of the Plan.
D. A Participant whose net pay after all deductions therefrom on any given
pay day is not sufficient to fund the payroll deduction authorized by the
Participant for a Purchase Period shall be permitted to fund any such shortfall
by contributing the amount thereof to the Plan in cash, by personal check or in
any other form permitted from time to time by the Plan Administrator ("Shortfall
Contributions"). Shortfall Contributions must be contributed to the Plan before
the tenth (10th) Business Day immediately preceding the Purchase Date for the
Purchase Period. All references in this Plan to payroll deductions also shall be
deemed to refer to and include Shortfall Contributions, except where the context
clearly requires otherwise.
E. No interest shall accrue on the payroll deductions of a Participant in
the Plan.
VII. PURCHASE RIGHTS
A. A Participant shall be granted a separate purchase right on the first
day of each Purchase Period in which he or she participates. The purchase right
shall provide the Participant with the right to purchase shares of Common Stock
on the Purchase Date upon the terms set forth below. Under no circumstances
shall purchase rights be granted under the Plan to any Eligible Employee if such
individual would, immediately after the grant, own (within the meaning of
Section 424(d) of the Code) or hold outstanding options or other rights to
purchase, stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or any Corporate
Affiliate.
A-2
<PAGE> 20
B. Each purchase right shall be automatically exercised on the Purchase
Date, and shares of Common Stock shall accordingly be purchased on such date on
behalf of each Participant participating in the related Purchase Period (other
than any Participant whose payroll deductions have previously been refunded in
accordance with paragraph E below). The purchase shall be effected by applying
the Participant's Account balance as of the last day of the Purchase Period to
the purchase of shares of Common Stock (subject to the limitation on the maximum
number of shares purchasable per Participant) at the Purchase Price in effect
for that Purchase Period.
C. The number of shares of Common Stock purchasable by a Participant on
each Purchase Date shall be the number of whole and fractional shares obtained
by dividing the Participant's Account balance on the last day of the Purchase
Period by the Purchase Price in effect for that Purchase Date. However, the
maximum number of shares of Common Stock purchasable per Participant on any one
Purchase Date shall not exceed 3,000 shares.
D. Any portion of the Participant's Account balance that is not applied to
the purchase of Common Stock by reason of the limitation on the maximum number
of shares purchasable by the Participant on the Purchase Date shall be refunded
as soon as administratively feasible.
E. The following provisions shall govern the termination of outstanding
purchase rights:
(i) A Participant may, at any time prior to the tenth (10th) Business
Day immediately preceding the Purchase Date for the Purchase Period,
terminate his or her outstanding purchase right by filing the appropriate
form with the Plan Administrator (or its designee), and no further payroll
deductions shall be collected from or made by the Participant with respect
to such terminated purchase right. The Participant's entire Account balance
as of the effective date of such termination shall be refunded as soon as
administratively feasible.
(ii) The termination of such purchase right shall be irrevocable, and
the Participant may not subsequently rejoin the Purchase Period for which
the terminated purchase right was granted. In order to resume participation
in any subsequent Purchase Period, such individual must re-enroll in the
Plan (by making a timely filing of the prescribed enrollment forms) before
the first day of the new Purchase Period.
(iii) Should the Participant cease to remain an Eligible Employee for
any reason (including death, disability or change in employment status)
while his or her purchase right remains outstanding, then that purchase
right shall immediately terminate, and the Participant's entire Account
balance shall be refunded as soon as administratively feasible. However,
should the Participant cease to remain in active service by reason of an
approved unpaid leave of absence, then the Participant shall have the
right, exercisable up until the tenth (10th) Business Day immediately
preceding the Purchase Date for the Purchase Period in which such leave
commences, to withdraw his or her entire Account balance. If a Participant
on such an unpaid leave does not exercise this right, such Participant's
Account balance shall be held for the purchase of shares at the next
Purchase Date. In no event, however, shall any further payroll deductions
be collected on the Participant's behalf during any such unpaid leave. Upon
the return to active service of any Participant previously on unpaid leave,
his or her payroll deductions under the Plan shall automatically resume at
the rate in effect at the time the leave began, unless the Participant
elected to withdraw his or her Account balance for the Purchase Period in
which the leave commenced.
