Exhibit 10.20
AGREEMENT RELATING TO RETIREMENT
This Agreement
Relating to Retirement (this “Agreement”), dated
January 15, 2004, but effective as of the 1st day of November,
2003, is by and between Johnie Schulte, an individual resident of
the State of Texas (“Schulte”), and NCI Buildings
Systems, Inc., a Delaware corporation with its principal office in
the State of Texas (the “Company”), and joined herein
for the limited purposes described herein by the Schulte Investment
Trust (the “Trust”), Karen Rene Rosales, Trustee, and
Karen Rene Rosales, individually.
WITNESSETH:
WHEREAS, Schulte
has served as an employee, officer and director of the Company,
including its Chief Executive Officer, since 1984; and
WHEREAS, Schulte
desires to retire as an employee and officer of the Company and all
of its subsidiary entities, including the positions of President
and Chief Executive Officer of the Company; and
WHEREAS, Schulte
has agreed to remain a director of the Company at least until the
annual meeting of stockholders of the Company to be held in 2004
and Schulte has agreed to assist the Company in the orderly
transition of his duties to his replacement for a period of time;
and
WHEREAS, the
Company and the Trust have entered into that certain Split-Dollar
Life Insurance Agreement, dated October 13, 1998 (the
“Insurance Agreement”), pursuant to which the Trust has
insured the life of Schulte and his spouse, the Company has agreed
to make at least eleven (11) annual premium payments on the
Policy (as defined in the Insurance Agreement) and, as security for
the repayment of such premiums, the Trust has assigned the Policy
to the Company; and
WHEREAS, NCI
Building Systems, L.P., a Texas limited partnership and indirect
wholly owned subsidiary of the Company (“NCI LP”), and
Schulte are parties to that certain Amended and Restated Employment
Agreement, dated January 29, 2003 (the “Employment
Agreement”), pursuant to which Schulte is employed by NCI LP;
and
WHEREAS, the
Company and Schulte are parties to that certain Supplemental
Benefit Agreement, dated December 13, 2002 (the
“Supplemental Agreement”) (the Insurance Agreement, the
Employment Agreement and the Supplemental Agreement are sometimes
collectively referred to herein as the “Schulte Benefit
Agreements”), pursuant to which the Company agreed to provide
Schulte with certain retirement benefits;
WHEREAS, the
Company and Schulte are parties to that certain Indemnification
Agreement, dated October 13, 2000 (the “Indemnification
Agreement”), pursuant to which the Company has agreed, under
certain circumstances, to indemnify Schulte in his capacity as an
officer and director of the Company; and
WHEREAS, the
Company and Schulte desire by this Agreement to set forth their
covenants and promises regarding the terms and provisions of his
retirement;
NOW, THEREFORE,
the parties hereto, in consideration of the mutual covenants and
promises set forth and intending to be legally bound, hereby
covenant and agree as follows:
1. Retirement.
Schulte hereby retires as an officer of the Company and all of its
subsidiary entities, including the positions of President and Chief
Executive Officer of the Company, effective as of the close of
business on November 1, 2003 (the “Effective
Time”), such retirement to become effective at the Effective
Time without any further action on the part of Schulte or the
Company. Schulte hereby agrees to provide consulting advice and
assist in the transition of his responsibilities and duties from
the Effective Time through the close of business on
December 31, 2003, at which time Schulte will terminate all of
his consulting activities on behalf of the Company and all
relationships between Schulte and the Company, other than his
relationship as a director and a shareholder of the Company, shall
terminate (the “Termination Time”), such termination to
become effective at the Termination Time without any further action
on the part of Schulte or the Company. During the period from the
Effective Time until the Termination Time, Schulte’s salary
shall continue at the same rate as in effect for the
Company’s fiscal 2003 year. The Company and Schulte
hereby agree that Schulte’s participation in the
Company’s Bonus Program shall terminate at the Effective
Time, provided, however, that the Company and Schulte hereby agree
that based on Schulte’s employment and service during all of
fiscal 2003, Schulte shall be eligible to receive a bonus at Level
1 under the Company’s Bonus Program for fiscal 2003, which
bonus, if any, will be based on the Company’s performance for
fiscal 2003, will be determined in the manner prescribed by the
Bonus Program applicable to all Level 1 bonus participants and will
be paid at the time and in the manner provided by the Bonus Program
and the Compensation Committee of the Board of
Directors.
