Document:

EX-10.4

 

Exhibit 10.4

 EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT (this “Agreement”), dated as of April 1, 2008, by and between
ASSOCIATED MATERIALS LLC, a Delaware limited liability company (as successor to Associated
Materials Incorporated, a Delaware corporation) (the “Company”), and a wholly owned
indirect subsidiary of AMH Holdings II, Inc., a Delaware corporation (“AMH II”), and
CYNTHIA L. SOBE, an individual residing in the State of Ohio (the “Executive”).

WITNESSETH:

          WHEREAS, the Company desires to continue to retain the services and employment of the
Executive on behalf of the Company, and the Executive desires to continue her employment with the
Company, upon the terms and conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for
good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto,
each intending to be legally bound hereby, agree as follows:

     1. Employment. On the terms and subject to the conditions set forth herein, the
Company hereby employs the Executive as the Vice President Chief Financial Officer of the Company,
and the Executive accepts such employment, for the Employment Term (as defined in Section 3).
During the Employment Term, the Executive shall serve as the Vice President and Chief Financial
Officer of the Company and shall report to the President and Chief Executive Officer of the
Company, performing such duties as shall be reasonably required of a vice president, and shall have
such other powers and perform such other duties as may from time to time be assigned to him by the
President and Chief Executive Officer of the Company and the Board of Directors of AMH II (the
“Board”). To the extent requested by the Company’s President and Chief Executive Officer
or the Board, the Executive shall also serve on any committee of the Board and/or as a director,
officer or employee of AMH II or any other person or entity which, from time to time, is a direct
or indirect subsidiary of AMH II (AMH II and each such subsidiary, person or entity, other than the
Company, are hereinafter referred to collectively as the “Affiliates,” and individually as
an “Affiliate”). The Executive’s service as a director of the Company or as a director,
officer or employee of any Affiliate shall be without additional compensation.

     2. Performance. The Executive will serve the Company faithfully and to the best of
her ability and will devote her full business time, energy, experience and talents to the business
of the Company and the Affiliates; provided, however, that it shall not be a violation of this
Agreement for the Executive to manage her personal investments and business affairs, or to engage
in or serve such civic, community, charitable, educational, or religious organizations as she may
reasonably select so long as such service does not interfere with the Executive’s performance of
her duties hereunder.

 

 

     3. Employment Term. Unless earlier terminated pursuant to Section 6, the Executive’s
term of employment hereunder shall begin on April 1, 2008 (hereinafter referred to as the
“Commencement Date”), and continue through the date which is one (1) year following the
Commencement Date (the “Initial Term”); provided that such term shall be automatically
extended for additional one (1) year periods commencing on the first day immediately following the
expiration date of the Initial Term and successively thereafter on the first day immediately
following the expiration of each such one-year period (each such period an “Additional
Term”) unless the Company shall have given notice to the Executive that the Company does not
desire to extend the term of this Agreement, such notice to be given at least thirty (30) days
prior to the end of the Initial Term or the applicable Additional Term (the Initial Term and any
Additional Terms, if applicable, collectively, the “Employment Term”).

     4. Compensation and Benefits.

               (a) Salary. As compensation for her services hereunder and in consideration of the
Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the
Executive a base salary, payable in equal installments in accordance with the Company’s payroll
procedures, at an annual rate of Two Hundred Twenty Five Thousand Dollars ($225,000), subject to
annual review by the Board or its Compensation Committee, which may increase, but not decrease, the
Executive’s base salary.

               (b) Annual Incentive Bonus; Stock Options. The Executive shall be entitled to
participate in an annual incentive bonus arrangement established by the Company on terms and
conditions substantially as set forth in Exhibit A hereto. The Executive shall not be
entitled to participate in any other annual cash bonus plan, program or arrangement with respect to
any period to which the annual incentive bonus arrangement described in the immediately preceding
sentence applies. The Executive shall also be entitled to participate in the stock option plan
established by AMH II.

               (c) Retirement, Medical, Dental and Other Benefits. During the Employment Term, the
Executive shall, in accordance with the terms and conditions of the applicable plan documents and
all applicable laws, be eligible to participate in the various retirement, medical, dental and
other employee benefit plans made available by the Company, from time to time, for its executives.

               (d) Vacation; Sick Leave. During the Employment Term, the Executive shall be entitled
to not less than three (3) weeks of vacation during each calendar year and sick leave in accordance
with the Company’s policies and practices with respect to its executives.

               (e) Business Expenses. The Company shall reimburse or advance payment to the
Executive for all reasonable expenses actually incurred by him in connection with the performance
of her duties hereunder in accordance with policies established by the Company from time to time
and subject to receipt by the Company of appropriate documentation.

     5. Covenants of the Executive. The Executive acknowledges that in the course of her
employment with the Company she has and will become familiar with the Company’s and the Affiliates’
trade secrets and with other confidential information concerning the Company and the

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Affiliates, and that her services are of special, unique and extraordinary value to the
Company and the Affiliates. Therefore, the Company and the Executive mutually agree that it is in
the interest of both parties for the Executive to enter into the restrictive covenants set forth in
this Section 5 and that such restrictions and covenants are reasonable given the nature of the
Executive’s duties and the nature of the Company’s business.

               (a) Noncompetition. During the Employment Term and for the two (2)-year period (the
“Restricted Period”) following termination of the Employment Term, the Executive shall not,
within any jurisdiction or marketing area in which the Company or any Affiliate is doing or is
qualified to do business, directly or indirectly, own, manage, operate, control, be employed by or
participate in the ownership, management, operation or control of, or be connected in any manner
with, any Business (as hereinafter defined), provided that the Executive’s ownership of securities
of two percent (2%) or less of any class of securities of a public company shall not, by itself, be
considered to be competition with the Company or any Affiliate. For purposes of this Agreement,
“Business” shall mean the manufacturing, production, distribution or sale of exterior
residential building products, including, without limitation, vinyl siding, windows, fencing,
decking, railings and garage doors, or any other business of a type and character engaged in by the
Company or an Affiliate during the Employment Term.

               (b) Nonsolicitation. During the Employment Term and for the Restricted Period
following termination of the Employment Term, the Executive shall not, directly or indirectly, (i)
employ, solicit for employment or otherwise contract for the services of any individual who is or
was an employee of the Company or any Affiliate during the Employment Term; (ii) otherwise induce
or attempt to induce any employee of the Company or an Affiliate to leave the employ of the Company
or such Affiliate, or in any way knowingly interfere with the relationship between the Company or
any Affiliate and any employee respectively thereof; or (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company or any Affiliate to cease
doing business with the Company or such Affiliate, or interfere in any way with the relationship
between any such customer, supplier, licensee or business relation and the Company or any
Affiliate.

               (c) Nondisclosure; Inventions. For the Employment Term and thereafter, (i) the
Executive shall not divulge, transmit or otherwise disclose (except as legally compelled by court
order, and then only to the extent required, after prompt notice to the Board of any such order),
directly or indirectly, other than in the regular and proper course of business of the Company and
the Affiliates, any customer lists, trade secrets or other confidential knowledge or information
with respect to the operations or finances of the Company or any Affiliates or with respect to
confidential or secret processes, services, techniques, customers or plans with respect to the
Company or the Affiliates (all of the foregoing collectively hereinafter referred to as,
“Confidential Information”), and (ii) the Executive will not use, directly or indirectly,
any Confidential Information for the benefit of anyone other than the Company and the Affiliates;
provided, however, that the Executive has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter shall become
available to the general public other than through disclosure by the Executive. All Confidential
Information, new processes, techniques, know-how, methods, inventions, plans, products, patents and
devices developed, made or invented by the Executive, alone or with others, while an employee of
the Company which are related to the business of the

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Company and the Affiliates shall be and become the sole property of the Company, unless
released in writing by the Board, and the Executive hereby assigns any and all rights therein or
thereto to the Company.

               (d) Nondisparagement. During the Employment Term and thereafter, the Executive shall
not take any action to disparage or criticize the Company or any Affiliate or their respective
employees, directors, owners or customers or to engage in any other action that injures or hinders
the business relationships of the Company or any Affiliate. Nothing contained in this Section 5(d)
shall preclude the Executive from enforcing her rights under this Agreement.

