þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2005 | ||
OR | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware
|
52-2084569 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
2001 Bryan Street, Suite 1600
Dallas, Texas (Address of principal executive offices) |
75201
(Zip Code) |
1
Item 1. | Financial Statements (unaudited) |
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(Restated) | |||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Sales
|
$ | 643,964 | $ | 575,395 | $ | 1,771,906 | $ | 1,552,453 | |||||||||
Cost of sales
|
474,019 | 437,306 | 1,325,523 | 1,198,405 | |||||||||||||
Gross margin
|
169,945 | 138,089 | 446,383 | 354,048 | |||||||||||||
Selling, general and administrative expenses
|
115,969 | 99,548 | 322,403 | 275,596 | |||||||||||||
Stock compensation expense
|
5 | | 36,369 | 437 | |||||||||||||
Income from operations
|
53,971 | 38,541 | 87,611 | 78,015 | |||||||||||||
Interest expense
|
8,137 | 6,223 | 39,644 | 18,687 | |||||||||||||
Income from continuing operations before income taxes
|
45,834 | 32,318 | 47,967 | 59,328 | |||||||||||||
Income tax expense
|
18,006 | 12,442 | 18,838 | 22,841 | |||||||||||||
Income from continuing operations
|
27,828 | 19,876 | 29,129 | 36,487 | |||||||||||||
Income (loss) from discontinued operations (net of income tax
(expense) benefit of $77 and ($56) for the three and nine
months in 2004, respectively)
|
| (143 | ) | | 103 | ||||||||||||
Net income
|
$ | 27,828 | $ | 19,733 | $ | 29,129 | $ | 36,590 | |||||||||
Basic net income per share:
|
|||||||||||||||||
Income from continuing operations
|
$ | 0.85 | $ | 0.79 | $ | 1.04 | $ | 1.46 | |||||||||
Income (loss) from discontinued operations
|
| | | | |||||||||||||
Net income
|
$ | 0.85 | $ | 0.79 | $ | 1.04 | $ | 1.46 | |||||||||
Diluted net income per share:
|
|||||||||||||||||
Income from continuing operations
|
$ | 0.80 | $ | 0.73 | $ | 0.96 | $ | 1.38 | |||||||||
Income (loss) from discontinued operations
|
| | | | |||||||||||||
Net income
|
$ | 0.80 | $ | 0.73 | $ | 0.96 | $ | 1.38 | |||||||||
Weighted average common shares outstanding:
|
|||||||||||||||||
Basic
|
32,660 | 25,134 | 27,927 | 25,132 | |||||||||||||
Diluted
|
34,999 | 27,214 | 30,202 | 26,474 | |||||||||||||
2
3
Nine Months Ended
September 30,
2005
2004
(Restated)
(In thousands)
(Unaudited)
$
29,129
$
36,590
14,248
14,480
15,379
3,498
2,024
2,387
139
(423
)
(59,566
)
(54,324
)
(9,991
)
(33,426
)
(3,160
)
440
570
(324
)
66,644
55,049
33,306
37,382
88,722
61,329
(22,601
)
(16,394
)
3,901
1,571
(18,700
)
(14,823
)
(68,900
)
225,000
315,000
275,000
(473,480
)
(100,578
)
(21,149
)
(10,989
)
109,055
(201,186
)
(139,592
)
95
14
(351
)
196
(20
)
(24,092
)
(86,685
)
(29,292
)
(16,663
)
17,214
50,628
5,585
$
33,965
$
22,799
4
Accumulated
Common Stock
Additional
Unearned
Other
Paid-In
Stock
Retained
Comprehensive
Shares
Amount
Capital
Compensation
Earnings
Income
Total
(In thousands, except share amounts)
(Unaudited)
25,148,213
$
251
$
160,213
$
$
50,426
$
$
210,890
7,500,000
75
108,931
109,006
6,507
120
(120
)
5
5
30,245
272
272
(160,213
)
(40,973
)
(201,186
)
29,129
29,129
1,351
1,351
30,480
32,684,965
$
326
$
109,323
$
(115
)
$
38,582
$
1,351
$
149,467
5
1. | Basis of Presentation |
Accounting Estimates |
1-for-10 Reverse Stock Split |
Net Income per Common Share |
6
Three Months
Nine Months
Ended
Ended
September 30,
September 30,
2005
2004
2005
2004
32,660
25,134
27,927
25,132
2,339
2,080
2,275
1,342
34,999
27,214
30,202
26,474
Comprehensive Income |
Stock Compensation |
7
Three Months Ended
Nine Months Ended
September 30,
September 30,
2005
2004
2005
2004
(In thousands, except per share amounts)
$
27,828
$
19,733
$
29,129
$
36,590
(251
)
(205
)
(700
)
(714
)
$
27,577
$
19,528
$
28,429
$
35,876
$
0.85
$
0.79
$
1.04
$
1.46
$
0.80
$
0.73
$
0.96
$
1.38
$
0.84
$
0.78
$
1.02
$
1.43
$
0.79
$
0.72
$
0.94
$
1.36
Recently Issued Accounting Pronouncements |
8
Reclassifications |
2. | Restatement of Previously Issued Financial Statements |
Property, plant and equipment and depreciation |
Inventory and cost of sales |
Income tax |
9
Nine Months Ended September 30, 2004
As Previously
Reported
Adjustments
As Restated
$
1,201,004
$
(2,599
)
$
1,198,405
351,449
2,599
354,048
275,114
482
275,596
75,898
2,117
78,015
57,211
2,117
59,328
22,026
815
22,841
35,185
1,302
36,487
35,288
1,302
36,590
$
1.40
$
0.06
$
1.46
$
1.40
$
0.06
$
1.46
$
1.33
$
0.05
$
1.38
$
1.33
$
0.05
$
1.38
3.
Long-Term Debt
September 30,
December 31,
2005
2004
(In thousands)
$
65,000
$
275,000
228,275
85,000
205
340,000
313,480
165
1,688
$
339,835
$
311,792
2005 Senior Secured Credit Agreement |
10
Second Priority Senior Secured Floating Rate Notes |
11
Year ended December 31,
|
|||||
2005
|
$ | | |||
2006
|
329 | ||||
2007
|
658 | ||||
2008
|
658 | ||||
2009
|
658 | ||||
Thereafter
|
337,697 | ||||
$ | 340,000 | ||||
4. | Shareholders Equity |
Initial Public Offering |
12
1-for-10 Reverse Stock Split |
Special Cash Dividends |
13
5. | Employee Stock Based Compensation |
6. | Commitments and Contingencies |
7. | Sales by Product Category |
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
Prefabricated components
|
$ | 142,358 | $ | 112,464 | $ | 376,787 | $ | 287,286 | |||||||||
Windows & doors
|
121,487 | 107,458 | 330,667 | 291,634 | |||||||||||||
Lumber & lumber sheet goods
|
232,069 | 227,817 | 655,916 | 624,473 | |||||||||||||
Millwork
|
55,826 | 47,757 | 151,519 | 130,667 | |||||||||||||
Other building products & services
|
92,224 | 79,899 | 257,017 | 218,393 | |||||||||||||
Total sales
|
$ | 643,964 | $ | 575,395 | $ | 1,771,906 | $ | 1,552,453 | |||||||||
14
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
15
| Homebuilding Industry. Our business is driven primarily by the residential new construction market, which is in turn dependent upon a number of factors, including interest rates and consumer confidence. In recent years, the homebuilding industry has undergone significant consolidation, with the larger homebuilders substantially increasing their market share. In accordance with this trend, our customer base has increasingly shifted to production homebuilders the fastest growing segment of the residential homebuilders. Market indicators currently show continued strength in homebuilding activity in our geographic markets, but not at the robust levels experienced in the third quarter 2005. | |
| Increasing Use of Prefabricated Components. The growing use of prefabricated components in the homebuilding process represents a major trend within the residential new construction building products supply market. In response to this trend, we have continued to increase our manufacturing capacity and our ability to provide customers with prefabricated components such as roof and floor trusses, wall panels, stairs and engineered wood, as well as windows, pre-hung doors and our branded Synboard millwork products. | |
| Expansion through New Facilities. We are seeking to increase our market penetration through the introduction of additional distribution and manufacturing facilities. In the third quarter, due to higher than expected demand in our Florida and Mid-Atlantic markets, we experienced capacity constraints in some manufacturing operations. We believe planned new facilities will help alleviate the capacity constraints and help us grow market share. |
We are also selectively seeking expansion opportunities that will enable us to grow in the multi-family and commercial end markets. While we cannot guarantee that we will be successful in pursuing these expansion opportunities, we believe that they will be a component of our planned expansion. |
| Economic Conditions. Our financial performance is impacted by economic changes nationally and locally in the markets we serve. The building products supply industry is dependent on new home construction and subject to cyclical market pressures. Our operations are subject to fluctuations arising from changes in supply and demand, national and international economic conditions, labor costs, competition, government regulation, trade policies and other factors that affect the homebuilding industry such as demographic trends, interest rates, single-family housing starts, employment levels, consumer confidence, and the availability of credit to homebuilders, contractors and homeowners. | |
| Cost of Materials. Prices of wood products, which are subject to cyclical market pressures, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time. We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and prefabricated products. Short-term changes in the cost of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers, but our pricing quotation periods may limit our ability to pass on such price changes. Our inability to pass on material price increases to our customers could adversely impact our operating income. |
Market prices for lumber and lumber sheet goods softened for the majority of the third quarter 2005, as expected. However, the hurricanes drove higher demand, and market prices rose during the last few weeks of the quarter. While the hurricanes have resulted in higher market prices for lumber and lumber sheet goods than we had previously anticipated, we expect the prices for this commodity to return to normalized lower levels after the near-term demand is absorbed or market speculation ceases. |
| Selling, General and Administrative Expenses. In June 2005, we completed the IPO of our common stock. As a public company, we will incur significant incremental legal, accounting and other expenses that we did not incur as a private company. These include costs associated with SEC rules and regulations (such as periodic reporting requirements and compliance with Section 404 of the Sarbanes-Oxley Act of 2002), NASDAQ rules and regulations, and director and officer liability insurance costs. |
16
| The volatility of lumber prices; | |
| The cyclical nature of the homebuilding industry; | |
| General economic conditions in the markets in which we compete; | |
| The pricing policies of our competitors; | |
| The production schedules of our customers; and | |
| The effects of weather. |
17
18
Three Months Ended
Nine Months Ended
September 30,
September 30,
2005
2004
2005
2004
100.0%
100.0%
100.0%
100.0%
73.6%
76.0%
74.8%
77.2%
26.4%
24.0%
25.2%
22.8%
18.0%
17.3%
18.2%
17.8%
0.0%
0.0%
2.1%
0.0%
8.4%
6.7%
4.9%
5.0%
1.3%
1.1%
2.2%
1.2%
7.1%
5.6%
2.7%
3.8%
2.8%
2.2%
1.1%
1.4%
4.3%
3.4%
1.6%
2.4%
0.0%
0.0%
0.0%
0.0%
4.3%
3.4%
1.6%
2.4%
Three Months Ended September 30, | |||||||||||||||||||||
2005 | 2004 | ||||||||||||||||||||
% of | % of | % | |||||||||||||||||||