(iv) Notwithstanding any other provision of the Plan to the contrary,
a Participant's purchase rights with respect to a Purchase Period shall
terminate, and his or her Account balance shall be refunded as soon as
administratively feasible, if the Participant's employment with the
Participating Companies terminates for any reason on or before the Purchase
Date for such Purchase Period.
F. Each outstanding purchase right shall automatically be exercised,
immediately prior to the date any Corporate Transaction is consummated, by
applying the Participant's Account balance to the purchase of whole and
fractional shares of Common Stock at a purchase price per share equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
Common Stock on the first day of the Purchase Period
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in which such Corporate Transaction occurs or (ii) the Fair Market Value per
share of Common Stock immediately prior to the date such Corporate Transaction
is consummated. However, the applicable limitation on the number of shares of
Common Stock purchasable per Participant shall continue to apply to any such
purchase. The Company shall use reasonable efforts to provide prior written
notice of the occurrence of any Corporate Transaction, and Participants shall,
following the receipt of such notice, have the right to terminate their
outstanding purchase rights prior to the effective date of the Corporate
Transaction.
G. Should the total number of shares of Common Stock which are to be
purchased pursuant to outstanding purchase rights on any particular date exceed
the number of shares then available for issuance under the Plan, the Plan
Administrator shall make a pro-rata allocation of the available shares on a
uniform and nondiscriminatory basis, and the Account balance of each
Participant, to the extent in excess of the aggregate Purchase Price payable for
the Common Stock pro-rated to such individual, shall be refunded as soon as
administratively feasible.
H. The purchase right shall be exercisable only by the Participant and
shall not be assignable or transferable by the Participant.
I. A Participant shall have no stockholder rights with respect to the
shares subject to his or her outstanding purchase right until the shares are
purchased on the Participant's behalf in accordance with the provisions of the
Plan and the Participant has become the owner of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such rights, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning of
Section 423 of the Code) of the Company or any Corporate Affiliate, would
otherwise permit such Participant to purchase more than Twenty-Five Thousand
Dollars ($25,000) worth of stock of the Company and of any Corporate Affiliate
(determined on the basis of the Fair Market Value of such stock on the date or
dates such rights are granted) for each calendar year such rights are at any
time outstanding, subject to the following:
(i) The right to acquire Common Stock under each outstanding purchase
right shall accrue on the Purchase Date in effect for the Purchase Period
for which such right is granted.
(ii) No right to acquire Common Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in the
same calendar year the right to acquire Common Stock under one (1) or more
other purchase rights at a rate equal to Twenty-Five Thousand Dollars
($25,000) worth of Common Stock (determined on the basis of the Fair Market
Value per share on the date or dates of grant) for each calendar year such
rights were at any time outstanding.
B. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Period, then the
Participant's Account balance with respect to such purchase right shall be
refunded as soon as administratively feasible.
C. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on August 26, 1998 and shall become
effective on the Effective Date, provided no purchase rights granted under the
Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until the Company shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation other than approval of
the Plan by the Company's stockholders. In the event
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stockholder approval of the Plan by majority vote of the shares represented in
person or by proxy at a meeting of the stockholders of the Company at which a
quorum is present is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and the Participants'
Account balances shall be distributed as soon as administratively feasible.
B. Unless sooner terminated by the Board, the Plan shall terminate upon the
earliest to occur of (i) the last Business Day in December 2008, (ii) the date
on which all shares available for issuance under the Plan shall have been sold
to Participants pursuant to purchase rights exercised under the Plan or (iii)
the date on which all purchase rights are exercised in connection with a
Corporate Transaction. Following such termination, no further purchase rights
shall be granted or exercised, and no further payroll deductions shall be
collected under the Plan.
X. AMENDMENT OF THE PLAN
A. The Plan may be amended from time to time by the Board or any duly
authorized committee thereof, and all purchase rights outstanding at the
effective date of any such amendment will be subject to such amendment. In the
event any law, or any rule or regulation issued or promulgated by the Internal
Revenue Service, the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc., any stock exchange upon which the
Common Stock is listed for trading, or any other governmental or quasi-
governmental agency having jurisdiction over the Company, the Common Stock or
the Plan, requires the Plan to be amended, or in the event any of the rules
under Section 16 of the 1934 Act are amended or supplemented (e.g., by addition
of alternative rules), in either event to require or permit the Company to add,
remove or lessen any restrictions on or with respect to purchase rights under
the Plan, the Board reserves the right to amend the Plan to the extent of any
such requirement, amendment or supplement, and all purchase rights then
outstanding will be subject to such amendment.