               (e) Return of Company Property. All Confidential Information, files, records,
correspondence, memoranda, notes or other documents (including, without limitation, those in
computer-readable form) or property relating or belonging to the Company or an Affiliate, whether
prepared by the Executive or otherwise coming into her possession in the course of the performance
of her services under this Agreement, shall be the exclusive property of the Company and shall be
delivered to the Company, and not retained by the Executive (including, without limitations, any
copies thereof), promptly upon request by the Company and, in any event, promptly upon termination
of the Employment Term.

               (f) Enforcement. The Executive acknowledges that a breach of her covenants contained
in this Section 5 may cause irreparable damage to the Company and the Affiliates, the exact amount
of which would be difficult to ascertain, and that the remedies at law for any such breach or
threatened breach would be inadequate. Accordingly, the Executive agrees that if she breaches or
threatens to breach any of the covenants contained in this Section 5, in addition to any other
remedy which may be available at law or in equity, the Company and the Affiliates shall be entitled
to specific performance and injunctive relief to prevent the breach or any threatened breach
thereof without bond or other security or a showing that monetary damages will not provide an
adequate remedy.

               (g) Scope of Covenants. The Company and the Executive further acknowledge that the
time, scope, geographic area and other provisions of this Section 5 have been specifically
negotiated by sophisticated commercial parties and agree that all such provisions are reasonable
under the circumstances of the activities contemplated by this Agreement. In the event that the
agreements in this Section 5 shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of time or over too great a
geographical area or by reason of their being too extensive in any other respect, they shall be
interpreted to extend only over the maximum period of time for which they may be enforceable and/or
over the maximum geographical area as to which they may be enforceable and/or to the maximum extent
in all other respects as to which they may be enforceable, all as determined by such court in such
action.

     6. Termination. The employment of the Executive hereunder shall automatically
terminate at the end of the Employment Term. The employment of the Executive hereunder and the
Employment Term may also be terminated at any time by the Company with or without Cause. For
purposes of this Agreement, except as otherwise provided in Section 8, “Cause” shall mean:
(i) embezzlement, theft or misappropriation by the Executive of any property of the Company or an
Affiliate; (ii) any breach by the Executive of the Executive’s covenants under

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Section 5; (iii) any breach by the Executive of any other material provision of this Agreement
which breach is not cured, to the extent susceptible to cure, within thirty (30) days after the
Company has given notice to the Executive describing such breach; (iv) willful failure by the
Executive to perform the duties of her employment hereunder which continues for a period of
fourteen (14) days following written notice thereof by the Company to the Executive; (v) the
conviction of, or a plea of nolo contendere (or a similar plea) to, any criminal offense that is a
felony or involves fraud, or any other criminal offense punishable by imprisonment of at least one
year or materially injurious to the business or reputation of the Company involving theft,
dishonesty, misrepresentation or moral turpitude; (vi) gross negligence or willful misconduct on
the part of the Executive in the performance of her duties as an employee, officer or director of
the Company or an Affiliate; (vii) the Executive’s breach of her fiduciary obligations to the
Company or an Affiliate; (viii) the Executive’s commission of intentional, wrongful damage to
property of the Company or an Affiliate; (ix) any chemical dependence of the Executive which
adversely affects the performance of her duties and responsibilities to the Company or an
Affiliate; or (x) the Executive’s violation of the Company’s or an Affiliate’s code of ethics, code
of business conduct or similar policies applicable to the Executive. The existence or
non-existence of Cause shall be determined in good faith by the Board. The employment of the
Executive may also be terminated at any time by the Executive by notice of resignation delivered to
the Company not less than ninety (90) days prior to the effective date of such resignation.

     7. Severance. Except as otherwise provided in Section 8, if the Executive’s
employment hereunder is terminated during the Employment Term by the Company or is terminated due
to expiration of the Employment Term following notice by the Company not to extend the Employment
Term in accordance with Section 3, in each case other than for Cause or due to disability (as
determined in the good faith discretion of the Board) or death, the Executive shall be entitled to
receive as severance (subject to Section 9): (i) an amount equal to the Executive’s base salary as
in effect immediately prior to the date of the Executive’s termination of employment for twelve
(12) months, payable, commencing no later than sixty (60) days following such termination, in equal
installments in accordance with the Company’s payroll procedures during the twelve months following
the date of the Executive’s termination (such twelve-month period, the “Severance Period”);
(ii) continued medical and dental benefits described in Section 4(c) for the Severance Period, at
the same rate of employee and Company shared costs of such coverage as in effect from time to time
for active employees of the Company; and (iii) a pro rata portion (based on the number of days the
Executive was employed by the Company during the calendar year of termination) of any incentive
bonus otherwise payable in accordance with Section 4(b) for the year of termination of the
Executive’s employment, payable no earlier than the date on which such bonus, if any, would have
been paid under the applicable plan or policy of the Company absent such termination of employment,
but no later than March 15 of the calendar year immediately following the calendar year of such
termination. With respect to any such continued medical and dental benefits described in clause
(ii) of the first sentence of this Section 7 for which the Executive is eligible, (I) if the
Company cannot continue such benefits, the Company shall pay the Executive for the cost of such
benefits; (II) such benefits shall be discontinued in the event the Executive becomes eligible for
similar benefits from a successor employer (and the Executive’s eligibility for any such benefits
shall be reported by the Executive to the Company); and (III) the Executive’s period of
“continuation coverage” for purposes of Section 4980B of the Internal Revenue Code of 1986, as
amended (the

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“Code”), shall be deemed to commence on the date of the Executive’s termination of
employment.

     8. Change in Control. This Section 8 will be binding upon the date of this Agreement,
but notwithstanding anything in this Agreement to the contrary, this Section 8 will not be
operative unless and until a Change in Control occurs. Upon the occurrence of a Change in Control
at any time during the Employment Term, this Section 8 shall become immediately operative without
further action; provided, however, that if, prior to a Change in Control, the Executive ceases for
any reason to be an employee of the Company and any Affiliate, the effectiveness of this Section 8
will immediately terminate without further action and be of no further effect. Certain capitalized
terms used in this Section 8 are defined for purposes of this Section 8 in Section 8(e).

               (a) Termination Following a Change in Control. In the event of a Change in Control,
if the Executive’s employment is terminated by the Company or an Affiliate during the Post-Change
Period, the Executive shall be entitled to the benefits provided by Section 8(c) unless such
termination is the result of the occurrence of one or more of the following events:

	 	(i)	 	The Executive’s death;
	 
	 	(ii)	 	If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive disability
benefits under, the long-term disability plan applicable to the
Executive immediately prior to the Change in Control; or
	 
	 	(iii)	 	Cause (as defined in Section 8(e)(i)).

	 	 	If, during the Post-Change Period, the Executive’s employment is terminated by the Company
or an Affiliate as described in clause (i), (ii) or (iii) of this Section 8(a), the
Executive will not be entitled to the benefits provided by Section 8(c).

               (b) Termination by Executive. In the event of a Change in Control, the Executive may
terminate employment with the Company during the Post-Change Period with the right to severance
compensation as provided in Section 8(c) upon the occurrence of one or more of the following events
(regardless of whether any other reason, other than death, permanent disability or Cause, for such
termination has occurred, including other employment):

	 	(i)	 	the failure to maintain the Executive in the position, or a
substantially equivalent or superior position, with the Company and/or with a
direct or indirect parent company of the Company that the Executive held
immediately prior to the Change in Control, which is not remedied by the
Company within 10 calendar days after receipt by the Company of notice from the
Executive of such failure;
	 
	 	(ii)	 	(A) a reduction in the Executive’s base salary pursuant to
Section 4(a) hereof or (B) the termination or significant reduction in the
aggregate of the Executive’s right to participate in employee benefit plans or
programs

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	 		 	of the Company as in effect prior to the Change in Control (other than
Incentive Pay (as hereinafter defined) or any other bonus, incentive or
stock or equity-based compensation or benefits), in either case which is not
remedied by the Company within 10 calendar days after receipt by the Company
of notice from the Executive of such reduction or termination;
	 
	 	(iii)	 	a reduction or elimination of the Executive’s opportunity to
earn Incentive Pay pursuant to any plan or program in effect immediately prior
to the Change in Control which is not remedied by the Company within 10
calendar days after receipt by the Company of notice from the Executive of such
reduction or elimination (for the avoidance of doubt, changes in the value or
performance of the Company or an Affiliate or successor of either following the
Change in Control shall not be considered a reduction or elimination of the
Executive’s opportunity to earn Incentive Pay); or
	 
	 	(iv)	 	the Company requires the Executive to have her principal place
of work changed to any location that is more than 35 miles from the location
thereof immediately prior to the Change in Control, without her prior written
consent.