Sales | Sales | Sales | Sales | Growth | |||||||||||||||||
Prefabricated components
|
$ | 142.4 | 22.1% | $ | 112.5 | 19.5% | 26.6% | ||||||||||||||
Windows & doors
|
121.5 | 18.9% | 107.4 | 18.7% | 13.1% | ||||||||||||||||
Lumber & lumber sheet goods
|
232.1 | 36.0% | 227.8 | 39.6% | 1.9% | ||||||||||||||||
Millwork
|
55.8 | 8.7% | 47.8 | 8.3% | 16.9% | ||||||||||||||||
Other building products & services
|
92.2 | 14.3% | 79.9 | 13.9% | 15.4% | ||||||||||||||||
Total sales
|
$ | 644.0 | 100.0% | $ | 575.4 | 100.0% | 11.9% | ||||||||||||||
19
20
Nine Months Ended September 30, | |||||||||||||||||||||
2005 | 2004 | ||||||||||||||||||||
% of | % of | % | |||||||||||||||||||
Sales | Sales | Sales | Sales | Growth | |||||||||||||||||
Prefabricated components
|
$ | 376.8 | 21.3% | $ | 287.3 | 18.5% | 31.2% | ||||||||||||||
Windows & doors
|
330.7 | 18.7% | 291.6 | 18.8% | 13.4% | ||||||||||||||||
Lumber & lumber sheet goods
|
655.9 | 37.0% | 624.5 | 40.2% | 5.0% | ||||||||||||||||
Millwork
|
151.5 | 8.5% | 130.7 | 8.4% | 16.0% | ||||||||||||||||
Other building products & services
|
257.0 | 14.5% | 218.4 | 14.1% | 17.7% | ||||||||||||||||
Total sales
|
$ | 1,771.9 | 100.0% | $ | 1,552.5 | 100.0% | 14.1% | ||||||||||||||
21
Nine Months Ended | ||||||||
September 30, | ||||||||
2005 | 2004 | |||||||
Write-off of unamortized deferred debt issuance costs
|
$ | 10,835 | $ | 2,182 | ||||
Financing costs incurred in conjunction with the February 2005
refinancing
|
2,425 | | ||||||
Termination penalty resulting from prepayment of term loan under
prior credit facility
|
1,700 | | ||||||
$ | 14,960 | $ | 2,182 | |||||
22
| In February 2004, we entered into a senior secured credit agreement (the 2004 Agreement) and received proceeds of $315.0 million. We used the proceeds, together with cash on hand, to pay a special dividend to our stockholders of approximately $139.6 million, to pay transaction costs associated with the 2004 Agreement of $11.0 million and to retire the existing debt facility of $168.3 million. | |
| In February 2005, we recapitalized the Company by entering into a senior secured credit agreement (the 2005 Agreement) and issuing second priority senior secured floating rate notes. We received gross proceeds of $225.0 million and $275.0 million from these two transactions, respectively. We used the proceeds, together with cash on hand, to retire $313.3 million of the 2004 Agreement, to pay a special cash dividend of $201.2 million to stockholders, to make a special cash payment of $36.4 million to stock option holders, and to pay $21.1 million of expenses related to the refinancing. | |
| In June 2005, we completed our IPO, and received net proceeds of $109.0 million. At September 30, 2005, the amount of unpaid transaction costs included in accrued liabilities was immaterial. We used the net proceeds from the IPO and cash generated from operations to repay $135.0 million of our term loan under the 2005 Agreement. | |
| During the third quarter 2005, we repaid $25.0 million of our term loan under the 2005 Agreement. |
23
24
September 30, | December 31, | ||||||||
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Term loan
|
$ | 65,000 | $ | | |||||
Floating rate notes
|
275,000 | | |||||||
Tranche A term loan
|
| 228,275 | |||||||
Tranche B term loan
|
| 85,000 | |||||||
Other notes
|
| 205 | |||||||
340,000 | 313,480 | ||||||||
Less current portion of long-term debt
|
165 | 1,688 | |||||||
Total long-term debt
|
$ | 339,835 | $ | 311,792 | |||||
Payments Due by Period | ||||||||||||||||||||||||
Less than | After | |||||||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 4 Years | 5 Years | 5 Years | ||||||||||||||||||
Long-term debt(1)
|
$ | 340,000 | $ | | $ | 1,645 | $ | 658 | $ | 658 | $ | 337,039 | ||||||||||||
Operating leases
|
172,664 | 31,072 | 65,018 | 16,449 | 11,476 | 48,649 | ||||||||||||||||||
Interest on long-term debt(1)(2)
|
203,269 | 34,258 | 85,420 | 27,864 | 27,298 | 28,429 | ||||||||||||||||||
Total contractual cash obligations
|
$ | 715,933 | $ | 65,330 | $ | 152,083 | $ | 44,971 | $ | 39,432 | $ | 414,117 | ||||||||||||
25
(1) | These future maturities of long-term debt and the related interest obligations reflect the refinancing of our credit agreement and the issuance of $275.0 million second priority senior secured floating rate notes on February 11, 2005; a $135.0 million repayment of our term loan with proceeds from our IPO, together with cash on hand; and repayments of our term loan totaling $25.0 million made during the third quarter 2005 utilizing cash generated from operations. |
(2) | Interest based on LIBOR rate of 4.05% at September 30, 2005. Interest on long-term debt reflects two interest rate swap agreements effective June 10, 2005 and July 1, 2005. Actual interest may fluctuate based on LIBOR fluctuations. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
26
Item 1. | Legal Proceedings |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(a) | During the quarter ended September 30, 2005, employees and former employees of the Company exercised options to purchase 500 shares of our common stock at an exercise price of $3.15 per share. All of the shares were issued pursuant to our 1998 Stock Incentive Plan in reliance on Rule 701 of the Securities Act. |
(b) | On June 22, 2005, the SEC declared Amendment No. 7 to our registration statement on Form S-1 effective, and on June 27, 2005, we completed an IPO of 12,250,000 shares of our common stock at a price of $16.00 per share for an aggregate offering price of $196.0 million. Aggregate underwriting |
27
discounts and commissions were $13.7 million. Of the 12,250,000 shares offered, 7,500,000 shares were sold by us, and 4,750,000 were sold by our selling stockholders. Our common stock began trading on the NASDAQ National Market under the symbol BLDR on June 22, 2005. |
Our selling stockholders granted the underwriters an option to purchase up to an additional 1,837,500 shares of our common stock at the IPO price, which the underwriters exercised in full on July 22, 2005. The exercise of the over-allotment option increased the aggregate offering price and aggregate underwriting discounts and commissions to $225.4 million and $15.8 million, respectively. We did not receive any proceeds from the shares sold by our selling stockholders. | |
UBS Securities LLC and Deutsche Bank Securities Inc. were the joint book-running managers of this offering. J.P. Morgan Securities Inc., Robert W. Baird & Co. Incorporated and BB&T Capital Markets (a division of Scott & Stringfellow, Inc.) acted as co-managers. | |
After underwriting discounts and commissions of $8.4 million and transaction costs of $2.6 million, net proceeds to us were $109.0 million. The amount of estimated transaction costs included in accrued liabilities was immaterial at September 30, 2005. We used all of the net proceeds from the IPO, together with cash on hand, to repay a portion of our outstanding debt. |
Item 3. | Defaults upon Senior Securities |
Item 4. | Submission of Matters to a Vote of Security Holders |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit | ||||
Number | Description | |||
3 | .1 | Amended and Restated Certificate of Incorporation of Builders FirstSource, Inc. (previously filed as Exhibit 3.1 to Amendment No. 4 to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on June 6, 2005, File Number 333-122788) | ||
3 | .2 | Amended and Restated By-Laws of Builders FirstSource, Inc. (previously filed as Exhibit 3.2 to Amendment No. 1 to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on April 27, 2005, File Number 333-122788) | ||
4 | .1 | Second Amended and Restated Stockholders Agreement, dated as of June 2, 2005, among JLL Building Products, LLC, Builders FirstSource, Inc., Floyd F. Sherman, Charles L. Horn, Kevin P. OMeara, and Donald F. McAleenan (previously filed as Exhibit 4.1 to the Companys Quarterly Report for the quarter ended June 30, 2005, filed with the Securities and Exchange Commission on August 4, 2005, File Number 0-51357) | ||
4 | .2 | Registration Rights Agreement, dated as of February 11, 2005, among Builders FirstSource, Inc., the Guarantors named therein, and UBS Securities LLC and Deutsche Bank Securities Inc. (previously filed as Exhibit 4.3 to Amendment No. 1 to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on April 27, 2005, File Number 333-122788) | ||
4 | .3 | Stockholders Agreement, dated as of June 11, 1999, among Stonegate Resources Holdings, LLC, BSL Holdings, Inc., Holmes Lumber Company, and Lockwood Holmes (previously filed as Exhibit 4.5 to Amendment No. 2 to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on April 27, 2005, File Number 333-122788) |
28
Exhibit
Number
Description
4
.4
Stock Purchase Agreement, dated as of March 3, 2000, among
Stonegate Resources Holdings, LLC, Builders FirstSource, Inc.,
and William A. Schwartz (previously filed as Exhibit 4.6 to
Amendment No. 2 to the Registration Statement of the
Company on Form S-1, filed with the Securities and Exchange
Commission on April 27, 2005, File Number 333-122788)
4
.5
Indenture, dated as of February 11, 2005, among Builders
FirstSource, Inc., the Subsidiary Guarantors thereto, and
Wilmington Trust Company, as Trustee (previously filed as
Exhibit 4.1 to Amendment No. 1 to the Registration
Statement of the Company on Form S-1, filed with the
Securities and Exchange Commission on April 27, 2005, File
Number 333-122788)
10
.1*
Employment Agreement, dated January 15, 2004, between
Builders FirstSource, Inc. and Kevin P. OMeara
10
.2*
Employment Agreement, dated January 15, 2004, between
Builders FirstSource, Inc. and Charles L. Horn
10
.3*
Employment Agreement, dated January 15, 2004, between
Builders FirstSource, Inc. and Donald F. McAleenan
31
.1*
Written statement pursuant to 17 CFR 240.13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, signed by Floyd F. Sherman as chief executive officer
31
.2*
Written statement pursuant to 17 CFR 240.13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, signed by Charles L. Horn as chief financial officer
32
.1**
Written statement pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, signed by Floyd F. Sherman as chief executive
officer and Charles L. Horn as chief financial officer
* | Filed herewith. |
** | Builders FirstSource, Inc. is furnishing, but not filing, the written statements pursuant to Title 18 United States Code 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, of Floyd F. Sherman, our chief executive officer, and Charles L. Horn, our chief financial officer. |
29
30
BUILDERS FIRSTSOURCE,
INC.
