-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R3Ezw3LsQK6O3hMI1qq9xM/doZ+GG7GFEUkZUDM+zL8oF87YPYCbTVvP0NJ/dTCI q4dRLEq+SjxNLPsZJEFdlg== 0000950134-03-001370.txt : 20030131 0000950134-03-001370.hdr.sgml : 20030131 20030131163627 ACCESSION NUMBER: 0000950134-03-001370 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20021102 FILED AS OF DATE: 20030131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCI BUILDING SYSTEMS INC CENTRAL INDEX KEY: 0000883902 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 760127701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14315 FILM NUMBER: 03534922 BUSINESS ADDRESS: STREET 1: 10943 NORTH SAM HOUSTON PARKWAY W CITY: HOUSTON TEXAS STATE: TX ZIP: 77041 BUSINESS PHONE: 7134667788 MAIL ADDRESS: STREET 1: 7301 FAIRVIEW STREET 2: P O BOX 40220 CITY: HOUSTON STATE: TX ZIP: 77041 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL COMPONENTS INCORPORATED DATE OF NAME CHANGE: 19600201 10-K 1 d02830e10vk.txt FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 2, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-14315 NCI BUILDING SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 76-0127701 (State or other jurisdiction) (I.R.S. employer of incorporation or organization identification no.) 10943 North Sam Houston Parkway West 77064 Houston, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (281) 897-7788 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 par value Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes X No --------- --------- The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant on January 15, 2003, was $418,197,589, which aggregate market value was calculated using the closing sales price reported by the New York Stock Exchange as of the last day of the registrant's most recently completed second fiscal quarter. The number of shares of common stock of the registrant outstanding on January 15, 2003, was 18,717,582. DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Parts I and II of this Annual Report is incorporated by reference from the registrant's 2002 Annual Report to Shareholders, and certain information required by Parts II and III of this Annual Report is incorporated by reference from the registrant's definitive proxy statement for its annual meeting of shareholders to be held on March 14, 2003. ================================================================================ TABLE OF CONTENTS PART I Item 1. Business............................................................................................1 Item 2. Properties.........................................................................................13 Item 3. Legal Proceedings..................................................................................14 Item 4. Submission of Matters to a Vote of Security Holders................................................14 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters..............................14 Item 6. Selected Financial Data............................................................................14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..............15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.........................................15 Item 8. Financial Statements and Supplementary Data........................................................15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............15 PART III Item 10. Directors and Executive Officers of the Registrant.................................................15 Item 11. Executive Compensation.............................................................................15 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters................................................................................15 Item 13. Certain Relationships and Related Transactions.....................................................16 Item 14. Controls and Procedures............................................................................16 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................................16
This Annual Report contains forward-looking statements concerning our business and operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and other factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and other patterns, raw material pricing, competitive activity and pricing pressure, the ability to make strategic acquisitions accretive to earnings, and general economic conditions affecting the construction industry, as well as other risks detailed in our filings with the SEC. We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations. PART I ITEM 1. BUSINESS. GENERAL NCI Building Systems, Inc. is one of North America's largest integrated manufacturers of metal products for the building industry. We operate 35 manufacturing facilities located in 16 states and Mexico. We sell metal building components and engineered building systems, offering one of the most extensive metal product lines in the building industry with well-recognized brand names. We believe that our leading market positions and strong track record of growth and profitability have resulted from our focus on: o Controlling operating and administrative costs o Managing working capital and fixed assets o Developing new markets and products o Successfully identifying strategic growth opportunities We believe that metal products have gained and continue to gain a greater share of the new non-residential construction and repair and retrofit markets. This is due to increasing acceptance and recognition of the benefits of metal products in building applications. Metal building components offer builders, designers, architects and end-users several advantages, including lower long-term costs, longer life, attractive aesthetics and design flexibility. Similarly, engineered building systems offer a number of advantages over traditional construction alternatives, including shorter construction time, more efficient use of materials, lower construction costs, greater ease of expansion and lower maintenance costs. In March 2000, we acquired the remaining 50% interest in DOUBLECOTE, L.L.C. from our previous joint venture partner. The acquisition gave us complete control over our principal metal coating facility. In December 2000, we bought substantially all of the assets of Midland Metals, Inc., an Iowa-based manufacturer of metal building components, which gave us a stronger presence in the Midwest. In June 2001, we sold our 50% interest in Midwest Metal Coatings, LLC, a joint venture that operated a hot rolled coil coating facility, to our joint venture partner. In October 2001, we announced the closing of five of our manufacturing facilities, which we completed during the first quarter of fiscal 2002. Two of the closings resulted from ongoing synergies realized from our 1998 acquisition of Metal Building Components, Inc. ("MBCI"). The operations of the other three facilities were consolidated into our other manufacturing facilities that could efficiently provide delivery and service to those geographic areas. In the second quarter of fiscal 2001, we discovered errors in a new accounting and financial system that impacted certain inventories and related liabilities, which resulted in a restatement of our financial results for the third and fourth quarters of 1999, fiscal year 2000 and the quarter ended January 31, 2001. The restatement was reflected in our Annual Report on Form 10-K/A for the fiscal year ended October 31, 2000 and our Quarterly Report on Form 10-Q/A for the quarter ended January 31, 2001 filed with the SEC. All financial information in this Annual Report on Form 10-K for fiscal 2000 and 2001 reflect this restatement. See "Item 3. Legal Proceedings" for a description of litigation matters related to our restatement. We were founded in 1984 and we reincorporated in Delaware in 1991. Our principal offices are located at 10943 North Sam Houston Parkway West, Houston, Texas 77064 and our telephone number is (281) 897-7788. Unless indicated otherwise, references in this report to NCI, us, or we include our predecessors and our subsidiaries. We file annual, quarterly and current reports and other information with the SEC. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with any amendments to those reports, are available free of charge at our corporate website at "http://www.ncilp.com." 1 BUSINESS SEGMENTS We have divided our operations into two reportable segments: engineered building systems and metal building components, based upon similarities in product lines, manufacturing process, marketing and management of its business. Products of both segments are similar in basic raw materials used. The engineered building systems segment includes the manufacturing of structural framing and includes value added engineering and drafting, which are typically not part of metal building component products or services. Our approximate sales to outside customers, operating income and total assets attributable to these business segments were as follows for the periods indicated (in thousands):
2000 2001 2002 --------------------------- --------------------------- --------------------------- SALES TO OUTSIDE CUSTOMERS: Engineered building systems ......... $ 337,849 33% $ 320,789 34% $ 317,926 33% Metal building components ........... 680,475 67 634,088 66 635,516 67 Intersegment sales .................. 51,869 5 43,620 5 44,725 5 Corporate/eliminations .............. (51,869) (5) (43,620) (5) (44,725) (5) ------------ ------------ ------------ ------------ ------------ ------------ Total net sales ............. $ 1,018,324 100% $ 954,877 100% $ 953,442 100% ============ ============ ============ ============ ============ ============ OPERATING INCOME: Engineered building systems ......... $ 48,446 14% $ 43,827 14% $ 28,695 9% Metal building components ........... 96,099 14 60,746 10 70,407 11 Restructuring charge ................ -- -- (2,815) -- -- -- Corporate/eliminations .............. (30,875) -- (36,933) -- (26,878) -- ------------ ------------ ------------ ------------ ------------ ------------ Total operating income ..... $ 113,670 11% $ 64,825 7% $ 72,224 8% ============ ============ ============ ============ ============ ============ TOTAL ASSETS: Engineered building systems ......... $ 102,322 12% $ 93,094 11% $ 206,429 29% Metal building components ........... 380,312 44 343,112 41 468,667 65 Corporate/eliminations .............. 386,287 44 402,606 48 46,169 6 ------------ ------------ ------------ ------------ ------------ ------------ Total assets ............... $ 868,921 100% $ 838,812 100% $ 721,265 100% ============ ============ ============ ============ ============ ============
For more business segment information, please see the supplementary business segment information contained in footnote 14 to our consolidated financial statements included in our 2002 Annual Report to Shareholders. Metal Building Components. We are the largest domestic supplier of metal building components to the nonresidential building industry and have a market share at least twice that of our largest competitor. We are also one of the largest suppliers in the U.S. of roll-up doors for self-storage facilities. We design, manufacture, sell and distribute one of the widest selections of components for a variety of new construction applications as well as repair and retrofit uses. The following are the types of components we sell: o Metal roof and wall systems o Fascia systems o Roll-up doors o Mansard systems o Interior and exterior doors o Trim and accessories Our components are used in the following markets: o Industrial o Governmental o Community o Commercial o Agricultural o Residential As part of our metal building components manufacturing, we also provide hot roll and light gauge metal coil coating and painting services and products. We coat and paint hot roll and light gauge metal coils for our own use in metal building components manufacturing, supplying substantially all of our internal metal coating and painting 2 requirements. On average, our internal use accounts for about 52% of our production. We also coat and paint hot roll metal coils and light gauge metal for third parties for a variety of applications, including heating and air conditioning systems, water heaters, lighting fixtures and office furniture. We market our metal building components products and metal coating and painting services nationwide primarily through a direct sales force under several brand names. These brand names include "Metal Building Components," "American Building Components," "Doors and Building Components," "ABC," "DBCI," "MBCI," "Midland Metals," "IPS," "Metal Coaters," "Metal-Prep," "NCI Metal Depot" and "DOUBLECOTE." Engineered Building Systems. We are one of the largest domestic suppliers of engineered building systems. We design, manufacture and market engineered building systems, self-storage building systems and metal home framing systems for commercial, industrial, agricultural, governmental, community and residential uses. We market these systems nationwide through authorized builder networks totaling over 1,400 builders and a direct sales force under several brand names. These brand names include "Metallic Buildings," "Metallic de Mexico," "Mid-West Steel Buildings," "A & S Buildings," "All American Systems," "Classic," "Steel Systems" and "Mesco." INDUSTRY OVERVIEW The building industry encompasses a broad range of metal products, principally composed of steel, sold through a variety of distribution channels for use in diverse applications. These metal products include metal building components and engineered building systems. Metal Building Components. Manufacturers of metal components supply products to the building industry. These products include roof and wall panels, doors, metal partitions, metal trim and other related accessories. These products are used in new construction and in repair and retrofit applications for commercial, industrial, agricultural, governmental, community and residential uses. Metal building components are used in a wide variety of construction applications, including purlins and girts, roofing, walls, doors, trim and other parts of traditional buildings, as well as in architectural applications and engineered building systems. We estimate the metal building components market including roofing applications to be a multi-billion dollar market, although market data is limited. We believe that the metal building components business is less affected by economic cycles than the engineered building systems business due to the use of metal building components in repair and retrofit applications. We believe that metal products have gained and continue to gain a greater share of new construction and repair and retrofit markets due to increasing acceptance and recognition of the benefits of metal products in building applications. Metal roofing accounts for a significant portion of the overall metal building components market, but less than 10% of total annual roofing material expenditures. As a result, we believe that significant opportunities exist for metal roofing, with its advantages over conventional roofing materials, to increase its overall share of this market. Metal roofing systems have several advantages over conventional roofing systems, including the following: o Lower lifecycle cost. The total cost over the life of metal roofing systems is lower than that of conventional roofing systems for both new construction and retrofit roofing. For new construction, the cost of installing metal roofing is greater than the cost of conventional roofing. Yet, the longer life and lower maintenance costs of metal roofing make the cost more attractive. For retrofit roofing, although installation costs are 60-70% higher for metal roofing due to the need for a sloping support system, the lower ongoing costs more than offset the initial cost. o Increased longevity. Metal roofing systems generally last for 20 years without requiring major maintenance or replacement. This compares to five to ten years for conventional roofs. The cost of leaks and roof failures associated with conventional roofing can be very high, including damage to building interiors and disruption of the functional usefulness of the building. Metal roofing prolongs the intervals between costly and time-consuming repair work. o Attractive aesthetics and design flexibility. Metal roofing systems allow architects and builders to integrate colors and geometric design into the roofing of new and existing buildings, providing an increasingly fashionable means of enhancing a building's aesthetics. Conventional roofing material is generally tar paper or a gravel surface, and building designers tend to conceal roofs made with these materials. 3 Engineered Building Systems. Engineered building systems consist of engineered structural members and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. Engineered building systems manufacturers design an integrated system that meets applicable building code requirements. These systems consist of primary structural framing, secondary structural members (purlins and girts) and covering for roofs and walls. Over the last 15 years, engineered building systems have significantly increased penetration of the market for nonresidential low rise structures and are being used in a broad variety of other applications. According to the Metal Building Manufacturers Association ("MBMA"), reported sales of engineered building systems have increased from approximately $1.5 billion in 1993 to $2.5 billion in 2000. We believe this increase resulted primarily from (1) the significant cost advantages offered by these systems, (2) increased architectural acceptance of engineered building systems for construction of commercial and industrial building projects, (3) advances in design versatility and production processes and (4) a favorable economic environment through the year 2000. In 2001, the MBMA reported a decline of 20% in sales, which was in-line with the general decline in non-residential construction. This downturn continued into 2002 with a further decline of 10%. Industry sales are expected to improve as non-residential construction markets show improvements. We believe the cost of an engineered building system generally represents approximately 15-20% of the total cost of constructing a building, which includes land cost, labor, plumbing, electrical, heating and air conditioning systems installation and interior finish. Technological advances in products and materials, as well as significant improvements in engineering and design techniques, have led to the development of structural systems that are compatible with more traditional construction materials. Architects and designers now often combine an engineered building system with masonry, glass and wood exterior facades to meet the aesthetic requirements of customers while preserving the inherent characteristics of engineered building systems. As a result, the uses for engineered building systems now include office buildings, showrooms, retail stores, banks, schools, warehouses, factories, distribution centers, government buildings and community centers for which aesthetics and architectural features are important considerations of the end-users. In our marketing efforts, we and other major manufacturers generally emphasize the following characteristics of engineered building systems to distinguish them from other methods of construction: o Shorter construction time. In many instances, it takes less time to construct an engineered building than other building types. In addition, because most of the work is done in the factory, the likelihood of weather interruptions is reduced. o More efficient material utilization. The larger engineered building systems manufacturers use computer-aided analysis and design to fabricate structural members with high strength-to-weight ratios, minimizing raw materials costs. o Lower construction costs. The in-plant manufacture of engineered building systems, coupled with automation, allows the substitution of less expensive factory labor for much of the skilled on-site construction labor otherwise required for traditional building methods. o Greater ease of expansion. Engineered building systems can be modified quickly and economically before, during or after the building is completed to accommodate all types of expansion. Typically, an engineered building system can be expanded by removing the end or side walls, erecting new framework and adding matching wall and roof panels. o Lower maintenance costs. Unlike wood, metal will not deteriorate because of cracking, rot or insect damage. Furthermore, factory-applied roof and siding panel coatings resist cracking, peeling, chipping, chalking and fading. Consolidation. Over the last several years, there has been consolidation in the metal building components and engineered building systems industry, which includes a large number of small local and regional firms. We believe that this industry will continue to consolidate, driven by the needs of manufacturers to increase manufacturing capacity, 4 achieve greater process integration and add geographic diversity to meet customers' product and delivery needs, improve production efficiency and manage costs. PRODUCTS AND MARKETS Our product lines consist of metal building components and engineered building systems. Metal Building Components. Our metal building components consist of individual components, including secondary structural framing, covering systems and associated metal trims, that are sold directly to contractors or end-users for use in the building industry, including the construction of metal buildings. We also stock and market metal component parts for use in the maintenance and repair of existing buildings. Specific component products consist of end and side wall panels, roof panels, purlins, girts, partitions, header panels and related trim and screws. We believe we offer the widest selection of metal building components in the building industry. Purlins and girts are medium gauge, roll formed steel components. They are supplied to builders for secondary structural framing. We custom produce purlins and girts for our customers and offer the widest selection of sizes and profiles in the United States. Covering systems, consisting of wall and roof panels, protect the rest of the structure and the contents of the building from the weather. They also contribute to the structural integrity of the building. Our metal roofing products are attractive and durable. We use standing seam roof technology to replace traditional built-up and single-ply roofs as well as to provide a distinctive look to new construction. We manufacture and design metal roofing systems for sales to regional metal building manufacturers, general contractors and subcontractors. We believe we have the broadest line of standing seam roofing products in the building industry. We also have developed and patented a retrofit metal panel, Retro-R(R), that is used to replace wall and roof panels of metal buildings. Retro-R(R) can be installed over the top of existing metal panels to remodel or preserve a standing structure. Although metal roofing is somewhat more expensive than traditional roofing in upfront costs, its durability and low maintenance costs make metal roofing a lower cost roofing product after the first 10 years. We manufacture overhead doors and interior and exterior doors for use in metal and other buildings. We are one of the largest suppliers in the U.S. of roll-up doors to builders of self-storage facilities. During fiscal 2000, we introduced our new "pier and header" system that is used in the construction of self-storage warehouse facilities. Conventional metal building systems require approximately ten steps and processes to construct the areas between and above the doors of self-storage units. Our pier and header system requires only two and produces a facility that is more aesthetically pleasing with a clean, uncluttered profile. We provide our own metal coating and painting products and services for use in component manufacturing. We also provide pre-painted hot roll coils to manufacturers of engineered building systems and metal building components. We also pre-paint light gauge steel coils for steel mills, which supply the painted coils to various industrial users, including manufacturers of engineered building systems, metal building components and lighting fixtures. Our metal coating and painting operations apply a variety of paint systems to metal coils. The process generally includes cleaning and painting the coil and slitting it to customer specifications. We believe that pre-painted metal coils are a better quality product, environmentally cleaner and more cost-effective than painted metal products prepared in other manufacturers' in-house painting operations. Painted metal coils also offer manufacturers the opportunity to produce a broader and more aesthetically pleasing range of products. Engineered Building Systems. Engineered building systems consist of pre-engineered structural members and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. We design an integrated engineered building system that meets customer specifications and allows easy on-site assembly by the builder or independent contractor. Engineered building systems typically consist of three systems: o Primary structural framing. Primary structural framing, fabricated from heavy-gauge steel, supports the secondary structural framing, roof, walls and all externally applied loads. Through the primary framing, the force of all applied loads is structurally transferred to the foundation. 5 o Secondary structural framing. Secondary structural framing consists of medium-gauge, roll-formed steel components called purlins and girts. Purlins are attached to the primary frame to support the roof. Girts are attached to the primary frame to support the walls. The secondary structural framing is designed to strengthen the primary structural framing and efficiently transfer applied loads from the roof and walls to the primary structural framing. o Covering systems. Covering systems consist of roof and wall panels. These panels not only lock out the weather but also contribute to the structural integrity of the overall building system. Roof and siding panels are fabricated from light-gauge, roll-formed steel. Accessory components complete the engineered building system. These components include doors, windows, gutters and interior partitions. Our "Long Bay System" allows for the construction of metal buildings with base spacings of up to 60 feet without internal supports. This compares to base spacings of up to 30 feet under other engineered building systems. The Long Bay System virtually eliminates all welding at the site, which significantly reduces erection time compared with conventional steel construction. Our Long Bay System is designed for larger buildings that typically require less custom engineering and design than our other engineered building systems, which allows us to meet our customers' needs more quickly. SALES, MARKETING AND CUSTOMERS Metal Building Components. We sell metal building components directly to regional manufacturers, contractors, subcontractors, distributors, lumberyards, cooperative buying groups and other customers under the brand names "Metal Building Components," "American Building Components," "ABC," "MBCI," "Midland Metals," "NCI Metal Depot," "DOUBLECOTE," "IPS," "Metal Coaters" and "Metal Prep." Roll-up doors, interior and exterior doors, interior partitions and walls, header panels and trim are sold directly to contractors and other customers under the brand names "Doors & Building Components" or "DBCI." These components also are produced for integration into self storage and engineered building systems sold by us. We also operate three retail stores that sell components directly to the public. We market our components products within four product lines: commercial/industrial, architectural, agricultural and residential. Customers include regional engineered building systems manufacturers, general contractors, subcontractors, roofing installers, architects and end-users. Commercial and industrial businesses are heavy users of metal building components and metal buildings systems. Standing seam roof and architectural customers are growing in importance. As metal buildings become a more acceptable building alternative and aesthetics become an increasingly important consideration for end-users of metal buildings, we believe that architects are participating in metal building design and purchase decisions to a greater extent. Wood frame builders also purchase our metal building components through distributors, lumberyards, cooperative buying groups and chain stores for various uses, including agricultural buildings. Residential customers are generally contractors building upscale homes that require an architect-specified product. Our metal building components sales operations are organized into four geographic regions. Each region is headed by a general sales manager supported by individual plant sales managers. In addition, each of our metal coating facilities has its own sales manager. Each local sales office is located adjacent to a manufacturing plant and is staffed by a direct sales force responsible for contacting customers and architects and a sales coordinator who supervises the sales process from the time the order is received until it is shipped and invoiced. The regional and local focus of our customers requires extensive knowledge of local business conditions. During fiscal 2002, our largest customer for metal building components accounted for less than 3% of our total sales. We provide our customers with product catalogs tailored to our product lines, which include product specifications and suggested list prices. Some of our catalogs are available on-line through the Internet, which enables architects and other customers to download drawings for use in developing project specifications. Customers place orders via telephone or facsimile to a sales coordinator at the regional office who enters it onto a standard order form. The form is then sent via computer to the plant and downloaded automatically to the production machines. 