               (c) Change in Control Severance. If, following the occurrence of a Change in Control,
the Company or an Affiliate terminates the Executive’s employment during the Post-Change Period
other than as described in clause (i), (ii) or (iii) of Section 8(a), or if the Executive
terminates her employment pursuant to Section 8(b), the Executive shall not be entitled to the
severance compensation described in Section 7, and, subject to Section 9, the Company will (i) pay
or cause to be paid to the Executive the amounts described in Sections 8(c)(1), 8(c)(2), 8(c)(3),
and 8(c)(6) in a lump-sum no later than sixty (60) days after the Termination Date; (ii) pay or
cause to be paid to the Executive the amount described in Section 8(c)(4), such amount to be
payable no earlier than the date on which such Incentive Pay, if any, would have been paid under
the applicable plan or policy of the Company absent such termination of employment, but no later
than March 15 of the calendar year immediately following the calendar year of the Termination Date;
and (iii) provide the Executive the benefits described in Section 8(c)(5) for the period described
therein. The foregoing to the contrary notwithstanding, if the Executive is entitled to payments
under this Section 8(c) following a Change in Control that does not constitute a “change in the
ownership or effective control” of the relevant company or a “change in the ownership of a
substantial portion of the assets” of the relevant company, as such terms are used in Code Section
409A(a)(2)(A)(v), then an amount equal to the amount that would have been paid under Section 7(i)
had a Change in Control not occurred shall be paid in installments during the twelve (12) month
period following the Termination Date, and the remaining amounts described in clause (i) of this
Section 8(c) above (reduced by the amount so paid in installments) shall be paid in a lump-sum,

	 	(1)	 	A lump sum payment in an amount equal to all Base Pay and
Incentive Pay (other than for the calendar year of such termination of
employment) owed to the Executive for periods on or prior to the Termination
Date.

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	 	(2)	 	A lump sum payment in an amount equal to two times the
Executive’s base salary pursuant to Section 4(a) (at the rate in effect
immediately prior to the Termination Date).
	 
	 	(3)	 	A lump sum payment equal to two times Incentive Pay (in an
amount equal to the highest amount of Incentive Pay earned by the Executive in
any calendar year during the three calendar years immediately preceding the
calendar year in which the Change in Control occurred).
	 
	 	(4)	 	In the event that the Termination Date occurs after June 30 in
any calendar year, a lump sum payment equal to one times Incentive Pay for such
calendar year, multiplied by a fraction, the numerator of which is the number
of days between (and including) January 1 of the calendar year in which the
Termination Date occurs and the Termination Date, and the denominator of which
is 365.
	 
	 	(5)	 	For a period of 24 months following the Termination Date (the
“Continuation Period”), the Company will provide the Executive with
medical, dental and life insurance benefits consistent with the terms in effect
for such benefits for active employees of the Company during the Continuation
Period. If and to the extent that any benefit described in this Section
8(c)(5) is not or cannot be paid or provided under any Company plan or program,
then the Company will pay or provide for the payment to the Executive, her
dependants and beneficiaries, of such employee benefits. Without otherwise
limiting the purposes of Section 8(d), employee benefits otherwise receivable
by the Executive pursuant to this Section 8(c)(5) will be reduced to the extent
comparable welfare benefits are actually received by the Executive from another
employer during the Continuation Period following the Executive’s Termination
Date, and any such benefits actually received by the Executive shall be
reported by the Executive to the Company. The foregoing to the contrary
notwithstanding, to the extent required in order to comply with Section 409A of
the Code, in no event shall any such benefits be provided beyond the end of the
second calendar year that begins after the Executive’s “separation from
service” within the meaning of Section 409A of the Code.
	 
	 	(6)	 	The Company will pay to the Executive the cost of employee
outplacement services for the Executive in the amount of $30,000.

               (d) No Mitigation Obligation; Effect on Other Rights The payment of the severance
compensation by the Company to the Executive in accordance with the terms of this Section 8 is
hereby acknowledged by the Company to be reasonable, and the Executive will not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking other employment or
otherwise, except as expressly provided in the last sentence of Section 8(c)(5). This Section 8
will not affect any rights (other than any rights to severance, termination, retention or similar
compensation or benefits) that the Executive may have pursuant to any

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agreement, plan or policy of the Company or a subsidiary thereof providing employee benefits,
which rights shall be governed by the terms thereof.

               (e) Certain Defined Terms. The following terms have the following meanings when used
in this Section 8:

	 	(i)	 	“Cause” means that, prior to any termination pursuant
to Section 8(b), the Executive shall have:

	 	(1)	 	been convicted of a criminal violation
involving fraud, embezzlement or theft;
	 
	 	(2)	 	committed intentional wrongful damage to
property of the Company or any Affiliate; or
	 
	 	(3)	 	committed intentional wrongful disclosure of
confidential information of the Company or any Affiliate.
	 
	 	 	 	Nothing herein will limit the right of the Executive or her
beneficiaries to contest the validity of any determination by the
Company to terminate the Executive for Cause.

	 	(ii)	 	“Change in Control” means (A) a stock sale, merger,
consolidation, combination, reorganization or other transaction involving the
Company resulting in less than fifty percent (50%) of the combined voting power
of the surviving or resulting entity being owned by the owner or owners of the
Company immediately prior to such transaction; (B) a stock sale, merger,
consolidation, combination, reorganization or other transaction involving AMH
II, AMH Holdings, Inc. (“AMH”) or Associated Materials Holdings, LLC
(“Parent”) resulting in less than fifty percent (50%) of the combined
voting power of the surviving or resulting entity being owned by the
shareholders or owners of AMH II, AMH or Parent, as applicable, immediately
prior to such transaction or (C) the liquidation or dissolution of the Company,
AMH II, AMH or Parent or the sale or other disposition of all or substantially
all of the assets or business of the Company, AMH II, AMH or Parent (other
than, in the case of either clause (A), (B) or (C) above, in connection with
any employee benefit plan of the Company or an Affiliate).
	 
	 	(iii)	 	“Incentive Pay” means an annual cash bonus or annual
cash incentive compensation, in addition to base salary, made or to be made in
regard to services rendered in any year or other period pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the Company or
an Affiliate, or any successor thereto; provided that the Incentive Pay
shall not include any stock options or other stock-based compensation or any
special management bonuses paid in connection with any debt offering or
recapitalization of AMH II and/or another Affiliate.

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	 	 	 	For the avoidance of doubt, as of the date hereof, Incentive Pay shall mean
the annual incentive bonus arrangement described in Section 4(b).
	 
	 	(iv)	 	“Post-Change Period” means the period of time
commencing on the date of the first occurrence of a Change in Control and
continuing until the second anniversary of the occurrence of such Change in
Control.
	 
	 	(v)	 	“Termination Date” means the date on which the
Executive’s employment with the Company or an Affiliate is terminated.

