<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 permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ASSOCIATED MATERIALS INCORPORATED
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
April 19, 2000
Dear Stockholders:
You are cordially invited to attend our annual stockholder meeting to be held at
2:00 p.m. on Thursday, May 25, 2000, in the Tyler Room on the 39th Floor of
Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201.
The proposals to be acted upon at the annual meeting include the election of
directors and the ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for 2000. I hope you will carefully read these
proposals, which are described in the accompanying proxy statement, and vote
your shares.
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
<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 25, 2000, starting at 2:00 p.m., in the Tyler Room on the 39th
Floor of Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201. This proxy
statement and the enclosed proxy card are first being mailed on or about April
19, 2000, 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 and FOR the ratification of the appointment of Ernst &
Young LLP as the Company's independent auditors.
RECORD DATE AND VOTING STOCK
March 30, 2000 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 6,469,270 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. William W. Winspear, Donald L. Kaufman, and Alan B. Lerner are
currently serving terms that expire at the Annual Meeting. The Board has
nominated Mr. Winspear, Mr. Kaufman and Mr. Lerner to continue to serve as
directors for terms expiring at Associated Materials' annual stockholders
meeting in 2003.
Unless a proxy specifies otherwise, the Proxy Committee will vote the
shares of common stock covered by the proxy for the election of Mr. Winspear,
Mr. Kaufman and Mr. Lerner.
DIRECTOR NOMINEES
WILLIAM W. WINSPEAR, AGE 66. Mr. Winspear has been Chairman of the Board,
President and Chief Executive Officer of the Company since its inception in
1983. Mr. Winspear was President and Chief Executive Officer of Chaparral Steel
Company from 1975 to 1982. Mr. Winspear is the father of Robert L. Winspear, the
Company's Vice President and Chief Financial Officer.
DONALD L. KAUFMAN, AGE 68. 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.
ALAN B. LERNER, AGE 69. 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 in 1993 as a Senior Executive Vice President of Associates Corporation
of North America, a consumer and commercial finance company, where he had been
employed since 1981.
CONTINUING DIRECTORS
RICHARD I. GALLAND, AGE 83. 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. 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 64. Mr. Gray became a director of the Company in 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 is
also a director of Lincoln Snacks, Inc., a snack food manufacturer and J.B.
Williams Co., a marketer of men's grooming and cold-care products. Mr. Gray
serves in the class of directors whose term of office expires at Associated
Materials' annual stockholders meeting in 2001.
JAMES F. LEARY, AGE 70. Mr. Leary became a director of the Company in
1984 and serves as a member of the Audit and Compensation Committees. Mr. Leary
is a managing director of Benefit Capital South West, Inc., a financial
consulting firm. From 1995 to 1998, Mr. Leary was Vice Chairman--Finance and a
director of Search Financial Services Inc., a consumer finance company. Mr.
Leary is also a director of Capstone Growth Fund and Capstone Fixed Income Fund,
Prospect St. High 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. Mr. Leary serves in
the class of directors whose term of office expires at Associated Materials'
annual stockholders meeting in 2002.
2
<PAGE> 5
A.A. MEITZ, AGE 63. 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 serves in the class of
directors whose term of office expires at Associated Materials' annual
stockholders meeting in 2002.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
BOARD OF DIRECTORS. The Board currently consists of seven members. During
1999, the Board of Directors held five 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 1999, each current Director attended
all Board and applicable committee meetings held during the period he was a
director, with the exception of John Gray who was unable to attend one Board
meeting.
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
1999. 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. The Compensation
Committee met once in 1999. 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.
3
<PAGE> 6
DIRECTOR COMPENSATION
Directors, including directors who are employees of the Company, receive an
annual retainer of $16,000 plus $3,000 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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of April 1, 2000, 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.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED PERCENTAGE
------------------------ --------- ----------
<S> <C> <C>
William W. Winspear (1).......................................... 3,797,242 58.7%
Richard I. Galland............................................... 29,667 *
John T. Gray (2)................................................. 7,500 *
Donald L. Kaufman (3) ........................................... 476,900 7.3%
James F. Leary .................................................. 2,000 *
Alan B. Lerner (2) .............................................. 55,000 *
A.A. Meitz (2)................................................... 40,000 *
Robert F. Hogan, Jr (2).......................................... 92,000 1.4%
Robert L. Winspear (2) (4) ...................................... 378,192 5.8%
All directors and executive officers as a group (9 persons)...... 4,578,309 67.9%
</TABLE>
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* Less than 1%.