6 We have a small number of national accounts for our coating and painting products and services and rely on a single sales manager. Engineered Building Systems. We sell engineered building systems to builders nationwide under the brand names "Metallic Buildings," "Mid-West Steel Buildings," "A&S Buildings" and "Mesco." We market engineered building systems through an in-house sales force to authorized builder networks of over 1,400 builders. We market engineered building systems under the brand name "Mid-West Steel Buildings" directly to contractors in Texas and surrounding states using an in-house sales force. We also sell engineered building systems under the names "All American Systems" and "Steel Systems" to various private labels. Our authorized builder networks consist of independent general contractors that market our Mid-West Steel Buildings, Metallic Buildings, A&S Buildings and Mesco products to end-users. Most of our sales of engineered building systems outside of Texas and surrounding states are through our authorized builder networks. We rely upon maintaining a satisfactory business relationship for continuing job orders from our authorized builders and do not consider the builder agreements to be material to our business. During fiscal 2002, our largest customer for engineered building systems accounted for less than 1% of our total sales. We enter into an agreement with an authorized builder, which generally grants the builder the non-exclusive right to market our products in a specified territory. The agreement is cancelable by either party on 60 days notice. The agreement does not prohibit the builder from marketing engineered building systems of other manufacturers. We establish an annual sales goal for each builder and provide the builder with sales and pricing information, design and engineering manuals, drawings and assistance, application programs for estimating and quoting jobs and advertising and promotional literature. We also defray a portion of the builder's advertising costs and provide volume purchasing and other pricing incentives to encourage it to deal exclusively or principally with us. The builder is required to maintain a place of business in its designated territory, provide a sales organization, conduct periodic advertising programs and perform construction, warranty and other services for customers and potential customers. An authorized builder usually is hired by an end-user to erect an engineered building system on the customer's site and provide general contracting and other services related to the completion of the project. We sell our products to the builder, which generally includes the price of the building as a part of its overall construction contract with its customer. Our Long Bay System provides us with an entree to larger builders. This also provides us with new opportunities to cross-sell our other products to these new builders. During fiscal 2001, we introduced a National Accounts program. This program is designed to provide our builders with access to the largest contractors and developers in the United States. We currently have a team of nine people who comprise our National Accounts group. We market our engineered building systems and our Long Bay System under this program using the brand name "Metallic Buildings." MANUFACTURE AND DESIGN Metal Building Components. We operate 27 facilities used for manufacturing of metal building components for the building industry, including our doors and our metal coating and painting operations. We believe this broad geographic penetration gives us an advantage over our components competitors because major elements of a customer's decision are the speed and cost of delivery from the manufacturing facility to the product's ultimate destination. With the exception of our architectural and standing seam products, we are not involved in the design process for the components we manufacture. We also own a fleet of trucks to deliver our products to our customers in a more timely manner than most of our competitors. Our doors, interior partitions and other related panels and trim products are manufactured at dedicated plants in Georgia, Texas and Arizona. Orders are processed at the Georgia plant and sent to the appropriate plant, which is generally determined based upon the lowest shipping cost. Metal component products are roll-formed or fabricated at each plant using roll-formers and other metal working equipment. In roll forming, pre-finished coils of steel are unwound and passed through a series of progressive forming rolls which form the steel into various profiles of medium-gauge structural shapes and light-gauge sheets and panels. 7 We operate two metal coating and painting facilities for hot rolled, medium gauge steel coils and three metal coating and painting facilities for painting light gauge steel coils. These facilities primarily service our needs, but we also process steel coils at these facilities for other manufacturers. Metal coating and painting processes involve applying various types of chemical treatments and paint systems to flat rolled continuous coils of metal, including steel and aluminum. These processes give the coils a baked-on finish that both protects the metal and makes it more attractive. Initially, various metals in coil form are flattened, cleaned and pretreated. The metal is then coated, oven cured, cooled, recoiled and packaged for shipment. Slitting and embossing services can also be performed on the coated metal before shipping according to customer specifications. Hot roll steel coils typically are used in the production of secondary structural framing of metal buildings and other structural applications. Painted light gauge steel coils are used in the manufacture of products for building exteriors, metal doors, lighting fixtures and appliances. Engineered Building Systems. We operate eight facilities used for manufacturing engineered building systems. After we receive an order, our engineers design the engineered building system to meet the customer's requirements and to satisfy applicable building codes and zoning requirements. To expedite this process, we use computer-aided design and engineering systems to generate engineering and erection drawings and a bill of materials for the manufacture of the engineered building system. We employ approximately 294 engineers and draftsmen in this area. Once the specifications and designs of the customer's project have been finalized, the manufacturing of frames and other building systems begins at one of our five frame manufacturing facilities in Texas, Georgia or Tennessee or our joint venture facility in Mexico. The fabrication of the primary structural framing consists of a process in which rigid steel plates are punched and sheared and then routed through an automatic welding machine and sent through further fitting and welding processes. The secondary structural framing and the covering subsystem are roll-formed steel products that are manufactured at our full manufacturing facilities as well as our components plants. Once manufactured, structural framing members and covering systems are shipped to the job site for assembly. We generally are not responsible for any on-site construction. The time elapsed between our receipt of an order and shipment of a completed building system has typically ranged from four to eight weeks, although delivery can extend somewhat longer if engineering and drafting requirements are extensive. We own 51% of a joint venture, which operates a framing facility in Monterrey, Mexico. We purchase substantially all of the framing systems produced by the Mexico joint venture. RAW MATERIALS The principal raw material used in manufacturing of our metal building components and engineered building systems is steel. Our various products are fabricated from steel produced by mills including bars, plates, structural shapes, sheets, hot rolled coils and galvanized or galvalume-coated coils. During fiscal 2002, we purchased approximately 76% of our steel requirements from National Steel Corporation, Bethlehem Steel Corporation and U.S. Steel. No other steel supplier accounted for more than 8% of steel purchases for the same period. We believe concentration of our steel purchases among a small group of suppliers that have mills and warehouse facilities close to our facilities enables us, as a large customer of those suppliers, to obtain better pricing, service and delivery. These suppliers generally maintain an inventory of the types of materials we require. We do not have any long-term contracts for the purchase of raw materials. A prolonged labor strike against one of our principal domestic suppliers, or financial or other difficulties of a principal supplier that affects its ability to produce steel, could have a material adverse effect on our operations. Alternative sources, however, including foreign steel, are currently believed to be sufficient to maintain required deliveries. BACKLOG At November 2, 2002, the total backlog of orders for our products believed by us to be firm was $162 million. This compares with a total backlog for our products of $152 million at October 31, 2001. Backlog primarily consists of engineered building systems. Job orders generally are cancelable by customers at any time for any reason. Occasionally, orders in the backlog are not completed and shipped for reasons that include changes in the requirements of the customers and the inability of customers to obtain necessary financing or zoning variances. None of the backlog at November 2, 2002 currently is scheduled to extend beyond fiscal 2003. 8 COMPETITION We and other manufacturers of metal building components and engineered building systems compete in the building industry with all other alternative methods of building construction such as tilt-wall, concrete and wood, all of which may be perceived as more traditional, more aesthetically pleasing or having other advantages over our products. We compete with all manufacturers of building products, from small local firms to large national firms. In addition, competition in the metal building components and engineered building systems market of the building industry is intense. It is based primarily on: o quality o service o delivery o ability to provide added value in the design and engineering of buildings o price o speed of construction We compete with a number of other manufacturers of metal building components and engineered building systems for the building industry, ranging from small local firms to large national firms. Most of these competitors operate on a regional basis, although we believe that at least four other manufacturers of engineered building systems and three manufacturers of metal building components have nationwide coverage. REGULATORY MATTERS We must comply with a wide variety of federal, state and local laws and regulations governing the protection of the environment. These laws and regulations cover air emissions, discharges to water, the generation, handling, storage, transportation, treatment and disposal of hazardous substances, the cleanup of contamination, the control of noise and odors and other materials and health and safety matters. Laws protecting the environment generally have become more stringent than in the past and are expected to continue to do so. Environmental laws and regulations generally impose strict liability. This means that in some situations we could be exposed to liability for cleanup costs, and toxic tort or other damages as a result of conduct that was lawful at the time it occurred or because of the conduct of or conditions caused by prior operators or other third parties. This strict liability is regardless of fault on our part. We believe we are in substantial compliance with all environmental standards applicable to our operations. We cannot assure you, however, that cleanup costs, natural resource damages, criminal sanctions, toxic tort or other damages arising as a result of environmental laws and costs associated with complying with changes in environmental laws and regulations will not be substantial and will not have a material adverse effect on our financial condition. From time to time, claims have been made against us under environmental laws. We have insurance coverage applicable to some environmental claims and to specified locations after payment of the applicable deductible. We do not anticipate material capital expenditures to meet current environmental quality control standards. We cannot assure you that more stringent regulatory standards will not be established that might require material capital expenditures. We also must comply with federal, state and local laws and regulations governing occupational safety and health, including review by the federal Occupational Health and Safety Administration and similar state agencies. We believe we are in substantial compliance with applicable laws and regulations. Compliance does not have a material adverse affect on our business. The engineered building systems and components we manufacture must meet zoning, building code and uplift requirements adopted by local governmental agencies. PATENTS, LICENSES AND PROPRIETARY RIGHTS We have a number of United States patents and pending patent applications, including patents and applications relating to metal roofing systems, metal overhead doors, our new pier and header system, our Long Bay System and Retro-R(R) panel. We do not, however, consider patent protection to be a material competitive factor in our industry. We also have several registered trademarks and pending registrations in the United States. 9 EMPLOYEES As of November 2, 2002, we had approximately 4,050 employees, of whom 3,099 were manufacturing and engineering personnel. We regard our employee relations as satisfactory. Our employees are not represented by a labor union or covered by a collective bargaining agreement. The United Steel Workers of America has periodically petitioned the National Labor Relations Board to be recognized as the collective bargaining representative of the production and maintenance employees at various facilities, but has lost the resulting union election each time. The last elections were at our Rancho Cucamonga, California facility in August 1998 and November 1999. RISK FACTORS OUR BUSINESSES ARE CYCLICAL. The nonresidential construction industry is highly sensitive to national and regional economic conditions. From time to time, it has been adversely affected in various parts of the country by unfavorable economic conditions, low use of manufacturing capacity, high vacancy rates, changes in tax laws affecting the real estate industry, high interest rates and the unavailability of financing. Sales of our products may be adversely affected by weakness in demand for our products within particular customer groups, or a recession in the general construction industry or particular geographic regions. We cannot predict the timing or severity of future economic or industry downturns. Any economic downturn, particularly in states where many of our sales are made, could have a material adverse effect on our results of operations and financial condition. OUR BUSINESSES ARE SEASONAL. The metal components and engineered building systems businesses, as well as the construction industry in general, are seasonal in nature. Sales normally are lower in the first calendar quarter of each year compared to the other three quarters because of unfavorable weather conditions for construction and typical business planning cycles affecting construction. This seasonality adversely affects our results of operations for the first two fiscal quarters. Prolonged severe winter weather conditions can delay construction projects and otherwise adversely affect our business. SUPPLY AND DEMAND FOR STEEL MAY AFFECT OUR BUSINESS. Our principal raw material is steel. We do not have any long-term contracts for the purchase of steel. During fiscal 2002, we purchased approximately 63% of our steel requirements from Bethlehem Steel Corporation and National Steel Corporation, each of which has filed for protection under federal bankruptcy laws. In addition, we purchased approximately 13% of our steel requirements from U.S. Steel during fiscal 2002. We believe that our other primary steel supplier can meet our demand for steel if our supply from Bethlehem Steel or National Steel is interrupted. We do not maintain an inventory of steel in excess of our current production requirements. We can give you no assurance that steel will remain available or that prices will remain stable. The steel industry is highly cyclical in nature, and steel prices are influenced by numerous factors beyond our control. These factors include general economic conditions, competition, labor costs, import duties and other trade restrictions. Furthermore, a prolonged labor strike against one or more of our principal domestic suppliers could have a material adverse effect on our operations. If the available supply of steel declines or if one or more of our current suppliers is unable for financial or any other any reason to continue in business or produce steel sufficient to meet our requirements, we could experience price increases, a deterioration of service from our suppliers or interruptions or delays that may cause us not to meet delivery schedules to our customers. Any of these problems could adversely affect our results of operations and financial condition. WE HAVE POTENTIAL EXPOSURE TO SHAREHOLDER LAWSUITS. As a result of our restatement of our financial results for the last half of fiscal 1999, all of fiscal 2000 and the first quarter of fiscal 2001, several class action lawsuits were filed against us and certain of our current officers in the United States District Court for the Southern District of Texas, commencing in April 2001. The plaintiffs in the actions purport to represent purchasers of our common stock during various periods ranging from August 25, 1999 through April 12, 2001. The lawsuits were consolidated into one class action lawsuit on August 16, 2001. On January 10, 2002, the court appointed lead plaintiffs for the consolidated lawsuit. The lead plaintiffs filed a consolidated amended complaint on February 1, 2002. In the consolidated complaint the plaintiffs allege, among other things, that during the financial periods that were restated we made materially false and misleading statements about the status and effectiveness of a management information and accounting system used by our components division and costs associated with that system, failed to assure that the system maintained books and records accurately reflecting inventory levels and costs of goods sold, failed to maintain internal controls on manual accounting entries made to certain inventory-related accounts in an effort to correct the data in the system, otherwise 10 engaged in improper accounting practices that overstated earnings, and issued materially false and misleading financial statements. The plaintiffs further allege that the individual defendants traded in our common stock while in possession of material, non-public information regarding the foregoing. The plaintiffs in the consolidated complaint assert various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and seek unspecified amounts of compensatory damages, interest and costs, including legal fees. On March 15, 2002, we filed our Motion to Dismiss Plaintiffs' Amended Consolidated Class Action Complaint and Memorandum in Support. The Motion to Dismiss is currently pending before the court. We and the individual defendants deny the allegations in the complaint and intend to defend against them vigorously. Procedurally, the consolidated lawsuit is at a very early stage. Consequently, at this time we are not able to predict whether we will incur any liability in excess of insurance coverages or to estimate the damages, or the range of damages, if any, that we might incur in connection with the lawsuit, or whether an adverse outcome could have a material adverse impact on our business, consolidated financial condition or results of operations. WE HAVE POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. We must comply with federal, state and local laws and regulations governing the protection of the environment. These laws and regulations cover air emissions, discharges to water, the management of wastes and hazardous substances, the cleanup of contamination and the control of noise and odors. We may incur significant fines or penalties if we fail to comply with these environmental requirements. In some circumstances, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of at real property, may be held liable for the cost to investigate or clean up hazardous substances on or under the property. We may incur liability, including liability for cleanup costs, if contamination is discovered at one of our facilities or at a landfill or other location where we have disposed of wastes. Because environmental requirements are becoming increasingly stringent, our expenditures for environmental compliance may increase and we may incur material costs associated with environmental compliance in the future. From time to time, claims have been made against us under environmental laws or regulations. OUR BUSINESSES ARE HIGHLY COMPETITIVE. Competition in the metal components and metal buildings markets of the building industry is intense. It is based primarily on: o quality o service o delivery o ability to provide added value in the design and engineering of buildings o price o speed of construction We compete with a number of other manufacturers of metal components and engineered building systems ranging from small local firms to large national firms. In addition, we and other manufacturers of metal components and engineered building systems compete with alternative methods of building construction. These alternative building methods may be perceived as more traditional, more aesthetically pleasing or having other advantages. ACQUISITIONS MAY HAVE SHORT-TERM ADVERSE EFFECTS ON OUR OPERATIONS. One element of our growth strategy is to pursue strategic acquisitions that either expand or complement our business. We may not be able to integrate successfully an acquired business into our business or operate profitably any business we may acquire. Acquisitions involve a number of special risks. They divert management's attention to the integration of the operations and personnel of the acquired companies. They may also have adverse short-term effects on our operating results. We may have difficulty integrating our financial reporting and other management systems in connection with acquisitions. OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE. The trading price of our common stock has fluctuated in the past and is subject to significant fluctuations in response to the following factors, some of which are beyond our control: o variations in quarterly operating results; o changes in earnings estimates by analysts; o our announcements of significant contracts, acquisitions, strategic partnerships or joint ventures; 11 o general conditions in the metal components and engineered building systems industries; o fluctuations in stock market price and volume; and o other general economic conditions. In recent years, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price for many companies in industries similar to ours. Some of these fluctuations have been unrelated to the operating performance of the affected companies. These market fluctuations may decrease the market price of our common stock in the future. WE MAY NOT BE ABLE TO SERVICE OUR DEBT. In connection with our acquisition activity, especially the MBCI acquisition, we have incurred debt. We may also incur additional debt from time to time to finance additional acquisitions, capital expenditures or for other purposes if we comply with the restrictions in our senior credit facility and the indenture governing our publicly-held notes. The debt that we carry may have important consequences to us, including the following: o Our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or additional financing may not be available on favorable terms. o We must use a portion of our cash flow to pay the principal and interest on our debt. These payments reduce the funds that would otherwise be available for our operations and future business opportunities. o A substantial decrease in our net operating cash flows could make it difficult for us to meet our debt service requirements and force us to modify our operations. o We may be more vulnerable to a downturn in our business or the economy generally. If we cannot service our debt, we will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We can give you no assurance that we can do any of these things on satisfactory terms or at all. WE MUST COMPLY WITH DEBT COVENANTS. We must comply with operating and financing restrictions in our senior credit facility and the indenture governing our publicly-held notes. We may also have similar restrictions with any future debt. These restrictions affect, and in many respects limit or prohibit our ability to: o incur additional indebtedness; o make restricted payments, including dividends or other distributions; o incur liens; o make investments, including joint venture investments; o sell assets; and o merge or consolidate with or into other companies or sell substantially all our assets. Our senior credit facility also requires us to achieve specified financial and operating results and satisfy set financial tests governing our consolidated net worth and our leverage, fixed charge coverage and senior debt ratios. These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise could restrict corporate activities. These restrictions could also adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that would be in our interest. 12 ITEM 2. PROPERTIES. We conduct manufacturing operations at the following facilities:
Square Owned Facility Products Feet or Leased - -------- -------- ------- --------- Chandler, Arizona Doors and related metal components 35,000 Leased Tolleson, Arizona Metal components (1) 65,980 Owned Atwater, California Metal components (2) 112,200 Owned Rancho Cucamonga, California Metal coating and painting 98,000 Owned Adel, Georgia Metal components (1) 59,550 Owned Douglasville, Georgia Metal components (3) 110,536 Owned Douglasville, Georgia Doors and related metal components 60,000 Owned Marietta, Georgia Metal coating and painting 125,700 Owned Tallapoosa, Georgia Engineered building systems (4) 249,000 Leased Mattoon, Illinois Metal components (2) 115,480 Owned Shelbyville, Indiana Metal components (1) 66,450 Owned Oskaloosa, Iowa Metal components (5) 62,702 Owned Nicholasville, Kentucky Metal components (5) 41,280 Owned Monterrey, Mexico (6) Engineered building systems (4) 237,476 Owned Big Rapids, Michigan Metal components 54,640 Owned Jackson, Mississippi Metal components (5) 96,000 Owned Jackson, Mississippi Metal coating and painting 363,200 Owned Hernando, Mississippi Metal components (1) 71,720 Owned Omaha, Nebraska Metal components (5) 51,750 Owned Rome, New York Metal components (5) 57,700 Owned Oklahoma City, Oklahoma Metal components (1) 59,695 Owned Caryville, Tennessee Engineered building systems (4) 193,800 Owned Memphis, Tennessee Metal coating and painting 61,500 Owned Ennis, Texas Metal components (1) 33,000 Owned Houston, Texas Metal components (3) 209,355 Owned Houston, Texas Metal coating and painting 39,550 Owned Houston, Texas Engineered building systems (7) 410,980 Owned Houston, Texas Doors and related metal components 23,625 Owned Houston, Texas Engineered building systems (4) 148,500 Owned Lubbock, Texas Metal components (1) 64,320 Owned San Antonio, Texas Metal components (5) 52,360 Owned Southlake, Texas Engineered building systems (4) 123,000 Owned Stafford, Texas Metal components (8) 56,840 Leased Salt Lake City, Utah Metal components (3) 93,150 Owned Colonial Heights, Virginia Metal components (1) 37,000 Owned
- ---------- (1) Secondary structures and covering systems. (2) Endwalls, secondary structures and covering systems for components and engineered building systems. (3) Full components product range. (4) Primary structures, secondary structures and covering systems for engineered building systems. (5) Covering systems. (6) We own a 51% interest in a joint venture that owns this facility. (7) Structural steel. (8) Insulated Panel Systems. We also maintain several drafting office facilities and small retail locations in various states. We have short-term leases for these additional facilities. We believe that our present facilities are adequate for our current and projected operations. Additionally, we own approximately six acres of land in Houston, Texas and have a 60,000 square foot facility that is used as our principal executive and administrative offices. Approximately 14,000 square feet of this facility is leased to third parties for a term of five years with approximately two and one-half years remaining on the lease term. 13 During the fourth quarter of fiscal 2001 and the first quarter of fiscal 2002, we closed five of our manufacturing facilities, and sold three of the five facilities during fiscal 2002. During fiscal 2002, we bought four acres of real property outside of Houston, Texas. We intend to construct a metal depot on this real property. ITEM 3. LEGAL PROCEEDINGS. As a result of our restatement of our financial results for the last half of fiscal 1999, all of fiscal 2000 and the first quarter of fiscal 2001, several class action lawsuits were filed against us and certain of our current officers in the United States District Court for the Southern District of Texas, commencing in April 2001. The plaintiffs in the actions purport to represent purchasers of our common stock during various periods ranging from August 25, 1999 through April 12, 2001. The lawsuits were consolidated into one class action lawsuit on August 16, 2001. On January 10, 2002, the court appointed lead plaintiffs for the consolidated lawsuit. The lead plaintiffs filed a consolidated amended complaint on February 1, 2002. In the consolidated complaint the plaintiffs allege, among other things, that during the financial periods that were restated we made materially false and misleading statements about the status and effectiveness of a management information and accounting system used by our components division and costs associated with that system, failed to assure that the system maintained books and records accurately reflecting inventory levels and costs of goods sold, failed to maintain internal controls on manual accounting entries made to certain inventory-related accounts in an effort to correct the data in the system, otherwise engaged in improper accounting practices that overstated earnings, and issued materially false and misleading financial statements. The plaintiffs further allege that the individual defendants traded in our common stock while in possession of material, non-public information regarding the foregoing. The plaintiffs in the consolidated complaint assert various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and seek unspecified amounts of compensatory damages, interest and costs, including legal fees. On March 15, 2002, we filed our Motion to Dismiss Plaintiffs' Amended Consolidated Class Action Complaint and Memorandum in Support. The Motion to Dismiss is currently pending before the court. We and the individual defendants deny the allegations in the complaint and intend to defend against them vigorously. Procedurally, the consolidated lawsuit is at a very early stage. Consequently, at this time we are not able to predict whether we will incur any liability in excess of insurance coverages or to estimate the damages, or the range of damages, if any, that we might incur in connection with the lawsuit, or whether an adverse outcome could have a material adverse impact on our business, consolidated financial condition or results of operations. We are involved in various other legal proceedings that we consider to be in the normal course of business. We believe that these proceedings will not have a material adverse effect on our business, consolidated financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. The information required by this Item is incorporated by reference from our 2002 Annual Report to Shareholders, bottom of page 36, regarding the market for our common stock. The information required by this Item is incorporated by reference from our definitive proxy statement for our annual meeting of shareholders to be held on March 14, 2003, page 22, regarding securities authorized for issuance under equity compensation plans. ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is incorporated by reference from our 2002 Annual Report to Shareholders, bottom of the inside gatefold front cover. 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this Item is incorporated by reference from the following portions of our 2002 Annual Report to Shareholders: Management's Discussion and Analysis of Results of Operations and Financial Condition, pages 29 through 35. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required by this Item is incorporated by reference from our 2002 Annual Report to Shareholders, page 35. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following consolidated financial statements and supplementary financial information are incorporated by reference from the indicated pages in our 2002 Annual Report to Shareholders.