     9. Termination of Compensation and Benefits; Execution of Release; Coordination of
Provisions. If the Executive’s employment terminates otherwise than in a termination entitling
him to severance pay and benefits pursuant to Section 7 or Section 8, the Executive shall not be
entitled to any severance, termination pay or similar compensation or benefits, provided that the
Executive shall be entitled to any benefits then due or accrued in accordance with the applicable
employee benefit plans of the Company or applicable law, including “continuation coverage” under
the Company’s group health plans for purposes of Section 4980B of the Code. As a condition of
receiving any severance compensation for which the Executive otherwise qualifies under Section 7 or
Section 8, the Executive agrees to execute within sixty (60) days following the date of the
Executive’s termination of employment a general release of the Company and the Affiliates and their
respective officers, directors and employees from any and all claims, obligations and liabilities
of any kind whatsoever, including, without limitation, those arising from or in connection with the
Executive’s employment or termination of employment with the Company or this Agreement (including,
without limitation, civil rights claims), in such form as is requested by the Company, such release
to be delivered, and to have become fully irrevocable, on or before the end of such sixty (60)-day
period. It is expressly agreed and understood that if such a release has not been executed and
delivered and become fully irrevocable by the end of such sixty (60)-day period, no amounts or
benefits under Section 7 or 8 shall be or become payable (except that any continued medical, dental
or life insurance benefits may be provided during such sixty (60)-day period pursuant to Section 7
or 8, as the case may be, but will cease to be provided on the last day of such period). Any
severance compensation and benefits to which the Executive may be entitled under Section 8 shall be
in lieu of any severance compensation or benefits to which the Executive may be entitled under
Section 7. The Executive acknowledges and agrees that, except as specifically described in Section
7 and Section 8, all of the Executive’s rights to any compensation, benefits (other than base
salary earned through the date of termination of employment and any benefits due or accrued prior
to termination of employment in accordance with the applicable employee benefit plans of the
Company or applicable law), bonuses or severance from the Company or any Affiliate after
termination of the Employment Term shall cease upon such termination.

     10. Limitation on Payments and Benefits. Notwithstanding any provision of this
Agreement to the contrary, no amount or benefit shall be paid or provided under this Agreement to
an extent or in a manner that would result in payments or benefits (or other compensation) not
being fully deductible by the Company or an Affiliate for federal income tax purposes because of
Section 280G of the Code, or any successor provision thereto (or that would result in the Executive
being subject to the excise tax imposed by Section 4999 of the Code, or any successor provision
thereto). The determination of whether any such payments or benefits to be provided

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under this Agreement or otherwise would not be so deductible (or whether the Executive would
be subject to such excise tax) shall be made at the expense of the Company, if requested by either
the Executive or the Company, by a firm of independent accountants or a law firm selected by the
Company and reasonably acceptable to the Executive. In the event that any payment or benefit
intended to be provided under this Agreement or otherwise would constitute a “parachute payment,”
as defined in Section 280G of the Code, the Executive shall be entitled to designate the payments
and/or benefits (beginning with cash payments) to be reduced or modified so that the Company or an
Affiliate is not denied any federal income tax deductions for any such parachute payment because of
Section 280G of the Code (or so that the Executive is not subject to the excise tax imposed by
Section 4999 of the Code). The Company shall provide the Executive with all information reasonably
requested by the Executive to permit the Executive to make such designation. In the event that the
Executive fails to make such designation within 10 business days of the date her employment with
the Company or an Affiliate terminates, the Company may effect such reduction in any manner it
deems appropriate (beginning with cash payments).

     11. Notice. Any notices required or permitted hereunder shall be in writing and shall
be deemed to have been given when personally delivered or when mailed, certified or registered
mail, or sent by reputable overnight courier, postage prepaid, to the addresses set forth as
follows:

	 	 	 
	If to the Company:

	 	Associated Materials LLC
	 

	 	3773 State Road
	 

	 	Cuyahoga Falls, Ohio 44223
	 
	 	 
	With copies to:

	 	Harvest Partners, LLC
	 

	 	280 Park Avenue, 33rd Floor
	 

	 	New York, New York 10017
	 

	 	Attention: Ira D. Kleinman
	 
	 	 
	and

	 	Investcorp International Inc.
	 

	 	280 Park Avenue, 36th Floor
	 

	 	New York, New York 10017
	 

	 	Attention: Thomas Sullivan
	 
	 	 
	and

	 	White & Case LLP
	 

	 	1155 Avenue of the Americas
	 

	 	New York, New York 10036
	 

	 	Attention: Oliver C. Brahmst, Esq.
	 
	 	 
	If to the Executive:

	 	Cynthia L. Sobe
	 

	 	4803 Heights Drive
	 

	 	Stow, OH 44224

or to such other address as shall be furnished in writing by either party to the other party;
provided that such notice or change in address shall be effective only when actually received by
the other party.

-11-

 

     12. General.

               (a) Governing Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York applicable to contracts executed
and to be performed entirely within said State.

               (b) Construction and Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or impaired, and the
parties undertake to implement all efforts which are necessary, desirable and sufficient to amend,
supplement or substitute all and any such invalid, illegal or unenforceable provisions with
enforceable and valid provisions which would produce as nearly as may be possible the result
previously intended by the parties without renegotiation of any material terms and conditions
stipulated herein.

               (c) Assignability. The Executive may not assign her interest in or delegate her
duties under this Agreement. This Agreement is for the employment of the Executive, personally,
and the services to be rendered by him under this Agreement must be rendered by him and no other
person. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the
Company and its successors and assigns. Without limiting the foregoing and notwithstanding
anything else in this Agreement to the contrary, the Company may assign this Agreement to, and all
rights hereunder shall inure to the benefit of, any subsidiary of the Company or any person, firm
or corporation resulting from the reorganization of the Company or succeeding to the business or
assets of the Company by purchase, merger, consolidation or otherwise.

               (d) Warranty by the Executive. The Executive represents and warrants to the Company
that the Executive is not subject to any contract, agreement, judgment, order or decree of any
kind, or any restrictive agreement of any character, that restricts the Executive’s ability to
perform her obligations under this Agreement or that would be breached by the Executive upon her
performance of her duties pursuant to this Agreement.

               (e) Compliance with Rules and Policies. The Executive shall perform all services in
accordance with the lawful policies, procedures and rules established by the Company and the Board.
In addition, the Executive shall comply with all laws, rules and regulations that are generally
applicable to the Company or its subsidiaries and their respective employees, directors and
officers.

               (f) Withholding Taxes. All amounts payable hereunder shall be subject to the
withholding of all applicable taxes and deductions required by any applicable law.

               (g) Entire Agreement; Modification. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof, supersedes all prior agreements
and undertakings, both written and oral, and may not be modified or amended in any way except in
writing by the parties hereto. As of the date hereof, the Severance Agreement, dated as of July
27, 2004, between the Company and the Executive shall be cancelled and be of no further force or
effect, without the payment of any additional consideration by or to either of the parties thereto.

-12-

 

               (h) Duration. Notwithstanding the Employment Term hereunder, this Agreement shall
continue for so long as any obligations remain under this Agreement.

               (i) Survival. The covenants set forth in Section 5 and the parties’ respective rights
and obligations under Section 8 shall survive and shall continue to be binding upon the Executive
and the Company, as the case may be, notwithstanding the termination or expiration of this
Agreement or the termination of the Executive’s employment following a Change in Control for any
reason whatsoever.

               (j) Waiver. No waiver by either party hereto of any of the requirements imposed by
this Agreement on, or any breach of any condition or provision of this Agreement to be performed
by, the other party shall be deemed a waiver of a similar or dissimilar requirement, provision or
condition of this Agreement at the same or any prior or subsequent time. Any such waiver shall be
express and in writing, and there shall be no waiver by conduct. Pursuit by either party of any
available remedy, either in law or equity, or any action of any kind, does not constitute waiver of
any other remedy or action. Such remedies are cumulative and not exclusive.

               (k) Counterparts. This Agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.

               (l) Section References. The words Section and paragraph herein shall refer to
provisions of this Agreement unless expressly indicated otherwise.

          IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed
this Agreement as of the day and year first written above.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	ASSOCIATED MATERIALS LLC	 	 
	 
	 	 	 	 	 	 	 	 
	Date: April 1, 2008

	 	
	 	By:
	 	/s/ Thomas N. Chieffe	 	 
	 

	 	 

	 	 	 	 

Name: Thomas N. Chieffe
	 	 
	 

	 	 	 	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	CYNTHIA L. SOBE	 	 
	 
	 	 	 	 	 	 	 	 
	Date: April 1, 2008

	 	
	 	 	 	/s/ Cynthia L. Sobe	 	 
	 

	 	 
	 	 	 	 	 	 

-13-

 

Exhibit A

Annual Incentive Bonus

          The Executive’s annual incentive bonus for each calendar year during the Employment Term shall
be a percentage of the Executive’s base salary based upon the achievement by AMH II of annual
EBITDA Hurdles, or such other financial measures as may be established by the Board or its
Compensation Committee, with respect to the applicable calendar year, as follows:

	 	 	 
	Achievement of EBITDA Hurdles	 	Percentage of Base Salary
	 	 	 
	Less than threshold
	 	Zero
	 	 	 
	Threshold
	 	20.00%
	 	 	 
	Target
	 	60.00%
	 	 	 
	Maximum
	 	100.00%

          If the actual EBITDA for a particular calendar year is between two EBITDA Hurdles, the
applicable percentage of base salary shall be determined by linear interpolation based on the
difference between such EBITDA Hurdles. For the avoidance of doubt, in no event shall the annual
incentive bonus exceed 100% of base salary. For purposes of the Executive’s annual incentive bonus
and the computation thereof:

	1.	 	Base salary shall mean the annual rate of base salary in effect under this Agreement as of
April 1 of the calendar year to which the bonus relates.
	 
	2.	 	“EBITDA Hurdle” means threshold, target and maximum amounts of EBITDA with respect to a
calendar year, as determined in good faith by the Board or its Compensation Committee. EBITDA
Hurdles shall be adjusted consistent with the definition of EBITDA, in the discretion of the
Board or its Compensation Committee.
	 
	3.	 	EBITDA shall mean the consolidated net income of AMH II, adjusted to exclude deduction of
interest expense (net of interest income), income taxes, depreciation and amortization and the
Harvest Fee pursuant to the Management Agreement, dated as of April 19, 2002, between Harvest
Partners, Inc. and Associated Materials Incorporated, as amended from time to time, and to
exclude gain or loss from sale of capital assets, and including deduction of all bonuses paid
or accrued with respect to the Executive and all other officers and employees of AMH II and
its subsidiaries (including, without limitation, the Executive’s bonus hereunder), for the
relevant calendar year, calculated otherwise in accordance with generally accepted accounting
principles, subject to any adjustments made in good faith by the Board or its Compensation
Committee. EBITDA shall be determined by the Company’s management, subject to audit or review
by AMH II’s external accountants and approval, in good faith, by the Board or its Compensation
Committee. EBITDA shall exclude, without duplication, any transaction- or merger-related
costs which are expensed rather than capitalized; any revenue, expense, gain or

-14-

 

	 	 	loss from operations divested during the relevant calendar year; the effect of inventory
write-ups made due to purchase accounting; and any other non-recurring, extraordinary items
subject to approval, in good faith, by the Board or its Compensation Committee. EBITDA
shall be adjusted to reflect acquisitions, divestitures and other similar transactions
involving AMH II or its subsidiaries, in the discretion of the Board or its Compensation
Committee.
	 
	4.	 	Any annual incentive bonus to which the Executive is entitled under this Agreement for any
calendar year shall be paid in a cash lump-sum within thirty days following the close of AMH
II’s books and completion of AMH II’s annual audit by its external accountants for such
calendar year but in any event shall not be paid later than March 15 of the calendar year
immediately following the calendar year to which the bonus relates.

The Executive’s entitlement to an annual incentive bonus shall be determined by the Board or its
Compensation Committee in good faith in accordance with this Exhibit A.

-15-EX-4.1

 

EXHIBIT 4.1

United Community Financial Corp.

2007 LONG-TERM INCENTIVE PLAN

INDEX

	 	 	 
	SECTION	 	DESCRIPTION	 
	 
	 	 
	1

	 	Purpose of the Plan
	2

	 	Definitions
	3

	 	Types of Awards Covered
	4

	 	Administration
	5

	 	Eligibility
	6

	 	Shares of Stock Subject to the Plan
	7

	 	Stock Options
	8

	 	Stock Appreciation Rights
	9

	 	Restricted Stock
	10

	 	Performance Awards
	11

	 	Other Stock-Based Incentive Awards
	12

	 	Rights in the Event of Resignation,
Removal or Termination
	13

	 	Rights in Event of Death, Disability or Retirement
	14

	 	Award Agreements
	15

	 	Tax Withholding
	16

	 	Change of Control
	17

	 	Dilution or Other Adjustment
	18

	 	Transferability
	19

	 	Amendment, Termination or Modification
	20

	 	General Provisions
	21

	 	Plan Effective Date
	22

	 	Plan Termination
	23

	 	Governing Law

 

 

United Community Financial Corp.

2007 LONG-TERM INCENTIVE PLAN

SECTION 1

Purpose of the Plan

	1.1	 	The purpose of the United Community Financial Corp. 2007 Long-Term Incentive Plan is to
attract and retain qualified directors, directors emeritus and employees and to strengthen the
mutuality of interests between such directors, directors emeritus and employees and the
Corporation’s shareholders by providing directors, directors emeritus and employees with a
proprietary interest in pursuing the long-term growth, profitability and financial success of
the Corporation.

SECTION 2

Definitions

	2.1	 	Unless the context indicates otherwise, the following terms, when used in this Plan, shall
have the meanings set forth in this Section:

	 	a)	 	“Affiliate” means (i) a member of a controlled group of corporations of
which the Corporation is a member or (ii) an unincorporated trade or business which
is under common control with the Corporation as determined in accordance with
Section 414(c) of the Code, and the regulations issued thereunder. For purposes
hereof, a “controlled group of corporations” shall have the meaning set forth in
Section 1563(a) of the Code determined without regard to Sections 1563(a)(4) and
(e)(3)(c) of the Code.
	 
	 	b)	 	“Award” means a grant or award under this Plan in the form of an
Option, an SAR, Restricted Shares, a Performance Award or any other stock-based
incentive award.
	 
	 	c)	 	“Board” means the Board of Directors of the Corporation.
	 
	 	d)	 	“Change of Control” means an event defined in Section 16 of this Plan.
	 
	 	e)	 	“Code” means the Internal Revenue Code of 1986, as amended, and related
Treasury Regulations.
	 
	 	f)	 	“Committee” means any Committee comprised of two or more Outside
Directors designated by the Board to administer the Plan in accordance with Section
4 of this Plan.
	 
	 	g)	 	“Common Shares” means the common shares, without par value, of the
Corporation.
	 
	 	h)	 	“Corporation” means United Community Financial Corp.
	 
	 	i)	 	“Deferred Shares” means an award made pursuant to Section 11 of this
Plan of the right to receive Common Shares in lieu of cash thereof at the end of a
specified time period.
	 
	 	j)	 	“Director” means any member of the Board of Directors of the
Corporation or the Board of Directors of a Subsidiary.
	 
	 	k)	 	“Director Emeritus” means any director emeritus of the Corporation or a
Subsidiary.
	 
	 	l)	 	“Disability” means permanent and total disability within the meaning of
Section 22(e)(3) of the Code.
	 
	 	m)	 	“Effective Date” means the date defined in Section 21.1 of this Plan.