/s/ FLOYD F. SHERMAN
President and Chief Executive Officer
(Principal Executive Officer)
/s/ CHARLES L. HORN
Senior Vice President Chief Financial Officer
(Principal Financial Officer)
Table of Contents
Exhibit
Number
Description
3
.1
Amended and Restated Certificate of Incorporation of Builders
FirstSource, Inc. (previously filed as Exhibit 3.1 to
Amendment No. 4 to the Registration Statement of the
Company on Form S-1, filed with the Securities and Exchange
Commission on June 6, 2005, File Number 333-122788)
3
.2
Amended and Restated By-Laws of Builders FirstSource, Inc.
(previously filed as Exhibit 3.2 to Amendment No. 1 to
the Registration Statement of the Company on Form S-1,
filed with the Securities and Exchange Commission on
April 27, 2005, File Number 333-122788)
4
.1
Second Amended and Restated Stockholders Agreement, dated as of
June 2, 2005, among JLL Building Products, LLC, Builders
FirstSource, Inc., Floyd F. Sherman, Charles L. Horn, Kevin P.
OMeara, and Donald F. McAleenan (previously filed as
Exhibit 4.1 to the Companys Quarterly Report for the
quarter ended June 30, 2005, filed with the Securities and
Exchange Commission on August 4, 2005, File
Number 0-51357)
4
.2
Registration Rights Agreement, dated as of February 11,
2005, among Builders FirstSource, Inc., the Guarantors named
therein, and UBS Securities LLC and Deutsche Bank Securities
Inc. (previously filed as Exhibit 4.3 to Amendment
No. 1 to the Registration Statement of the Company on
Form S-1, filed with the Securities and Exchange Commission
on April 27, 2005, File Number 333-122788)
4
.3
Stockholders Agreement, dated as of June 11, 1999, among
Stonegate Resources Holdings, LLC, BSL Holdings, Inc., Holmes
Lumber Company, and Lockwood Holmes (previously filed as
Exhibit 4.5 to Amendment No. 2 to the Registration
Statement of the Company on Form S-1, filed with the
Securities and Exchange Commission on April 27, 2005, File
Number 333-122788)
4
.4
Stock Purchase Agreement, dated as of March 3, 2000, among
Stonegate Resources Holdings, LLC, Builders FirstSource, Inc.,
and William A. Schwartz (previously filed as Exhibit 4.6 to
Amendment No. 2 to the Registration Statement of the
Company on Form S-1, filed with the Securities and Exchange
Commission on April 27, 2005, File Number 333-122788)
4
.5
Indenture, dated as of February 11, 2005, among Builders
FirstSource, Inc., the Subsidiary Guarantors thereto, and
Wilmington Trust Company, as Trustee (previously filed as
Exhibit 4.1 to Amendment No. 1 to the Registration
Statement of the Company on Form S-1, filed with the
Securities and Exchange Commission on April 27, 2005, File
Number 333-122788)
10
.1*
Employment Agreement, dated January 15, 2004, between
Builders FirstSource, Inc. and Kevin P. OMeara
10
.2*
Employment Agreement, dated January 15, 2004, between
Builders FirstSource, Inc. and Charles L. Horn
10
.3*
Employment Agreement, dated January 15, 2004, between
Builders FirstSource, Inc. and Donald F. McAleenan
31
.1*
Written statement pursuant to 17 CFR 240.13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, signed by Floyd F. Sherman as chief executive officer
31
.2*
Written statement pursuant to 17 CFR 240.13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, signed by Charles L. Horn as chief financial officer
32
.1**
Written statement pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, signed by Floyd F. Sherman as chief executive
officer and Charles L. Horn as chief financial officer
*
Filed herewith.
**
Builders FirstSource, Inc. is furnishing, but not filing, the
written statements pursuant to Title 18 United States Code
1350, as added by Section 906 of the Sarbanes-Oxley Act of
2002, of Floyd F. Sherman, our chief executive officer, and
Charles L. Horn, our chief financial officer.
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 15, 2004, by and between Builders FirstSource, Inc., a Delaware corporation (the "Company"), and Kevin P. O'Meara (the "Executive").
WHEREAS, the Company desires that Executive serve as the Senior Vice President - Operations and Chief Operating Officer of the Company, and Executive desires to hold such positions under the terms and conditions of this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Company Board") has approved and authorized the Company to enter into this Agreement with Executive.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and intending to be legally bound hereby, the parties agree as follows:
1. Employment. The Company hereby employs Executive, and Executive hereby accepts employment with the Company, upon the terms and subject to the conditions set forth herein.
2. Term.
(a) Subject to Section 2(b) hereof, the term of employment by the Company of Executive pursuant to this Agreement (as the same may be extended, the "Term") shall commence on January 15, 2004 (the "Effective Date"), and terminate on the first anniversary thereof.
(b) Commencing on the first anniversary of the Effective Date and on each subsequent anniversary thereof, the Term shall automatically be extended for one (1) additional year unless, not later than ninety days (90) prior to any such anniversary date, either party hereto shall have notified the other party hereto in writing that such extension shall not take effect.
3. Position. During the Term, Executive shall serve as the Senior Vice President - Operations and Chief Operating Officer of the Company, supervising the conduct of the business and affairs of the Company and performing such other duties as the Company Board shall determine.
4. Duties. During the Term, Executive shall devote his full time and attention during normal business hours to the business and affairs of the Company, except vacations in accordance with the Company's policies and for illness or incapacity, in accordance with Section 6 hereof.
5. Salary and Bonus.
(a) During the Term, the Company shall pay to Executive a base salary at the rate of $360,000 per year (the "Base Salary"), subject to adjustments pursuant to the terms of Section 5(b) hereof.
(b) On or prior to each anniversary hereof during the Term (assuming
the Term of the Agreement is extended pursuant to Section 2(b) hereof), the
Company Board or the Compensation Committee of the Company Board (the
"Compensation Committee") shall review the Base Salary and may, in its sole
discretion, increase the Base Salary based upon performance and merit.
Executive's Base Salary shall not be decreased below the amount set forth in
Section 5(a) hereof. The Base Salary shall be payable to Executive in
substantially equal installments in accordance with the Company's normal payroll
practices, but in no event less often than semi-monthly.
(c) For the Company's fiscal year ending December 31, 2004, and for each fiscal year during the Term thereafter, Executive shall be eligible to receive an annual cash bonus equal to the amount provided for in the Company's Annual Cash Incentive Plan ("Annual Incentive Plan") (which currently provides for a target bonus percentage of 100% of Executive's Base Salary), which Annual Incentive Plan is approved by the Company Board or the Compensation Committee thereof. Executive's target bonus percentage under the Annual Incentive Plan shall not be reduced below 100% of his Base Salary.
6. Vacation, Holidays and Sick Leave. During the Term, Executive shall be entitled to paid vacation, paid holidays and sick leave in accordance with the Company's standard policies for its senior executive officers.
7. Business Expenses. Executive shall be reimbursed for all reasonable and necessary business expenses incurred by him in connection with his employment, including, without limitation, expenses for travel and entertainment incurred in conducting or promoting business for the Company upon timely submission by Executive of receipts and other documentation as required by the Internal Revenue Code of 1986, as amended (the "Code"), and in accordance with the Company's normal expense reimbursement policies.