Pages of Annual Report to Shareholders ---------------------- Selected quarterly financial data 36 Consolidated statements of income for each of the three fiscal years in the period ended November 2, 2002 14 Consolidated balance sheets at November 2, 2002 and October 31, 2001 15 Consolidated statements of shareholders' equity for each of the three fiscal years in the period ended November 2, 2002 16 Consolidated statements of cash flows for each of the three fiscal years in the period ended November 2, 2002 17 Notes to consolidated financial statements 18 - 27 Report of independent auditors 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this Item is incorporated by reference from our definitive proxy statement for our annual meeting of shareholders to be held on March 14, 2003, pages 3 through 6. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference from our definitive proxy statement for our annual meeting of shareholders to be held on March 14, 2003, pages 7 through 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS The information required by this Item is incorporated by reference from our definitive proxy statement for our annual meeting of shareholders to be held on March 14, 2003, pages 1 through 3. 15 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated by reference from our definitive proxy statement for our annual meeting of shareholders to be held on March 14, 2003, top of page 25. ITEM 14. CONTROLS AND PROCEDURES. Within 90 days before the date of this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report: 1. Consolidated financial statements (see Item 8). 2. Consolidated financial statement schedules. Schedule II--Valuation and Qualifying Accounts All other schedules are omitted because they are inapplicable or the requested information is shown in the financial statements or noted therein. 3. Exhibits *3.1 Restated Certificate of Incorporation, as amended through September 30, 1998 *3.2 Amended and Restated By-Laws, as amended through May 30, 2002 4.1 Form of certificate representing shares of NCI's common stock (filed as Exhibit 1 to NCI's registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein) 4.2 Credit Agreement, dated September 13, 2002 (the "Credit Agreement"), by and among NCI, Bank of America, N.A., as administrative agent ("BOA"), Wachovia Bank, N.A., as syndication agent, and the several lenders named therein (filed as Exhibit 4.1 to NCI's Quarterly Report on Form 10-Q for the quarter ended August 3, 2002 and incorporated by reference herein) 16 4.3 Guaranty, dated September 13, 2002, by and among BOA and all of NCI's domestic subsidiaries and operating limited partnerships (filed as Exhibit 4.2 to NCI's Quarterly Report on Form 10-Q for the quarter ended August 3, 2002 and incorporated by reference herein) 4.4 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of NCI (filed as Exhibit 4.26 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein) 4.5 Note Pledge Agreement, dated May 5, 1998, between NCI and BOA (filed as Exhibit 4.27 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein) 4.6 Rights Agreement, dated June 24, 1998, between NCI and Harris Trust and Savings Bank (filed as Exhibit 2 to NCI's registration statement on Form 8-A (filed with the SEC on July 9, 1998 and incorporated by reference herein) 4.7 First Amendment to Rights Agreement, dated June 24, 1999, between NCI and Harris Trust and Savings Bank (filed as Exhibit 3 to NCI's registration statement on Form 8-A, Amendment No. 1 filed with the SEC on June 25, 1999 and incorporated by reference herein) *10.1 Amended and Restated Employment Agreement, dated January 29, 2003, between NCI and Johnie Schulte, Jr. 10.2 Amended and Restated Bonus Program, as amended and restated on December 11, 1998, September 9, 1999, December 7, 2000, May 24, 2001 and December 6, 2001 10.3 Stock Option Plan, as amended and restated on December 14, 2000 (filed as Exhibit 10.4 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein) 10.4 Form of Nonqualified Stock Option Agreement (filed as Exhibit 10.5 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein) 10.5 Form of Incentive Stock Option Agreement (filed as Exhibit 10.6 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein) *10.6 2003 Long-Term Stock Incentive Plan 10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to NCI's registration statement no. 33-52078 and incorporated by reference herein) *10.8 Amended and Restated Supplemental Benefit Plan (as amended and restated on December 12, 2002 *10.9 Supplemental Benefit Agreement, dated December 13, 2002, between NCI and A.R. Ginn, Jr. *10.10 Supplemental Benefit Agreement, dated December 13, 2002, between NCI and Johnie Schulte *10.11 Split-Dollar Life Insurance Agreement, dated February 1, 1996, between NCI and Fredrick D. Koetting *10.12 Split-Dollar Life Insurance Agreement, dated October 13, 1998, between NCI and Karen Rene Rosales, trustee of the Schulte Investment Trust 17 *10.13 Form of Metal Building Components, L.P. (formerly, MBCI Operating, L.P.) ("MBC") and NCI Group, L.P. (formerly, Metal Coaters Operating, L.P.) ("NCI Group") Management Incentive Trust Agreement (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox *10.14 Form of MBC and NCI Group Long-Term Management Incentive Plan (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox 10.15 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to NCI's registration statement no. 33-45612 and incorporated by reference herein) 10.16 Form of A&S Builder Agreement (filed as Exhibit 10.17 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by reference herein) 10.17 Stock Purchase Agreement, dated March 25, 1998, by and among BTR Australia Limited and NCI, and joined therein for certain purposes by BTR plc (filed as Exhibit 2.1 to NCI's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) 10.18 Letter Agreement, dated May 4, 1998, by and among NCI, BTR Australia Limited and BTR plc, amending the Stock Purchase Agreement (filed as Exhibit 2.2 to NCI's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) 10.19 Note Purchase Agreement, dated April 30, 1999, by and among NCI, the guarantors named therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities LLC, First Union Capital Markets Corp. and Bear, Stearns & Co. Inc. (filed as Exhibit 10.18 to NCI's registration statement no. 333-80029 and incorporated by reference herein) 10.20 Registration Rights Agreement, dated May 5, 1999, by and among NCI, the guarantors named therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities LLC, First Union Capital Markets Corp. and Bear, Stearns & Co. Inc. (filed as Exhibit 10.19 to NCI's registration statement no. 333-80029 and incorporated by reference herein) 10.21 Indenture, dated May 5, 1999, by and among NCI, the guarantors named therein and Harris Trust Company of New York (filed as Exhibit 10.20 to NCI's registration statement no. 333-80029 and incorporated by reference herein) 10.22 Agreement Regarding Retirement, dated July 31, 2000, between NCI and C.A. Rundell, Jr. (filed as Exhibit 10.15 to NCI's Annual Report on Form 10-K/A for the fiscal year ended October 31, 2000 and incorporated by reference herein) *13 2002 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7, 7A and 8 of this Form 10-K, the 2002 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K. *21 List of Subsidiaries *23.1 Consent of Independent Auditors *23.2 Report of Independent Auditors - ---------- * Filed herewith (b) Reports on Form 8-K. None 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 31st day of January, 2003. NCI BUILDING SYSTEMS, INC. By: /s/ Johnie Schulte, Jr. -------------------------------- Johnie Schulte, Jr., President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 31st day of January, 2003.
Name Title ---- ----- /s/ Johnie Schulte, Jr. President and Chief Executive Officer and Director - ---------------------------- (principal executive officer) Johnie Schulte, Jr. /s/ Robert J. Medlock Executive Vice President and Chief Financial Officer - ---------------------------- (principal accounting and financial officer) Robert J. Medlock Director - ---------------------------- William D. Breedlove /s/ Sheldon R. Erikson Director - ---------------------------- Sheldon R. Erikson /s/ Gary L. Forbes Director - ---------------------------- Gary L. Forbes /s/ A.R. Ginn Director - ---------------------------- A.R. Ginn /s/ W.B. Pieper Director - ---------------------------- W.B. Pieper
CERTIFICATION PURSUANT TO RULE 13a-14(b) I, A. R. Ginn, certify that: 1. I have reviewed this annual report on Form 10-K of NCI Building Systems, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 19 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures 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 annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 31, 2003 /s/ A.R. Ginn ------------------------------------- A. R. Ginn Chairman of the Board CERTIFICATION PURSUANT TO RULE 13a-14(b) I, Johnie Schulte, Jr., certify that: 1. I have reviewed this annual report on Form 10-K of NCI Building Systems, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 20 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures 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 annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 31, 2003 /s/ Johnie Schulte, Jr. ----------------------------------------- Johnie Schulte, Jr. President and Chief Executive Officer CERTIFICATION PURSUANT TO RULE 13a-14(b) I, Robert J. Medlock, certify that: 1. I have reviewed this annual report on Form 10-K of NCI Building Systems, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: 21 (a) designed such disclosure controls and procedures 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 annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 31, 2003 /s/ Robert J. Medlock -------------------------------------- Robert J. Medlock Executive Vice President and Chief Financial Officer CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, A. R. Ginn, certify that: 1. I have reviewed this periodic report on Form 10-K of NCI Building Systems, Inc.; 2. This annual report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 3. The information contained in this annual report fairly presents, in all material respects, the financial condition and results of operations of NCI Building Systems, Inc. Date: January 31, 2003 /s/ A.R. Ginn --------------------------------------- A. R. Ginn Chairman of the Board 22 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, Johnie Schulte, Jr., certify that: 1. I have reviewed this periodic report on Form 10-K of NCI Building Systems, Inc.; 2. This annual report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 3. The information contained in this annual report fairly presents, in all material respects, the financial condition and results of operations of NCI Building Systems, Inc. Date: January 31, 2003 /s/ Johnie Schulte, Jr. ---------------------------------------- Johnie Schulte, Jr. President and Chief Executive Officer CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT I, Robert J. Medlock, certify that: 1. I have reviewed this periodic report on Form 10-K of NCI Building Systems, Inc.; 2. This annual report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 3 The information contained in this annual report fairly presents, in all material respects, the financial condition and results of operations of NCI Building Systems, Inc. Date: January 31, 2003 /s/ Robert J. Medlock ---------------------------------------- Robert J. Medlock Executive Vice President and Chief Financial Officer 23 NCI BUILDING SYSTEMS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)
ADDITIONS BALANCE AT CHARGED BALANCE BEGINNING TO COSTS AND AT END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS (1) OF PERIOD - -------------------------------------- --------------- --------------- --------------- --------------- Year ended November 2, 2002: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts and backcharges .......... $ 3,862 $ 3,300 $ 1,502 $ 5,660 Year ended October 31, 2001: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts and backcharges .......... $ 3,656 $ 2,396 $ 2,190 $ 3,862 Year ended October 31, 2000: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts and backcharges .......... $ 3,309 $ 2,645 $ 2,298 $ 3,656
- ---------- (1) Uncollectible accounts, net of recoveries. 24 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION *3.1 Restated Certificate of Incorporation, as amended through September 30, 1998 *3.2 Amended and Restated By-Laws, as amended through May 30, 2002 4.1 Form of certificate representing shares of NCI's common stock (filed as Exhibit 1 to NCI's registration statement on Form 8-A filed with the SEC on July 20, 1998 and incorporated by reference herein) 4.2 Credit Agreement, dated September 13, 2002 (the "Credit Agreement"), by and among NCI, Bank of America, N.A., as administrative agent ("BOA"), Wachovia Bank, N.A., as syndication agent, and the several lenders named therein (filed as Exhibit 4.1 to NCI's Quarterly Report on Form 10-Q for the quarter ended August 3, 2002 and incorporated by reference herein) 4.3 Guaranty, dated September 13, 2002, by and among BOA and all of NCI's domestic subsidiaries and operating limited partnerships (filed as Exhibit 4.2 to NCI's Quarterly Report on Form 10-Q for the quarter ended August 3, 2002 and incorporated by reference herein) 4.4 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of NCI (filed as Exhibit 4.26 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein) 4.5 Note Pledge Agreement, dated May 5, 1998, between NCI and BOA (filed as Exhibit 4.27 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1998 and incorporated by reference herein) 4.6 Rights Agreement, dated June 24, 1998, between NCI and Harris Trust and Savings Bank (filed as Exhibit 2 to NCI's registration statement on Form 8-A (filed with the SEC on July 9, 1998 and incorporated by reference herein) 4.7 First Amendment to Rights Agreement, dated June 24, 1999, between NCI and Harris Trust and Savings Bank (filed as Exhibit 3 to NCI's registration statement on Form 8-A, Amendment No. 1 filed with the SEC on June 25, 1999 and incorporated by reference herein) *10.1 Amended and Restated Employment Agreement, dated January 29, 2003, between NCI and Johnie Schulte, Jr. 10.2 Amended and Restated Bonus Program, as amended and restated on December 11, 1998, September 9, 1999, December 7, 2000, May 24, 2001 and December 6, 2001 10.3 Stock Option Plan, as amended and restated on December 14, 2000 (filed as Exhibit 10.4 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein) 10.4 Form of Nonqualified Stock Option Agreement (filed as Exhibit 10.5 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein) 10.5 Form of Incentive Stock Option Agreement (filed as Exhibit 10.6 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and incorporated by reference herein) *10.6 2003 Long-Term Stock Incentive Plan 10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to NCI's registration statement no. 33-52078 and incorporated by reference herein)
*10.8 Amended and Restated Supplemental Benefit Plan (as amended and restated on December 12, 2002 *10.9 Supplemental Benefit Agreement, dated December 13, 2002, between NCI and A.R. Ginn, Jr. *10.10 Supplemental Benefit Agreement, dated December 13, 2002, between NCI and Johnie Schulte *10.11 Split-Dollar Life Insurance Agreement, dated February 1, 1996, between NCI and Fredrick D. Koetting *10.12 Split-Dollar Life Insurance Agreement, dated October 13, 1998, between NCI and Karen Rene Rosales, trustee of the Schulte Investment Trust *10.13 Form of Metal Building Components, L.P. (formerly, MBCI Operating, L.P.) ("MBC") and NCI Group, L.P. (formerly, Metal Coaters Operating, L.P.) ("NCI Group") Management Incentive Trust Agreement (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox *10.14 Form of MBC and NCI Group Long-Term Management Incentive Plan (as amended through December 12, 2002) in effect for A.R. Ginn, Jr. and Kenneth W. Maddox 10.15 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to NCI's registration statement no. 33-45612 and incorporated by reference herein) 10.16 Form of A&S Builder Agreement (filed as Exhibit 10.17 to NCI's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by reference herein) 10.17 Stock Purchase Agreement, dated March 25, 1998, by and among BTR Australia Limited and NCI, and joined therein for certain purposes by BTR plc (filed as Exhibit 2.1 to NCI's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) 10.18 Letter Agreement, dated May 4, 1998, by and among NCI, BTR Australia Limited and BTR plc, amending the Stock Purchase Agreement (filed as Exhibit 2.2 to NCI's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) 10.19 Note Purchase Agreement, dated April 30, 1999, by and among NCI, the guarantors named therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities LLC, First Union Capital Markets Corp. and Bear, Stearns & Co. Inc. (filed as Exhibit 10.18 to NCI's registration statement no. 333-80029 and incorporated by reference herein) 10.20 Registration Rights Agreement, dated May 5, 1999, by and among NCI, the guarantors named therein, Warburg Dillon Read LLC, Montgomery NationsBanc Securities LLC, First Union Capital Markets Corp. and Bear, Stearns & Co. Inc. (filed as Exhibit 10.19 to NCI's registration statement no. 333-80029 and incorporated by reference herein) 10.21 Indenture, dated May 5, 1999, by and among NCI, the guarantors named therein and Harris Trust Company of New York (filed as Exhibit 10.20 to NCI's registration statement no. 333-80029 and incorporated by reference herein) 10.22 Agreement Regarding Retirement, dated July 31, 2000, between NCI and C.A. Rundell, Jr. (filed as Exhibit 10.15 to NCI's Annual Report on Form 10-K/A for the fiscal year ended October 31, 2000 and incorporated by reference herein) *13 2002 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7, 7A and 8 of this Form 10-K, the 2002 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K.
*21 List of Subsidiaries *23.1 Consent of Independent Auditors *23.2 Report of Independent Auditors
- ---------- * Filed herewith EX-3.1 3 d02830exv3w1.txt RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF NCI BUILDING SYSTEMS, INC. UNDER SECTION 245 OF THE DELAWARE GENERAL CORPORATION LAW We, Johnie Schulte, President, and Donnie Humphries, Secretary, of National Components Incorporated, do hereby certify under the seal of said Corporation as follows: ARTICLE ONE The name of the Corporation is NCI Building Systems, Inc. ARTICLE TWO The Certificate of Incorporation of the Corporation was filed with the Secretary of State, Dover, Delaware, on December 23, 1991. ARTICLE THREE This Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 242 and Section 245 of the Delaware General Corporation Law. ARTICLE FOUR This Restated Certificate of Incorporation restates and integrates previous provisions and also amends the provisions of the Corporation's Certificate of Incorporation. ARTICLE FIVE The text of the Restated Certificate of Incorporation of the Corporation, as amended hereby, is hereby restated to read in full as follows: FIRST. The name of the Corporation is NCI Building Systems, Inc. SECOND. The Corporation's registered office in the State of Delaware is 1209 Orange Street, Corporation Trust Center, in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware. THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH. Section 1. Capitalization. The Corporation is authorized to issue Fifty-One Million (51,000,000) shares of capital stock. Fifty Million (50,000,000) of the authorized shares shall be common stock, one cent ($0.01) par value each ("Common Stock"), and One Million (1,000,000) of the authorized shares shall be preferred stock, one dollar ($1.00) par value each ("Preferred Stock"). Each holder of shares of capital stock of the Corporation shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock of the Corporation held by the stockholder, unless otherwise specifically provided pursuant to this Restated Certificate of Incorporation. Section 2. Preferred Stock. A. The Preferred Stock may, from time to time, be divided into and issued in one or more series with each series to be so designated as to distinguish the shares thereof from the shares of all other series and classes. The shares of each series may have such powers, designations, preferences, relative rights, qualifications, limitations or restrictions as are stated herein and in one or more resolutions providing for the issue of such series adopted by the Board of Directors as provided below. B. To the extent that this Restated Certificate of Incorporation does not fix and determine the variations in the relative rights and preferences of the Preferred Stock, both in relation to the Common Stock and as between series of Preferred Stock, the Board of Directors of the Corporation is expressly vested with the authority to divide the Preferred Stock into one or more series and, within the limitations set forth in this Restated Certificate of Incorporation, to fix and determine the relative rights and preferences of the shares of any series so established, and, with respect to each such series, to fix by one or more resolutions providing for the issue of such series, the following: (i) The maximum number of shares to constitute such series and the distinctive designation thereof; (ii) The annual dividend rate, if any, on the shares of such series and the date or dates from which dividends shall commence to accrue or accumulate as herein provided, and whether dividends shall be cumulative; (iii) The price at and the terms and conditions on which the shares of such series may be redeemed, including, without limitation, the time during which shares of the series may be redeemed, the premium, if any, over and above the par value thereof and any accumulated dividends thereon that the holders of shares of such series shall be entitled to receive upon the redemption thereof, which premium may vary at different dates and may also be different with respect to shares redeemed through the operation of any retirement or sinking fund; 2 (iv) The liquidation preference, if any, over and above the par value thereof, and any accumulated dividends thereon, that the holders of shares of such series shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (v) Whether or not the shares of such series shall be subject to the operation of a retirement or sinking fund, and, if so, the extent and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or for other corporate purposes, and the terms and provisions relative to the operations of such retirement or sinking fund; (vi) The terms and conditions, if any, on which the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of capital stock of the Corporation or any series of any other class or classes, or of any other series of the same class, including the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, provided that shares of such series may not be convertible into shares of a series or class that has prior or superior rights and preferences as to dividends or distribution of assets of the Corporation upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (vii) The voting rights, if any, on the shares of such series; and (viii) Any or all other preferences and relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, as shall not be inconsistent with the law or with this Article Fourth. C. All shares of any one series of Preferred Stock shall be identical with each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon, if any, shall be cumulative; and all series shall rank equally and be identical in all respects, except as provided in Paragraph A of this Section 2 and except as permitted by the foregoing provisions of Paragraph B. D. Except to the extent restricted or otherwise provided in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Preferred Stock, no dividends (other than dividends payable in Common Stock) on any class or classes of capital stock of the Corporation ranking, with respect to dividends, junior to the Preferred Stock, or any series thereof, shall be declared, paid or set apart for payment, until and unless the holders of shares of Preferred Stock of each senior series shall have been paid, or there shall have been set apart for payment, cash dividends, when and as declared by the Board of Directors out of funds of the Corporation legally available therefor, at the annual rate, and no more, fixed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series. E. To the extent provided in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Preferred Stock, upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation before any 3 payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of any class or classes of capital stock of the Corporation ranking junior, as to liquidation rights, to the Preferred Stock, or any series thereof, the holders of the shares of the Preferred Stock shall be entitled to receive payment at the rate fixed in the resolution or resolutions adopted by the Board of Directors providing for the issue of the respective series. Unless otherwise provided in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Preferred Stock, for the purposes of this Paragraph E and Paragraph B(iv) of this Section 2, neither the consolidation nor merger of the Corporation with one or more other corporations shall be deemed to be a liquidation, dissolution or winding up. F. The Corporation, at the option of the Board of Directors, may redeem, unless otherwise provided in the resolution establishing a series of Preferred Stock, at such time as is fixed (and if not so fixed, at any time) in the resolution or resolutions adopted by the Board of Directors providing for the issue of a series, the whole or, from time to time, any part of the Preferred Stock of any series then outstanding, at the par value thereof, plus in every case an amount equal to all accumulated dividends, if any (whether or not earned or declared), with respect to each share so redeemed and, in addition thereto, the amount of the premium, if any, payable upon such redemption fixed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series. The Board of Directors shall have full power and authority, subject to the limitations and provisions contained herein and in the Delaware General Corporation Law, to prescribe the terms and conditions upon which the Preferred Stock shall be redeemed from time to time. G. Shares of Preferred Stock that have been redeemed, purchased or otherwise acquired by the Corporation or that, if convertible or exchangeable, have been converted into or exchanged for shares of capital stock of any other class or classes or any series of any other class or classes or of any other series of the same class, shall be cancelled and such shares may not under any circumstances thereafter be reissued as Preferred Stock, and the Corporation shall from time to time cause all such acquired shares of Preferred Stock to be cancelled in the manner provided by law. H. Nothing herein contained shall limit any legal right of the Corporation to purchase any shares of the Preferred Stock. Section 3. Common Stock. A. Shares of Common Stock may be issued by the Corporation from time to time for such consideration as may lawfully be fixed by the Board of Directors. B. Subject to the prior rights and preferences of the Preferred Stock set forth in this Article Fourth, or in any resolution or resolutions providing for the issuance of a series of Preferred Stock, and to the extent permitted by the laws of the State of Delaware, the holders of Common Stock shall be entitled to receive such cash dividends as may be declared and made payable by the Board of Directors. 4 C. After payment shall have been made in full to the holders of any series of Preferred Stock having preferred liquidation rights, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the remaining assets and funds of the Corporation shall be distributed among the holders of the Common Stock according to their respective shares. FIFTH. Section 1. Number, Election and Terms of Directors; Board Action. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. The number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors. Commencing with the first shareholders' meeting after adoption of this Restated Certificate of Incorporation at which directors are elected, the directors shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1993 annual meeting of shareholders, the term of office of the second class to expire at the 1994 annual meeting of shareholders and the term of office of the third class to expire at the 1995 annual meeting of shareholders, with each director to hold office until his or her successor shall been duly elected and qualified. At each annual meeting of shareholders, commencing with the 1993 annual meeting, (i) directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election, with each director to hold office until his or her successor shall been duly elected and qualified, and (ii) if authorized by a resolution of the Board of Directors, directors may be elected to fill any vacancy on the Board of Directors, regardless of how such vacancy shall have been created. Section 2. Shareholder Nomination of Director Candidates and Introduction of Business. Advance notice of shareholder nominations for the election of directors and of business to be brought by shareholders before any meeting of the shareholders of the Corporation shall be given in the manner provided in the By-Laws of the Corporation. Section 3. Newly Created Directorships and Vacancies. Subject to applicable law and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class to which they have been elected expires and until such director's successor shall have been duly elected and qualified. No decrease in the numbers of authorized directors constituting the entire Board of Directors shall shorten the term of any incumbent director. Section 4. Removal. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of all of the then outstanding shares of the Voting Stock, voting together as a single class. 5 Section 5. Stockholders' Meetings. Meetings of stockholders of the Corporation may be called only by the Chief Executive Officer or by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Section 6. Stockholder Actions. Stockholders may only take action at a meeting of stockholders duly called by or under the authority of the Chief Executive Officer or the Board of Directors of the Corporation. No action that is required or permitted to be taken at any meeting of stockholders of the Corporation may be taken by the written consent of stockholders. Section 7. Amendment, Repeal or Alteration. Notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock required by law or this Restated Certificate of Incorporation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article Fifth. SIXTH. Cumulative voting for the election of directors shall not be permitted. SEVENTH. No stockholder shall by reason of his holding shares of any class have a preemptive or preferential right to purchase or subscribe to any shares of any class of stock of the Corporation, or any notes, debentures, bonds, warrants, rights, options or other securities of the Corporation, now or hereafter to be authorized, other than such rights, if any, as the Board of Directors, in its discretion, may fix. EIGHTH. The Board of Directors of the Corporation shall have the power to make, alter or repeal the By-Laws of the Corporation, subject to such restrictions upon the exercise of such powers as may be imposed by the stockholders in any by-laws adopted by them from time to time. NINTH. It shall be a proper corporate purpose, reasonably calculated to benefit stockholders, for the Board of Directors to base the response of the Corporation to any "Acquisition Proposal" on the evaluation by the Board of Directors of what response is in the best interests of the Corporation, and for the Board of Directors, in evaluating what response is in the best interests of the Corporation, to consider: (i) the best interests of the stockholders and, for this purpose, the Board of Directors shall consider, among other factors, not only the consideration being offered in the Acquisition Proposal, in relation to the market price, but also in relation to the value of the Corporation in a freely negotiated transaction and in relation to the estimate by the Board of Directors of the future value of the Corporation as an independent entity; and (ii) such other factors as the Board of Directors determines to be relevant, including, among other factors, the social, legal and economic effects upon the Corporation's employees, suppliers, customers and business and the communities in which the Corporation operates. For purposes of this Section 1, "Acquisition Proposal" means any proposal of any person or entity (a) for a tender offer or exchange offer for any equity security of the Corporation, (b) to merge or consolidate the Corporation with another corporation, or (c) to purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation. 