B. The Plan may be terminated at any time by action of the Board; provided,
however, that the termination of the Plan shall not adversely affect the terms
of any outstanding purchase rights.
C. Notwithstanding the foregoing, the Board may not, without the approval
of the Company's stockholders, increase the number of shares of Common Stock
issuable under the Plan, except to the extent permitted under Section III.B.
D. With respect to any Participating Corporation which employs Eligible
Employees who reside outside of the United States, and notwithstanding anything
herein to the contrary, the Board may in its sole discretion amend the terms of
the Plan, or any purchase right granted under the Plan, in order to comply with
the requirements of local law, and may, where appropriate, establish one or more
sub-plans to reflect such amended provisions applicable to such Eligible
Employees.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan shall
be paid by the Company.
B. Nothing in the Plan shall confer upon any Participant any right to
continue in the employ of the Company or any Corporate Affiliate for any period
of specific duration, or interfere with or otherwise restrict in any way the
rights of the Company (or any Corporate Affiliate employing such person) or of
the Participant, which rights are hereby expressly reserved by each, to
terminate such Participant's employment at any time for any reason, with or
without cause.
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<PAGE> 23
APPENDIX
The following definitions shall be in effect under the Plan:
A. Account shall mean the account established by the Plan Administrator to
record a Participant's payroll deductions as of any given date.
B. Board shall mean the Company's Board of Directors.
C. Business Day shall mean a day on which the New York Stock Exchange is
open for trading.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Company's common stock, par value $.0025 per
share.
F. Company shall mean Associated Materials Incorporated, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Associated Materials Incorporated which shall by
appropriate action adopt the Plan.
G. Corporate Affiliate shall mean any parent or subsidiary corporation of
the Company (as determined in accordance with Section 424 of the Code), whether
now existing or subsequently established.
H. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger, consolidation or reorganization of the Company into or
with another corporation or legal person as a result of which securities
possessing less than fifty percent (50%) of the total combined voting power
of the then-outstanding voting securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders
of the voting securities of the Company immediately prior to such
transaction, or
(ii) a sale or other transfer of all or substantially all of the
assets of the Company to another corporation or other legal person as a
result of which securities possessing less than fifty percent (50%) of the
total combined voting power of the then-outstanding voting securities of
such corporation or person immediately after such sale or transfer are held
in the aggregate by the holders of the voting securities of the Company
immediately prior to such sale or transfer.
I. Effective Date shall mean October 1, 1998.
J. Eligible Compensation means the following items of remuneration paid to
a Participant by one or more Participating Companies during each Purchase
Period: base salary, overtime pay, commissions and cash incentive compensation,
computed before giving effect to the Participant's salary reduction elections
under Section 125 or Section 401(k) of the Code or the Participant's deferral
elections under any nonqualified deferred compensation plan of the Company or
any Corporate Affiliate.
K. Eligible Employee shall mean an Employee who is employed by a
Participating Company on a basis under which he or she is regularly expected to
render at least twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages. Notwithstanding the
foregoing, a person who is an independent contractor performing services for a
Participating Company shall not be eligible to participate in the Plan.
L. Employee shall mean an individual who is a common law employee of the
Company or any Corporate Affiliate.
M. Fair Market Value per share of Common Stock on any relevant date shall
be the closing selling price per share of Common Stock on the date in question
on the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock or the NASDAQ, as such price is officially quoted in
the composite tape of transactions on such exchange or NASDAQ. If there is no
closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
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<PAGE> 24
N. 1933 Act shall mean the Securities Act of 1933, as amended.
O. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
P. Participant shall mean any Eligible Employee of a Participating Company
who is actively participating in the Plan.
Q. Participating Company shall mean the Company, each Corporate Affiliate
that is a direct or indirect domestic subsidiary of the Company and each other
Corporate Affiliate that is authorized from time to time by the Board to extend
the benefits of the Plan to its Eligible Employees. For purposes of the
foregoing, the term "subsidiary" has the meaning set forth in Section 424(f) of
the Code.
R. Plan shall mean the Company's Employee Stock Purchase Plan, as set forth
in this document.