2. Vesting.
Notwithstanding anything to the contrary in the Employment
Agreement and the Supplemental Agreement, at the Termination Time,
without any further action necessary on the part of Schulte or the
Company, 100% of the benefits provided to Schulte in the Employment
Agreement and the Supplemental Agreement dependent upon the lapse
of time will become vested; i.e. Schulte shall be vested in
and, subject to Section 9 hereof, shall be entitled to receive
seventy-five percent (75%) of his 2003 base salary, or $337,500 a
year, for the calendar years 2004, 2005 and 2006 under the
Employment Agreement and 100% of the Retirement Benefit (as defined
in the Supplemental Agreement), or $200,000 a year, for the
calendar years 2007 through 2013 under the Supplemental
Agreement.
3. Payment of
Salary and Supplemental Benefits. Subject to the provisions of
Section 9 hereof, after the Termination Time, the Company
will, or will cause NCI LP to, pay Schulte the Vested Payments (as
defined in the Employment Agreement) on the terms and at the times,
subject to applicable withholding, set forth in the Employment
Agreement and the Company will pay Schulte the Retirement Benefit
on the terms and at the times, subject to applicable withholding,
set forth in the Supplemental Agreement.
4. Stock
Options. The Company and Schulte acknowledge and agree that
Schulte’s retirement as an officer and employee of the
Company and its subsidiaries will not affect Schulte’s
outstanding options so long as Schulte continues to serve as a
director of the Company. If and when Mr. Schulte retires from
his directorship with the Company, all of his then outstanding
stock options shall immediately become 100% vested and
Mr. Schulte will have either (i) one year from the date
of his retirement as a director if such stock options were granted
before May 30, 2002, or (ii) five years from the date of
his retirement as a director if such stock options were granted on
or after May 30, 2002, to exercise such stock options, unless in
each instance, the stock option agreement relating to such stock
option provides for an expiration date that is earlier than the
expiration of such one- or five-year period.
2
5. Payment of
Insurance Premiums.
(a)
Immediately following Schulte’s resignation as a director of
the Company or the election of his successor if Schulte decides not
to stand for re-election as a director of the Company, and subject
to the provisions of Section 9 hereof, the Company agrees to
resume making annual premium payments (which shall be deemed for
all purposes to be “Corporation Premiums” as defined in
the Insurance Agreement) on the Policy in accordance with the terms
and limitations of the Insurance Agreement; provided, however, that
if the terms and provisions of the Sarbanes-Oxley Act of 2002
prohibit the Company’s payment of such annual premiums, the
Company will provide Schulte with a comparable benefit permitted by
applicable laws and the rules and regulations of the Securities and
Exchange Commission and the New York Stock Exchange.
(b)
If, at any time, the Company is relieved of its obligations to make
annual premium payments on the Policy pursuant to the provisions of
Section 9 hereof, then notwithstanding anything to the
contrary in the Insurance Agreement, the Company shall offer to
sell to Schulte or the Trust the Company’s interest in the
Policy at a purchase price equal to the aggregate amount of
Corporation Premiums paid on the Policy pursuant to this Agreement
and the Insurance Agreement. If Schulte or the Trust does not
purchase the Company’s interest in the Policy as provided in
this subsection, then notwithstanding anything to the contrary in
the Insurance Agreement, the Company shall have the right, in its
absolute and sole discretion, to continue to make annual premium
payments (until such time as the Company elects, in its sole and
absolute discretion, to stop making such payments) and/or to
surrender the Policy to the Insurer (as defined in the Insurance
Agreement) in exchange for the then current cash surrender value of
the Policy (the “Cash Value”). The Company and Schulte
agree that the Company shall retain that portion of the Cash Value
received from the Insurer necessary to repay the Company for the
Corporation Premiums. The Company and Schulte further agree that
(a) if the Corporation Premiums exceed the Cash Value, neither
Schulte nor the Trust shall have any further obligation to the
Comp