6 TENTH. Section 1. Approval of Certain Business Combinations. A Business Combination (as hereinafter defined) shall require (i) only such affirmative vote as is required by law and any other provision of this Restated Certificate of Incorporation, if all of the conditions specified in either of Paragraph A or Paragraph B of this Section 1 are met or (ii) in addition to any affirmative vote required by law or this Restated Certificate of Incorporation, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (referred to in this Article Tenth as the "Voting Stock"), voting together as a single class (it being understood that for the purposes of this Article Tenth, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth of this Restated Certificate of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law. A. Approval by Disinterested Directors. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined). B. Price and Procedure Requirements. All of the following conditions shall have been met: (i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of Common Stock in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest price per share (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder (as hereinafter defined) for any shares of Common Stock or the common stock of any Predecessor Corporation (as hereinafter defined) acquired by it (1) within the two-year period immediately prior to the first public announcement of the terms of the proposed Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Stockholder, whichever is higher; and (b) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (such later date is referred to in this Article Tenth as the "Determination Date"), whichever is higher. (ii) The aggregate amount of the cash and Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this Paragraph B(ii) shall be required to be met with respect to every 7 class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock); (a) (if applicable) the highest price per share (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock or a substantially identical class of stock of any Predecessor Corporation acquired by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Stockholder, whichever is higher; (b) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (c) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (iii) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock or stock of a Predecessor Corporation. If the Interested Stockholder has paid for shares of any class of Voting Stock or stock of a Predecessor Corporation with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock or stock of a Predecessor Corporation previously acquired by it. The price determined in accordance with Paragraphs B(i) and B(ii) of this Section 1 shall be subject to appropriate adjustment in the event of any special dividend or other disposition of material assets other than in the ordinary course of business, stock dividend, stock split, combination of shares or similar event. Whether specific consideration satisfies this subsection shall be determined by vote of a majority of the Disinterested Directors. (iv) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding stock having preference over the Common Stock as to dividends or upon liquidation; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a 8 majority of the Disinterested Directors; and (c) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction that results in such Interested Stockholder's becoming an Interested Stockholder. (v) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guaranties, pledges or other financial assistance or any tax credits or other tax advantages provided to or by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Section 2. Certain Definitions. For purposes of this Article Tenth: A. "Business Combination" shall mean any transaction that is referred to in any one or more of the following clauses (i) through (v): (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder or (b) any other corporation (whether or not itself an Interested Stockholder) that is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $5 million or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $5 million or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Stockholder or any Affiliate of any Interested Stockholder; or 9 (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of Equity Security (as hereinafter defined) of the Corporation or any Subsidiary that is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder. B. "Person" shall mean any individual, firm, corporation or other entity. C. "Interested Stockholder" shall mean any Person (other than the Corporation or any Subsidiary or employee benefit plan of the Corporation or any Subsidiary) that: (i) is the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding Voting Stock; or (ii) at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock or of capital stock of any Predecessor Corporation that were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. D. A person shall be a "beneficial owner" of any stock that: (i) such Person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns directly or indirectly; or (ii) such Person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) is beneficially owned, directly or indirectly, by any other Person with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of such stock. E. For the purpose of determining whether a Person is an Interested Stockholder pursuant to Paragraph C of this Section 2, the number of shares of Voting Stock 10 deemed to be outstanding shall include shares deemed owned through application of Paragraph D of this Section 2 but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. F. "Affiliate" and "Associate" shall have the meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1992. G. "Subsidiary" means any corporation of which a majority of any class of Equity Security is owned, directly or indirectly, by the Corporation, provided, however, that for purposes of the definition of Interested Stockholder set forth in Paragraph C of this Section 2, the term "Subsidiary" shall mean only a corporation of which a majority of each class of Equity Security is owned, directly or indirectly, by the Corporation. H. "Disinterested Director" means any member of the Board of Directors who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors immediately before the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. I. "Fair Market Value" means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of stock (a) on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, (b) if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, (c) if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; or (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. J. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs B(i) and B(ii) of Section 1 of this Article Tenth shall include the shares of Common Stock and the shares of any other class of outstanding Voting Stock retained by the holders of such shares. K. "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on January 1, 1992. L. A "Predecessor Corporation" includes any corporation of which the Corporation was at one time a wholly-owned subsidiary, or of which the Corporation would be deemed to be a legal successor in interest (by contract or by merger or other operation of law), 11 including, but not limited to, National Components Incorporated, a Texas corporation incorporated on December 11, 1984. Section 3. Powers of the Board of Directors. A majority of the Disinterested Directors shall have the power and duty to determine for the purposes of this Article Tenth, on the basis of information known to them after reasonable inquiry, (i) whether a Person is an Interested Stockholder, (ii) the number of shares of Voting Stock beneficially owned by any Person, (iii) whether a Person is an Affiliate or Associate of another, (iv) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $5 million or more. A majority of the Disinterested Directors shall have the further power to interpret all of the terms and provisions of this Article Tenth. Section 4. No Effect on Fiduciary Obligations of Interested Stockholders. Nothing contained in this Article Tenth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. Section 5. Amendment of Article Tenth. Notwithstanding any other provisions of this Restated Certificate of Incorporation, including Article Thirteenth hereof, or the By-Laws (and notwithstanding the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or the By-Laws), the affirmative vote of the holders of 80% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, this Article Tenth or any provision hereof. ELEVENTH. No contract or other transactions between the Corporation and any other corporation, firm or individual shall be affected or invalidated by the fact that any one or more of the directors or officers of the Corporation is or are interested in or is a director or officer of such other corporation, or a member of such firm, and any director or officer, individually or jointly, may be a party to or may be interested in any contract or transaction with this Corporation, or in which this Corporation is interested, and no contract, act or transaction of this Corporation with any person or persons, firms or corporations, shall be affected or invalidated by the fact that any director or officer of this Corporation is a party to or interested in such contract, act or transaction, or in any way connected with such person or persons, firms or corporations, and each and every person who may become a director or officer of this Corporation is hereby relieved from any liability that might otherwise exist from contracting with the Corporation for the benefit of himself or any firm or corporation in which he may be in any way interested. TWELFTH. To the fullest extent permitted by Delaware statutory or decisional law, as the same exists or may hereafter be amended or interpreted, a director of the Corporation shall not be liable to the Corporation or its stockholders for any act or omission in such director's capacity as a director. Any repeal or amendment of this Article, or adoption of any other provision of this Restated Certificate of Incorporation inconsistent with this Article, by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the liability to the Corporation or its stockholders of a director of the Corporation existing at the time of such repeal, amendment or adoption of an inconsistent provision. 12 THIRTEENTH. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the By-Laws (and notwithstanding the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or the By-Laws), the affirmative vote of the holders of two-thirds or more of the outstanding voting stock, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, Articles Ninth, Twelfth or this Article Thirteenth of this Restated Certificate of Incorporation. Except as provided in Article Tenth and this Article Thirteenth, this Restated Certificate of Incorporation may be amended in the manner provided by the General Corporation Law of the State of Delaware. The By-Laws of the Corporation may be altered, amended or repealed, or new By-Laws adopted, only at any regular or special meeting of the Board of Directors or upon the affirmative vote of the holders of two-thirds or more of the outstanding shares entitled to vote at any regular or special meeting of stockholders, and only if such proposed alteration, amendment, repeal or adoption be contained in the notice of such regular or special meeting. IN WITNESS WHEREOF, NCI Building Systems, Inc. has caused its corporate seal to be affixed hereunder and this Restated Certificate of Incorporation to be signed by Johnie Schulte, its President, and attested by Donnie Humphries, its Secretary, as of the 30th day of September, 1998. NCI BUILDING SYSTEMS, INC. By: /s/ Johnie Schulte ---------------------------------- Johnie Schulte, President ATTEST: /s/ Donnie Humphries - --------------------------- Donnie Humphries, Secretary 13 EX-3.2 4 d02830exv3w2.txt AMENDED AND RESTATED BY-LAWS EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF NCI BUILDING SYSTEMS, INC. [EFFECTIVE AS OF FEBRUARY 5, 1992, AS AMENDED MARCH 17, 1999, SEPTEMBER 9, 1999, SEPTEMBER 7, 2000 AND MAY 30, 2002] TABLE OF CONTENTS
Page ---- ARTICLE I OFFICES SECTION 1. Registered Office.............................................................................1 SECTION 2. Other Offices.................................................................................1 ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Time and Place of Meetings....................................................................1 SECTION 2. Annual Meetings...............................................................................1 SECTION 3. Notice of Annual Meetings.....................................................................1 SECTION 4. Special Meetings..............................................................................1 SECTION 5. Notice of Special Meetings....................................................................1 SECTION 6. Quorum........................................................................................1 SECTION 7. Order of Business.............................................................................2 SECTION 8. New Business..................................................................................2 SECTION 9. Voting........................................................................................3 SECTION 10. List of Stockholders..........................................................................3 SECTION 11. Inspectors of Votes...........................................................................4 ARTICLE III BOARD OF DIRECTORS SECTION 1. Powers........................................................................................4 SECTION 2. Number, Tenure and Qualification..............................................................4 SECTION 3. Resignations..................................................................................5 SECTION 4. Nominations...................................................................................5 SECTION 5. Removal.......................................................................................6 SECTION 6. Vacancies.....................................................................................6 SECTION 7. Time and Place of Meetings....................................................................6 SECTION 8. Annual Meetings...............................................................................7 SECTION 9. Regular Meetings - Notice.....................................................................7 SECTION 10. Special Meetings - Notice.....................................................................7 SECTION 11. Quorum and Manner of Acting...................................................................7 SECTION 12. Remuneration..................................................................................7 SECTION 13. How Constituted and Powers....................................................................7 SECTION 14. Minutes of Committees.........................................................................8 SECTION 15. Actions Without a Meeting.....................................................................8 SECTION 16. Presence at Meetings by Means of Communications Equipment.....................................8
-i- ARTICLE IV NOTICES SECTION 1. Type of Notice................................................................................8 SECTION 2. Waiver of Notice..............................................................................9 SECTION 3. Authorized Notices............................................................................9 ARTICLE V OFFICERS SECTION 1. Description...................................................................................9 SECTION 2. Election......................................................................................9 SECTION 3. Salaries......................................................................................9 SECTION 4. Term..........................................................................................9 SECTION 5. Duties of the Chairman.......................................................................10 SECTION 6. Duties of the Chief Executive Officer........................................................10 SECTION 6A. Duties of the Chief Operating Officer........................................................10 SECTION 6B. Duties of the President......................................................................11 SECTION 7. Duties of Vice President - Finance...........................................................11 SECTION 8. Duties of Vice Presidents and Assistant Vice Presidents......................................11 SECTION 9. Duties of Secretary and Assistant Secretaries................................................11 SECTION 10. Duties of Treasurer and Assistant Treasurers.................................................12 SECTION 11. Duties of Controller and Assistant Controllers...............................................12 ARTICLE VI INDEMNIFICATION SECTION 1. Damages and Expenses.........................................................................13 SECTION 2. Prepaid Expenses.............................................................................13 SECTION 3. Insurance....................................................................................13 SECTION 4. Mergers......................................................................................13 ARTICLE VII CERTIFICATES REPRESENTING STOCK SECTION 1. Right to Certificate.........................................................................14 SECTION 2. Facsimile Signatures.........................................................................14 SECTION 3. New Certificates.............................................................................14 SECTION 4. Transfers....................................................................................14 SECTION 5. Record Date..................................................................................15 SECTION 6. Registered Stockholders......................................................................15
-ii- ARTICLE VIII GENERAL PROVISIONS SECTION 1. Dividends....................................................................................15 SECTION 2. Reserves.....................................................................................15 SECTION 3. Annual Statement.............................................................................15 SECTION 4. Checks.......................................................................................15 SECTION 5. Fiscal Year..................................................................................15 SECTION 6. Corporate Seal...............................................................................16 SECTION 7. Certificate of Incorporation.................................................................16 ARTICLE IX AMENDMENTS.......................................................................................................16
-iii- ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. Other Offices. The corporation may also have offices at such other place or places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Time and Place of Meetings. All meetings of the stockholders shall be held at such time and place, either within or without the State of Delaware, as the board of directors shall designate and as shall be stated in the notice of the meeting. SECTION 2. Annual Meetings. The annual meeting of the stockholders shall be held on the fourth Wednesday of February of each year, if not a legal holiday, and if a legal holiday, then the next secular day following, or at such other date as the board of directors of the corporation may determine and commencing at such time as the board of directors shall determine; at the annual meeting, the stockholders shall elect by a plurality vote by written ballot a board of directors and transact such other business as may properly be brought before the meeting. SECTION 3. Notice of Annual Meetings. Written notice of the annual meeting, stating the place, date and hour of the meeting, shall be given to each stockholder of record entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. SECTION 4. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called at any time by the chief executive officer, or by order of the board of directors, and shall be called by the chairman of the board, the chief executive officer or the secretary at the request in writing of a majority of the board of directors. Such request shall state the purpose or purposes of the proposed special meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. SECTION 5. Notice of Special Meetings. Written notice of a special meeting, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. SECTION 6. Quorum. The holders of stock having a majority of the voting power of the stock entitled to be voted thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time without notice (other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting) until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 7. Order of Business. The order of business at annual meetings of stockholders and, so far as practicable, at other meetings of stockholders shall be determined by the chief executive officer. SECTION 8. New Business. At an annual meeting of stockholders, only such new business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before the annual meeting. For any new business proposed by the board of directors to be properly brought before the annual meeting, such new business shall be approved by the board of directors and shall be stated in writing and filed with the secretary of the corporation at least five days before the date of the annual meeting, and all business so approved, stated and filed shall be considered at the annual meeting. Any stockholder may make any other proposal at the annual meeting, but unless properly brought before the annual meeting such proposal shall not be acted upon at the annual meeting. For a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must have given proper and timely notice thereof in writing to the secretary of the corporation as specified herein. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not later than the date that corresponds to 120 days prior to the date the corporation's proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders. A stockholder's notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation's books, of the stockholder proposing such business and any other stockholders known by such stockholder to be supporting such proposal, (c) the class and number of shares of the stock that are held of record, beneficially owned and represented by proxy on the date of such stockholder notice and on the record date of the meeting (if such date shall have been made publicly available) by the stockholder and by any other stockholders known by such stockholder to be supporting such proposal on such dates, (d) any financial interest of the stockholder in such proposal, and (e) all other information that would be required to be filed with the Securities and Exchange Commission if, with respect to any such item of business, such stockholder or stockholders were a participant in a solicitation subject to Section 14 of the Securities Exchange Act of 1934, as amended. 2 The board of directors may reject any stockholder proposal not made strictly in accordance with the terms of this Section 8. Alternatively, if the board of directors fails to consider the validity of any stockholder proposal, the presiding officer of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that the stockholder proposal was not made in strict accordance with the terms of this section and, if he should so determine, he shall so declare at the annual meeting and any such business or proposal not properly brought before the annual meeting shall not be acted upon at the annual meeting. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees of the board of directors, but, in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided. SECTION 9. Voting. Except as otherwise provided in the certificate of incorporation, each stockholder shall, at each meeting of the stockholders, be entitled to one vote in person or by proxy for each share of stock of the corporation held by him and registered in his name on the books of the corporation on the date fixed pursuant to the provisions of Section 5 of Article VII of these by-laws as the record date for the determination of stockholders who shall be entitled to notice of and to vote at such meeting. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held directly or indirectly by the corporation, shall not be entitled to vote. Any vote by stock of the corporation may be given at any meeting of stockholders by the stockholder entitled thereto, in person or by his proxy appointed by an instrument in writing subscribed by such stockholder or by his attorney thereunto duly authorized and delivered to the secretary of the corporation or to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date, unless said proxy shall provide for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law. At all meetings of the stockholders, all matters, except where other provision is made by law, the certificate of incorporation, or these by-laws, shall be decided by the vote of a majority of the votes cast by the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present. Unless demanded by a stockholder of the corporation present in person or by proxy at any meeting of the stockholders and entitled to vote thereat, or so directed by the chairman of the meeting, the vote thereat on any question other than the election or removal of directors need not be by written ballot. Upon a demand of any such stockholder for a vote by written ballot on any question or at the direction of such chairman that a vote by written ballot be taken on any question, such vote shall be taken by written ballot. On a vote by written ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. SECTION 10. List of Stockholders. It shall be the duty of the secretary or other officer of the corporation who shall have charge of its stock ledger, either directly or through another officer of the corporation designated by him or through a transfer agent appointed by the board of directors, to prepare and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each 3 stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days before said meeting, either at a place within the city where said meeting is to be held, which place shall be specified in the notice of said meeting, or, if not so specified, at the place where said meeting is to be held. The list shall also be produced and kept at the time and place of said meeting during the whole time thereof, and may be inspected by any stockholder of record who shall be present thereat. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, such list or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 11. Inspectors of Votes. The chairman may appoint two inspectors of votes to act at each meeting of the stockholders, unless the board of directors shall have theretofore made such appointments. Each inspector of votes shall first subscribe an oath or affirmation faithfully to execute the duties of an inspector of votes at the meeting with strict impartiality and according to the best of his ability. Such inspectors of votes, if any, shall take charge of the ballots, if any, at the meeting, and after the balloting on any question, shall count the ballots cast and shall make a report in writing to the secretary of the meeting of the results of the balloting. An inspector of votes need not be a stockholder of the corporation, and any officer of the corporation may be an inspector of votes on any question other than a vote for or against his election to any position with the corporation or on any other question in which he may be directly interested. ARTICLE III BOARD OF DIRECTORS SECTION 1. Powers. The business and affairs of the corporation shall be managed by its board of directors, which shall have and may exercise all powers of the corporation and take all lawful acts as are not by statute, the certificate of incorporation or these by-laws directed or required to be exercised or taken by the stockholders. SECTION 2. Number, Tenure and Qualification. The number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the board of directors. Commencing with the first shareholders' meeting after adoption of these Amended and Restated By-Laws at which directors are elected, the directors shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, with the term of office of the first class to expire at the 1993 annual meeting of shareholders, the term of office of the second class to expire at the 1994 annual meeting of shareholders and the term of office of the third class to expire at the 1995 annual meeting of shareholders, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of shareholders, commencing with the 1993 annual meeting, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified. No person may stand for election as a director if, on the date of any annual 4 or special meeting held for the purpose of electing directors, such person shall have reached the age of 72. [AMENDED 5/30/2002] SECTION 3. Resignations. Any director may resign at any time by giving written notice of his resignation to the corporation, effective at the time specified therein or, if not specified, immediately upon its receipt by the corporation. Unless otherwise specified in the notice, acceptance of a resignation shall not be necessary to make it effective. SECTION 4. Nominations. If a person is to be elected to the board of directors because of a vacancy existing on the board, nomination shall be made only by the board of directors or of a nominating committee of the board of directors (the board of directors as a whole or such committee of the board being referred to herein as the "nominating committee") pursuant to the affirmative vote of the majority of the entire membership of the nominating committee. The nominating committee shall also make nominations for the directors to be elected by the stockholders of the corporation at an annual meeting of the stockholders as provided in this section. Only persons nominated in accordance with the procedures set forth in this Section 4 shall be eligible for election as directors at an annual meeting. The nominating committee shall select the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death, incapacity, disqualification or other inability to serve as a management nominee, the nominating committee shall deliver written nominations to the secretary at least 30 days prior to the date of the annual meeting. Management nominees substituted as a result of the death, incapacity, disqualification or other inability to serve as a management nominee shall be delivered to the secretary as promptly as practicable. Provided the nominating committee selects the management nominees, no nominees for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by stockholders are made in accordance with the provisions of this Section 4. Ballots bearing the names of all the persons nominated for election as directors at an annual meeting in accordance with the procedures set forth in this Section 4 by the nominating committee and by stockholders shall be provided for use at the annual meeting. However, except in the case of a management nominee substituted as a result of the death, incapacity, disqualification or other inability to serve as a management nominee, if the nominating committee shall fail or refuse to nominate a slate of directors at least 30 days prior to the date of the annual meeting, nominations for directors may be made at the annual meeting by any stockholder entitled to vote and shall be voted upon. No person shall be elected as a director of the corporation unless nominated in accordance with the terms set forth in this Section 4. Nominations of individuals for election to the board of directors of the corporation at an annual meeting of stockholders may be made by any stockholder of the corporation entitled to vote for the election of directors at that meeting who complies with the procedures set forth in this Section 4. To be timely, a stockholder's notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than 75 days prior to the date of the annual meeting of stockholders nor more than 85 days prior to the date of 5 such annual meeting; provided, however, that if less than 75 days' notice or prior public disclosure of the date of the annual meeting is given or made, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (a) the day on which such notice of the date of the annual meetings was mailed or (b) the day on which such public disclosure was made. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or re-election as a director (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the classes and number of shares of capital stock of the corporation that are owned of record and beneficially owned by such person on the date of such stockholder notice and (D) any other information relating to such person that is required to be disclosed in solicitations of proxies with respect to nominees for election as directors pursuant to Section 14 under the Securities Exchange Act of 1934, as amended; and (ii) as to the stockholder giving the notice (A) the name and address, as they appear on the corporation's books, of such stockholder and any other stockholders known by such stockholder to be supporting such nominees, and (B) the classes and number of shares of capital stock of the corporation that are owned of record and beneficially owned by such stockholder on the date of such stockholder notice and by any other stockholders known by such stockholder to be supporting such nominees on the date of such stockholder notice. The board of directors may reject any nomination by a stockholder not made in strict accordance with the terms of this Section 4. Alternatively, if the board of directors fails to consider the validity of any nominations by a stockholder, the presiding officer of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in strict accordance with the terms of this Section 4, and, if he should so determine, he shall so declare at the annual meeting and the defective nomination shall be disregarded. SECTION 5. Removal. Any director may be removed, with cause, at any time, by the affirmative vote by written ballot of 80% of the voting interest of the stockholders of record of the corporation entitled to vote, given at an annual meeting or at a special meeting of the stockholders called for that purpose. The vacancy in the Board of Directors caused by any such removal shall be filled by the Board of Directors as provided in Section 6 of this Article III. SECTION 6. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled only by a majority of the directors then in office though less than a quorum or by a sole remaining director. Directors so chosen shall hold office until the annual meeting next after their election or until their successors are elected and qualified, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. MEETINGS OF THE BOARD OF DIRECTORS SECTION 7. Time and Place of Meetings. The board of directors of the corporation may hold meetings, both regular and special, at such time and places as it determines. 6 SECTION 8. Annual Meetings. The first meeting of each newly elected board of directors shall be held immediately following the annual meeting of stockholders, and no notice of such meeting to the newly elected directors shall be necessary in order legally to constitute the meeting, provided a quorum shall be present. If such meeting is not held immediately following the annual meeting of stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. SECTION 9. Regular Meetings - Notice. Regular meetings of the board of directors may be held without notice. SECTION 10. Special Meetings - Notice. Special meetings of the board of directors may be called by the chairman of the board, chief executive officer or two directors on 12 hours' notice to each director, either personally or by telephone or by mail, telegraph, telex, cable, wireless or other form of recorded communication; special meetings shall be called by the secretary in like manner and on like notice on the written request of the chairman of the board, chief executive officer or two directors. Notice of any such meeting need not be given to any director, however, if waived by him in writing or by telegraph, telex, cable, wireless or other form of recorded communication, or if he shall be present at the meeting. SECTION 11. Quorum and Manner of Acting. At all meetings of the board of directors, fifty percent (50%) of the directors at the time in office (but not less than one-third of the whole board of directors) shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 12. Remuneration. Unless otherwise expressly provided by resolution adopted by the board of directors, none of the directors shall, as such, receive any stated remuneration for his services; but the board of directors may at any time and from time to time by resolution provide that a specified sum shall be paid to any director of the corporation, either as his annual remuneration as such director or member of any committee of the board of directors or as remuneration for his attendance at each meeting of the board of directors or any such committee. The board of directors may also likewise provide that the corporation shall reimburse each director for any expenses paid by him on account of his attendance at any meeting. Nothing in this section shall be construed to preclude any director from serving the corporation in any other capacity and receiving remuneration therefor. COMMITTEES OF DIRECTORS SECTION 13. How Constituted and Powers. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to 7 consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If no alternate be so appointed, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member; provided, that members of the Audit Committee and the Compensation Committee may only appoint a "non-employee director" (as defined in Rule 16b-3 promulgated under the Securities and Exchange Act of 1934, as amended) of the Board of Directors. Any committee, to the extent provided in the resolution of the board of directors and not prohibited by law, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it. At any meeting of a committee, a majority of the members of the committee shall constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee. [AMENDED 9/9/1999] SECTION 14. Minutes of Committees. Each committee shall keep regular minutes of its meetings and proceedings and report the same to the board of directors at the next meeting thereof. GENERAL SECTION 15. Actions Without a Meeting. Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board of directors or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board of directors or the committee. SECTION 16. Presence at Meetings by Means of Communications Equipment. Members of the board of directors, or of any committee designated by the board of directors, may participate in a meeting of the board of directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another. Participation in a meeting conducted pursuant to this section shall constitute presence in person at the meeting. ARTICLE IV NOTICES SECTION 1. Type of Notice. Whenever, under the provisions of any applicable statute, the certificate of incorporation, or these by-laws, notice is required to be given to any director or stockholder, the requirement shall not be construed to mean personal notice, but such notice may be given in writing, in person or by mail, addressed to such director or stockholder at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice 8 shall be deemed to be given at the time when it shall be deposited in the United States mail. Notice to directors may also be given in any manner permitted by Article III hereof and shall be deemed to be given at the time when first transmitted by the method of communication so permitted. SECTION 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of any applicable statute, the certificate of incorporation or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto, and transmission of a waiver of notice by a director or stockholder by mail, telegraph, telex, cable, wireless or other form of recorded communication may constitute such a waiver. SECTION 3. Authorized Notices. Unless otherwise specified herein, the secretary or such other person or persons as the chief executive officer designates shall be authorized to give notices for the corporation. ARTICLE V OFFICERS SECTION 1. Description. The elected officers of the corporation shall be a chief executive officer, a chief operating officer, a president, one or more vice presidents, with or without such descriptive titles as the board of directors shall deem appropriate, a secretary and a treasurer and, if the board of directors so elects a chairman of the board (who shall be a director) and a controller. The board of directors by resolution shall also appoint one or more assistant secretaries, assistant treasurers, assistant controllers and such other officers and agents as from time to time may appear to be necessary or advisable in the conduct of the affairs of the corporation. Any two or more offices may be held by the same person. Unless otherwise provided in a resolution of the board of directors or a written directive of the chief executive officer, each of the officers of the corporation shall have general authority to agree upon and execute all bonds, evidences of indebtedness, deeds, leases, contracts, and other obligations in the name of the corporation and affix the corporate seal thereto. [AMENDED 3/17/1999] SECTION 2. Election. The board of directors at its first meeting after each annual meeting of stockholders shall elect and appoint the officers to fill the positions designated in Section 1 of this Article V. SECTION 3. Salaries. The board of directors shall fix all salaries of all elected officers of the corporation. SECTION 4. Term. An officer of the corporation shall hold office until he resigns or his successor is chosen and qualified. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors. The board of directors shall fill any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise. 9 SECTION 5. Duties of the Chairman. The chairman of the board shall preside when present at all meetings of the board of directors. He shall advise and counsel the chief executive officer and chief financial officer and other officers of the corporation, and shall exercise such powers and perform such duties as shall be assigned to or required of him from time to time by the board of directors. [AMENDED 3/17/1999] SECTION 6. Duties of the Chief Executive Officer. The chief executive officer shall have responsibility for and general supervision of the affairs of the corporation and shall have general and active executive charge, management, and control of all the business, operations, and properties of the corporation with all such powers as may be reasonably incident to such responsibilities, subject to the provisions of these by-laws and the control of the board of directors. Unless a chairman of the board shall have been elected, the chief executive officer shall preside, when present, at all meetings of stockholders and at all meetings of the board of directors. The chief executive officer shall be the ranking officer of the corporation, to whom all other officers shall be subordinate, and he shall be responsible for and see that all orders and resolutions of the stockholders and the board of directors are carried into effect. The chief executive officer shall have the power and authority to sign stock certificates; to cause the employment or appointment of such employees and agents of the corporation as the proper conduct of operations may require; to terminate, remove or suspend any employee or agent who shall have been employed or appointed under his authority or under authority of an officer subordinate to him; to suspend for cause any officer subordinate to the chief executive officer, pending final action by the board of directors or such other authority as shall have elected or appointed such officer; to delegate any of the foregoing powers and authority to any other officer or agent of the corporation; and, in general, to exercise all the powers and authority usually appertaining to the chief executive officer of a corporation (except as otherwise provided in these by-laws or in resolutions or written directives of the board of directors), as may be designated in accordance with these by-laws, and as from time to time may be assigned to him by the board of directors. In the absence of the chief executive officer, his duties shall be performed and his powers may be exercised by the chief operating officer, if different from the chief executive officer and president, by the president in the absence of the chief operating officer, or otherwise by such other officer as the chief executive officer shall designate in writing or (failing such designation) by the executive committee (if any has been appointed) or such officer as it may designate in writing, subject, in either case, to review and superseding action by the board of directors. [AMENDED 3/17/1999] SECTION 6A. Duties of the Chief Operating Officer. The chief operating officer shall have general, active supervision of and responsibility for the business operations of the corporation, subject to the review and approval of the chief executive officer. The chief operating officer shall have the same authority and powers with respect to the conduct of the business operations of the corporation as has the chief executive officer with respect to its affairs generally. As such, he shall have all such powers and authority as may be reasonably incident to such responsibilities and as usually appertain to the chief operating officer of a corporation (except as otherwise provided in these by-laws or in resolutions or written directives of the board of directors or chief executive officer), as well as other powers and authority as may be 10 designated in accordance with these by-laws and as from time to time may be assigned to him by the board of directors or the chief executive officer. He shall preside, in the absence of any other person designated by these by-laws, at all meetings of the board of directors and shareholders. He shall have the power and authority to sign stock certificates. The chief operating officer shall report to the chief executive officer and otherwise shall be the ranking officer of the corporation to whom all other officers shall be subordinate. [AMENDED 3/17/1999] SECTION 6B. Duties of the President. The president shall be the chief executive officer and/or the chief operating officer of the corporation, unless a chief executive officer or a chief operating officer is otherwise elected. The president shall have all powers and authority as usually appertain to the president of a corporation (except as otherwise provided in these by-laws or in resolutions or written directives of the board of directors or chief executive officer), as well as other powers and authority as may be designated in accordance with these by-laws and as from time to time may be assigned to him by the board of directors or the chief executive officer. He shall have the power and authority to sign stock certificates. [AMENDED 3/17/1999] SECTION 7. Duties of Vice President - Finance. There may be designated a vice president - finance, who, if so designated, shall be the chief financial and accounting officer of the corporation. He shall have active control of and responsibility for all matters pertaining to the financial affairs of the corporation and its subsidiaries. His authority shall include the authorities of the treasurer and controller. He shall be responsible for approval of all filings with governmental agencies. He shall have the authority to execute and deliver bonds, deeds, contracts and stock certificates of and for the corporation, and to affix the corporate seal thereto by handwritten or facsimile signature and all other powers customarily appertaining to his office, except to the extent otherwise limited or enlarged. He shall report to the president and to the executive committee and the board of directors of the corporation at their request on all financial matters of the corporation. SECTION 8. Duties of Vice Presidents and Assistant Vice Presidents. In the absence of the chief executive officer or chief financial officer or in the event of his inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated by the board, or in the absence of any designation, in the order of their election) shall perform the duties of the president and, when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice presidents shall perform such other duties and have such other powers as the board of directors or the president may from time to time prescribe. [AMENDED 3/17/1999] SECTION 9. Duties of Secretary and Assistant Secretaries. The secretary or an assistant secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all proceedings of the meetings of the stockholders of the corporation and of the board of directors in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. The secretary shall be under the supervision of the chief executive officer and shall perform such other duties as may be prescribed by the chief executive officer. The secretary shall have charge of the seal of the corporation and have 11 authority to affix the seal to any instrument requiring it. When so affixed, the seal shall be attested by the signature of the secretary or treasurer or an assistant secretary or assistant treasurer, which may be a facsimile. The secretary shall keep and account for all books, documents, papers and records of the corporation except those for which some other officer or agent is properly accountable. The secretary shall have authority to sign stock certificates, and shall generally perform all the duties usually appertaining to the office of the secretary of a corporation. [AMENDED 3/17/1999] Assistant secretaries in the order of their seniority, unless otherwise determined by the board of directors, shall assist the secretary, and in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary. They shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. SECTION 10. Duties of Treasurer and Assistant Treasurers. The treasurer shall have the responsibility for and custody over all assets of the corporation, and the responsibility for handling of the liabilities of the corporation. He shall cause proper entries of all receipts and disbursements of the corporation to be recorded in its books of account. He shall have the responsibility for all matters pertaining to taxation and insurance. He shall have the authority to endorse for deposit or collection, or otherwise, all commercial paper payable to the corporation, and to give proper receipts or discharges for all payments to the corporation. He shall be responsible for all terms of credit granted by the corporation and for the collection of all its accounts. He shall have the authority to execute and deliver bonds, deeds, contracts and stock certificates of and for the corporation, and to affix the corporate seal thereto by handwritten or facsimile signature and all other powers customarily appertaining to his office, except to the extent otherwise limited or enlarged. The treasurer shall be under the supervision of the vice president - finance and he shall perform such other duties as may be prescribed to him by the vice president - finance, if one be designated. Assistant treasurers, in the order of their seniority, shall assist the treasurer, and in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. SECTION 11. Duties of Controller and Assistant Controllers. The controller shall be responsible for all matters pertaining to the accounts of the corporation, its subsidiaries and divisions, with the supervision of the books of account, their installation, arrangement and classification. The controller shall maintain adequate records of all assets, liabilities and transactions; see that an adequate system of internal audit thereof is currently and regularly maintained; coordinate the efforts of the corporation's independent public accountants in its external audit program; receive, review and consolidate all operating and financial statements of the corporation and its various departments and subsidiaries; and prepare financial statements, reports and analyses. The controller shall have supervision of the accounting practices of the corporation and of each subsidiary and division of the corporation, and shall prescribe the duties and powers of the chief accounting personnel of the subsidiaries and divisions. The controller 12 shall cause to be maintained an adequate system of financial control through a program of budgets, financial planning and interpretive reports. The controller shall initiate and enforce accounting measures and procedures whereby the business of the corporation and its subsidiaries and divisions shall be conducted with the maximum efficiency and economy. The controller shall have all other powers customarily appertaining to the office of controller, except to the extent otherwise limited or enlarged. The controller shall be under the supervision of the vice president - finance, if one be designated. The assistant controllers, in the order of their seniority, shall assist the controller, and if the controller is unavailable, perform the duties and exercise the powers of the controller. ARTICLE VI INDEMNIFICATION SECTION 1. Damages and Expenses. To the full extent permitted by law, the corporation shall indemnify and pay the expenses of any party who is or was made, or threatened to be made, a party to an action or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that he is or was a director, officer or employee of the corporation or served any other corporation, trust or enterprise in any capacity at the request of the corporation. SECTION 2. Prepaid Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation as incurred and in advance of the final disposition of such action, suit or proceeding, provided the party undertakes in writing (in form and substance reasonably satisfactory to the corporation) to repay the amount paid or reimbursed if it is ultimately determined that such party is not entitled to indemnification for such expenses. [AMENDED 9/7/2000] SECTION 3. Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI. SECTION 4. Mergers. For purposes of this Article VI, references to "the corporation" shall include, in addition to the resulting or surviving corporation, constituent corporations (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this 13 Article VI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VII CERTIFICATES REPRESENTING STOCK SECTION 1. Right to Certificate. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman of the board, the chief executive officer, the chief financial officer, the president or a vice president and by the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, option or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights. [AMENDED 3/17/1999] SECTION 2. Facsimile Signatures. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. New Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificate. SECTION 4. Transfers. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation, subject to 14 any proper restrictions on transfer, to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 5. Record Date. The board of directors may fix, in advance, a record date for stockholders' meetings or for any other lawful purpose, which shall be no fewer than 10 nor more than 60 days before the date of the meeting or other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. SECTION 6. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not provided by the laws of the State of Delaware. ARTICLE VIII GENERAL PROVISIONS SECTION 1. Dividends. Dividends upon the capital stock of the corporation, if any, may be declared by the board of directors (but not any committee thereof) at any regular meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock or other securities. SECTION 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the board of directors from time to time, in their absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the board of directors shall think conducive to the interest of the corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. SECTION 3. Annual Statement. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. SECTION 4. Checks. All checks or demands for money and promissory notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time prescribe. SECTION 5. Fiscal Year. The fiscal year of the corporation shall be determined by the board of directors. 15 SECTION 6. Corporate Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization, and the word "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed, affixed, reproduced or otherwise. SECTION 7. Certificate of Incorporation. These by-laws are subject to the terms of the certificate of incorporation of the corporation. ARTICLE IX AMENDMENTS The by-laws may be altered, amended or repealed or new by-laws adopted only in accordance with the Restated Certificate of Incorporation of the corporation and any other requirements specified in these by-laws. 16 CERTIFICATION I, Donnie Humphries, Secretary of NCI Building Systems, Inc., hereby certify that the foregoing is a true, accurate and complete copy of the By-Laws of NCI Building Systems, Inc., as amended and restated by its Board of Directors as of February 5, 1992 and as amended March 17, 1999, September 9, 1999, September 7, 2000 and May 30, 2002. /s/ Donnie R. Humphries --------------------------------------- Donnie R. Humphries, Secretary 17 EX-10.1 5 d02830exv10w1.txt AMENDED/RESTATED EMPLOYMENT AGREEMENT - SCHULTE EXHIBIT 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made this 29th day of January, 2003, is between NCI BUILDING SYSTEMS, L.P., a Texas limited partnership (the "Company"), and JOHNIE SCHULTE (the "Employee"). 1. Employment Term. The Company hereby employs the Employee for a term commencing on April 10, 1989 and ending on December 31, 1995, subject to earlier termination as provided in Section 6 hereof, ending December 31, 1995 (such term, as from time to time extended or earlier terminated as hereafter provided, being herein referred to as the "term of this Agreement"). The Employee agrees to accept such employment and to perform the services specified therein, all upon the terms and conditions hereinafter stated. The term of this Agreement shall be automatically renewed after December 31, 1995 for successive one-month periods unless and until either party provides the other party with at least thirty (30) days prior written notice of such party's intention to terminate this Agreement. 2. Duties. The Employee shall serve the Company in an executive capacity and shall report to, and be subject to the general direction and control of, the Board of Directors of the Company (the "Board"). The Employee shall perform the executive, management and administrative duties of the President and Chief Executive Officer of the Company and such other executive duties as are from time to time assigned to him by the Board or such executive officers and as are not inconsistent with the provisions hereof. The Company agrees that it will assign the Employee those duties, and only those duties, of the type, nature and dignity normally assigned to an officer of his position in a corporation of the size, stature and nature of the Company. 3. Extent of Service. The Employee shall devote his full business time and attention to the business of the Company, and, except as may be specifically permitted by the Board, shall not be engaged in any other business activity during the term of this Agreement. The foregoing shall not be construed as preventing the Employee from making passive investments in other businesses or enterprises, provided, however, that such investments will not require services on the part of the Employee which would in any way impair the performance of his duties under this Agreement. 4. Salary. The Company shall pay Employee a base salary of $125,000.00 per year. From time to time during the term of this Agreement, the Employee's salary may be increased by, and at the sole discretion of, the Board, or any committee thereof with responsibility for executive compensation matters, in which case the amount of such increased salary shall thereafter be deemed to be the amount of salary contracted for in this Agreement. The salary set forth herein shall be payable in installments in accordance with the payroll policies of the Company in effect from time to time during the term of this Agreement. 