8. Health, Welfare and Related Benefits. During the Term, Executive and eligible members of his family shall be eligible to participate fully in all (a) health and dental benefits and insurance programs; (b) life and short- and long-term disability benefits and insurance programs; and (c) defined contribution and equity compensation programs, all as available to senior executive officers of the Company generally.
9. Confidentiality, Non-Competition.
(a) Executive acknowledges that: (I) the Executive has, and his employment hereunder will require that Executive continue to have, access to and knowledge of Confidential Information (as hereinafter defined); (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of the Company or its subsidiaries would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Company's businesses; and (iii) the engaging by Executive in any of the activities prohibited by this Section 9 may constitute improper appropriation and/or use of such Confidential Information. Executive expressly acknowledges that the Confidential Information constitutes a protectable business interest of the Company. As used herein, the term "Confidential Information" shall mean information of any kind, nature or description which is disclosed to or otherwise known to the Executive as a direct or indirect consequence of his
association with the Company, which information is not generally known to the public or in the businesses in which such entities are engaged or which information relates to specific investment opportunities within the scope of their business which were considered by the Company during the Term; provided, however, that "Confidential Information" shall not be deemed to include information which (i) is or becomes generally available to the public other than as a result of a disclosure by the Executive, (ii) becomes available to the Executive on a non-confidential basis from a source other than the Company, provided that such source is not bound by any contractual, legal or fiduciary obligation with respect to such information or (iii) was in the Executive's possession prior to being furnished by the Company.
(b) During the Term of this Agreement and for a period of one year after the termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, whether individually, as a director, stockholder, owner, manager, member, partner, employee, consultant, principal or agent of any business, or in any other capacity, use for his own account, utilize or make known, disclose, furnish or make available to any person, firm or corporation any of the Confidential Information, other than to authorized officers, directors and employees of the Company in the proper performance of the duties contemplated herein, or as required by a court of competent jurisdiction or other administrative or legislative body; provided that, prior to disclosing any of the Confidential Information to a court or other administrative or legislative body, Executive shall promptly notify the Company so that the Company may seek a protective order or other appropriate remedy. Executive agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his employment for any reason.
(c) During the Term of this Agreement and for a period of one year after termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, own any interest in, operate, join, control or participate as a partner, member, director, manager, principal, officer, or agent of, enter into the employment of, act as a consultant or advisor to, or perform any services for, any entity (in those geographic areas in which the Company or any of its subsidiaries, as of the date of termination of the Executive's employment hereunder, have material operations) which entity is engaged in competition with the Company or any of its subsidiaries. An entity shall be deemed to be engaged in competition with the Company or its subsidiaries if it engages in a business which is the same as or substantially similar to any business engaged in by the Company or such subsidiary during the Term.
(d) During the Term of this Agreement and for a period of two years after termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, hire, solicit or recruit for hire any employee of the Company or any of its subsidiaries or encourage any employee of the Company or any of its subsidiaries to terminate his or her employment in order to obtain employment by any other person, firm or corporation.
(e) Executive acknowledges that(A) in connection with rendering the services to be rendered by Executive hereunder, Executive will have access to and knowledge of
Confidential Information, the disclosure of which would place the Company or its subsidiaries at a competitive disadvantage, causing irreparable injury, and (B) the services to be rendered by Executive hereunder are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by Executive of any of the provisions contained in this Section 9 will cause the Company irreparable injury. Executive, therefore, agrees that the Company shall be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Executive from any such violation or threatened violations.
(f) Executive further acknowledges and agrees that due to the uniqueness of his services and confidential nature of the information he will possess, the covenants set forth herein are reasonable and necessary for the protection of the business and goodwill of the Company; and it is the intent of the parties hereto that if, in the opinion of any court of competent jurisdiction, any provision set forth in this Section 9 is not reasonable in any respect, such court shall have the right, power and authority to modify any and all such provisions in such a manner as to such court shall appear not unreasonable and to enforce the remainder of this Section 9 as so modified.
10. Termination of Agreement. The employment by the Company of Executive pursuant to this Agreement shall not be terminated prior to the end of the Term, except as set forth in this Section 10.
(a) By Mutual Consent.
(i) The employment by the Company of Executive pursuant to this Agreement may be terminated at any time by the mutual written agreement of the Company and Executive.
(ii) In the event that (i) Executive's employment is terminated by mutual consent pursuant to this Section 10(a), and (ii) Executive and the Company determine at that time that it is in their mutual best interest for Executive to continue to be bound after his termination by the provisions of Section 9 of this Agreement for the periods set forth therein, then the parties may enter into an agreement to that effect, in exchange for which Executive would be entitled to the compensation provided for in Section 10(e) hereof.
(b) Death. The employment by the Company of Executive pursuant to this Agreement shall be terminated upon the death of Executive, in which event Executive's spouse or heirs shall receive the following: (i) Executive's Base Salary and benefits to be paid or provided to Executive under this Agreement through the Date of Termination and (ii) continuation of Executive's Base Salary and the health and welfare benefits provided for pursuant to Sections 8(a) and 8(b) hereof ("Health Benefits") for a period of one (1) year after the Date of Termination.
(c) Disability. The employment by the Company of Executive pursuant
to this Agreement may be terminated by written notice to Executive at the option
of the Company in the event that as a result of the Executive's incapacity due
to physical or mental illness (which physical or mental illness shall be
confirmed in writing by a physician or other medical expert acceptable to both
parties), the Executive is unable to perform his duties, services and
responsibilities hereunder or shall have been absent from his duties hereunder
on a full-time basis for ninety (90) consecutive days or for an aggregate of
ninety (90) days or more in any six (6) month period, and within thirty (30)
days after notice is given by the Company (which notice may be delivered no
earlier than thirty days prior to the expiration of such ninety (90) consecutive
days or six month period, as the case may be), the Executive shall not have
returned to the performance of his duties hereunder on a full-time basis. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(c), Executive shall be entitled to receive the following: (i) all
Base Salary and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination and (ii) continuation of his Base
Salary and Health Benefits for a period of one (1) year after the Date of
Termination; provided, however, that amounts payable to Executive under this
Section 10(c) shall be reduced by the proceeds of any short- and/or long-term
disability payments under the Company plans referred to in Section 8 hereof to
which Executive may be entitled during such period.
(d) By the Company for Cause. The employment of Executive pursuant
to this Agreement may be terminated by the Company by written notice to
Executive ("Notice of Termination") for Cause (as hereafter defined). In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(d), Executive shall be entitled to receive all Base Salary and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination and no more.
(e) By the Company Without Cause. The employment by the Company of
Executive pursuant to this Agreement may be terminated by the Company at any
time without Cause by delivery of a Notice of Termination to Executive. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(e), Executive shall be entitled to receive the following: (i) all
Base Salary and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination, (ii) continuation of his Base Salary
and Health Benefits for a period of one (1) year after the Date of Termination,
and (iii) an amount equal to his Average Bonus Compensation (as hereafter
defined).
(f) By Executive. The employment of Executive by the Company
pursuant to this Agreement may be terminated by Executive by written notice to
the Company of his resignation (a "Notice of Resignation") at any time. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(f), Executive shall be entitled to receive all Base Salary and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination and no more; provided, however, that if Executive terminates
his employment due to (i) a material adverse diminution of Executive's job title
or responsibilities from those currently in effect; or (ii) a relocation of
Executive's principal place of employment more than 100 miles from its current
location without his consent, then Executive shall instead be entitled to the
compensation provided for in Section 10(e) hereof.
(g) Non-Renewal. In the event that at any time during the Term (as it may be extended) the Company notifies Executive of its intent not to renew this Agreement pursuant to Section 2(b) hereof, and Executive then delivers a Notice of Resignation to the Company within ninety (90) days of receipt of such notice of non-renewal, Executive shall be entitled to receive the following: (i) all Base Salary and benefits to be paid or provided to Executive under this Agreement through the Date of Termination, (ii) continuation of his Base Salary and Health Benefits for a period of one (1) year after the Date of Termination, and (iii) an amount equal to his Average Bonus Compensation.
(h) Previously Earned Bonus. Notwithstanding any other provision of this Section 10, in the event that Executive's employment pursuant to this Agreement is terminated at a time when Executive shall have earned a bonus under the Annual Incentive Plan for performance during the prior fiscal year which has not yet been paid, Executive shall be paid such bonus in addition to the amounts otherwise provided for in this Section 10. Such bonus shall be paid in accordance with the Company's normal practices.
(i) Date of Termination. Executive's Date of Termination shall be:
(i) if the parties hereto mutually agree to terminate this Agreement pursuant to
Section 10(a) hereof, the date designated by the parties in such agreement; (ii)
if Executive's employment by the Company is terminated pursuant to Section
10(b), the date of Executive's death; (iii) if Executive's employment by the
Company is terminated pursuant to Section 10(c), the last day of the applicable
period referred to in Section 10(c) hereof; (iv) if Executive's employment by
the Company is terminated pursuant to Section 10(d), the date on which a Notice
of Termination is given; and (v) if Executive's employment by the Company is
terminated pursuant to Sections 10(e), 10(f) or 10(g), the date the Notice of
Termination or Notice of Resignation, as the case may be, is given.
(j) Payment of Post-Termination Compensation. After Executive's Date of Termination, all payments of Base Salary and Average Bonus Compensation to Executive pursuant to this Section 10 shall be paid in accordance with the Company's normal payroll practices, but in no event less often than semi-monthly. In the event of a breach by Executive of Section 9 of this Agreement during the applicable period following his Date of Termination, Executive agrees (i) that the Company shall have no further obligation to make any payments to Executive under Section 10 of the Agreement and (ii) that any payments of Base Salary or Average Bonus Compensation previously made to Executive after his Date of Termination shall be returned to the Company.