S. Plan Administrator shall mean the person or persons appointed by the
Board from time to time as the plan administrator of the Plan.
T. Purchase Date shall mean the last Business Day of each Purchase Period
or, with respect to a Corporate Transaction, the date specified for the purchase
in Section VII.F.
U. Purchase Period shall mean a period of six (6) months extending from
January 1 to June 30 and from July 1 to December 31 of each year; provided,
however, that the first Purchase Period shall begin on October 1, 1998, and
shall end on December 31, 1998.
V. Purchase Price shall mean the purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date and
shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market
Value per share of Common Stock on the first day of the Purchase Period in which
the Purchase Date occurs or (ii) the Fair Market Value per share of Common Stock
on that Purchase Date.
W. Service shall mean the performance of services to the Company or any
Corporate Affiliate by a person in the capacity of an Employee.
X. Shortfall Contributions shall have the meaning ascribed to such term in
Section VI.D. of the Plan.
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<PAGE> 25
ANNEX B
ASSOCIATED MATERIALS INCORPORATED
INCENTIVE BONUS PLAN
Associated Materials Incorporated, a Delaware corporation (the "Company"),
hereby adopts this Incentive Bonus Plan (this "Incentive Plan") effective as of
January 1, 1999.
1. PURPOSE. The purpose of this Incentive Plan is to promote the attainment
of the Company's performance goals by providing incentive compensation for
officers and other certain designated key employees of the Company and its
Subsidiaries.
2. DEFINITIONS. As used in this Incentive Plan, the following terms have
the following meanings when used herein with initial capital letters:
(a) "Annual Incentive Award" means the incentive bonus earned by a
Participant pursuant to Section 5.
(b) "Board" means the Board of Directors of the Company or, pursuant
to any delegation by the Board to the Compensation Committee pursuant to
Section 12, the Compensation Committee.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Compensation Committee" means a committee appointed by the Board
in accordance with the By-Laws of the Company consisting of at least two
Non-Employee Directors.
(e) "Covered Employee" means a Participant who is, or is determined by
the Board to be likely to become, a "covered employee" within the meaning
of Section 162(m) of the Code (or any successor provision).
(f) "Long-Term Incentive Award" means the incentive bonus, if any,
earned by a Participant pursuant to Section 6.
(g) "Non-Employee Director" means a Director of the Company who is not
a full-time employee of the Company or any Subsidiary.
(h) "Operating Unit" means the Company as a whole and each other
Subsidiary, division, plant, supply center, or other business unit of the
Company in which individuals employed thereby or therein have been approved
to participate in this Incentive Plan by the Board.
(i) "Participant" means a person who is designated by the Board, to
receive benefits under this Incentive Plan and who is at the time an
officer or other key employee of the Company or any one or more of its
Subsidiaries, or who has agreed to commence serving in such capacity.
(j) "Performance Goal" means the target level of performance for each
Performance Period for the Company as a whole and for each Operating Unit
of the Company and, where applicable, for an individual Participant, in
each case as established by the Board pursuant to Section 4. The
Performance Goals applicable to any Annual Incentive Award or Long-Term
Incentive Award made to a Covered Employee will be based solely upon one or
more of the following measures of performance:
1. total sales;
2. comparable supply center sales;
3. gross margin;
4. pre-tax profit, before or after extraordinary items;
5. operating or other expenses;
6. earnings before interest and taxes ("EBIT");
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7. earnings before interest, taxes, depreciation and amortization;
8. net income;
9. earnings per share;
10. cash flow;
11. return on investment (determined with reference to one or more
categories of income or cash flow and one or more categories of assets,
capital or equity); and
12. stock price appreciation.
Performance Goals may be expressed with respect to the Company or one or
more other Operating Units and may be expressed in terms of absolute levels
or percentages or ratios expressing relationships between two or more of
the foregoing measures of performance (e.g., EBIT as a percentage of total
sales), period-to-period changes, relative to business plans or budgets, or
relative to one or more other companies or one or more indices. The two
immediately preceding sentences are intended to comply with the exception
from Section 162(m) of the Code for qualified performance-based
compensation, and will be construed, applied and administered accordingly.