 

 

	 	n)	 	“Employee” means any full-time employee of the Corporation or any of
its Subsidiaries (including Directors or Directors Emeritus who are employed on a
full-time basis by the Corporation or any of its Subsidiaries).
	 
	 	o)	 	 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
	 
	 	p)	 	“Fair Market Value” of a Common Share on a given date shall be based
upon the last sales price or, if unavailable, the average of the closing bid and
asked prices of a Common Share on such date (or, if there was no trading or
quotation in the Common Shares on such date, on the next preceding date on which
there was trading or quotation) if the Common Shares are listed on a national
securities exchange or quoted on an interdealer quotation system. If the Common
Shares are not listed on a national securities exchange or quoted on an interdealer
quotation system, the Fair Market Value of a Common Share shall be determined by
the Committee in good faith based upon the best available facts and circumstances
at the time.
	 
	 	q)	 	“Grantee” means a person granted an Award under this Plan.
	 
	 	r)	 	“Immediate Family” means, with respect to a given Grantee, that
Grantee’s parents, spouse, brothers, sisters, children or grandchildren (including
adopted children or grandchildren).
	 
	 	s)	 	“ISO” means an Award that is intended to qualify as an incentive stock
option under Section 422 of the Code, as now or hereafter constituted.
	 
	 	t)	 	“Non-Employee Director” means a Director or Director Emeritus of the
Corporation or a Subsidiary who is not an Employee nor has been an Employee at any
time during the prior one-year period.
	 
	 	u)	 	“NQSO” means an Award that is not intended to qualify as an incentive
stock option under Section 422 of the Code, as now or hereafter constituted.
	 
	 	v)	 	“Options” refers collectively to NQSOs and ISOs issued under this Plan.
	 
	 	w)	 	“OTS” means the Office of Thrift Supervision, Department of the
Treasury.
	 
	 	x)	 	“Outside Director” means a non-employee Director or Director Emeritus
within the meaning of Rule 16b-3(b)(3) under the Exchange Act, or any successor
thereto, who is also an “outside director” within the meaning of Section 162(m) of
the Code and the regulations thereunder.
	 
	 	y)	 	“Performance Award” means an Award under the Plan, payable in cash,
Common Shares, other securities or other awards which confers on the holder thereof
the right to receive payments upon the achievement of certain performance goals
during the performance periods established by the Committee.
	 
	 	z)	 	“Permitted Transferee” means any individual or entity as defined in
Section 18.2 of this Plan.
	 
	 	aa)	 	“Plan” means this 2007 Long-Term Incentive Plan as set forth herein and
as amended from time to time.
	 
	 	bb)	 	“Restricted Shares” means an Award of Common Shares subject to
restrictions on transfer and/or any other restrictions on incidents of ownership as
the Committee may determine.
	 
	 	cc)	 	“Retirement” means the retirement of a Grantee between ages 60 and 64
with 15 or more years of service to the Corporation or a Subsidiary, or the
retirement of a Grantee at or after age 65, or as such meaning may be modified by
the Committee or Board in the future.
	 
	 	dd)	 	“Rules” means Rule 16(b)(3) and any successor provisions promulgated by
the Securities and Exchange Commission under Section 16 of the Exchange Act.

 

 

	 	ee)	 	“SAR” means an Award constituting the right to receive, upon surrender
of the right, but without payment, an amount payable in stock or cash, as
determined by the Committee.
	 
	 	ff)	 	“Subsidiary or Subsidiaries” means any entity or entities in which the
Corporation owns a majority of the voting power.
	 
	 	gg)	 	“Ten Percent Shareholder” means any Grantee who owns more than 10% of
the combined voting power of all classes of stock of the Corporation, within the
meaning of Section 422 of the Code.
	 
	 	hh)	 	“Terminated for Cause” means any removal of a Director or discharge of
an Employee for personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of a material provision of any law, rule or regulation
(other than traffic violations or similar offenses) or a material violation of a
final cease-and-desist order or for any other action of a Director or Employee
which results in a substantial financial loss to the Corporation or a Subsidiary.

SECTION 3

Types of Awards Covered

	3.1	 	Awards granted under this Plan may be:

	 	a)	 	Options which may be designated as:

	 	(i)	 	NQSOs; or
	 
	 	(ii)	 	ISOs;

	 	b)	 	SARs;
	 
	 	c)	 	Restricted Shares;
	 
	 	d)	 	Performance Awards; or
	 
	 	e)	 	other forms of stock-based incentive awards.

SECTION 4

Administration

	4.1	 	This Plan shall be administered by the Committee. The members of the Committee shall be
appointed from time to time by the Board. Members of the Committee shall serve at the
pleasure of the Board, and the Board may from time to time remove members from, or add members
to, the Committee. Subject to the provisions of this Plan and applicable law, the Committee
shall have full discretion and the exclusive power to:

	 	a)	 	select the Employees, Directors and Directors Emeritus who will
participate in the Plan and to make Awards to such Employees and Directors;
	 
	 	b)	 	determine the times at which Awards shall be granted and any terms and
conditions with respect to Awards as shall not be inconsistent with the provisions
of this Plan; and
	 
	 	c)	 	resolve all questions relating to the administration of this Plan and
applicable law.

	4.2	 	The interpretation of, and application by, the Committee of any provision of this Plan shall
be final and conclusive. The Committee, in its sole discretion, may establish rules and
guidelines relating to this Plan as it may deem appropriate.

 

 

	4.3	 	A majority of the members of the Committee shall constitute a quorum for the transaction of
business. An action in writing by all members of the Committee then serving shall be fully
effective as if the action had been taken by unanimous vote at a meeting duly called and held.

	4.4	 	The Committee may employ such legal counsel, consultants, and agents as it may deem desirable
for the administration of this Plan and may rely upon any opinion received from any retained
counsel or consultant and any computation received from any retained consultant or agent. The
Committee shall keep minutes of its actions under this Plan.

SECTION 5

Eligibility

	5.1	 	The individuals who shall be eligible to participate in this Plan shall be Directors,
Directors Emeritus, officers, management, and such other key Employees of the Corporation and
the Subsidiaries as the Committee may from time to time determine.

SECTION 6

Shares of Stock Subject to the Plan

	6.1	 	Awards may be granted with respect to the Common Shares.

	6.2	 	Shares delivered upon exercise of an Award, at the election of the Board, may be Common
Shares that are authorized but previously unissued, or Common Shares reacquired by the
Corporation, or both.

	6.3	 	The maximum number of Common Shares that may be issued pursuant to Awards granted under this
Plan, subject to adjustment as provided in Section 17 of this Plan, shall be 2,000,000 Common
Shares. For the purpose of computing the total number of Common Shares available for Awards
under this Plan, there shall be counted against the foregoing limitation the number of Common
Shares subject to issuance upon exercise of Awards as of the dates on which such Awards are
granted. If any Awards are forfeited, terminated or exchanged for other Awards, or expire
unexercised, the Common Shares which were subject to such Awards shall again be available for
Awards under this Plan to the extent of such forfeiture, termination or expiration; provided,
however, that forfeited shares or other securities shall not be available for further Awards
if the Grantee has realized any benefits of ownership from such shares.

	6.4	 	Notwithstanding any other provision of this Plan to the contrary, subject to adjustment as
provided in Section 17 of this Plan, the maximum number of Common Shares that may be issued to
any individual during the term of this Plan pursuant to Options granted under this Plan shall
be 25% of the number of Common Shares that may be issued pursuant to this Plan, all of which
may be granted as ISOs.

SECTION 7

Stock Options

	7.1	 	The Committee may grant Options, as follows, which shall be evidenced by a stock option
agreement and may be designated as NQSOs or ISOs:

	 	a)	 	NQSOs

	 	(i)	 	A NQSO is a right to purchase a specified number of Common
Shares during a period determined by the Committee, not to exceed ten years,
at a price determined by the Committee that is not less than the Fair Market
Value of the Common Shares on the date the Option is granted.
	 
	 	(ii)	 	The exercise price of the NQSO may be paid in cash. At the
discretion of the Committee, the exercise price may also be paid by the tender
of Common Shares to the Corporation or through a combination of Common Shares
and cash or through such other means as the Committee

 

 

	 	 	 	determines are consistent with the purpose of this Plan and applicable law. No
fractional Common Shares will be issued or accepted by the Corporation.

	 	b)	 	ISOs

	 	(i)	 	No ISO may be granted under this Plan to a Non-Employee
Director.
	 
	 	(ii)	 	To the extent the aggregate Fair Market Value (determined at
the time of the grant of the Award) of the number of Common Shares with
respect to which ISOs are exercisable under all plans of the Corporation or a
Subsidiary for the first time by a Grantee during any calendar year exceeds
$100,000, or such other limit as may be required by the Code, such ISOs shall
be treated as NQSOs to the extent of such excess.
	 