11. Representations.
(a) The Company represents and warrants that this Agreement has been authorized by all necessary corporate action of the Company and is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms.
(b) Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement and that this Agreement is a valid and binding agreement of Executive enforceable against Executive in accordance with its terms.
12. Successors. This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.
13. Entire Agreement. This Agreement contains all the understandings between the parties hereto pertaining to the matters referred to herein, and supersedes any other undertakings and agreements (other than any stock option agreement between Executive and the Company), whether oral or in writing, previously entered into by them with respect thereto. Executive represents that, in executing this Agreement, he does not rely and has not relied upon any representation or statement made by the Company not set forth herein with regard to the subject matter or effect of this Agreement or otherwise.
14. Termination; Amendment or Modification; Waiver.
(a) This Agreement may be terminated at any time by mutual written consent of the Company and Executive.
(b) No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by Executive and by a duly authorized officer of the Company. No waiver by any party hereto of any breach by another party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.
15. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be (i) delivered by hand, (ii)
delivered by a nationally recognized commercial overnight delivery service,
(iii) mailed postage prepaid by first class mail or (iv) transmitted by
facsimile transmitted to the party concerned at the address or telecopier number
set forth below:
To Executive at:
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: Kevin P. O'Meara
To the Company at:
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: General Counsel
with copies to:
JLL Partners
450 Lexington Avenue
New York, New York 10017
Facsimile: (212) 286-8626
Attention: Ramsey Frank
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile: (302) 651-3001
Attention: Robert B. Pincus
Such notices shall be effective: (i) in the case of hand deliveries when received; (ii) in the case of an overnight delivery service, on the next business day after being placed in the possession of such delivery service, with delivery charges prepaid; (iii) in the case of mail, seven (7) days after deposit in the postal system, first class mail, postage prepaid; and (iv) in the case of facsimile notices, when electronic confirmation of receipt is received by the sender. Any party may change its address and telecopy number by written notice to the other given in accordance with this Section 15; provided, however, that such change shall be effective when received.
16. Severability. If any provision or clause of this Agreement or the application of any such provision or clause to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision or clause to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision or clause hereof shall be validated and shall be enforced to the fullest extent permitted by law.
17. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
18. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles.
19. Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.
20. Withholding. All payments to Executive under this Agreement shall be reduced by all applicable withholding required by federal, state or local law.
21. Specific Performance. Each party hereto acknowledges that money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by such party and that any such breach would cause the other parties, irreparable harm. Accordingly, each party hereto also agrees that, in the event of any breach or threatened breach of the provisions of this Agreement by such party, the other parties shall be entitled to equitable relief without the requirement of posting a bond or other security, including in the form of injunctions and orders for specific performance, in addition to all other remedies available to such other parties at law or in equity.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
23. Definitions.
(a) "Cause" means the determination, in good faith, by the Company Board, after notice to Executive that one or more of the following events has occurred: (i) any act of gross negligence, fraud, willful misconduct or moral turpitude by Executive materially injuring the interest, business or reputation of the Company, or any of its parents, subsidiaries or affiliates; (ii) Executive's conviction of any felony; (iii) violation by Executive of the Company's Drug Policy; (iv) any misappropriation or embezzlement of the property of the Company, or any of its parents, subsidiaries or affiliates; or (v) any material breach by Executive of this Agreement, including, without limitation, a material breach of Section 9 hereof, which breach, to the extent it is capable of being cured, remains uncorrected for a period of thirty (30) days after receipt by Executive of written notice from the Company setting forth such breach.
(b) "Average Bonus Compensation" shall mean an amount equal to the average of the annual bonus amounts earned by Executive under the Company's Annual Incentive Plan during the two most recent fiscal years ended prior to Executive's Date of Termination.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the date first above written.
BUILDERS FIRSTSOURCE, INC.
By: /s/ Floyd Sherman ----------------- Floyd Sherman Chief Executive Officer |
EXECUTIVE
/s/ Kevin P. O'Meara -------------------- Kevin P. O'Meara |
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 15, 2004, by and between Builders FirstSource, Inc., a Delaware corporation (the "Company"), and Charles L. Horn (the "Executive").
WHEREAS, the Company desires that Executive serve as the Senior Vice President - Finance and Chief Financial Officer of the Company, and Executive desires to hold such positions under the terms and conditions of this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Company Board") has approved and authorized the Company to enter into this Agreement with Executive.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and intending to be legally bound hereby, the parties agree as follows:
1. Employment. The Company hereby employs Executive, and Executive hereby accepts employment with the Company, upon the terms and subject to the conditions set forth herein.
2. Term.
(a) Subject to Section 2(b) hereof, the term of employment by the Company of Executive pursuant to this Agreement (as the same may be extended, the "Term") shall commence on January 15, 2004 (the "Effective Date"), and terminate on the first anniversary thereof.
(b) Commencing on the first anniversary of the Effective Date and on each subsequent anniversary thereof, the Term shall automatically be extended for one (1) additional year unless, not later than ninety days (90) prior to any such anniversary date, either party hereto shall have notified the other party hereto in writing that such extension shall not take effect.
3. Position. During the Term, Executive shall serve as the Senior Vice President - Finance and Chief Financial Officer of the Company, supervising the financial operations and affairs of the Company and performing such other duties as the Company Board shall determine.
4. Duties. During the Term, Executive shall devote his full time and attention during normal business hours to the business and affairs of the Company, except vacations in accordance with the Company's policies and for illness or incapacity, in accordance with Section 6 hereof.
5. Salary and Bonus.
(a) During the Term, the Company shall pay to Executive a base salary at the rate of $330,000 per year (the "Base Salary"), subject to adjustments pursuant to the terms of Section 5(b) hereof.
(b) On or prior to each anniversary hereof during the Term (assuming
the Term of the Agreement is extended pursuant to Section 2(b) hereof), the
Company Board or the Compensation Committee of the Company Board (the
"Compensation Committee") shall review the Base Salary and may, in its sole
discretion, increase the Base Salary based upon performance and merit.
Executive's Base Salary shall not be decreased below the amount set forth in
Section 5(a) hereof. The Base Salary shall be payable to Executive in
substantially equal installments in accordance with the Company's normal payroll
practices, but in no event less often than semi-monthly.
(c) For the Company's fiscal year ending December 31, 2004, and for each fiscal year during the Term thereafter, Executive shall be eligible to receive an annual cash bonus equal to the amount provided for in the Company's Annual Cash Incentive Plan ("Annual Incentive Plan") (which currently provides for a target bonus percentage of 100% of Executive's Base Salary), which Annual Incentive Plan is approved by the Company Board or the Compensation Committee thereof. Executive's target bonus percentage under the Annual Incentive Plan shall not be reduced below 100% of his Base Salary.
6. Vacation, Holidays and Sick Leave. During the Term, Executive shall be entitled to paid vacation, paid holidays and sick leave in accordance with the Company's standard policies for its senior executive officers.
7. Business Expenses. Executive shall be reimbursed for all reasonable and necessary business expenses incurred by him in connection with his employment, including, without limitation, expenses for travel and entertainment incurred in conducting or promoting business for the Company upon timely submission by Executive of receipts and other documentation as required by the Internal Revenue Code of 1986, as amended (the "Code"), and in accordance with the Company's normal expense reimbursement policies.
8. Health, Welfare and Related Benefits. During the Term, Executive and eligible members of his family shall be eligible to participate fully in all (a) health and dental benefits and insurance programs; (b) life and short- and long-term disability benefits and insurance programs; and (c) defined contribution and equity compensation programs, all as available to senior executive officers of the Company generally.
9. Confidentiality, Non-Competition.
(a) Executive acknowledges that: (I) the Executive has, and his employment hereunder will require that Executive continue to have, access to and knowledge of Confidential Information (as hereinafter defined); (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of the Company or its subsidiaries would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Company's businesses; and (iii) the engaging by Executive in any of the activities prohibited by this Section 9 may constitute improper appropriation and/or use of such Confidential Information. Executive expressly acknowledges that the Confidential Information constitutes a protectable business interest of the Company. As used herein, the term "Confidential Information" shall mean information of any kind, nature or description which is disclosed to or otherwise known to the Executive as a direct or indirect consequence of his
association with the Company, which information is not generally known to the public or in the businesses in which such entities are engaged or which information relates to specific investment opportunities within the scope of their business which were considered by the Company during the Term; provided, however, that "Confidential Information" shall not be deemed to include information which (i) is or becomes generally available to the public other than as a result of a disclosure by the Executive, (ii) becomes available to the Executive on a non-confidential basis from a source other than the Company, provided that such source is not bound by any contractual, legal or fiduciary obligation with respect to such information or (iii) was in the Executive's possession prior to being furnished by the Company.
(b) During the Term of this Agreement and for a period of one year after the termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, whether individually, as a director, stockholder, owner, manager, member, partner, employee, consultant, principal or agent of any business, or in any other capacity, use for his own account, utilize or make known, disclose, furnish or make available to any person, firm or corporation any of the Confidential Information, other than to authorized officers, directors and employees of the Company in the proper performance of the duties contemplated herein, or as required by a court of competent jurisdiction or other administrative or legislative body; provided that, prior to disclosing any of the Confidential Information to a court or other administrative or legislative body, Executive shall promptly notify the Company so that the Company may seek a protective order or other appropriate remedy. Executive agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his employment for any reason.