(k) "Performance Period" means, in the case of determining Annual
Incentive Awards pursuant to Section 5, one fiscal year of the Company, and
in the case of determining Long-Term Incentive Awards pursuant to Section
6, a period determined by the Board not longer than five consecutive fiscal
years of the Company. The initial Performance Period under this Incentive
Plan will commence on January 1, 1999. Any new Performance Period in each
case would commence on the first day of each fiscal year of the Company.
(l) "Retirement" means a Participant's voluntary termination of
employment with the Company on or after attainment of age 65, or such other
age as may from time to time be established as the normal retirement date
under the Company's principal retirement plan in which the Participant is a
participant, and before being informed by the Company that his or her
employment will be terminated.
(m) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (or any successor rule substantially to
the same effect), as in effect from time to time.
(n) "Subsidiary" has the meaning specified in Rule 405 promulgated
under the Securities Act of 1933, as amended (or under any successor rule
substantially to the same effect).
3. ELIGIBILITY. Except as otherwise provided in this Section 3, an employee
of the Company or one of its Subsidiaries will become a Participant for a
particular Performance Period if such employee is approved as a Participant by
the Board.
4. PERFORMANCE GOALS. (a) The Board will approve for each Performance
Period the applicable Performance Goals for the Company and each other Operating
Unit, as well as for individual Participants in this Incentive Plan, where
appropriate, based upon the consolidated business plan of the Company. Such
Performance Goals will not be adjusted during a Performance Period, except that
such Performance Goals may be so adjusted to prevent dilution or enlargement of
any Annual Incentive Award or Long-Term Incentive Award as a result of
extraordinary events or circumstances as determined by the Board or to exclude
the effects of extraordinary, unusual or nonrecurring events, changes in
accounting principles, discontinued operations, acquisitions, divestitures and
material restructuring charges; provided, however, in the case of a Covered
Employee, that no such adjustment will be made if the effect of such adjustment
would be to cause the related compensation to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code.
(b) Prior to the beginning of each Performance Period, the Board will (i)
notify each eligible employee who has been selected to participate in this
Incentive Plan that he or she is a Participant under this Incentive Plan for
such Performance Period and (ii) communicate in writing to each Participant the
minimum,
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maximum, and target Performance Goals applicable to such Participant for the
Company and each other Operating Unit for such Performance Period, and the
corresponding minimum, maximum, and target levels of Annual Incentive Awards and
Long-Term Incentive Awards for performance by the Participant with respect to
such Performance Goals.
5. ANNUAL INCENTIVE AWARDS. (a) Subject to Section 4, unless changed by the
Board, each eligible Participant may earn Annual Incentive Awards as hereinafter
provided. Each Operating Unit's actual performance during a particular
Performance Period will be measured against the Performance Goals established by
the Board in accordance with Section 4. In the event such Operating Unit's
performance for the Performance Period (1) is below the minimum Performance Goal
established, no Annual Incentive Awards will be paid to Participants in respect
thereof, (2) is equal to the minimum Performance Goal established, the minimum
level of Annual Incentive Awards will be paid to Participants in respect
thereof, (3) is equal to the target Performance Goal established, the target
level of Annual Incentive Awards will be paid to Participants in respect
thereof, (4) is equal to or greater than the maximum Performance Goal
established therefor, the maximum level of Annual Incentive Awards will be paid
to Participants in respect thereof, and (5) is between any two of the
Performance Goal levels described in the immediately preceding clauses (2), (3),
and (4), the level of Annual Incentive Awards to be paid to Participants in
respect thereof will be a level interpolated by the Board between the
corresponding levels of Annual Incentive Awards paid in respect of such
Performance Goal levels.
(b) Except in the case of a Covered Employee, the Annual Incentive Award
determined pursuant to Section 5(a) may be modified by the Board to recognize a
Participant's individual performance or in other circumstances deemed
appropriate by the Board.
(c) Notwithstanding any other provision of this Incentive Plan to the
contrary, in no event will an Annual Incentive Award paid to any Participant for
a fiscal year exceed $2.0 million.