1. Includes 2,911,165 shares of common stock held of record by the Winspear
Family Limited Partnership ("Winspear Partnership") and 100,000 shares of
common stock held of record by Winspear Family Investments, Ltd. ("Winspear
Investments"). Mr. Winspear is the trustee of a trust that is the general
partner of the Winspear Partnership and a general partner of Winspear
Investments. Also includes 376,709 shares of common stock held by a trust
established by Mr. Winspear's spouse, for which Mr. Winspear is the
trustee. Mr. Winspear disclaims beneficial ownership of the shares owned by
this trust. The address of Mr. Winspear, the Winspear Partnership and
Winspear Investments is 2200 Ross Avenue, Suite 4100 East, Dallas, Texas
75201.
2. Includes options to purchase common stock held by Mr. Gray (7,500 shares),
Mr. Hogan (12,000 shares), Mr. Lerner (40,000 shares), Mr. Meitz (40,000
shares) and Mr. R.L. Winspear (28,000 shares).
3. Includes options exercisable for 100,000 shares. Also includes 235,500
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.
4. Includes 252,182 shares held of record by Winspear Partnership and 98,010
shares held of record by Winspear Investments, as to which Mr. Winspear has
voting rights. Mr. Winspear disclaims beneficial ownership of the shares
owned by Winspear Investments. Mr. Winspear's address is 2200 Ross Avenue,
Suite 4100 East, Dallas, Texas 75201.
4
<PAGE> 7
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 19.3%
</TABLE>
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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.
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<PAGE> 8
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 1999, 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 1999. 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
$470,000 to $495,000 in February 1999. 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 1999
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 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 1999, the Company's chief executive officer earned a
cash bonus of $512,500.
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<PAGE> 9
In 1999, 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. No options were granted to the Company's
executive officers in 1999.
OTHER MATTERS
At the annual meeting in 1999, the Company submitted for stockholder
approval the Incentive Bonus Plan in order to minimize the impact of the $1
million deduction limitation on executive compensation which was implemented as
part of the Omnibus Budget Reconciliation Act of 1993. The stockholders approved
the Incentive Bonus Plan at the annual meeting last year. This Plan permits the
Company to continue its historical incentive compensation program while
maximizing the deductibility of the bonus payments under this Plan.
This report is submitted by the members of the Compensation Committee of
the Board.
THE COMPENSATION COMMITTEE OF THE BOARD
Richard I. Galland James F. Leary Alan B. Lerner A.A. Meitz
Chairman
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<PAGE> 10
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation paid by the Company for
services rendered in 1999, 1998 and 1997 by the chief executive officer and each
of the other executive officers of the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
------------------------------- -----------------
FISCAL SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS (2) COMPENSATION
- --------------------------- ---- ------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
William W. Winspear................... 1999 $492,917 $512,500 0 $ 36,000 (3)
Chairman of the Board, 1998 467,500 429,561 0 39,100
President and Chief 1997 436,667 342,930 0 31,600
Executive Officer
Donald L. Kaufman..................... 1999 $428,333 $293,451 0 $ 37,400 (4)
President and Chief 1998 407,917 242,031 0 33,500
Executive Officer of the 1997 378,333 209,529 100,000 26,000
Company's Alside division
Robert F. Hogan, Jr................... 1999 $238,750 $ 42,985 0 $ 5,600 (5)
President and Chief 1998 220,833 266,300 30,000 5,600
Executive Officer of the 1997 172,917 206,654 0 5,600
Company's AmerCable division
Robert L. Winspear.................... 1999 $181,667 $ 51,251 0 $ 5,600 (5)
Vice President and Chief 1998 141,458 42,956 20,000 4,951
Financial Officer 1997 100,816 34,293 0 3,529
</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 $31,000 and amounts accrued or allocated under
AmerCable's retirement plan of $5,600.
4. Represents directors fees of $31,000 and amounts accrued or allocated under
Alside's retirement plan of $6,400.
5. Represents amounts accrued or allocated under AmerCable's retirement plan.
COMPENSATION AND INCENTIVE PROGRAMS
INCENTIVE BONUS PLAN. The Company maintains an Incentive Bonus Plan
providing for annual bonus awards to certain key employees, including each of
the executive officers of the Company. 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 Incentive Bonus Plan are
not guaranteed. Cash bonuses accrued in 1999, 1998 and 1997 to each of the
Company's executive officers are set forth in the Summary Compensation Table.