(c) During the Term of this Agreement and for a period of one year after termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, own any interest in, operate, join, control or participate as a partner, member, director, manager, principal, officer, or agent of, enter into the employment of, act as a consultant or advisor to, or perform any services for, any entity (in those geographic areas in which the Company or any of its subsidiaries, as of the date of termination of the Executive's employment hereunder, have material operations) which entity is engaged in competition with the Company or any of its subsidiaries. An entity shall be deemed to be engaged in competition with the Company or its subsidiaries if it engages in a business which is the same as or substantially similar to any business engaged in by the Company or such subsidiary during the Term.
(d) During the Term of this Agreement and for a period of two years after termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, hire, solicit or recruit for hire any employee of the Company or any of its subsidiaries or encourage any employee of the Company or any of its subsidiaries to terminate his or her employment in order to obtain employment by any other person, firm or corporation.
(e) Executive acknowledges that(A) in connection with rendering the services to be rendered by Executive hereunder, Executive will have access to and knowledge of
Confidential Information, the disclosure of which would place the Company or its subsidiaries at a competitive disadvantage, causing irreparable injury, and (B) the services to be rendered by Executive hereunder are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by Executive of any of the provisions contained in this Section 9 will cause the Company irreparable injury. Executive, therefore, agrees that the Company shall be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Executive from any such violation or threatened violations.
(f) Executive further acknowledges and agrees that due to the uniqueness of his services and confidential nature of the information he will possess, the covenants set forth herein are reasonable and necessary for the protection of the business and goodwill of the Company; and it is the intent of the parties hereto that if, in the opinion of any court of competent jurisdiction, any provision set forth in this Section 9 is not reasonable in any respect, such court shall have the right, power and authority to modify any and all such provisions in such a manner as to such court shall appear not unreasonable and to enforce the remainder of this Section 9 as so modified.
10. Termination of Agreement. The employment by the Company of Executive pursuant to this Agreement shall not be terminated prior to the end of the Term, except as set forth in this Section 10.
(a) By Mutual Consent.
(i) The employment by the Company of Executive pursuant to this Agreement may be terminated at any time by the mutual written agreement of the Company and Executive.
(ii) In the event that (i) Executive's employment is terminated by mutual consent pursuant to this Section 10(a), and (ii) Executive and the Company determine at that time that it is in their mutual best interest for Executive to continue to be bound after his termination by the provisions of Section 9 of this Agreement for the periods set forth therein, then the parties may enter into an agreement to that effect, in exchange for which Executive would be entitled to the compensation provided for in Section 10(e) hereof.
(b) Death. The employment by the Company of Executive pursuant to this Agreement shall be terminated upon the death of Executive, in which event Executive's spouse or heirs shall receive the following: (i) Executive's Base Salary and benefits to be paid or provided to Executive under this Agreement through the Date of Termination and (ii) continuation of Executive's Base Salary and the health and welfare benefits provided for pursuant to Sections 8(a) and 8(b) hereof ("Health Benefits") for a period of one (1) year after the Date of Termination.
(c) Disability. The employment by the Company of Executive pursuant
to this Agreement may be terminated by written notice to Executive at the option
of the Company in the event that as a result of the Executive's incapacity due
to physical or mental illness (which physical or mental illness shall be
confirmed in writing by a physician or other medical expert acceptable to both
parties), the Executive is unable to perform his duties, services and
responsibilities hereunder or shall have been absent from his duties hereunder
on a full-time basis for ninety (90) consecutive days or for an aggregate of
ninety (90) days or more in any six (6) month period, and within thirty (30)
days after notice is given by the Company (which notice may be delivered no
earlier than thirty days prior to the expiration of such ninety (90) consecutive
days or six month period, as the case may be), the Executive shall not have
returned to the performance of his duties hereunder on a full-time basis. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(c), Executive shall be entitled to receive the following: (i) all
Base Salary and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination and (ii) continuation of his Base
Salary and Health Benefits for a period of one (1) year after the Date of
Termination; provided, however, that amounts payable to Executive under this
Section 10(c) shall be reduced by the proceeds of any short- and/or long-term
disability payments under the Company plans referred to in Section 8 hereof to
which Executive may be entitled during such period.
(d) By the Company for Cause. The employment of Executive pursuant
to this Agreement may be terminated by the Company by written notice to
Executive ("Notice of Termination") for Cause (as hereafter defined). In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(d), Executive shall be entitled to receive all Base Salary and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination and no more.
(e) By the Company Without Cause. The employment by the Company of
Executive pursuant to this Agreement may be terminated by the Company at any
time without Cause by delivery of a Notice of Termination to Executive. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(e), Executive shall be entitled to receive the following: (i) all
Base Salary and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination, (ii) continuation of his Base Salary
and Health Benefits for a period of one (1) year after the Date of Termination,
and (iii) an amount equal to his Average Bonus Compensation (as hereafter
defined).
(f) By Executive. The employment of Executive by the Company
pursuant to this Agreement may be terminated by Executive by written notice to
the Company of his resignation (a "Notice of Resignation") at any time. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(f), Executive shall be entitled to receive all Base Salary and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination and no more; provided, however, that if Executive terminates
his employment due to (i) a material adverse diminution of Executive's job title
or responsibilities from those currently in effect; or (ii) a relocation of
Executive's principal place of employment more than 100 miles from its current
location without his consent, then Executive shall instead be entitled to the
compensation provided for in Section 10(e) hereof.
(g) Non-Renewal. In the event that at any time during the Term (as it may be extended) the Company notifies Executive of its intent not to renew this Agreement pursuant to Section 2(b) hereof, and Executive then delivers a Notice of Resignation to the Company within ninety (90) days of receipt of such notice of non-renewal, Executive shall be entitled to receive the following: (i) all Base Salary and benefits to be paid or provided to Executive under this Agreement through the Date of Termination, (ii) continuation of his Base Salary and Health Benefits for a period of one (1) year after the Date of Termination, and (iii) an amount equal to his Average Bonus Compensation.
(h) Previously Earned Bonus. Notwithstanding any other provision of this Section 10, in the event that Executive's employment pursuant to this Agreement is terminated at a time when Executive shall have earned a bonus under the Annual Incentive Plan for performance during the prior fiscal year which has not yet been paid, Executive shall be paid such bonus in addition to the amounts otherwise provided for in this Section 10. Such bonus shall be paid in accordance with the Company's normal practices.
(i) Date of Termination. Executive's Date of Termination shall be:
(i) if the parties hereto mutually agree to terminate this Agreement pursuant to
Section 10(a) hereof, the date designated by the parties in such agreement; (ii)
if Executive's employment by the Company is terminated pursuant to Section
10(b), the date of Executive's death; (iii) if Executive's employment by the
Company is terminated pursuant to Section 10(c), the last day of the applicable
period referred to in Section 10(c) hereof; (iv) if Executive's employment by
the Company is terminated pursuant to Section 10(d), the date on which a Notice
of Termination is given; and (v) if Executive's employment by the Company is
terminated pursuant to Sections 10(e), 10(f) or 10(g), the date the Notice of
Termination or Notice of Resignation, as the case may be, is given.
(j) Payment of Post-Termination Compensation. After Executive's Date of Termination, all payments of Base Salary and Average Bonus Compensation to Executive pursuant to this Section 10 shall be paid in accordance with the Company's normal payroll practices, but in no event less often than semi-monthly. In the event of a breach by Executive of Section 9 of this Agreement during the applicable period following his Date of Termination, Executive agrees (i) that the Company shall have no further obligation to make any payments to Executive under Section 10 of the Agreement and (ii) that any payments of Base Salary or Average Bonus Compensation previously made to Executive after his Date of Termination shall be returned to the Company.
11. Representations.
(a) The Company represents and warrants that this Agreement has been authorized by all necessary corporate action of the Company and is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms.
(b) Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement and that this Agreement is a valid and binding agreement of Executive enforceable against Executive in accordance with its terms.
12. Successors. This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.
13. Entire Agreement. This Agreement contains all the understandings between the parties hereto pertaining to the matters referred to herein, and supersedes any other undertakings and agreements (other than any stock option agreement between Executive and the Company), whether oral or in writing, previously entered into by them with respect thereto. Executive represents that, in executing this Agreement, he does not rely and has not relied upon any representation or statement made by the Company not set forth herein with regard to the subject matter or effect of this Agreement or otherwise.
14. Termination; Amendment or Modification; Waiver.
(a) This Agreement may be terminated at any time by mutual written consent of the Company and Executive.
(b) No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by Executive and by a duly authorized officer of the Company. No waiver by any party hereto of any breach by another party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.
15. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be (i) delivered by hand, (ii)
delivered by a nationally recognized commercial overnight delivery service,
(iii) mailed postage prepaid by first class mail or (iv) transmitted by
facsimile transmitted to the party concerned at the address or telecopier number
set forth below:
To Executive at:
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: Charles L. Horn
To the Company at:
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: General Counsel
with copies to:
JLL Partners
450 Lexington Avenue
New York, New York 10017
Facsimile: (212) 286-8626
Attention: Ramsey Frank
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile: (302) 651-3001
Attention: Robert B. Pincus
Such notices shall be effective: (i) in the case of hand deliveries when received; (ii) in the case of an overnight delivery service, on the next business day after being placed in the possession of such delivery service, with delivery charges prepaid; (iii) in the case of mail, seven (7) days after deposit in the postal system, first class mail, postage prepaid; and (iv) in the case of facsimile notices, when electronic confirmation of receipt is received by the sender. Any party may change its address and telecopy number by written notice to the other given in accordance with this Section 15; provided, however, that such change shall be effective when received.
16. Severability. If any provision or clause of this Agreement or the application of any such provision or clause to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision or clause to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision or clause hereof shall be validated and shall be enforced to the fullest extent permitted by law.
17. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
18. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles.
19. Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.
20. Withholding. All payments to Executive under this Agreement shall be reduced by all applicable withholding required by federal, state or local law.