6. LONG-TERM INCENTIVE AWARDS. (a) Unless changed by the Board, each
eligible Participant may earn Long-Term Incentive Awards as hereinafter
provided. Each Operating Unit's actual performance during a particular
Performance Period will be measured against the Performance Goals established by
the Board in accordance with Section 4. In the event such Operating Unit's
performance for such Performance Period (1) is below the minimum Performance
Goal established, no Long-Term Incentive Awards will be paid to Participants in
respect thereof, (2) is equal to the minimum Performance Goal established, the
minimum level of Long-Term Incentive Awards will be paid to Participants in
respect thereof, (3) is equal to the target Performance Goal established, the
target level of Long-Term Incentive Awards will be paid to Participants in
respect thereof, (4) is equal to or greater than the maximum Performance Goal
established, the maximum level of Long-Term Incentive Awards will be paid to
Participants in respect thereof, and (5) is between any two of the Performance
Goal levels described in the immediately preceding clauses (2), (3), and (4),
the level of Long-Term Incentive Awards to be paid to Participants in respect
thereof will be a level interpolated by the Board between the corresponding
levels of Long-Term Incentive Awards paid in respect of such Performance Goal
levels.
(b) Except in the case of a Covered Employee, the Long-Term Incentive Award
determined pursuant to Section 6(a) may be modified by the Board to recognize a
Participant's individual performance or in other circumstances deemed
appropriate by the Board.
(c) Notwithstanding any other provision of this Incentive Plan to the
contrary, in no event will a Long-Term Incentive Award paid to any Participant
for a Performance Period exceed $3.0 million.
7. PAYMENT OF AWARDS. Annual Incentive Awards and Long-Term Incentive
Awards will be paid to Participants in respect of any specific Performance
Period (i) in cash, and (ii) on the date(s) and subject to such other terms as
shall be determined by the Board at the time that Performance Goals are
established for a specific Performance Period. The Company may deduct from any
payment such amounts as may be required to be withheld under applicable law.
8. TERMINATION OF EMPLOYMENT. If a Participant terminates employment with
the Company and its Subsidiaries before the last day of a Performance Period due
to death, disability, or Retirement with the
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<PAGE> 28
consent of the Company, the Participant's Annual Incentive Awards and Long-Term
Incentive Awards will be prorated on the basis of the ratio of the number of
months of participation during the Performance Period to which the Annual
Incentive Awards and Long-Term Incentive Awards relate to the aggregate number
of months in such Performance Period. If a Participant's employment with the
Company and its Subsidiaries is terminated by the Company or any such Subsidiary
before the last day of a Performance Period for any reason other than for Cause
(as hereinafter defined), the Participant's Annual Incentive Awards and
Long-Term Incentive Awards will be prorated on the basis of the ratio of the
number of months of participation during the Performance Period to which the
Annual Incentive Awards and the Long-Term Incentive Awards relate to the
aggregate number of months in such Performance Period, unless otherwise
determined by the Board. Except as otherwise provided in this Section 8, if a
Participant's employment with the Company and its Subsidiaries is terminated
before the last day of a Performance Period for any reason, the Participant will
not be entitled to any Annual Incentive Award or Long-Term Incentive Award for
such Performance Period unless otherwise determined by the Board. For purposes
of this Agreement, "Cause" means any act of dishonesty, fraud, or willful
misconduct by a Participant in the performance of the Participant's duties as an
employee of the Company, or any conviction of a Participant for any felony
involving moral turpitude.
9. CHANGE IN CONTROL. In connection with any actual or potential change in
control of the Company, whether as a result of any stock acquisition, merger, or
other business combination transaction, or any restructuring or recapitalization
of the Company, then the Board will take all such actions hereunder as it may
determine to be necessary or appropriate to treat Participants equitably
hereunder, including without limitation the modification or waiver of applicable
Performance Goals, Performance Periods, Annual Incentive Awards, or Long-Term
Incentive Awards, notwithstanding the terms of any initial award, and whether to
establish or fund a trust or other arrangement intended to secure the payment of
such awards.
10. TRANSFERS AND CHANGES IN RESPONSIBILITIES. (a) If a Participant's
responsibilities materially change or the Participant is transferred during a
Performance Period to another Operating Unit or to a position that is not
designated or eligible to participate in this Incentive Plan, the Company may,
as determined by the Board, either (i) continue the Participant's participation
in this Incentive Plan and, except in the case of a Covered Employee, as of the
date of such change or transfer, establish new performance awards (as determined
pursuant to Section 10(b)) in respect of Annual Incentive Awards and/or
Long-Term Incentive Awards, as the case may be, for the Participant with respect
to his or her new position, or (ii) terminate the Participant's participation in
this Incentive Plan in respect of Annual Incentive Awards and/or Long-Term
Incentive Awards, as the case may be, and, as of the date of such change or
transfer, the Participant's Annual Incentive Awards and/or Long-Term Incentive
Awards, as the case may be, would be prorated on the basis of the ratio of the
number of months of the Participant's participation during the Performance
Period to which such Annual Incentive Awards and/or Long-Term Incentive Awards,
as the case may be, relate to the aggregate number of months in such Performance
Period.