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<PAGE> 11
ALSIDE PENSION 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 under this plan. Mr. Kaufman, who is age 68, would
be eligible to receive a monthly pension amount of approximately $14,730 when he
retires.
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 by the
Company for any reason.
OPTION/SAR GRANTS IN 1999
No stock options or stock appreciation rights were granted to the Company's
executive officers in 1999.
AGGREGATED OPTION/SAR EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION/SAR VALUES
The following table provides information regarding the exercise of options
during 1999 and unexercised options held as of December 31, 1999 for each of the
Company's executive officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT DECEMBER 31, 1999 (1) DECEMBER 31, 1999 (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 0 100,000 0 437,500 0
Robert F. Hogan 0 0 12,000 18,000 88,500 132,750
Robert L. Winspear 0 0 28,000 12,000 328,000 88,500
</TABLE>
- -----------------
1. The Company has not granted stock appreciation rights.
2. Based on a price of $16.375 per share of common stock, the closing sale
price on December 31, 1999, multiplied by the number of shares of common
stock issuable upon exercise of these options.
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<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS' AGREEMENT
Prudential, the 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.
10
<PAGE> 13
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
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
26-Feb-98 31-Mar-98 30-Jun-98 30-Sep-98 31-Dec-98 31-Mar-99 30-Jun-99 30-Sep-99 31-Dec-99
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Associated Materials 100 125.00 83.59 48.44 73.44 67.03 84.38 97.00 103.31
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S&P SmallCap 600/Index 100 101.70 103.03 80.06 94.40 94.75 109.37 85.54 99.40
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S&P SmallCap 600/Building Materials 100 103.50 104.85 81.48 96.08 96.43 111.31 87.06 101.12
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</TABLE>
11
<PAGE> 14
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)
Upon recommendation of the Audit Committee, the Board unanimously selected
Ernst & Young LLP to continue to serve as independent auditors for Associated
Materials for the fiscal year ending December 31, 2000, subject to ratification
by Associated Materials' stockholders. 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 a statement 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, 1999, all Section 16(a)
filing requirements applicable to the directors, executive officers and greater
than 10% stockholders were complied with by such persons.
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.
12
<PAGE> 15
STOCKHOLDER PROPOSALS
In order to be included in the Company's Proxy Statement for its Annual
Meeting of Stockholders in 2001, 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 21, 2000, 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 19, 2000
13
<PAGE> 16
- --------------------------------------------------------------------------------
ASSOCIATED MATERIALS INCORPORATED
Please date and sign on reverse side and return in the enclosed
postage-paid envelope.
The undersigned acknowledge(s) receipt of the Proxy Statement of Associated
Materials Incorporated relating to the 2000 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
powers the undersigned would possess if personally present, to vote for and
P in the name and place of the undersigned all shares of Common Stock of
R Associated Materials Incorporated held or owned by the undersigned, or
O standing in the name of the undersigned, at the Annual Meeting to be held
X on May 25, 2000, commencing at 2:00 p.m., in the Tyler Room on the 39th
Y Floor of Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201, or any
adjournment or postponement thereof, upon the 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 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 AND 2.
1. ELECTION OF THREE DIRECTORS to serve until Associated
Materials Incorporated 2003 Annual Meeting of Stockholders.
The nominees are William W. Winspear, Donald L. Kaufman and
Alan B. Lerner.
2. RATIFICATION OF THE APPOINTMENT of Ernst & Young LLP as
independent auditors.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
o FOLD AND DETACH HERE o
<PAGE> 17
- --------------------------------------------------------------------------------
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 and FOR proposal 2.
- --------------------------------------------------------------------------------
1. Election of Directors (See reverse).
FOR all WITHHOLD
nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees
[ ] [ ]
- ---------------------------------------------------
For all nominees except as noted above
2. Ratification of Ernst & Young LLP as independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE
[ ] FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Date:
----------------------------
Signature:
-----------------------
Signature:
-----------------------
IMPORTANT: Whether or not you
expect to attend the annual meeting
in person, please date, sign and
return this proxy. Joint owners
should each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title in this capacity.
o FOLD AND DETACH HERE o
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders, you
can be sure your shares are represented at the Annual Meeting by promptly
returning your proxy in the enclosed envelope.