21. Specific Performance. Each party hereto acknowledges that money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by such party and that any such breach would cause the other parties, irreparable harm. Accordingly, each party hereto also agrees that, in the event of any breach or threatened breach of the provisions of this Agreement by such party, the other parties shall be entitled to equitable relief without the requirement of posting a bond or other security, including in the form of injunctions and orders for specific performance, in addition to all other remedies available to such other parties at law or in equity.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
23. Definitions.
(a) "Cause" means the determination, in good faith, by the Company Board, after notice to Executive that one or more of the following events has occurred: (i) any act of gross negligence, fraud, willful misconduct or moral turpitude by Executive materially injuring the interest, business or reputation of the Company, or any of its parents, subsidiaries or affiliates; (ii) Executive's conviction of any felony; (iii) violation by Executive of the Company's Drug Policy; (iv) any misappropriation or embezzlement of the property of the Company, or any of its parents, subsidiaries or affiliates; or (v) any material breach by Executive of this Agreement, including, without limitation, a material breach of Section 9 hereof, which breach, to the extent it is capable of being cured, remains uncorrected for a period of thirty (30) days after receipt by Executive of written notice from the Company setting forth such breach.
(b) "Average Bonus Compensation" shall mean an amount equal to the average of the annual bonus amounts earned by Executive under the Company's Annual Incentive Plan during the two most recent fiscal years ended prior to Executive's Date of Termination.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the date first above written.
BUILDERS FIRSTSOURCE, INC.
By: /s/ Floyd Sherman ----------------- Floyd Sherman Chief Executive Officer |
EXECUTIVE
/s/ Charles L. Horn ------------------- Charles L. Horn |
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 15, 2004, by and between Builders FirstSource, Inc., a Delaware corporation (the "Company"), and Donald F. McAleenan (the "Executive").
WHEREAS, the Company desires that Executive serve as the Senior Vice President and General Counsel of the Company, and Executive desires to hold such positions under the terms and conditions of this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Company Board") has approved and authorized the Company to enter into this Agreement with Executive.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and intending to be legally bound hereby, the parties agree as follows:
1. Employment. The Company hereby employs Executive, and Executive hereby accepts employment with the Company, upon the terms and subject to the conditions set forth herein.
2. Term.
(a) Subject to Section 2(b) hereof, the term of employment by the Company of Executive pursuant to this Agreement (as the same may be extended, the "Term") shall commence on January 15, 2004 (the "Effective Date"), and terminate on the first anniversary thereof.
(b) Commencing on the first anniversary of the Effective Date and on each subsequent anniversary thereof, the Term shall automatically be extended for one (1) additional year unless, not later than ninety days (90) prior to any such anniversary date, either party hereto shall have notified the other party hereto in writing that such extension shall not take effect.
3. Position. During the Term, Executive shall serve as the Senior Vice President and General Counsel of the Company, supervising the legal matters and affairs of the Company and performing such other duties as the Company Board shall determine.
4. Duties. During the Term, Executive shall devote his full time and attention during normal business hours to the business and affairs of the Company, except vacations in accordance with the Company's policies and for illness or incapacity, in accordance with Section 6 hereof.
5. Salary and Bonus.
(a) During the Term, the Company shall pay to Executive a base salary at the rate of $320,000 per year (the "Base Salary"), subject to adjustments pursuant to the terms of Section 5(b) hereof.
(b) On or prior to each anniversary hereof during the Term (assuming
the Term of the Agreement is extended pursuant to Section 2(b) hereof), the
Company Board or the Compensation Committee of the Company Board (the
"Compensation Committee") shall review the Base Salary and may, in its sole
discretion, increase the Base Salary based upon performance and merit.
Executive's Base Salary shall not be decreased below the amount set forth in
Section 5(a) hereof. The Base Salary shall be payable to Executive in
substantially equal installments in accordance with the Company's normal payroll
practices, but in no event less often than semi-monthly.
(c) For the Company's fiscal year ending December 31, 2004, and for each fiscal year during the Term thereafter, Executive shall be eligible to receive an annual cash bonus equal to the amount provided for in the Company's Annual Cash Incentive Plan ("Annual Incentive Plan") (which currently provides for a target bonus percentage of 100% of Executive's Base Salary), which Annual Incentive Plan is approved by the Company Board or the Compensation Committee thereof. Executive's target bonus percentage under the Annual Incentive Plan shall not be reduced below 100% of his Base Salary.
6. Vacation, Holidays and Sick Leave. During the Term, Executive shall be entitled to paid vacation, paid holidays and sick leave in accordance with the Company's standard policies for its senior executive officers.
7. Business Expenses. Executive shall be reimbursed for all reasonable and necessary business expenses incurred by him in connection with his employment, including, without limitation, expenses for travel and entertainment incurred in conducting or promoting business for the Company upon timely submission by Executive of receipts and other documentation as required by the Internal Revenue Code of 1986, as amended (the "Code"), and in accordance with the Company's normal expense reimbursement policies.
8. Health, Welfare and Related Benefits. During the Term, Executive and eligible members of his family shall be eligible to participate fully in all (a) health and dental benefits and insurance programs; (b) life and short- and long-term disability benefits and insurance programs; and (c) defined contribution and equity compensation programs, all as available to senior executive officers of the Company generally.
9. Confidentiality, Non-Competition.
(a) Executive acknowledges that: (I) the Executive has, and his employment hereunder will require that Executive continue to have, access to and knowledge of Confidential Information (as hereinafter defined); (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of the Company or its subsidiaries would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Company's businesses; and (iii) the engaging by Executive in any of the activities prohibited by this Section 9 may constitute improper appropriation and/or use of such Confidential Information. Executive expressly acknowledges that the Confidential Information constitutes a protectable business interest of the Company. As used herein, the term "Confidential Information" shall mean information of any kind, nature or description which is disclosed to or otherwise known to the Executive as a direct or indirect consequence of his
association with the Company, which information is not generally known to the public or in the businesses in which such entities are engaged or which information relates to specific investment opportunities within the scope of their business which were considered by the Company during the Term; provided, however, that "Confidential Information" shall not be deemed to include information which (i) is or becomes generally available to the public other than as a result of a disclosure by the Executive, (ii) becomes available to the Executive on a non-confidential basis from a source other than the Company, provided that such source is not bound by any contractual, legal or fiduciary obligation with respect to such information or (iii) was in the Executive's possession prior to being furnished by the Company.
(b) During the Term of this Agreement and for a period of one year after the termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, whether individually, as a director, stockholder, owner, manager, member, partner, employee, consultant, principal or agent of any business, or in any other capacity, use for his own account, utilize or make known, disclose, furnish or make available to any person, firm or corporation any of the Confidential Information, other than to authorized officers, directors and employees of the Company in the proper performance of the duties contemplated herein, or as required by a court of competent jurisdiction or other administrative or legislative body; provided that, prior to disclosing any of the Confidential Information to a court or other administrative or legislative body, Executive shall promptly notify the Company so that the Company may seek a protective order or other appropriate remedy. Executive agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his employment for any reason.
(c) During the Term of this Agreement and for a period of one year after termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, own any interest in, operate, join, control or participate as a partner, member, director, manager, principal, officer, or agent of, enter into the employment of, act as a consultant or advisor to, or perform any services for, any entity (in those geographic areas in which the Company or any of its subsidiaries, as of the date of termination of the Executive's employment hereunder, have material operations) which entity is engaged in competition with the Company or any of its subsidiaries. An entity shall be deemed to be engaged in competition with the Company or its subsidiaries if it engages in a business which is the same as or substantially similar to any business engaged in by the Company or such subsidiary during the Term.
(d) During the Term of this Agreement and for a period of two years after termination of Executive's employment hereunder (upon expiration of the Term or otherwise), Executive shall not, directly or indirectly, hire, solicit or recruit for hire any employee of the Company or any of its subsidiaries or encourage any employee of the Company or any of its subsidiaries to terminate his or her employment in order to obtain employment by any other person, firm or corporation.
(e) Executive acknowledges that(A) in connection with rendering the services to be rendered by Executive hereunder, Executive will have access to and knowledge of
Confidential Information, the disclosure of which would place the Company or its subsidiaries at a competitive disadvantage, causing irreparable injury, and (B) the services to be rendered by Executive hereunder are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by Executive of any of the provisions contained in this Section 9 will cause the Company irreparable injury. Executive, therefore, agrees that the Company shall be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Executive from any such violation or threatened violations.
(f) Executive further acknowledges and agrees that due to the uniqueness of his services and confidential nature of the information he will possess, the covenants set forth herein are reasonable and necessary for the protection of the business and goodwill of the Company; and it is the intent of the parties hereto that if, in the opinion of any court of competent jurisdiction, any provision set forth in this Section 9 is not reasonable in any respect, such court shall have the right, power and authority to modify any and all such provisions in such a manner as to such court shall appear not unreasonable and to enforce the remainder of this Section 9 as so modified.
10. Termination of Agreement. The employment by the Company of Executive pursuant to this Agreement shall not be terminated prior to the end of the Term, except as set forth in this Section 10.
(a) By Mutual Consent.
(i) The employment by the Company of Executive pursuant to this Agreement may be terminated at any time by the mutual written agreement of the Company and Executive.
(ii) In the event that (i) Executive's employment is terminated by mutual consent pursuant to this Section 10(a), and (ii) Executive and the Company determine at that time that it is in their mutual best interest for Executive to continue to be bound after his termination by the provisions of Section 9 of this Agreement for the periods set forth therein, then the parties may enter into an agreement to that effect, in exchange for which Executive would be entitled to the compensation provided for in Section 10(e) hereof.