(b) If in the event of such a change or transfer the Participant's
participation in this Incentive Plan in respect of Annual Incentive Awards
and/or Long-Term Incentive Awards, as the case may be, is not terminated
pursuant to Section 10(a)(ii), then the Participant's Annual Incentive Awards
and/or Long-Term Incentive Awards, as the case may be, will be prorated on the
basis of the number of months of service by the Participant at each Operating
Unit during the Performance Period.
11. SECURITY OF PAYMENT OF BENEFITS. Unless otherwise determined by the
Board, all Annual Incentive Awards and Long-Term Incentive Awards will be paid
from the Company's general assets, and nothing contained in this Incentive Plan
will require the Company to set aside or hold in trust any funds for the benefit
of any Participant, who will have the status of a general unsecured creditor of
the Company.
12. ADMINISTRATION OF THE PLAN. (a) This Incentive Plan will be
administered by the Board, which may from time to time delegate all or any part
of its authority under this Incentive Plan to the Compensation Committee.
(b) The Board will take such actions as are required to be taken by it
hereunder, may take the actions permitted to be taken by it hereunder, and will
have the authority from time to time to interpret this Incentive Plan and to
adopt, amend, and rescind rules and regulations for implementing and
administering this Incentive
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Plan. All such actions will be in the sole discretion of the Board and, when
taken, will be final, conclusive, and binding. Without limiting the generality
or effect of the foregoing, the interpretation and construction by the Board of
any provision of this Incentive Plan or of any agreement, notification, or
document evidencing the grant of benefits payable to Participants and any
determination by the Board in its sole discretion pursuant to any provision of
this Incentive Plan or any provision of such agreement, notification, or
document will be final and conclusive. Without limiting the generality or effect
of any provision of the Certificate of Incorporation of the Company, neither the
Chief Executive Officer nor any member of the Board will be liable for any
action or determination made in good faith.
(c) The provisions of Sections 5 and 6 will be interpreted as authorizing
the Board, in taking any action under or pursuant to this Incentive Plan, to
take any action it determines in its sole discretion to be appropriate, subject
only to the express limitations therein contained, and no authorization in
either such Section or any other provision of this Incentive Plan is intended or
may be deemed to constitute a limitation on the authority of the Board.
(d) The existence of this Incentive Plan or any right granted or other
action taken pursuant hereto will not affect the authority of the Board or the
Company to take any other action, including in respect of the grant or award of
any annual or long-term bonus or other right or benefit, whether or not
authorized by this Incentive Plan, subject only to limitations imposed by
applicable law as from time to time applicable thereto.
13. MISCELLANEOUS. (a) This Incentive Plan will not confer upon any
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate or modify
the terms of such Participant's employment or other service at any time.
(b) Except as otherwise provided in this Incentive Plan, no right or
benefit under this Incentive Plan will be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge such right or benefit will
be void. No such right or benefit will in any manner be liable for or subject to
the debts, liabilities, or torts of a Participant.
(c) This Incentive Plan may be amended or terminated from time to time by
the Board. In the event this Incentive Plan is terminated before the last day of
a Performance Period, Annual Incentive Awards and Long-Term Incentive Awards
payable for such Performance Period will be prorated on the basis of the ratio
of the number of months in such Performance Period prior to such termination to
the aggregate number of months in such Performance Period and will be paid only
after the end of such Performance Period, which will be deemed to continue until
the expiration thereof as if this Incentive Plan had not been terminated.
(d) If any provision in this Incentive Plan is held to be invalid or
unenforceable, no other provision of this Incentive Plan will be affected
thereby.