5. Benefits. The Employee shall be eligible to receive those benefits during the term of this Agreement that are from time to time applicable to executive employees of the Company, together with any additional benefits determined in the sole discretion of the Board, or any committee thereof with responsibility for executive compensation matters. Amended and Restated Employment Agreement - Johnie Schulte 6. Termination. (a) Death. If during the term of this Agreement and while in the employ of the Company, the Employee dies, this Agreement shall automatically terminate and the Company shall have no further obligation to the Employee or his Beneficiary (as hereinafter defined) except that the Company shall pay the Employee's Beneficiary (i) that portion of the Employee's salary accrued through the end of the month in which the Employee's death occurred and (ii) the Payments (as hereinafter defined) in the same manner and at the same times as if the Employee had not died. If Employee's Beneficiary dies prior to the payment of all of the Payments, the then present value of the remaining Payments shall be paid to Beneficiary's estate in a single sum distribution within 30 days after the date of Beneficiary's death. (b) Disability. If during the term of this Agreement and while in the employ of the Company, the Employee is prevented for sixty (60) consecutive days or ninety (90) days in the aggregate from performing his duties hereunder due to disability, this Agreement shall automatically terminate and the Company shall have no further obligation to the Employee or his Beneficiary except that the Company shall pay the Employee (i) that portion of the Employee's salary accrued through the end of the month in which the Board's determination of disability occurred and (ii) the Payments in the same manner and at the same times as if the Employee had not become disabled if, on each payment date, Employee has not breached or violated any of his covenants set forth in Section 8(a). For purposes of this Agreement, the Employee shall be deemed to have become disabled when the Board, upon the advice of a qualified physician, shall have determined that the Employee has become physically or mentally incapable (excluding infrequent and temporary absences due to ordinary illness) of performing his duties under this Agreement. (c) Termination for Cause. Notwithstanding any other provision of this Agreement to the contrary, if Employee's employment with the Company is terminated for Cause, this Agreement shall automatically terminate, the Company shall have no further obligation to the Employee other than to pay the Employee his base salary accrued through the date of termination and Employee shall forfeit his or her rights to any other benefits under this Agreement. (d) Involuntary Discharge. At any time during the term of this Agreement or prior to the end of the term of this Agreement, the Company may discharge the Employee without Cause, in which case this Agreement shall automatically terminate and the Company shall have no further obligation to the Employee or his Beneficiary other than (i) to pay the Employee his base salary accrued through the date of such termination and (ii) the Payments in the same manner and at the same times as if the Employee's employment had not been terminated if, on each payment date, Employee has not breached or violated any of his covenants set forth in Section 8(a). (e) Voluntary Termination. The Employee may voluntarily terminate his employment with the Company at any time during the term of this Agreement, in which case this Agreement shall automatically terminate and the Company shall have no further obligation to the Employee or his Beneficiary other than (i) to pay the Employee his base salary accrued through the date of such termination and (ii) the Vested Payments (as hereinafter defined) in the amount and manner described in subsection (g) below. (f) Payments. If Employee dies, becomes disabled or Employee's employment is terminated by the Company for any reason other than Cause, then for the Amended and Restated Employment Agreement - Johnie Schulte Page 2 following three-year period, the Company shall pay to the Employee an annual amount equal to 75% of the Employee's base salary in effect as of the date of termination of Employee's employment with the Company and the Company shall continue the Employee's participation in the Company's group health insurance program (if so requested by the Employee) on the same terms applicable to his on the date of discharge. Such amounts shall be paid to the Employee in the same manner and at the same times (in accordance with the Company's then existing payroll practices) as if the Employee had not died, became disabled or Employee's employment had not terminated (collectively, the "Payments"). If Employee dies prior to receiving all of the Payments and prior to his death had not breached or violated any of his covenants set forth in Section 8(a), Employee's Beneficiary shall receive the unpaid portion of Employee's Payments during the remainder of the three-year period. Notwithstanding any other provision of this Agreement to the contrary, if Employee breaches or violates any of his covenants set forth in Section 8(a), Employee immediately shall forfeit his or her rights to any remaining Payments. (g) Vested Payments. If the Employee voluntarily terminates his employment with the Company, then for the following three-year period, the Company shall pay to the Employee an annual amount equal to 25%, 50% or 75% of the Employee's base salary in effect as of the date of termination of Employee's employment with the Company, dependent upon the amount vested as provided in this subsection. Such amounts shall be paid to the Employee in the same manner and at the same times (in accordance with the Company's then existing payroll practices) as if the Employee had not voluntarily terminated his employment with the Company (collectively, the "Vested Payments"). Employee's right to receive amounts under this subsection shall vest over a period of three (3) years, at the rate of 33-1/3% for each year of employment by Employee after the date hereof. If Employee dies prior to receiving all of the Vested Payments and prior to his death had not breached or violated any of his covenants set forth in Section 8(a), Employee's Beneficiary shall receive the unpaid portion of Employee's Vested Payments during the remainder of the three-year period. Notwithstanding any other provision of this Agreement to the contrary, if Employee breaches or violates any of his covenants set forth in Section 8(a), Employee immediately shall forfeit his or her rights to any remaining Vested Payments. (h) Cause. For purposes of this Agreement, "Cause" shall be determined by the Board of Directors, in its sole and absolute discretion, and means the occurrence of any or all of the following: (i) Employee's conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony; or (ii) The willful engaging by Employee in gross misconduct materially and demonstrably injurious to the Company, as determined by the Company. However, no act or failure to act, on Employee's part shall be considered "willful" unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company; or (iii) The failure or inability for any reason of Employee to devote his full business time to the Company's business. (i) Present Value. For purposes of this Agreement, whenever the Company is required to calculate the present value of any benefit to be paid to Employee or Beneficiary hereunder, the Company shall calculate the present value of such benefit using a discount rate equal to the prime rate reported by the Company's principal bank lender on the date on which Amended and Restated Employment Agreement - Johnie Schulte Page 3 such payment became payable (i.e., the date of termination of Employee's employment with the Company), but in no event shall such discount rate exceed 8%. 7. Confidential Information. The Employee acknowledges that in the course of his employment by the Company he has received and will receive certain trade secrets, programs, lists of customers and other confidential information and knowledge concerning the business of the Company (hereinafter collectively referred to as "Information") which the Company desires to protect. The Employee understands that the Information is confidential and he agrees not to reveal the Information to anyone outside the Company so long as the confidential or secret nature of the Information shall continue. The Employee further agrees that he will at no time use the Information in competing with the Company or any affiliate of the Company. Upon termination of this Agreement, the Employee shall surrender to the Company all papers, documents, writings and other property produced by him or coming into his possession by or through his employment or relating to the Information and the Employee agrees that all such materials will at all times remain the property of the Company. 8. Restrictive Covenant. (a) In the event of any termination of the Employee's employment with the Company for any reason at any time during the term of this Agreement, then for a period beginning on the date of such termination and ending three (3) years following the date of such termination, the Employee shall not engage, anywhere within a radius of 500 miles of any plant, mini-plant or any other manufacturing facility owned or operated by the Company as of the time of such termination (the "Territory"), as principal, agent, trustee or through the agency of any corporation, partnership, association or agent or agency, in the business of manufacturing or selling engineered building systems, metal building components or any other business ancillary thereto (the "Industry"), and the Employee shall not be the owner of more than 5% of the outstanding capital stock of any corporation, or a member or employee of any partnership or an owner or employee of any business that conducts a business in the Territory within the Industry. During such period, the Employee further agrees that he shall not, either directly or indirectly, through any person, firm, association or corporation with which the Employee is now or may hereafter become associated, cause or induce any present or future employee of the Company (or its successors and assigns) or any of their affiliates to leave the employ of the Company (or its successors and assigns) or any such affiliate to accept employment with the Employee or with such person, firm, association or corporation. (b) The foregoing covenants in Section 8(a) shall not be held invalid or unenforceable because of the scope of the territory or actions subject thereto or restricted thereby, or the period of time within which such agreement is operative; but any judgment of a court of competent jurisdiction may define the maximum territory and actions subject to and restricted by covenants Section 8(a) and the period of time during which such covenants are enforceable; provided, however, that in the event that as a result of an action being instituted against the Company by or on behalf of the Employee, a judgment of a court of competent jurisdiction is entered against the Company decreasing the period of time during which this Agreement is enforceable, the term of this Agreement shall be similarly decreased. (c) The Employee represents and warrants to the Company that (i) the Employee has the full right, power and authority to enter into and perform this Agreement, including (without limitation) the giving of the covenants in Section 8(a), (ii) the Employee acknowledges the giving of fair and adequate consideration for his covenants in Section 8(a), and that such covenants are necessary to protect the business, operations and goodwill of the Amended and Restated Employment Agreement - Johnie Schulte Page 4 Company and to attract investment in the Company, (iii) such covenants are not oppressive to the Employee in any respect, and (iv) on the date hereof, the Employee is not engaged in a common calling. 9. Notices. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or three (3) business days following the date mailed, postage prepaid, by certified mail, return receipt requested, or when sent by telex or telecopy and confirmed, if addressed to the respective parties as follows: If to the Employee: Johnie Schulte 16021 Kube Ct. Houston, Texas 77040 Facsimile: If to the Company: NCI Building Systems, L.P. 10943 North Sam Houston Parkway West Houston, Texas 77064 Attention: Chairman of the Board Facsimile: (281) 477-9670 Either party hereto may designate a different address by providing written notice of such new address to the other party hereto. 10. Specific Performance. The Employee acknowledges that a remedy at law for any breach or attempted breach of Section 7 or 8 of this Agreement will be inadequate, agrees that the Company shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of an such injunctive or any other equitable relief. 11. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such provision or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 12. Beneficiary. The Employee shall designate in writing on Exhibit "A" hereto the person or entity to receive benefits due under this Agreement after his death (a "Beneficiary"). If Employee fails to designate a Beneficiary or if the designated Beneficiary predeceases Employee, Employee's Beneficiary shall be his or her spouse, if living, and if no such spouse is living, Employee's estate. 13. Assignment. This Agreement may not be assigned by the Employee. Neither the Employee nor his Beneficiary shall have any right to commute, encumber or dispose of any right to receive payments hereunder, it being agreed that such payments and the right thereto are nonassignable and nontransferable. 14. Binding Effect. Subject to the provisions of Section 13 of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto, the Employee's heirs and personal representatives, and the successors and assigns of the Company. Amended and Restated Employment Agreement - Johnie Schulte Page 5 18 15. Captions. The section and subsection headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 16. Complete Agreement. This Agreement represents the entire agreement between the parties concerning the subject hereof and supersedes all prior agreements between the parties concerning the subject thereof. 17. Amendment; Waiver. This Agreement may not be amended or modified in any respect except by a written instrument signed by the Company and the Employee. No waiver, express or implied, by either party of a breach or violation of any provision of this Agreement by the other party shall be construed as a continuing waiver of such breach or violation or as a waiver of any future breach or violation of the same or any other provision of this Agreement. All amendments, modifications, consents, determinations and other actions made or taken by or on behalf of the Company under this Agreement shall require the approval of 75% of the Board, with the Employee abstaining. 18. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. 19. Counterparts. This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 20. Prior Employment Agreements. The Employee represents and warrants to the Company that he has fulfilled all of the terms and conditions of all prior employment, consulting, non-competition or confidentiality agreements. The Employee shall indemnify and hold the Company harmless from any and all losses, costs, damages and expenses arising out of or resulting from any breach of or inaccuracy with respect to the representations and warranties of the Employee contained in this Section 20. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in Houston, Texas as of the date and year first above written. NCI BUILDING SYSTEMS, L.P. By: NCI Operating Corp., general partner By: /s/ A.R. Ginn ------------------------------------- A.R. Ginn, Chairman of the Board /s/ Johnie Schulte ----------------------------------------- JOHNIE SCHULTE Amended and Restated Employment Agreement - Johnie Schulte Page 6 EX-10.6 6 d02830exv10w6.txt 2003 LONG-TERM STOCK INCENTIVE PLAN EXHIBIT 10.6 NCI BUILDING SYSTEMS, INC. 2003 LONG-TERM STOCK INCENTIVE PLAN 1. PURPOSE. The purposes of the Plan are to attract and retain for the Company and its Subsidiaries the best available personnel, to provide additional incentives to Employees, Directors and Consultants, to increase their interest in the Company's welfare, and to promote the success of the business of the Company and its Subsidiaries. 2. INCENTIVE AWARDS AVAILABLE UNDER THE PLAN. Awards granted under this Plan may be (a) Incentive Stock Options, (b) Non-Qualified Stock Options, (c) Restricted Stock Awards; (d) Stock Appreciation Rights; (e) Performance Share Awards; and (f) Phantom Stock Awards. 3. SHARES SUBJECT TO PLAN. Subject to adjustment pursuant to Section 12(a) hereof, the total amount of Common Stock with respect to which Awards may be granted under the Plan shall not exceed 1,500,000. At all times during the term of the Plan, the Company shall allocate and keep available such number of shares of Common Stock as will be required to satisfy the requirements of outstanding Awards under the Plan. The number of shares reserved for issuance under the Plan shall be reduced only to the extent that shares of Common Stock are actually issued in connection with the exercise or settlement of an Award. Any shares of Common Stock covered by an Award (or a portion of an Award) that is forfeited or canceled or that expires shall be deemed not to have been issued for purposes of determining the maximum aggregate number of shares of Common Stock which may be issued under the Plan and shall again be available for Awards under the Plan. The shares to be delivered under the Plan shall be made available from authorized but unissued shares of Common Stock or Common Stock held in the treasury of the Company. 4. ELIGIBILITY. Awards other than Incentive Stock Options may be granted to Employees, Officers, Directors, and Consultants. Incentive Stock Options may be granted only to Employees. The Committee in its sole discretion shall select the recipients of Awards. A Grantee may be granted more than one Award under the Plan, and Awards may be granted at any time or times during the term of the Plan. The grant of an Award to an Employee, Officer, Director or Consultant shall not be deemed either to entitle that individual to, or to disqualify that individual from, participation in any other grant of Awards under the Plan. 5. LIMITATION ON INDIVIDUAL AWARDS. Any and all shares available for Awards under the Plan may be awarded by way of Options, Restricted Stock Awards or Stock Appreciation Rights (regardless of the form of payment) to any one person. The maximum Fair Market Value, measured as of the date of the grant of the Award, of any Awards (other than Options, Restricted Stock Awards and Stock Appreciation Rights) that may be granted to any one person during any fiscal year shall be $400,000, plus any consideration paid by that person for the Award. The preceding sentences shall be applied in a manner which will permit compensation generated under the Plan, where appropriate, to constitute "performance-based" compensation for purposes of Section 162(m) of the Code. 6. STOCK OPTIONS. (a) Grant of Options. An Option is a right to purchase shares of Common Stock during the option period for a specified exercise price. The Committee shall determine whether each Option shall be granted as an Incentive Stock Option or a Non-Qualified Stock NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 1 Option and the provisions, terms and conditions of each Option including, but not limited to, the vesting schedule, the number of shares of Common Stock subject to the Option, the exercise price of the Option, the period during which the Option may be exercised, repurchase provisions, forfeiture provisions, methods of payment, and all other terms and conditions of the Option. (b) Limitations on Incentive Stock Options. The aggregate Fair Market Value (determined as of the date of grant of an Option) of Common Stock which any Employee is first eligible to purchase during any calendar year by exercise of Incentive Stock Options granted under the Plan and by exercise of Incentive Stock Options granted under any other incentive stock option plan of the Company or a Subsidiary shall not exceed $100,000. If the Fair Market Value of stock with respect to which all Incentive Stock Options described in the preceding sentence held by any one Optionee are exercisable for the first time by such Optionee during any calendar year exceeds $100,000, the Options (that are intended to be Incentive Stock Options on the date of grant thereof) for the first $100,000 worth of shares of Common Stock to become exercisable in such year shall be deemed to constitute Incentive Stock Options and the Options (that are intended to be Incentive Stock Options on the date of grant thereof) for the shares of Common Stock in the amount in excess of $100,000 that become exercisable in that calendar year shall be treated as Non-Qualified Stock Options. If the Code or the Treasury regulations promulgated thereunder are amended after the effective date of the Plan to provide for a different limit than the one described in this Section 6(b), such different limit shall be incorporated herein and shall apply to any Options granted after the effective date of such amendment. (c) Acquisitions and Other Transactions. Notwithstanding the provisions of Section 11(h), in the case of an Option issued or assumed pursuant to Section 11(h), the exercise price and number of shares for the Option shall be determined in accordance with the principles of Section 424(a) of the Code and the Treasury regulations promulgated thereunder. (d) Payment on Exercise. Payment for the shares of Common Stock to be purchased upon exercise of an Option may be made in cash (by check) or, if elected by the Optionee where permitted by law: (i) if a public market for the Common Stock exists, through a "same day sale" arrangement between the Optionee and a NASD Dealer whereby the Optionee elects to exercise the Option and to sell a portion of the shares of Common Stock so purchased to pay for the exercise price and whereby the NASD Dealer commits upon receipt of such shares of Common Stock to forward the exercise price directly to the Company; (ii) if a public market for the Common Stock exists, through a "margin" commitment from the Optionee and an NASD Dealer whereby the Optionee elects to exercise the Option and to pledge the shares of Common Stock so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer commits upon receipt of such shares of Common Stock to forward the exercise price directly to the Company; (iii) by surrender for cancellation of Qualifying Shares at the Fair Market Value per share at the time of exercise (provided that such surrender does not result in an accounting charge for the Company); or (iv) where approved by the Committee at the time of exercise, by delivery of the Optionee's promissory note with such recourse, interest, security, redemption and other provisions as the Committee may require, provided that the par value of each of the shares of Common Stock to be purchased is paid for in cash. No shares of Common Stock may be issued until full payment of the purchase price therefor has been made. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 2 7. RESTRICTED STOCK AWARDS. (a) Restricted Stock Awards. A Restricted Stock Award is a grant of shares of Common stock for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions and other terms and conditions as are established by the Committee. (b) Forfeiture Restrictions. Shares of Common Stock that are the subject of a Restricted Stock Award shall be subject to restrictions on disposition by the Grantee and to an obligation of the Grantee to forfeit and surrender the shares to the Company under certain circumstances (the "Forfeiture Restrictions"). The Forfeiture Restrictions shall be determined by the Committee in its sole discretion, and the Committee may provide that the Forfeiture Restrictions shall lapse on the passage of time, the attainment of one or more performance targets established by the Committee, or the occurrence of such other event or events determined to be appropriate by the Committee. The Forfeiture Restrictions applicable to a particular Restricted Stock Award (which may differ from any other such Restricted Stock Award) shall be stated in the Restricted Stock Agreement. (c) Rights as Stockholder. Shares of Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Grantee of such Restricted Stock Award. The Grantee shall have the right to receive dividends with respect to the shares of Common Stock subject to a Restricted Stock Award, to vote the shares of Common Stock subject thereto and to enjoy all other stockholder rights with respect to the shares of Common Stock subject thereto, except that, unless provided otherwise in this Plan, or in the Restricted Stock Agreement, (i) the Grantee shall not be entitled to delivery of the shares of Common Stock except as the Forfeiture Restrictions expire, (ii) the Company or an escrow agent shall retain custody of the shares of Common Stock until the Forfeiture Restrictions expire, (iii) the Grantee may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the shares of Common Stock until the Forfeiture Restrictions expire. (d) Stock Certificate Delivery. One or more stock certificates representing shares of Common Stock, free of Forfeiture Restrictions, shall be delivered to the Grantee promptly after, and only after, the Forfeiture Restrictions have expired. The Grantee, by his or her acceptance of the Restricted Stock Award, irrevocably grants to the Company a power of attorney to transfer any shares so forfeited to the Company, agrees to execute any documents requested by the Company in connection with such forfeiture and transfer, and agrees that such provisions regarding transfers of forfeited shares shall be specifically performable by the Company in a court of equity or law. (e) Payment for Restricted Stock. The Committee shall determine the amount and form of any payment for shares of Common Stock received pursuant to a Restricted Stock Award. In the absence of such a determination, the Grantee shall not be required to make any payment for shares of Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by law. (f) Forfeiture of Restricted Stock. Unless otherwise provided in a Restricted Stock Agreement, on termination of the Grantee's employment or service prior to lapse of the Forfeiture Restrictions, the shares of Common Stock which are still subject to the Restricted Stock Award shall be forfeited by the Grantee. Upon any forfeiture, all rights of the Grantee with respect to the forfeited shares of the Common Stock subject to the Restricted Stock Award shall NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 3 cease and terminate, without any further obligation on the part of the Company except to repay any purchase price per share paid by the Grantee for the shares forfeited. (g) Waiver of Forfeiture Restrictions; Committee's Discretion. With respect to a Restricted Stock Award that has been granted to a Covered Employee where such Award has been designed to meet the exception for performance-based compensation under Section 162(m) of the Code, the Committee may not waive the Forfeiture Restrictions applicable to such Restricted Stock Award. 8. STOCK APPRECIATION RIGHTS. (a) Stock Appreciation Rights. A Stock Appreciation Right is a right to receive, upon exercise of the right, shares of Common Stock or their cash equivalent in an amount equal to the increase in Fair Market Value of the Common Stock between the grant and exercise dates. (b) Tandem Rights. Stock Appreciation Rights may be granted in connection with the grant of an Option, in which case exercise of Stock Appreciation Rights will result in the surrender of the right to purchase the shares under the Option as to which the Stock Appreciation Rights were exercised. Alternatively, Stock Appreciation Rights may be granted independently of Options in which case each Award of Stock Appreciation Rights shall be evidenced by a Stock Appreciation Rights Agreement. With respect to Stock Appreciation Rights that are subject to Section 16 of the Exchange Act, the Committee shall retain sole discretion (i) to determine the form in which payment of the Stock Appreciation Right will be made (i.e., cash, securities or any combination thereof) or (ii) to approve an election by a Grantee to receive cash in full or partial settlement of Stock Appreciation Rights. The number of shares reserved for issuance under the Plan shall be reduced only to the extent that shares of Common Stock are actually issued in connection with the exercise or settlement of an Award. (c) Limitations on Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall be exercisable in whole or in such installments and at such times as determined by the Committee. 9. PERFORMANCE SHARE AWARDS. (a) Performance Share Awards. A Performance Share Award is a right to receive shares of Common Stock or their cash equivalent based on the attainment of pre-established performance goals and such other conditions, restrictions and contingencies as the Committee shall determine. Each Performance Share Award may have a maximum value established by the Committee at the time of such Award. (b) Performance Period. The Committee shall establish, with respect to and at the time of each Performance Share Award, a performance period or periods over which the performance applicable to the Performance Share Award of the Grantee shall be measured. (c) Performance Measures. A Performance Share Award may be awarded to an Employee contingent upon future performance of the Grantee, the Company or any Subsidiary, division or department thereof by or in which he is employed or performing services during the performance period or periods, combinations thereof, or such other provisions as the Committee may determine to be appropriate. The Committee shall establish the performance NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 4 22 measures applicable to such performance prior to the beginning of any performance period but subject to such later revisions as the Committee shall deem appropriate to reflect significant, unforeseen events or changes. (d) Payment. Following the end of any performance period, the Grantee of a Performance Share Award shall be entitled to receive payment of an amount, not exceeding the maximum value of the Performance Share Award, if any, based on the achievement of the performance measures for such performance period, as determined by the Committee in its sole discretion. (e) Termination of Employment. The Committee shall determine the effect of termination of employment or service during the performance period on a Grantee's Performance Share Award, which shall be set forth in the Award Agreement. 10. PHANTOM STOCK AWARDS. (a) Phantom Stock Awards. Phantom Stock Awards are rights to receive an amount equal to the Fair Market Value of shares of Common Stock or rights to receive an amount equal to any appreciation or increase in the Fair Market Value of the Common Stock over a specified period of time, which may vest over a period of time as established by the Committee, without payment of any amounts by the Grantee thereof (except to the extent otherwise required by law) or satisfaction of any performance criteria or objectives. Each Phantom Stock Award may have a maximum value established by the Committee at the time of such Award. (b) Award Period. The Committee shall establish, at the time of grant of each Phantom Stock Award, a period over which the Award shall vest with respect to the Grantee. (c) Payment. Following the end of the determined period for a Phantom Stock Award, the Grantee of a Phantom Stock Award shall be entitled to receive payment of an amount, not exceeding the maximum value of the Phantom Stock Award, if any, based on the then vested value of the Award. Cash dividend equivalents may be paid during or may be accumulated and paid at the end of, the determined period with respect to a Phantom Stock Award, as determined by the Committee. 11. GENERAL PROVISIONS REGARDING AWARDS. (a) Form of Award Agreement. Each Award granted under the Plan shall be evidenced by a written Award Agreement in such form (which need not be the same for each Grantee) as the Committee from time to time approves but which is not inconsistent with the Plan, including any provisions that may be necessary to assure that any Option that is intended to be an Incentive Stock Option will comply with Section 422 of the Code. (b) Awards Criteria. In determining the amount and value of Awards to be granted, the Committee may take into account the responsibility level, performance, potential, other Awards and such other considerations with respect to a Grantee as it deems appropriate. (c) Date of Grant. The date of grant of an Award will be the date specified by the Committee as the effective date of the grant of an Award or, if the Committee does not so specify, will be the date on which the Committee makes the determination to grant such Award. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 5 (d) Stock Price. The exercise price or other measurement of stock value relative to any Award shall be not less than 100% of the Fair Market Value of the shares of Common Stock for the date of grant of the Award. The exercise price of any Incentive Stock Option granted to a Ten Percent Shareholder shall not be less than 110% of the Fair Market Value of the shares of Common Stock for the date of grant of the Option. (e) Period of Award. Awards shall be exercisable or payable within the time or times or upon the event or events determined by the Committee and set forth in the Award Agreement. Unless otherwise provided in an Award Agreement, Awards other than Restricted Stock Awards shall terminate on (and no longer be exercisable or payable after) the earlier of: (i) ten (10) years from the date of grant; (ii) for an Incentive Stock Option granted to a Ten Percent Shareholder, five (5) years from the date of grant of the Option; (iii) the 30th day after the Grantee is no longer serving in any capacity as an Employee, Consultant or Director of the Company for a reason other than death of the Grantee, Disability or retirement at or after the Normal Retirement Age; (iv) one year after death; or (v) one year (with respect to an Incentive Option) or five years (with respect to any other Award) after Disability of the Grantee or after his or her retirement at or after the Normal Retirement Age from any capacity as an Employee, Consultant or Director of the Company. (f) Acceleration of Vesting or Lapse of Restrictions. If the Grantee dies or becomes Disabled while serving as an Employee, Consultant or Director of the Company or retires at or after Normal Retirement Age, or if there occurs a Change in Control, then 100% of the benefits dependent upon lapse of time will become vested, all Forfeiture Restrictions and other forfeiture and repurchase provisions will lapse and, subject to meeting any performance or other criteria for such Award, such benefits will be available thereafter for purchase or payment during the Award term. (g) Transferability. Awards granted under the Plan, and any interest therein, shall not be transferable or assignable by the Grantee, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution, and shall be exercisable or payable during the lifetime of the Grantee only by the Grantee; provided, that the Grantee may designate persons who or which may exercise or receive his Awards following his death. Notwithstanding the preceding sentence, Awards other than Incentive Stock Options may be transferred to such family members, family member trusts, family limited partnerships and other family member entities as the Committee, in its sole discretion, may approve prior to any such transfer. No such transfer will be approved by the Committee if the Common Stock issuable under such transferred Award would not be eligible to be registered on Form S-8 promulgated under the Securities Act. (h) Acquisitions and Other Transactions. The Committee may, from time to time, approve the assumption of outstanding awards granted by another entity, whether in connection with an acquisition of such other entity or otherwise, by either (i) granting an Award under the Plan in replacement of or in substitution for the awards assumed by the Company, or (ii) treating the assumed award as if it had been granted under the Plan if the terms of such assumed award could be applied to an Award granted under the Plan. Such assumption shall be permissible if the holder of the assumed award would have been eligible to be granted an Award hereunder if the other entity had applied the rules of this Plan to such grant. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 6 (i) Payment. Payment of an Award (i) may be made in cash, Common Stock or a combination thereof, as determined by the Committee in its sole discretion, (ii) shall be made in a lump sum or in installments as prescribed by the Committee in its sole discretion and (iii) to the extent applicable, shall be based on the Fair Market Value of the Common Stock for the payment or exercise date. The Committee may permit or require the deferral of payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, dividend equivalents or other forms of investment return. (j) Notice. If an Award involves an exercise, it may be exercised only by delivery to the Company of a written exercise notice approved by the Committee, stating the number of shares of Common Stock being exercised, the method of payment, and such other matters as may be deemed appropriate by the Company in connection with the issuance of shares upon exercise, together with payment in full of any exercise price for any shares being purchased. (k) Withholding Taxes. The Committee may establish such rules and procedures as it considers desirable in order to satisfy any obligation of the Company to withhold the statutory prescribed minimum amount of federal or state income taxes or other taxes with respect to any Award granted under the Plan. Prior to issuance of any shares of Common Stock, the Grantee shall pay or make adequate provision acceptable to the Committee for the satisfaction of the statutory minimum prescribed amount of any federal or state income or other tax withholding obligations of the Company, if applicable. Upon exercise or payment of an Award, the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax withholding obligations. (l) Limitations on Exercise. The obligation of the Company to issue any shares of Common Stock or otherwise make payments hereunder shall be subject to the condition that any exercise and the issuance and delivery of such shares and other actions pursuant thereto comply with the Securities Act, all applicable state securities and other laws and the requirements of any stock exchange or national market system upon which the shares of Common Stock may then be listed or quoted, as in effect on the date of exercise. The Company shall be under no obligation to register the shares of Common Stock with the Securities and Exchange Commission or to effect compliance with the registration, qualification or listing requirements of any state securities laws or stock exchange or national market system, and the Company shall have no liability for any inability or failure to do so. (m) Privileges of Stock Ownership. Except as provided in the Plan with respect to Restricted Stock Awards, no Grantee will have any of the rights of a shareholder with respect to any shares of Common Stock subject to an Award until such Award is properly exercised and the purchased or awarded shares are issued and delivered to the Grantee, as evidenced by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to such date of issuance and delivery, except as provided in the Plan. (n) Breach; Additional Terms. A breach of the terms and conditions of this Plan or established by the Committee pursuant to the Award Agreement shall cause a forfeiture of the Award. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms, conditions or restrictions relating to the Award, including provisions pertaining to the termination of the Grantee's employment (by retirement, Disability, death or otherwise) NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 7 prior to expiration of the Forfeiture Restrictions or other vesting provisions. Such additional terms, conditions or restrictions shall also be set forth in an Award Agreement made in connection with the Award. (o) Performance-Based Compensation. The Committee may designate any Award as "qualified performance-based compensation" for purposes of Section 162(m) of the Code. Any Awards designated as "qualified performance-based compensation" shall be conditioned on the achievement of any one or more Performance Criteria, and the measurement may be stated in absolute terms or relative to individual performances, comparable companies, peer or industry groups or other standard indexes, and in terms of company-wide objectives or in terms of absolute or comparative objectives that relate to the performance of divisions, affiliates, departments or functions within the company or an affiliate. Notwithstanding any other provision of the Plan, the Committee may grant an Award that is not contingent on performance goals or is contingent on performance goals other than the Performance Criteria, so long as the Committee has determined that such Award is not intended to satisfy the requirements for "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. 12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION AND CORPORATE EVENTS. (a) Capital Adjustments. The number of shares of Common Stock (i) covered by each outstanding Award granted under the Plan, the exercise, target or purchase price of such outstanding Award, and any other terms of the Award that the Committee determines requires adjustment and (ii) available for issuance under Section 3 shall be adjusted to reflect, as deemed appropriate by the Committee, any increase or decrease in the number of shares of Common Stock resulting from a stock dividend, stock split, reverse stock split, combination, reclassification or similar change in the capital structure of the Company without receipt of consideration, subject to any required action by the Board or the shareholders of the Company and compliance with applicable securities laws; provided, however, that a fractional share will not be issued upon exercise of any Award, and either (i) any fraction of a share of Common Stock that would have resulted will be cashed out at Fair Market Value or (ii) the number of shares of Common Stock issuable under the Award will be rounded up to the nearest whole number, as determined by the Committee. (b) Change in Control. Unless specifically provided otherwise with respect to Change in Control events in an individual Award or Award Agreement or in a then-effective written employment agreement between the Grantee and the Company or a Subsidiary, if, during the effectiveness of the Plan, a Change in Control occurs, (i) each Award which is at the time outstanding under the Plan shall automatically become fully vested and exercisable or payable, as appropriate, and be released from any repurchase or forfeiture provisions, for all of the shares of Common Stock at the time represented by such Award, (ii) the Forfeiture Restrictions applicable to all outstanding Restricted Stock Awards shall lapse and shares of Common Stock subject to such Restricted Stock Awards shall be released from escrow, if applicable, and delivered to the Grantees of the Awards free of any Forfeiture Restriction, and (iii) all other Awards shall become fully vested and payment thereof shall be accelerated using, if applicable, the then-current Fair Market Value to measure any payment that is based on the value of the Common Stock or using such higher amount as the Committee may determine to be more reflective of the actual value of such stock. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 8 13. STOCKHOLDER APPROVAL. The Company shall obtain the approval of the Plan by the Company's stockholders at the next annual meeting following its adoption by the Board, and no Awards shall be made hereunder unless and until such approval is obtained. 14. ADMINISTRATION. This Plan shall be administered by the Committee. The Committee shall interpret the Plan and any Awards granted pursuant to the Plan and shall prescribe such rules and regulations in connection with the operation of the Plan as it determines to be advisable for the administration of the Plan. The Committee may rescind and amend its rules and regulations from time to time. The interpretation by the Committee of any of the provisions of this Plan or any Award granted under this Plan shall be final and binding upon the Company and all persons having an interest in any Award or any shares of Common Stock or other payments received pursuant to an Award. 15. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the Board or the Committee shall be deemed to give any Employee, Director or Consultant any right to be granted an Award or any other rights except as may be evidenced by the Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein. The existence of the Plan and the Awards granted hereunder shall not affect in any way the right of the Board, the Committee or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation or other transaction involving the Company, any issue of bonds, debentures, or shares of preferred stock ranking prior to or affecting the Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of the Company's assets or business, or any other corporate act or proceeding by or for the Company. Nothing contained in the Plan or in any Award Agreement or in other related documents shall confer upon any Employee, Director or Consultant any right with respect to such person's service or interfere or affect in any way with the right of the Company or a Subsidiary to terminate such person's employment or service at any time, with or without cause. 16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as specifically provided in a retirement or other benefit plan of the Company or a Subsidiary, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Subsidiary, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. 17. AMENDMENT OR TERMINATION OF PLAN. The Board in its discretion may, at any time or from time to time after the date of adoption of the Plan, terminate or amend the Plan in any respect, including amendment of any form of agreement or instrument to be executed pursuant to the Plan; provided, however, to the extent necessary to comply with the Code, including Sections 162(m) and 422 of the Code, other applicable laws and regulations, or the applicable requirements of any stock exchange or national market system, the Company shall obtain stockholder approval of any Plan amendment in such manner and to such a degree as required. No Award may be granted after termination of the Plan. Any amendment or termination of the Plan shall not adversely affect Awards previously granted, and such Awards shall otherwise remain in full force and effect as if the Plan had not been amended or terminated, unless mutually agreed otherwise in a writing signed by the Grantee and the Company. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 9 18. EFFECTIVE DATE AND TERM OF PLAN. The Plan as set forth herein shall become effective on the Effective Date and shall continue in effect for a term of ten (10) years thereafter unless sooner terminated by action of the Board. 19. GOVERNING LAW. The Plan shall be construed and interpreted in accordance with the laws of the State of Texas. 20. DEFINITIONS. As used herein, unless the context requires otherwise, the following terms shall have the meanings indicated below: (a) "Award" means any right granted under the Plan, whether granted singly or in combination, to a Grantee pursuant to the terms, conditions and limitations that the Committee may establish. (b) "Award Agreement" means a written agreement with a Grantee with respect to any Award. (c) "Board" means the Board of Directors of the Company. (d) "Change in Control" of the Company means the occurrence of any of the following events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities; (ii) as a result of, or in connection with, any tender offer or exchange offer, merger, or other business combination (a "Transaction"), the persons who were directors of the Company immediately before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company; (iii) the Company is merged or consolidated with another corporation or transfers substantially all of its assets to another corporation and as a result of the merger, consolidation or transfer less than 50 percent of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former stockholders of the Company; or (iv) a tender offer or exchange offer is made and consummated for the ownership of securities of the Company representing 30 percent or more of the combined voting power of the Company's then outstanding voting securities. (e) "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any Treasury regulations promulgated under such section. (f) "Committee" means the committee, (or committees), as constituted from time to time, of the Board that is appointed by the Board to administer the Plan; provided, however, that while the Common Stock is publicly traded, the Committee shall be a committee of the Board consisting solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3, as necessary in each case to satisfy such requirements with respect to Awards granted under the Plan. Within the scope of such authority, the Board or the Committee may delegate to a committee of one or more members of the Board who are or are not Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act, and the term "Committee" as used herein shall also NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 10 be applicable to such committee. The Board may assume any or all of the powers and responsibilities prescribed for the Committee, and to the extent it does so, the term "Committee" as used herein shall also be applicable to the Board. (g) "Common Stock" means the Common Stock, $0.01 par value per share, of the Company or the common stock that the Company may in the future be authorized to issue in replacement or substitution thereof. (h) "Company" means NCI Building Systems, Inc., a Delaware corporation. (i) "Consultant" means any person who is engaged by the Company or any Subsidiary to render consulting or advisory services to the Company or such Subsidiary and who is a "consultant or advisor" within the meaning of Rule 701 promulgated under the Securities Act or Form S-8 promulgated under the Securities Act. (j) "Covered Employee" means the chief executive officer and the four other most highly compensated officers of the Company for whom total compensation is required to be reported to stockholders under Regulation S-K, as determined for purposes of Section 162(m) of the Code. (k) "Director" means a member of the Board or the board of directors of a Subsidiary. (l) "Disability" means the "disability" of a person as defined in a then effective long-term disability plan maintained by the Company that covers such person, or if such a plan does not exist at any relevant time, "Disability" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. For purposes of determining the time during which an Incentive Stock Option may be exercised under the terms of an Option Agreement, "Disability" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. Section 22(e)(3) of the Code provides that an individual is totally and permanently disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. (m) "Effective Date" means the date on which the Plan is approved by the stockholders of the Company. (n) "Employee" means any person who is employed, within the meaning of Section 3401 of the Code, by the Company or a Subsidiary. The provision of compensation by the Company or a Subsidiary to a Director solely with respect to such individual rendering services in the capacity of a Director shall not be sufficient to constitute "employment" by the Company or that Subsidiary. (o) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor statute. Reference in the Plan to any section of the Exchange Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 11 (p) "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such a share of Common Stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable. (ii) In the absence of any such established markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Committee. (q) "Grantee" means an Employee, Director or Consultant to whom an Award has been granted under the Plan. (r) "Incentive Stock Option" means an Option granted to an Employee under the Plan that meets the requirements of Section 422 of the Code. (s) "NASD Dealer" means a broker-dealer that is a member of the National Association of Securities Dealers, Inc. (t) "Non-Employee Director" means a Director of the Company who either (i) is not an Employee or Officer, does not receive compensation (directly or indirectly) from the Company or a Subsidiary in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3. (u) "Non-Qualified Stock Option" means an Option granted under the Plan that is not intended to be an Incentive Stock Option. (v) "Normal Retirement Age" means the age established by the Board from time to time as the normal age for retirement of a Director or Employee, as applicable. In the absence of a determination by the Board with respect to any class of Grantee, the Normal Retirement Age shall be deemed to be 65 years of age. (w) "Officer" means a person who is an "officer" of the Company or any Subsidiary within the meaning of Section 16 of the Exchange Act (whether or not the Company is subject to the requirements of the Exchange Act). (x) "Option" means an award granted under Section 6 of the Plan. (y) "Option Agreement" means a written agreement with a Grantee with respect to the Award of an Option. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 12 (z) "Optionee" means an individual to whom an Option has been granted under the Plan. (aa) "Outside Director" means a Director of the Company who either (i) is not a current employee of the Company or an "Subsidiary corporation" (within the meaning of the Treasury regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an "Subsidiary corporation" receiving compensation for prior services (other than benefits under a tax qualified pension plan), has not been an officer of the Company or an "Subsidiary corporation" at any time and is not currently receiving (within the meaning of the Treasury regulations promulgated under Section 162(m) of the Code) direct or indirect remuneration from the Company or an "Subsidiary corporation" for services in any capacity other than as a Director, or (ii) is otherwise considered an "outside director" for purposes of Section 162(m) of the Code. (bb) "Performance Criteria" means (1) earnings; (2) earnings per share; (3) EBITDA (earnings before interest, taxes, depreciation and amortization); (4) EBIT (earnings before interest and taxes); (5) economic profit; (6) cash flow; (7) revenue; (8) revenue growth; (9) net profit before tax; (10) gross profit; (11) operating income or profit; (12) return on equity; (13) return on assets; (14) return on capital; (15) changes in working capital; (16) stockholder return; (17) cost reduction; (18) customer satisfaction or growth; or (19) employee satisfaction; and any other performance objective approved by the stockholders of the Company in accordance with Section 162(m) of the Code. (cc) "Performance Share Award" means an Award granted under Section 9 of the Plan. (dd) "Phantom Stock Award" means an Award granted under Section 10 of the Plan. (ee) "Plan" means this NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan, as set forth herein and as it may be amended from time to time. (ff) "Qualifying Shares" means shares of Common Stock which either (i) have been owned by the Grantee for more than six (6) months and have been "paid for" within the meaning of Rule 144 promulgated under the Securities Act, or (ii) were obtained by the Grantee in the public market. (gg) "Regulation S-K" means Regulation S-K promulgated under the Securities Act, as it may be amended from time to time, and any successor to Regulation S-K. Reference in the Plan to any item of Regulation S-K shall be deemed to include any amendments or successor provisions to such item. (hh) "Restricted Stock Agreement" means a written agreement with a Grantee with respect to a Restricted Stock Award. (ii) "Restricted Stock Award" means an Award granted under Section 7 of the Plan. (jj) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as it may be amended from time to time, and any successor to Rule 16b-3. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 13 (kk) "Section" means a section of the Plan unless otherwise stated or the context otherwise requires. (ll) "Securities Act" means the Securities Act of 1933, as amended, and any successor statute. Reference in the Plan to any section of the Securities Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section. (mm) "Spread" means an amount equal to the excess, if any, of the Fair Market Value of a share of Common Stock for the date of exercise of a Stock Appreciation Right, over the exercise price of such right. (nn) "Stock Appreciation Right" means an Award granted under Section 8 of the Plan. (oo) "Stock Appreciation Rights Agreement" means a written agreement with a Grantee with respect to an Award of Stock Appreciation Rights. (pp) "Subsidiary" means (i) for purposes of Awards other than Incentive Stock Options, any corporation, partnership or other entity of which a majority of the voting equity securities or equity interest is owned, directly or indirectly, by the Company, and (ii) with respect to an Option that is intended to be an Incentive Stock Option, any "subsidiary corporation" of the Company as defined in Section 424(f) of the Code, any other entity that is taxed as a corporation under Section 7701(a)(3) of the Code and is a member of the "Subsidiary group" as defined in Section 1504(a) of the Code of which the Company is the common parent, and any other entity that may be permitted from time to time by the Code or by the Internal Revenue Service to be an employer of Employees to whom Incentive Stock Options may be granted. (qq) "Ten Percent Shareholder" means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) at the time an Option is granted stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Subsidiaries. NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan Page 14 EX-10.8 7 d02830exv10w8.txt AMENDED/RESTATED SUPPLEMENTAL BENEFIT PLAN EXHIBIT 10.8 NCI BUILDING SYSTEMS, INC. AMENDED AND RESTATED SUPPLEMENTAL BENEFIT PLAN [AS AMENDED AND RESTATED ON DECEMBER 12, 2002] NCI Building Systems, Inc. (the "Company"), hereby establishes the NCI Building Systems, Inc. Supplemental Benefit Plan for specified employees of the Company upon the terms and conditions below, effective as of February 1, 1996. ARTICLE I PURPOSE The purpose of this Plan is to provide retirement and survivor benefits to or on behalf of a select group of management or highly compensated Employees on the terms and conditions set forth herein to reward such Employees for their loyal service to the Company and to provide an incentive to remain in the employ of the Company. The Company intends that the Plan shall constitute an unfunded deferred compensation arrangement for a select group of management or highly compensated employees for purposes of the Internal Revenue Code of 1986, as amended (the "Code") and of the Employee Retirement Income Security Act of 1974, as amended, and that any Employee or Beneficiary shall have the status of an unsecured general creditor of the Company in the event the Company becomes Insolvent as to the Plan and any trust fund that may be established by the Company, or asset identified specifically by the Company, as a reserve for the discharge of its obligations under the Plan. Benefits provided under the Plan are in addition to any other benefit plans or programs of the Company. Participation in the Plan does not limit or otherwise affect an Employee's participation in any other plan sponsored by the Company. ARTICLE II DEFINITIONS Unless the context otherwise requires, capitalized terms used herein shall have the meanings set forth below: 2.1 "Administrator" means the Company or such other person or committee as may be appointed from time to time by the Board to administer the Plan. 2.2 "Beneficiary" means the Beneficiary designated in writing by the Employee to receive benefits due under the Plan after his or her death. If the Employee fails to designate a Beneficiary or if the designated Beneficiary predeceases the Employee, the Employee's Beneficiary shall be his or her spouse, if living, and if no such spouse is living, the Employee's estate. 2.3 "Board" means the Board of Directors of the Company, or any committee of the Board or person authorized to act on its behalf. NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 1 2.4 "Cause" shall be determined by the Board, in its sole and absolute discretion, and means the occurrence of either or both of the following: (a) The Employee's conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony; or (b) The willful engaging by the Employee in gross misconduct materially and demonstrably injurious to the Company, as determined by the Company. However, no act or failure to act, on the Employee's part shall be considered "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. 2.5 "Change in Control" of the Company means the occurrence of one or more of the following conditions: (a) Any "Person", [as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and used in Sections 13(d) and 14(d) thereof], including a "group" as defined in Section 13(d) of the Exchange Act, (other than those Persons in control of the Company as of the effective date of this Agreement, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the "Beneficial Owner", [as described in Rule 13d-3 of the General Rules and Regulations under the Exchange Act], directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (b) During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who are in the beginning of such period constitute the Board (and any new members of the Board, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Board members then still in office who either were Board members at the beginning of the period or whose election or nomination for election was so approved), cease for any reason to constitute a majority thereof; or (c) The stockholders or Directors of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 2 (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. However, in no event shall a Change in Control be deemed to have occurred, with respect to an Employee if the Employee is part of a purchasing group which consummates the Change in Control transaction. The Employee shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Employee is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Board members). 2.6 "Disabled" or "Disability" means the physical or mental incapacity of an Employee which, in the opinion of a physician approved by the Company, will permanently prevent such Employee from performing the principal duties of his or her employment with the Company. 2.7 "Employee" means any person employed by the Company who is included on the Federal Insurance Contribution Act rolls of the Company and who is designated by the Board to receive benefits from the Plan in accordance with the provisions of Article III. 2.8 "Insolvent" means (i) the Company is unable to pay its debts as they become due or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.9 "Participation Agreement" means the agreement executed by the Employee following his designation by the Board as eligible to participate in the Plan and shall be in such form as the Board shall approve from time to time. The Participation Agreement shall become a part of the Plan with respect to the Employee who executes such Participation Agreement. 2.10 "Plan" means the agreement set forth in this document, as it may be amended from time to time. 2.11 "Preretirement Survivor Benefit" means with respect to any Employee, the amount designated by the Board and listed on Exhibit "A" to the Plan to which the Employee's Beneficiary will be entitled in the event an Employee dies prior to terminating employment with the Company. A Preretirement Survivor Benefit will be payable in accordance with Section 4.3. 2.12 "Normal Retirement Age" means, with respect to each Employee, the date the Employee attains age 65. 2.13 "Normal Retirement Date" means, with respect to each Employee, the later of (i) the first day of the month following the date the Employee attains Normal Retirement Age or NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 3 (ii) the first day of the month following the termination of the Employee's employment with the Company. 2.14 "Year of Participation" means (i) each calendar year during which an Employee is eligible to participate in the Plan and performs at least 1,000 hours of service for the Company, and (ii) each other calendar year, or portion thereof, commencing April 1, 1992, during which an Employee performs at least 1,000 hours of service for the Company. 2.15 "Retirement Benefit" means, with respect to any Employee, the amount designated by the Board on Exhibit "A" to the Plan to which the Employee will be entitled in the event of the Employee's termination of employment, subject to the vesting provisions of Section 4.4. An Employee's Retirement Benefit will be payable in accordance with Section 4.2. ARTICLE III ELIGIBILITY The Board shall designate Employees eligible to receive benefits under the terms of the Plan. The Board, or its representative, shall notify each Employee of his or her eligibility to participate in the Plan as soon as administratively practicable following the Board's designation. Prior to commencing participation in the Plan, each Employee shall be given a copy of this Agreement and shall execute a Participation Agreement. The amount of benefits, if any, that an Employee (or, if applicable, his or her Beneficiary following the Employee's death) shall be entitled to receive under the Plan shall be determined under Article IV. ARTICLE IV PLAN CONTRIBUTIONS AND PLAN BENEFITS 4.1 Amount of Benefits. At the time the Board designates an Employee as eligible to participate in the Plan, the Board shall irrevocably specify the amount of Retirement Benefit and Preretirement Survivor Benefit to which each Employee shall be entitled under the Plan. Benefits awarded to an Employee shall be expressed as a dollar amount, or as a percentage of an Employee's current compensation. A separate bookkeeping account shall be established by the Company for each Employee who is entitled to benefits hereunder and such account shall be credited with the amounts awarded to the Employee by the Board. The Company shall maintain a schedule, which shall be attached hereto as Exhibit "A", reflecting the Retirement Benefit and Preretirement Survivor Benefit to which each Employee is entitled under the Plan. As soon as administratively practicable following each such determination of Plan benefits by the Board, Exhibit "A" shall be restated to reflect the appropriate amount of benefits to which an Employee is entitled from the Plan. 4.2 Retirement Benefits. Except as provided in Section 4.5, the Retirement Benefit credited to an Employee's bookkeeping account pursuant to Section 4.1, to the extent vested under Section 4.4, shall become payable in the form described herein to the Employee as soon as NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 4 administratively practicable, but not later than 30 days, following the Employee's Normal Retirement Date, or if earlier, the date the Employee ceases active employment with the Company due to his Disability. The Employee's Retirement Benefit shall be paid in equal monthly installments over a period of 10 years. If the Employee dies prior to receiving the entire Retirement Benefit to which he or she is entitled, the Employee's Beneficiary shall receive the unpaid portion of the Employee's Retirement Benefit in equal monthly payments during the remainder of the 10 year period. 4.3 Preretirement Survivor Benefit. If an Employee dies while employed by the Company, the Employee shall not be entitled to a Retirement Benefit and Employee's Beneficiary shall receive the Preretirement Survivor Benefit credited to the Employee's bookkeeping account under Section 4.1 payable in equal monthly installments over a period of 10 years. Payment of the Beneficiary's Preretirement Survivor Benefit shall commence as soon as administratively practicable, but not later than 30 days, following the Employee's death. If the Employee's Beneficiary dies prior to the payment of the entire Preretirement Survivor Benefit, the then present value of Beneficiary's remaining Preretirement Survivor Benefit, shall be paid to Beneficiary's estate in a single sum distribution within 30 days after the date of Beneficiary's death. 