(b) Death. The employment by the Company of Executive pursuant to this Agreement shall be terminated upon the death of Executive, in which event Executive's spouse or heirs shall receive the following: (i) Executive's Base Salary and benefits to be paid or provided to Executive under this Agreement through the Date of Termination and (ii) continuation of Executive's Base Salary and the health and welfare benefits provided for pursuant to Sections 8(a) and 8(b) hereof ("Health Benefits") for a period of one (1) year after the Date of Termination.
(c) Disability. The employment by the Company of Executive pursuant
to this Agreement may be terminated by written notice to Executive at the option
of the Company in the event that as a result of the Executive's incapacity due
to physical or mental illness (which physical or mental illness shall be
confirmed in writing by a physician or other medical expert acceptable to both
parties), the Executive is unable to perform his duties, services and
responsibilities hereunder or shall have been absent from his duties hereunder
on a full-time basis for ninety (90) consecutive days or for an aggregate of
ninety (90) days or more in any six (6) month period, and within thirty (30)
days after notice is given by the Company (which notice may be delivered no
earlier than thirty days prior to the expiration of such ninety (90) consecutive
days or six month period, as the case may be), the Executive shall not have
returned to the performance of his duties hereunder on a full-time basis. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(c), Executive shall be entitled to receive the following: (i) all
Base Salary and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination and (ii) continuation of his Base
Salary and Health Benefits for a period of one (1) year after the Date of
Termination; provided, however, that amounts payable to Executive under this
Section 10(c) shall be reduced by the proceeds of any short- and/or long-term
disability payments under the Company plans referred to in Section 8 hereof to
which Executive may be entitled during such period.
(d) By the Company for Cause. The employment of Executive pursuant
to this Agreement may be terminated by the Company by written notice to
Executive ("Notice of Termination") for Cause (as hereafter defined). In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(d), Executive shall be entitled to receive all Base Salary and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination and no more.
(e) By the Company Without Cause. The employment by the Company of
Executive pursuant to this Agreement may be terminated by the Company at any
time without Cause by delivery of a Notice of Termination to Executive. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(e), Executive shall be entitled to receive the following: (i) all
Base Salary and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination, (ii) continuation of his Base Salary
and Health Benefits for a period of one (1) year after the Date of Termination,
and (iii) an amount equal to his Average Bonus Compensation (as hereafter
defined).
(f) By Executive. The employment of Executive by the Company
pursuant to this Agreement may be terminated by Executive by written notice to
the Company of his resignation (a "Notice of Resignation") at any time. In the
event the employment by the Company of Executive is terminated pursuant to this
Section 10(f), Executive shall be entitled to receive all Base Salary and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination and no more; provided, however, that if Executive terminates
his employment due to (i) a material adverse diminution of Executive's job title
or responsibilities from those currently in effect; or (ii) a relocation of
Executive's principal place of employment more than 100 miles from its current
location without his consent, then Executive shall instead be entitled to the
compensation provided for in Section 10(e) hereof.
(g) Non-Renewal. In the event that at any time during the Term (as it may be extended) the Company notifies Executive of its intent not to renew this Agreement pursuant to Section 2(b) hereof, and Executive then delivers a Notice of Resignation to the Company within ninety (90) days of receipt of such notice of non-renewal, Executive shall be entitled to receive the following: (i) all Base Salary and benefits to be paid or provided to Executive under this Agreement through the Date of Termination, (ii) continuation of his Base Salary and Health Benefits for a period of one (1) year after the Date of Termination, and (iii) an amount equal to his Average Bonus Compensation.
(h) Previously Earned Bonus. Notwithstanding any other provision of this Section 10, in the event that Executive's employment pursuant to this Agreement is terminated at a time when Executive shall have earned a bonus under the Annual Incentive Plan for performance during the prior fiscal year which has not yet been paid, Executive shall be paid such bonus in addition to the amounts otherwise provided for in this Section 10. Such bonus shall be paid in accordance with the Company's normal practices.
(i) Date of Termination. Executive's Date of Termination shall be:
(i) if the parties hereto mutually agree to terminate this Agreement pursuant to
Section 10(a) hereof, the date designated by the parties in such agreement; (ii)
if Executive's employment by the Company is terminated pursuant to Section
10(b), the date of Executive's death; (iii) if Executive's employment by the
Company is terminated pursuant to Section 10(c), the last day of the applicable
period referred to in Section 10(c) hereof; (iv) if Executive's employment by
the Company is terminated pursuant to Section 10(d), the date on which a Notice
of Termination is given; and (v) if Executive's employment by the Company is
terminated pursuant to Sections 10(e), 10(f) or 10(g), the date the Notice of
Termination or Notice of Resignation, as the case may be, is given.
(j) Payment of Post-Termination Compensation. After Executive's Date of Termination, all payments of Base Salary and Average Bonus Compensation to Executive pursuant to this Section 10 shall be paid in accordance with the Company's normal payroll practices, but in no event less often than semi-monthly. In the event of a breach by Executive of Section 9 of this Agreement during the applicable period following his Date of Termination, Executive agrees (i) that the Company shall have no further obligation to make any payments to Executive under Section 10 of the Agreement and (ii) that any payments of Base Salary or Average Bonus Compensation previously made to Executive after his Date of Termination shall be returned to the Company.
11. Representations.
(a) The Company represents and warrants that this Agreement has been authorized by all necessary corporate action of the Company and is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms.
(b) Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement and that this Agreement is a valid and binding agreement of Executive enforceable against Executive in accordance with its terms.
12. Successors. This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to him hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.
13. Entire Agreement. This Agreement contains all the understandings between the parties hereto pertaining to the matters referred to herein, and supersedes any other undertakings and agreements (other than any stock option agreement between Executive and the Company), whether oral or in writing, previously entered into by them with respect thereto. Executive represents that, in executing this Agreement, he does not rely and has not relied upon any representation or statement made by the Company not set forth herein with regard to the subject matter or effect of this Agreement or otherwise.
14. Termination; Amendment or Modification; Waiver.
(a) This Agreement may be terminated at any time by mutual written consent of the Company and Executive.
(b) No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by Executive and by a duly authorized officer of the Company. No waiver by any party hereto of any breach by another party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.
15. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be (i) delivered by hand, (ii)
delivered by a nationally recognized commercial overnight delivery service,
(iii) mailed postage prepaid by first class mail or (iv) transmitted by
facsimile transmitted to the party concerned at the address or telecopier number
set forth below:
To Executive at:
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: Donald F. McAleenan
To the Company at:
Builders FirstSource, Inc.
2001 Bryan Street, Suite 1600
Dallas, Texas 75201
Attention: General Counsel
with copies to:
JLL Partners
450 Lexington Avenue
New York, New York 10017
Facsimile: (212) 286-8626
Attention: Ramsey Frank
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile: (302) 651-3001
Attention: Robert B. Pincus
Such notices shall be effective: (i) in the case of hand deliveries when received; (ii) in the case of an overnight delivery service, on the next business day after being placed in the possession of such delivery service, with delivery charges prepaid; (iii) in the case of mail, seven (7) days after deposit in the postal system, first class mail, postage prepaid; and (iv) in the case of facsimile notices, when electronic confirmation of receipt is received by the sender. Any party may change its address and telecopy number by written notice to the other given in accordance with this Section 15; provided, however, that such change shall be effective when received.
16. Severability. If any provision or clause of this Agreement or the application of any such provision or clause to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision or clause to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision or clause hereof shall be validated and shall be enforced to the fullest extent permitted by law.
17. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
18. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law principles.
19. Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.
20. Withholding. All payments to Executive under this Agreement shall be reduced by all applicable withholding required by federal, state or local law.
21. Specific Performance. Each party hereto acknowledges that money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by such party and that any such breach would cause the other parties, irreparable harm. Accordingly, each party hereto also agrees that, in the event of any breach or threatened breach of the provisions of this Agreement by such party, the other parties shall be entitled to equitable relief without the requirement of posting a bond or other security, including in the form of injunctions and orders for specific performance, in addition to all other remedies available to such other parties at law or in equity.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
23. Definitions.
(a) "Cause" means the determination, in good faith, by the Company Board, after notice to Executive that one or more of the following events has occurred: (i) any act of gross negligence, fraud, willful misconduct or moral turpitude by Executive materially injuring the interest, business or reputation of the Company, or any of its parents, subsidiaries or affiliates; (ii) Executive's conviction of any felony; (iii) violation by Executive of the Company's Drug Policy; (iv) any misappropriation or embezzlement of the property of the Company, or any of its parents, subsidiaries or affiliates; or (v) any material breach by Executive of this Agreement, including, without limitation, a material breach of Section 9 hereof, which breach, to the extent it is capable of being cured, remains uncorrected for a period of thirty (30) days after receipt by Executive of written notice from the Company setting forth such breach.
(b) "Average Bonus Compensation" shall mean an amount equal to the average of the annual bonus amounts earned by Executive under the Company's Annual Incentive Plan during the two most recent fiscal years ended prior to Executive's Date of Termination.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Employment Agreement as of the date first above written.
BUILDERS FIRSTSOURCE, INC.
By: /s/ Floyd Sherman ----------------- Floyd Sherman Chief Executive Officer |
EXECUTIVE
/s/ Donald F. McAleenan ----------------------- Donald F. McAleenan |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | |
(b) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and | |
(c) | Disclosed in this quarterly report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ FLOYD F. SHERMAN | |
|
|
Floyd F. Sherman | |
President and Chief Executive Officer |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | |
(b) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and | |
(c) | Disclosed in this quarterly report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ CHARLES L. HORN | |
|
|
Charles L. Horn | |
Senior Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ FLOYD F. SHERMAN | |
|
|
Floyd F. Sherman | |
President and Chief Executive Officer | |
/s/ CHARLES L. HORN | |
|
|
Charles L. Horn | |
Senior Vice President and Chief Financial Officer |