(e) This Incentive Plan will be governed by and construed in accordance
with applicable United States federal law and, to the extent not preempted by
such federal law, in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
14. EFFECTIVENESS. This Incentive Plan will become effective as of January
1, 1999 provided, however, that no Annual Incentive Award or Long-Term Incentive
Award for any Performance Period commencing on or after January 1, 1999, will be
paid under this Incentive Plan unless, prior to such payment, the holders of a
majority of the shares of Common Stock of the Company actually voting on the
matter approve this Incentive Plan at a meeting of the stockholders of the
Company.
B-5
<PAGE> 30
- --------------------------------------------------------------------------------
DETACH HERE
Please mark
[X] votes as in
this example.
This Proxy when executed will be voted in the manner directed herein. If no
direction is made this Proxy will be voted FOR the election of the Director
nominees, FOR Proposal 2, FOR Proposal 3 and FOR Proposal 4.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors (See reverse). 2. Approval of the Associated Materials
Incorporated Employee Stock Purchase
Plan [ ] [ ] [ ]
FOR both WITHHOLD 3. Approval of the Associated Materials
nominees listed AUTHORITY Incorporated Incentive Bonus Plan [ ] [ ] [ ]
(except as to vote for both
marked to the nominees 4. Ratification of Ernst & Young LLP as
contrary) independent auditors. [ ] [ ] [ ]
[ ] [ ]
---------------------------------------
For both nominees except as noted above
- ------------------------------------------------------------------------------------------------------------------------------
MARK HERE
[ ] FOR ADDRESS
CHANGE AND
NOTE AT LEFT
IMPORTANT: Whether or not you expect to attend the annual
meeting in person, please date, sign and return this proxy.
Please sign exactly as your name appears on this proxy card.
Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give your
full title in this capacity.
Signature: Signature:
--------------------------------------------------- ----------------------------------------------------
Date: Date:
-------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<PAGE> 31
- --------------------------------------------------------------------------------
DETACH HERE
ASSOCIATED MATERIALS INCORPORATED
PLEASE DATE AND SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<TABLE>
<S> <C>
The undersigned acknowledge(s) receipt of the Proxy Statement of Associated Materials Incorporated relating to the 1999
Annual Meeting of Stockholders (the "Annual Meeting") and hereby constitute(s) and appoint(s) William W. Winspear and Robert L
Winspear, attorneys and proxies of the undersigned, with full power of substitution and resubstitution to each and with all the
P powers the undersigned would possess if personally present, to vote for and in the name and place of the undersigned all shares
R of Common Stock of Associated Materials Incorporated held or owned by the undersigned, or standing in the name of the
O undersigned, at the Annual Meeting to be held on Thursday, May 20, 1999, commencing at 2:00 p.m., in the Keystone Room, 40th
X Floor Skylobby in the Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201, or any adjournment or postponement thereof, upon the
Y matters referred to in the Proxy Statement for the Annual Meeting as stated below and on the reverse side. The proxies are
further authorized to vote, in their discretion, upon such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof. Said attorneys and proxies present and acting at the Annual Meeting (or if only one shall
be present and act, then that one) shall have, and may exercise, all the powers of all said attorneys and proxies hereunder.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ASSOCIATED MATERIALS INCORPORATED. UNLESS OTHERWISE
SPECIFIED BELOW OR ON THE REVERSE SIDE, THIS PROXY WILL BE VOTED FOR THE NOMINEES OF THE BOARD OF DIRECTORS LISTED BELOW, FOR
THE APPROVAL OF THE ASSOCIATED MATERIALS INCORPORATED EMPLOYEE STOCK PURCHASE PLAN, FOR THE APPROVAL OF THE ASSOCIATED MATERIALS
INCORPORATED INCENTIVE BONUS PLAN AND FOR THE RATIFICATION OF ERNST & YOUNG LLP AS ASSOCIATED MATERIALS INCORPORATED'S
INDEPENDENT AUDITORS. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL
MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF TWO DIRECTORS to serve until Associated Materials Incorporated 2002 Annual Meeting of Stockholders. The
nominees are James F. Leary and A. A. Meitz.
2. APPROVAL OF THE ASSOCIATED MATERIALS INCORPORATED EMPLOYEE STOCK PURCHASE PLAN.
3. APPROVAL OF THE ASSOCIATED MATERIALS INCORPORATED INCENTIVE BONUS PLAN.
4. RATIFICATION OF THE APPOINTMENT of Ernst & Young LLP as independent auditors.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
</TABLE>