	 	(iii)	 	No ISO may be exercisable more than:

	 	A)	 	ten years after the date the ISO is granted in the case
of a Grantee who is not a Ten Percent Shareholder on the date the ISO is
granted; and
	 
	 	B)	 	five years after the date the ISO is granted in the case
of a Grantee who is a Ten Percent Shareholder on the date the ISO is
granted.

	 	(iv)	 	The exercise price of any ISO shall be determined by the
Committee and shall not be less than:

	 	A)	 	the Fair Market Value of the Common Shares subject to
the ISO on the date of grant in the case of a Grantee who is not a Ten
Percent Shareholder on the date the ISO is granted; and
	 
	 	B)	 	110 percent of the Fair Market Value of the Common
Shares subject to the ISO on the date of grant in the case of a Grantee who
is a Ten Percent Shareholder on the date the ISO is granted.

	 	(v)	 	The Committee may provide that the exercise price under an ISO
may be paid by one or more of the methods available for paying the exercise
price of an NQSO under Section 7.1(a)(ii) of this Plan.

SECTION 8

Stock Appreciation Rights

	8.1	 	The amount payable with respect to each SAR shall be equal in value to the applicable
percentage of the excess, if any, of the Fair Market Value of a Common Share on the exercise
date over the exercise price of the SAR. The exercise price of the SAR shall be determined
by the Committee and shall not be less than the Fair Market Value of a Common Share on the
date the SAR is granted. SARs may be granted in tandem with an Option in which event the
Grantee has the right to elect to exercise either the SAR or the Option. Upon the election
to exercise one of these Awards, the other Award is subsequently terminated.

	8.2	 	In the case of an SAR granted in tandem with an ISO to an Employee who is a Ten Percent
Shareholder on the date of such grant, the amount payable with respect to each SAR shall be
equal in value to the applicable percentage of the excess, if any, of the Fair Market Value
of a Common Share on the exercise date over the exercise price of the SAR, which exercise
price shall not be less than 110 percent of the Fair Market Value of a Common Share on the
date the SAR is granted.

	8.3	 	The applicable percentage, exercise price and exercise period of an SAR shall be established
by the Committee at the time the SAR is granted.

 

 

SECTION 9

Restricted Stock

	9.1	 	Restricted Shares are Common Shares that are issued to a Grantee at a price determined by
the Committee, which price may be zero, and are subject to restrictions on transfer and/or
such other restrictions on incidents of ownership as the Committee may determine.

	9.2	 	The Committee shall specify in the restricted share award agreement the terms upon which
Restricted Shares shall vest.

	9.3	 	The Committee may, in its discretion, provide for accelerated vesting of Restricted Shares
upon the achievement of specified performance goals to be determined by the Committee.

	9.4	 	A Grantee may make an election under Section 83(b) of the Code.

SECTION 10

Performance Awards

	10.1	 	A Performance Award granted under this Plan:

	 	a)	 	may be denominated or payable in cash, Common Shares, Restricted
Shares, other securities or other Awards; and
	 
	 	b)	 	shall confer on the holder thereof the right to receive payments, in
whole or in part, upon the achievement of such performance goals during such
performance periods as the Committee or a majority of the Outside Directors,
excluding Directors Emeritus, shall establish.

	10.2	 	Subject to the terms of this Plan and any applicable Award agreement, the performance goals
to be achieved during any performance period, the length of any performance period, the
amount of any Performance Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee.

SECTION 11

Other Stock-Based Incentive Awards

	11.1	 	The Committee may from time to time grant Awards under this Plan that provide a Grantee the
right to purchase Common Shares or units that are valued by reference to the Fair Market
Value of the Common Shares (including, but not limited to, phantom securities or dividend
equivalents) or to receive Deferred Shares. Such Awards shall be in a form determined by the
Committee (and may include terms contingent upon a Change of Control); provided that such
Awards shall not be inconsistent with the terms and purposes of this Plan.

SECTION 12

Rights in the Event of Resignation, Removal or Termination

	12.1	 	The Committee may provide for the exercise of Options in installments and upon such terms,
conditions and restrictions as it may determine subject to applicable law and the other
requirements of this Plan.

	12.2	 	Except in the event of the death, Disability or Retirement of a Grantee, upon the
resignation or removal from the board of directors of any Grantee who is an Outside Director
or upon the termination of employment of a Grantee who is not an Outside Director (unless
Terminated for Cause), any Option which has not yet become exercisable or any other Award
which has not yet vested shall thereupon terminate and be of no further force or effect, and,
unless the Committee shall specifically state otherwise at the time an Option is granted, any
Option which has become exercisable shall terminate if it is not exercised before the earlier
to occur of the date of its expiration or three months after such resignation, removal or
termination of employment or directorship.

 

 

	12.3	 	Unless the Committee shall specifically state otherwise at the time an Award is granted, in
the event the employment or the directorship of a Grantee is Terminated for Cause, any Option
that has not been exercised and any other Award that has not vested shall thereupon terminate
and be of no further force or effect.

	12.4	 	An Option granted hereunder shall be exercisable, in whole or in part, only by written
notice delivered in person or by mail to the Secretary of the Corporation at its principal
office, specifying the number of Common Shares to be purchased and accompanied by payment
thereof and otherwise in accordance with the stock option award agreement pursuant to which
the Option was granted.

SECTION 13

Rights in Event of Death, Disability or Retirement

	13.1	 	If a Grantee dies, becomes subject to a Disability or enters Retirement prior to termination
of his or her right to exercise an Option in accordance with the provisions of his or her
stock option award agreement without having totally exercised the Option, the Option will
become exercisable in full on the date of the Grantee’s death, Disability or Retirement, (i)
in the event of the Grantee’s death, by the Grantee’s estate or by the person who acquired
the right to exercise the Option by bequest or inheritance, (ii) in the event of the
Grantee’s Disability, by the Grantee or his or her personal representative or (iii) in the
event of a Grantee’s Retirement, by the Grantee.

	13.2	 	In the event of the Grantee’s death, Disability or Retirement, the Option shall not be
exercisable after the date of its expiration or more than twelve months from the date of the
Grantee’s death, Disability or Retirement, whichever first occurs.

	13.3	 	If a Grantee dies, becomes subject to a Disability or enters Retirement prior to the vesting
of any other Award, all Awards that have not expired and which are then held by any Grantee
(or the person or persons to whom any deceased Grantee’s rights have been transferred) shall
become fully and immediately vested and exercisable.

	13.4	 	The date of Disability of a Grantee shall be determined by the Committee.

SECTION 14

Award Agreements

	14.1	 	Each Award granted under this Plan shall be evidenced by an award agreement, as the
Committee may deem appropriate, between the Grantee to whom the Award is granted and the
Corporation, setting forth the number of Common Shares, SARs, or units subject to the Award
and such other terms and conditions applicable to the Award not inconsistent with this Plan.

	14.2	 	The award agreement for an Option shall also be referred to as a stock option award
agreement.

SECTION 15

Tax Withholding

	15.1	 	The Committee may establish such rules and procedures as it considers desirable in order to
satisfy any obligation of the Corporation to withhold federal income taxes or other taxes
with respect to any Award made under this Plan. Such rules and procedures may provide:

	 	a)	 	in the case of Awards paid in Common Shares, the Corporation may
withhold Common Shares otherwise issuable upon exercise of such Award in order to
satisfy withholding obligations, unless otherwise instructed by the Grantee or
unless the Committee determines otherwise at the time of Grant; and

 

 

	 	b)	 	in the case of an Award paid in cash, that the withholding obligation
shall be satisfied by withholding the applicable amount and paying the net amount
in cash to the Grantee; provided that the requirements of the Rules, to the extent
applicable, must be satisfied with regard to any withholding pursuant to clause
(a).

SECTION 16

Change of Control

	16.1	 	For the purpose of this Plan, a “Change of Control” of the Corporation means:

	 	(i)	 	a change of control of the Corporation within the meaning of the Home
Owners’ Loan Act of 1933, as amended, and the Rules and Regulations promulgated by
the OTS, as in effect on the Effective Date (provided, that in applying the
definition of change of control as set forth under the rules and regulations of
the OTS, the Board shall substitute its judgment for that of the OTS);
	 
	 	(ii)	 	the time at which any “person” (as the term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the Corporation’s outstanding securities
ordinarily having the right to vote at the election of directors;
	 
	 	(iii)	 	the time at which individuals who constitute the Board on the date
hereof (the “Incumbent Board”) cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of a least 75% of the directors
comprising the Incumbent Board, or whose nomination for election by the
Corporation’s shareholders was approved by the same Nominating Committee serving
under an Incumbent Board shall be, for purposes of this clause (iii), considered as
though he were a member of the Incumbent Board;
	 
	 	(iv)	 	the consummation of a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Corporation or similar
transaction in which the Corporation is not the resulting entity;
	 
	 	(v)	 	the approval by shareholders of a proxy statement proposal submitted by
someone other than management of the Corporation seeking shareholder approval of a
plan of reorganization, merger or consolidation of the Corporation or similar
transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Corporation; or
	 
	 	(vi)	 	a completed tender offer for 20% or more of the voting securities of the
Corporation by anyone other than the Corporation.

	16.2	 	In the event of a Change of Control affecting the Corporation, then, notwithstanding any
provision of this Plan or of any provisions of any Award agreements entered into between the
Corporation and any Grantee to the contrary, all Awards that have not expired and which are
then held by any Grantee (or the person or persons to whom any deceased Grantee’s rights have
been transferred) shall, as of such Change of Control, become fully and immediately vested
and exercisable and may be exercised for the remaining term of such Awards; provided,
however, that in the event that any exercise or receipt of an Award in connection with a
Change of Control alone, or in the aggregate with other payments to a Grantee, would result
in the imposition of a penalty tax pursuant to Section 280G of the Code, such exercise or
receipt would remain subject to any vesting schedule set forth in an Award.

SECTION 17

Dilution or Other Adjustment

	17.1	 	If the Corporation is a party to any merger or consolidation, or undergoes any merger,
consolidation, separation, reorganization, liquidation or the like, the Committee shall have
the power to make

 

 

	 	 	arrangements, which shall be binding upon the holders of unexpired Awards, for the
substitution of new Awards for, or the assumption by another corporation of, any
unexpired Awards then outstanding hereunder.

	17.2	 	In the event of any change in capitalization affecting the Common Shares, such as a stock
split, stock dividend, recapitalization, merger, consolidation, spin-off, split-up,
combination or exchange of shares or other form of reorganization, or any other change
affecting the Common Shares, including a distribution (other than normal cash dividends) of
Corporation assets to shareholders, the Committee shall conclusively determine the
appropriate adjustment in the terms of outstanding Awards, including the option prices of
outstanding Options, and the number and kind of shares or other securities as to which
outstanding Awards shall be exercisable, and the aggregate number of shares with respect to
which Awards may be granted.

	17.3	 	The existence of this Plan and the Awards granted hereunder shall not affect or restrict in
any way the right or power of the Board or the shareholders of the Corporation to make or
authorize the following: any adjustment, recapitalization, reorganization or other change in
the Corporation’s capital structure or its business; any merger, acquisition or consolidation
of the Corporation; any issuance of bonds, debentures, preferred or prior preference stocks
ahead of or affecting the Corporation’s capital stock or the rights thereof; the dissolution
or liquidation of the Corporation or any sale or transfer of all or any part of its assets or
business; or any other corporate act or proceeding, including any merger or acquisition which
would result in the exchange of cash, stock of another company or options to purchase the
stock of another company for any Award outstanding at the time of such corporate transaction
or which would involve the termination of all Awards outstanding at the time of such
corporation transaction.

SECTION 18

Transferability

	18.1	 	Except as set forth in Section 18.2 of this Plan, no Award shall be sold, pledged, assigned,
transferred, or encumbered by a Grantee other than by will or by the laws of descent and
distribution.

	18.2	 	Only an NQSO may be pledged, assigned, or transferred by a Grantee to another individual
provided that the NQSO is pledged, assigned, or transferred without consideration by a
Grantee, subject to such rules as the Committee may adopt, to (i) a member of the Grantee’s
Immediate Family, (ii) a trust solely for the benefit of the Grantee and his or her Immediate
Family or (iii) a partnership or limited liability company whose only partners or members are
the Grantee and his or her Immediate Family (hereinafter referred to as the Permitted
Transferee); provided that the Committee is notified in advance in writing of the terms and
conditions of any proposed pledge, assignment or transfer and the Committee determines that
such pledge, assignment or transfer complies with the requirements of this Plan and the
applicable Award agreement.

	18.3	 	Any pledge, assignment or transfer of an Award that does not comply with the provisions of
this Plan and the applicable Award agreement shall be void and unenforceable against the
Corporation.

	18.4	 	All terms and conditions of a pledged, assigned or transferred Award shall apply to the
beneficiary, executor, administrator, and Permitted Transferee, whether one or more, of the
Grantee (including the beneficiary, executor and administrator of a permitted transferee),
including the right to amend the applicable Award agreement; provided that the
Permitted Transferee shall not pledge, assign or transfer an Award other than by will or by
the laws of descent and distribution.

SECTION 19

Amendment, Termination or Modification

	19.1	 	Without further approval of the shareholders of the Corporation, the Board may at any time
terminate this Plan, or may amend it from time to time in such respects as the Board may deem
advisable, except that the Board may not, without approval of the shareholders, make any
amendment which would (i) increase the aggregate number of Common Shares that may be issued
under this Plan, except for adjustments pursuant to Section 17 of this Plan, (ii) materially
modify the requirements as to eligibility for participation in this Plan, or (iii) materially
increase the benefits accruing under this Plan. The above notwithstanding, the

 

 

	 	 	Board may amend this Plan to take into account changes in applicable securities, federal
income tax and other applicable laws.

	19.2	 	The Board may authorize the Committee to direct the execution of an instrument providing for
the modification of any outstanding Award which the Board believes to be in the best
interests of the Corporation; provided, however, that no such modification, extension or
renewal shall confer on the holder of such Award any right or benefit which could not be
conferred on him by the grant of a new Award at such time and shall not materially decrease
the holder’s benefits under the Award without the consent of the holder of the Award, except
as otherwise permitted under this Plan.

SECTION 20

General Provisions

	20.1	 	No Awards may be exercised by a Grantee if such exercise, and the receipt of cash or stock
thereunder, would be, in the opinion of counsel selected by the Corporation, contrary to law
or the regulations of any duly constituted authority having jurisdiction over this Plan.

	20.2	 	A bona fide leave of absence approved by a duly constituted officer of the Corporation shall
not be considered interruption or termination of service of any Grantee for any purposes of
this Plan or Awards granted thereunder, except that no Awards may be granted to an Employee
while he or she is on a bona fide leave of absence.

	20.3	 	Nothing contained in this Plan or in an Award agreement granted thereunder shall confer upon
any Grantee any right to (i) continue in the employ of the Corporation or any of its
Subsidiaries or continue serving on the Board or the Board of Directors of a Subsidiary, or
(ii) interfere in any way with the right of the Corporation or any of its Subsidiaries to
terminate the Grantee’s employment or service on the Board at any time.

	20.4	 	Any Award agreement may provide that shares issued upon exercise of any Awards may be
subject to such restrictions, including, without limitation, restrictions as to
transferability and restrictions constituting substantial risks of forfeiture as the
Committee may determine at the time such Award is granted.

SECTION 21

Plan Effective Date

	21.1	 	This Plan shall become effective on the date of its adoption by the shareholders of the
Corporation (the “Effective Date”).

SECTION 22

Plan Termination

	22.1	 	No Award may be granted under this Plan on or after the date which is ten years following
the Effective Date, but Awards previously granted may be exercised in accordance with their
terms.

SECTION 23

Governing Law

	23.1	 	This Plan and all actions taken hereunder shall be governed by and construed in accordance
with the laws of the State of Ohio, except to the extent federal law shall be deemed
applicable.

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