4.4 Vesting. An Employee's right to a Retirement Benefit shall vest over a period of 10 years, at the rate of 10% for each Year of Participation by the Employee. In addition, an Employee shall become fully vested in his or her Retirement Benefit upon the occurrence of his or her Disability or a Change in Control. Notwithstanding any other provision of the Plan to the contrary, if an Employee's employment with the Company is terminated for Cause, the Employee shall forfeit his or her rights to any benefits under the Plan. 4.5 Timing of Certain Payments. Notwithstanding the provisions of Section 4.2, benefits will be paid to an Employee or if applicable his or her Beneficiary upon the following terms: (a) If an Employee's employment with the Company is terminated without Cause on or after the occurrence of a Change in Control (irrespective of whether such termination is initiated by an Employee or the Company and without regard to the reason therefor), the then present value of the Employee's Retirement Benefit shall be paid to the Employee in a single sum distribution within 30 days after the Employee's termination of employment. (b) If Employee's employment with the Company is terminated without Cause prior to the occurrence of a Change in Control (irrespective of whether such termination is initiated by Employee or the Company and without regard to the reason therefor), Employee shall become fully vested in his or her Retirement Benefit, which Retirement Benefit shall be paid in annual installments over a period of 10 years, commencing on the first anniversary of such termination. If a Change in Control occurs while Employee is entitled to receive his Retirement Benefit, the then present value of Employee's remaining NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 5 Retirement Benefit shall be paid to Employee in a single sum distribution within 30 days after such Change in Control. (c) For purposes of this Plan, whenever the Company is required to calculate the present value of any benefit to be paid in a single sum hereunder, the Company shall calculate the present value of such benefit using a discount rate equal to the prime rate reported by the Company's principal bank lender on the date on which such payment became payable (i.e., the date of termination of Employee's employment with the Company or the occurrence of a Change in Control), but in no event shall such discount rate exceed 8%. (d) The Administrator may make payments from the Plan before they would otherwise be due if, based on a change in the federal or applicable state tax or revenue laws, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury, a decision by a court or competent jurisdiction involving an Employee or a Beneficiary, or a closing agreement made under Code section 7121 that is approved by the Internal Revenue Service and involves an Employee, the Administrator determines that an Employee has or will recognize income for federal or state income tax purposes with respect to amounts that are or will be payable under the Plan before they otherwise would be paid. The amount of any payments made from the Plan pursuant to this Section 4.5 shall not exceed the lesser of (i) the amount in the trust properly allocable to the Employee or (ii) the amount of taxable income with respect to which the tax liability is assessed or determined. 4.6 Financing the Plan. All benefits under this Plan shall be paid or provided directly by the Company. Such benefits shall be general obligations of the Company which shall not require the segregation of any funds or property therefor. Notwithstanding the foregoing, in the discretion of the Company, the Company's obligations hereunder may be satisfied from a grantor trust established by the Company or from an insurance contract, annuity or similar funding vehicle owned by the Company. The assets of any such trust, insurance contract, or other funding vehicle shall continue for all purposes to be a part of the general funds of the Company, shall be considered solely a means to assist the Company to meet its contractual obligations under this Plan and shall not create a funded account or security interest for the benefit of any Employee under this Plan. All such assets shall be subject to the claims of the general creditors of the Company in the event the Company is Insolvent. To the extent that any person acquires a right to receive a payment from the Company under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. 4.7 Death of Employee. In the event of an Employee's death, the Company shall make any payments called for hereunder to his or her Beneficiary in the manner described in Section 4.2 or 4.3, as applicable, following his or her death. Any payment made by the Company in good faith shall fully discharge the Company from its obligations with respect to such payment, and the Company shall have no further obligation to see to the application of any money so paid. NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 6 4.8 Claims Procedure. An Employee or Beneficiary may make a claim for specific benefits under the Plan by filing a written request with the Company. If a claim is wholly or partially denied, notice of the decision shall be furnished to the claimant within 60 days after receipt of the claim by the Company, unless special circumstances require an extension of time for processing the claim, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the claim. Written notice of the extension shall be furnished to the claimant prior to the termination of the initial 60-day period, and shall indicate the circumstances requiring the extension and the date by which the Company expects to render its decision. The notice of the decision shall contain the specific reason or reasons for the denial of the claim, specific references to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim, an explanation of why such additional material or information is necessary and an explanation of the Plan's claims review procedure. If notice of the denial is not furnished in accordance with the above procedure, the claim shall be deemed denied and the claimant shall be permitted to proceed with the review procedure. A claimant or his duly authorized representative may appeal the denial of a claim by making a written application to the Company requesting a review. The claimant or his duly authorized representative may, in connection with the appeal, review pertinent documents and submit issues and comments to the Company in writing. The request for a review of a denied claim must be made to the Company within 60 days after receipt by the claimant of written notification of denial of a claim. A decision by the Company shall be made no later than 60 days after its receipt of a request for a review, unless special circumstances require an extension of time for processing the request, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based. If the decision on review is not furnished within the appropriate time, the claim shall be deemed denied on review. All interpretations, determinations, and decisions by the Company in respect of any matter hereunder will be final, conclusive, and binding upon the Company, Employees, Beneficiaries, and all other persons claiming any interest in the Plan. 4.9 Arbitration. If an Employee or Beneficiary has completed the claims procedures set forth in Section 4.8 and decides to pursue his or her claim further, the Employee or Beneficiary shall comply with the following procedures: (a) The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement shall be arbitration. Arbitration shall be held in Houston, Texas by three arbitrators, one to be appointed by the Company, a second to be appointed by the Employee (or Beneficiary, if applicable), and a third to be appointed by those two arbitrators. The third arbitrator shall act as chairman. Any arbitration may be initiated by the Employee (or Beneficiary) by written notice to the Company specifying the NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 7 subject of the requested arbitration and appointing the Employee's (or Beneficiary's) arbitrator ("Arbitration Notice"). (b) If (i) the Company fails to appoint an arbitrator by written notice to the Employee (or Beneficiary) within ten days after the Arbitration Notice is given, or (ii) the two arbitrators appointed by the parties herein fail to appoint a third arbitrator within ten days after the date of the appointment of the second arbitrator, then the American Arbitration Association in Houston, Texas, upon application of the Employee (or Beneficiary) shall appoint an arbitrator to fill that position. (c) The arbitration proceeding shall be conducted in accordance with the rules of the American Arbitration Association. A determination or award made or approved by at least two of the arbitrators shall be the valid and binding action of the arbitrators. The costs of arbitration (exclusive of the expense of a party in obtaining and presenting evidence and attending the arbitration and of the fees and expense of legal counsel to a party, all of which shall be borne by that party) shall be borne by the Company if the Employee (or Beneficiary) receives substantially the relief sought by the Employee (or Beneficiary) in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne equally by the parties. The arbitration determination or award shall be final and conclusive on the parties, and judgment upon such award may be entered and enforced in any court of competent jurisdiction. ARTICLE V ADMINISTRATION 5.1 Authority of Company. The Administrator may adopt rules and procedures regarding the operation of the Plan and shall have full power and authority to interpret, construe and administer the Plan. The Administrator's interpretation and construction hereof, and actions hereunder, including any determination of the amount or recipient of any payment to be made under the Plan, shall be binding and conclusive on all persons and for all purposes. The Board may request certain of the Company's employees to assist the Administrator in its administration of the Plan. The Administrator may employ attorneys, accountants, actuaries and other professional advisors to assist the Administrator in its administration of the Plan. The Company shall pay the reasonable fees of any such advisor employed by the Administrator. To the extent permitted by law, no member of the Board or any employee or officer of the Company shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own willful misconduct or lack of good faith. 5.2 Indemnification of Employees of the Company. The Company hereby agrees to indemnify, jointly and severally, all members of the Board and all employees of the Company against any and all claims, losses, damages, expenses, including counsel fees, incurred by them, and any liability, including any amounts paid in settlement with their approval arising from their action or failure to act with respect to any matter relating to the Plan, except when the same is NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 8 judicially determined to be attributable to their willful misconduct or lack of good faith. The indemnification provided by this Section 5.2 shall survive the termination of the Plan and shall be binding upon the Company's successors and assigns. 5.3 Cost of Administration. The cost of this Plan and the expenses of administering the Plan shall be paid by the Company. ARTICLE VI AMENDMENT AND TERMINATION 6.1 Amendment. The Company, by action of the Board, shall have the right to amend this Plan at any time and from time to time, including a retroactive amendment, by resolution adopted by the Board. Any such amendment shall become effective upon the date stated therein, except as otherwise provided in such amendment; provided, however, that no such action shall affect any benefit adversely to which an Employee would be entitled had his employment terminated immediately before such amendment was effective. 6.2 Termination of the Plan. The Company has established this Plan with the bona fide intention and expectation that from year to year it will deem it advisable to continue it in effect. However, the Board, in its sole discretion, reserves the right to terminate the Plan in its entirety at any time; provided, however, that (i) an Employee's benefits hereunder shall not be affected by the termination where the event giving rise to the benefit (the Employee's termination of employment, death or disability, or a Change in Control) has occurred and (ii) no such action shall affect any benefit adversely to which an Employee would be entitled had his employment terminated immediately before such termination was effective. ARTICLE VII GENERAL PROVISIONS 7.1 Rights Against Company. The Plan shall not be deemed to constitute a contract between the Company and any Employee or to be a consideration for, or an inducement for, the employment of any Employees by the Company. Nothing contained in the Plan shall be deemed to give any Employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge any Employee at any time, without regard to the effect such discharge may have on any rights under the Plan. 7.2 Payment Due an Incompetent. If the Company shall find that any person to whom any payment is payable under the Plan is unable to care for his affairs because of mental or physical illness, accident, or death, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister or any person deemed by the Company, in its sole discretion, to have incurred expenses for such person otherwise entitled to payment, in such manner and proportions as the Company may determine. Any such payment shall be a NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 9 complete discharge of the liabilities of the Company under this Plan, and the Company shall have no further obligation to see to the application of any money so paid. 7.3 Spendthrift Clause. No right, title or interest of any kind in the Plan shall be transferable or assignable by any Employee or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void. 7.4 Severability. In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 7.5 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of this Plan. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender. 7.6 Governing Law. The validity and effect of this Plan, and the rights and obligations of all persons affected hereby, shall be construed and determined in accordance with the laws of the State of Texas unless superseded by federal law. 7.7 Effectiveness. Section 4.5(b) of this Amended and Restated Plan shall be effective on December 12, 2002. All other terms and provisions hereof are effective as of February 1, 1996, including amendments adopted thereafter. EXECUTED this 12th day of December, 2002. NCI BUILDING SYSTEMS, INC. By: /s/ A.R. Ginn ------------------------------------- A.R. Ginn, Chairman of the Board NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 10 EXHIBIT "A" NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN
Employee's Name Benefit Retirement Benefit Preretirement Survivor ----------------------- ------------------ ---------------------- Robert J. Medlock $ 1,000,000 $ 2,500,000
THIS EXHIBIT "A" to the NCI Building Systems, Inc. Supplemental Benefit Plan is dated effective as of February 1, 1996. NCI BUILDING SYSTEMS, INC. By: /s/ A.R. Ginn ------------------------------------- A.R. Ginn, Chairman of the Board NCI BUILDING SYSTEMS, INC. SUPPLEMENTAL BENEFIT PLAN (AMENDED AND RESTATED 12/12/02) Page 11 EX-10.9 8 d02830exv10w9.txt SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. EXHIBIT 10.9 SUPPLEMENTAL BENEFIT AGREEMENT This Supplemental Benefit Agreement (this "Agreement"), dated December 13, 2002, is by and between NCI Building Systems, Inc. (the "Company"), and A.R. Ginn, Jr. ("Employee"). ARTICLE I PURPOSE The purpose of this Agreement is to provide retirement and survivor benefits to or on behalf of a member of senior management or highly compensated Employee on the terms and conditions set forth herein to reward Employee for loyal service to the Company and to provide an incentive to remain in the employ of the Company. The Company intends that this Agreement shall constitute an unfunded deferred compensation arrangement for a member of a select group of senior management or highly compensated employee for purposes of the Internal Revenue Code of 1986, as amended (the "Code") and of the Employee Retirement Income Security Act of 1974, as amended, and that Employee or Beneficiary shall have the status of an unsecured general creditor of the Company in the event the Company becomes Insolvent as to this Agreement and any trust fund that may be established by the Company, or asset identified specifically by the Company, as a reserve for the discharge of its obligations under this Agreement. Benefits provided under this Agreement are in addition to any other benefit plans or programs of the Company. The existence of this Agreement does not limit or otherwise affect Employee's participation in any other plan sponsored by the Company. ARTICLE II DEFINITIONS Unless the context otherwise requires, capitalized terms used herein shall have the meanings set forth below: 2.1 "Administrator" means the Company or such other person or committee as may be appointed from time to time by the Board to administer this Agreement. 2.2 "Agreement" means this Agreement, as it may be amended from time to time. 2.3 "Beneficiary" means the Beneficiary designated in writing by Employee on Exhibit "A" hereto to receive benefits due under this Agreement after his or her death. If Employee fails to designate a Beneficiary or if the designated Beneficiary predeceases Employee, Employee's Beneficiary shall be his or her spouse, if living, and if no such spouse is living, Employee's estate. 2.4 "Board" means the Board of Directors of the Company, or any committee of the Board or person authorized to act on its behalf. 2.5 "Cause" shall be determined by the Board, in its sole and absolute discretion, and means the occurrence of any or all of the following: SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 1 (a) Employee's conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony; or (b) The willful engaging by Employee in gross misconduct materially and demonstrably injurious to the Company, as determined by the Company. However, no act or failure to act, on Employee's part shall be considered "willful" unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company; or (c) The failure or inability for any reason of Employee to devote his full business time to the Company's business. 2.6 "Change in Control" of the Company means the occurrence of one or more of the following conditions: (a) Any "Person", [as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and used in Sections 13(d) and 14(d) thereof], including a "group" as defined in Section 13(d) of the Exchange Act, (other than those Persons in control of the Company, as of the effective date of this Agreement, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the "Beneficial Owner", [as described in Rule 13d-3 of the General Rules and Regulations under the Exchange Act], directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (b) During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who are in the beginning of such period constitute the Board (and any new members of the Board, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Board members then still in office who either were Board members at the beginning of the period or whose election or nomination for election was so approved), cease for any reason to constitute a majority thereof; or (c) The stockholders or Directors of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. However, in no event shall a Change in Control be deemed to have occurred, with respect to Employee if Employee is part of a purchasing group that consummates the Change in Control transaction. Employee shall be deemed "part of a purchasing group" for purposes of the preceding sentence if Employee is an equity participant in the purchasing company or group SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 2 (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Board members). 2.7 "Disabled" or "Disability" means the physical or mental incapacity of Employee which, in the opinion of a physician approved by the Company, will permanently prevent Employee from performing the principal duties of his or her employment with the Company. 2.8 "Employee" means any person employed by the Company who is included on the Federal Insurance Contribution Act rolls of the Company. 2.9 "Insolvent" means (i) the Company is unable to pay its debts as they become due or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.10 "Preretirement Survivor Benefit" means with respect to Employee, the amount designated by the Board and listed on Exhibit "A" to this Agreement to which Employee's Beneficiary will be entitled in the event Employee dies prior to terminating employment with the Company. A Preretirement Survivor Benefit will be payable in accordance with Section 3.3. 2.11 "Normal Retirement Age" means, with respect to Employee, the date Employee attains age 65. 2.12 "Normal Retirement Date" means, with respect to Employee, the later of (i) the first day of the month following the date Employee attains Normal Retirement Age or (ii) the first day of the month following the termination of Employee's employment with the Company. 2.13 "Year of Participation" means (i) each calendar year during which Employee performs at least 1,000 hours of service for the Company, and (ii) each other calendar year, or portion thereof, commencing May 1, 1998, during which Employee performs at least 1,000 hours of service for the Company. 2.14 "Retirement Benefit" means, with respect to Employee, the amount designated by the Board on Exhibit "A" to this Agreement to which Employee will be entitled in the event of Employee's termination of employment, subject to the vesting provisions of Section 3.4. Employee's Retirement Benefit will be payable in accordance with Section 3.2. ARTICLE III CONTRIBUTIONS AND BENEFITS 3.1 Amount of Benefits. The amount of Retirement Benefit and Preretirement Survivor Benefit to which Employee shall be entitled under this Agreement are set forth on Exhibit "A," attached hereto and incorporated by reference herein. The Company shall establish a separate bookkeeping account for Employee and such account shall be credited with the amounts awarded to Employee. SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 3 3.2 Retirement Benefits. Except as provided in Section 3.5, the Retirement Benefit credited to Employee's bookkeeping account pursuant to Section 3.1, to the extent vested under Section 3.4, shall become payable in the form described herein to Employee as soon as administratively practicable, but not later than 30 days, following Employee's Normal Retirement Date, or if earlier, the date Employee ceases active employment with the Company due to his Disability. Employee's Retirement Benefit shall be paid on January 15th of each calendar year in equal annual installments over a period of 10 years if, on each annual payment date, Employee has not breached or violated any of his or her covenants set forth in Article V hereof. If Employee dies prior to receiving the entire Retirement Benefit to which he or she is entitled and has not breached or violated any of his or her covenants set forth in Article V hereof, Employee's Beneficiary shall receive the unpaid portion of Employee's Retirement Benefit in equal annual payments during the remainder of the 10-year period. Notwithstanding any other provision of this Agreement to the contrary, if Employee breaches or violates any of his or her covenants set forth in Article V hereof, Employee immediately shall forfeit his or her rights to any remaining Retirement Benefit under this Agreement. 3.3 Preretirement Survivor Benefit. If Employee dies while employed by the Company, Employee shall not be entitled to a Retirement Benefit and Employee's Beneficiary shall receive the Preretirement Survivor Benefit credited to Employee's bookkeeping account under Section 3.1 payable in equal annual installments over a period of 10 years. Payment of the Beneficiary's Preretirement Survivor Benefit shall commence on the January 15th next following the date of death. If Employee's Beneficiary dies prior to the payment of the entire Preretirement Survivor Benefit, the then present value of Beneficiary's remaining Preretirement Survivor Benefit, determined in accordance with Section 3.5(c) hereof, shall be paid to Beneficiary's estate in a single sum distribution within 30 days after the date of Beneficiary's death. 3.4 Vesting. (a) If, at the time of execution of this Agreement, Employee has ten or more years until he reaches Normal Retirement Age, Employee's right to a Retirement Benefit shall vest over a period of 10 years, at the rate of 10% for each Year of Participation by Employee. If, at the time of execution of this Agreement, Employee has five or fewer years until he reaches Normal Retirement Age, Employee's right to a Retirement Benefit shall vest over a period of 5 years, at the rate of 20% for each Year of Participation by Employee. In addition, Employee shall become fully vested in his or her Retirement Benefit upon the occurrence of his or her death, Disability or a Change in Control. Notwithstanding any other provision of this Agreement to the contrary, if Employee's employment with the Company is terminated for Cause, Employee shall forfeit his or her rights to any benefits under this Agreement. (b) Employee acknowledges and agrees that during the vesting period described in Section 3.4(a) above, the Company may, from time to time, be required by applicable law to withhold amounts for certain federal employment taxes related to or incurred in connection with the amount of the benefit vested during each Year of Participation (the "Employment Taxes"). Employee may elect, in his sole discretion, to pay such Employment Taxes by either (i) delivering to the Company a check, cash or other readily available funds in an amount equal to the Employment Taxes no later than 30 days prior to the end of the applicable Year of Participation, or SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 4 (ii) executing such documentation as the Company may require authorizing the Company to, beginning July 1 of the applicable Year of Participation, withhold from the Employee's compensation, in substantially equal amounts per pay period, the Employment Taxes. Notwithstanding the foregoing, if Employee terminates service with the Company subsequent to receiving a Year of Participation for vesting purposes under the Plan but prior to paying the entire amount of Employment Taxes applicable to such Year of Participation, Employee agrees, in the sole discretion of the Company, to either (i) execute such documentation as the Company may require authorizing the Company to withhold from the Employee's final paycheck the balance of the Employment Taxes due or (ii) deliver to the Company a check, cash or other readily available funds in an amount equal to the Employment Taxes no later than the date of termination of Employee's employment with the Company. 3.5 Timing of Certain Payments. Notwithstanding the provisions of Section 3.2, benefits will be paid to Employee or if applicable his or her Beneficiary upon the following terms: (a) If Employee's employment with the Company is terminated without Cause on or after the occurrence of a Change in Control (irrespective of whether such termination is initiated by Employee or the Company and without regard to the reason therefor), the present value of Employee's Retirement Benefit, determined in accordance with Section 3.5(c) hereof, shall be paid to Employee in a single sum distribution within 30 days after Employee's termination of employment. (b) If Employee's employment with the Company is terminated without Cause prior to the occurrence of a Change in Control (irrespective of whether such termination is initiated by Employee or the Company and without regard to the reason therefor), Employee shall become fully vested in his or her Retirement Benefit, which Retirement Benefit shall be paid on January 15th of each calendar year, commencing on the January 15th next following such termination. If a Change in Control occurs while Employee is entitled to receive his Retirement Benefit, the then present value of Employee's remaining Retirement Benefit, determined in accordance with Section 3.5(c) hereof, shall be paid to Employee in a single sum distribution within 30 days after such Change in Control. (c) For purposes of this Agreement, whenever the Company is required to calculate the present value of any benefit to be paid to Employee or Beneficiary hereunder, the Company shall calculate the present value of such benefit using a discount rate equal to the prime rate reported by the Company's principal bank lender on the date on which such payment became payable (i.e., the date of termination of Employee's employment with the Company or the occurrence of a Change in Control), but in no event shall such discount rate exceed 8%. (d) The Administrator may make payments from this Agreement before they would otherwise be due if, based on a change in the federal or applicable state tax or revenue laws, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury, a decision by a court or competent jurisdiction involving Employee or a Beneficiary, or a closing agreement made under Code section 7121 that is approved by the Internal Revenue Service and involves Employee, the Administrator determines that Employee has or will recognize income for federal or state income tax purposes with respect to SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 5 amounts that are or will be payable under this Agreement before they otherwise would be paid. The amount of any payments made from this Agreement pursuant to this Section 3.5 shall not exceed the lesser of (i) the amount in the trust properly allocable to Employee or (ii) the amount of taxable income with respect to which the tax liability is assessed or determined. 3.6 Financing this Agreement. All benefits under this Agreement shall be paid or provided directly by the Company. Such benefits shall be general obligations of the Company which shall not require the segregation of any funds or property therefor. Notwithstanding the foregoing, in the discretion of the Company, the Company's obligations hereunder may be satisfied from a grantor trust established by the Company or from an insurance contract, annuity or similar funding vehicle owned by the Company. The assets of any such trust, insurance contract, or other funding vehicle shall continue for all purposes to be a part of the general funds of the Company, shall be considered solely a means to assist the Company to meet its contractual obligations under this Agreement and shall not create a funded account or security interest for the benefit of Employee under this Agreement. All such assets shall be subject to the claims of the general creditors of the Company in the event the Company is Insolvent. To the extent that any person acquires a right to receive a payment from the Company under this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company. 3.7 Death of Employee. In the event of Employee's death, the Company shall make any payments called for hereunder to his or her Beneficiary in the manner described in Section 3.2 or 3.3, as applicable, following his or her death. Any payment made by the Company in good faith shall fully discharge the Company from its obligations with respect to such payment, and the Company shall have no further obligation to see to the application of any money so paid. 3.8 Claims Procedure. Employee or Beneficiary may make a claim for specific benefits under this Agreement by filing a written request with the Company. If a claim is wholly or partially denied, notice of the decision shall be furnished to the claimant within 60 days after receipt of the claim by the Company, unless special circumstances require an extension of time for processing the claim, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the claim. Written notice of the extension shall be furnished to the claimant prior to the termination of the initial 60-day period, and shall indicate the circumstances requiring the extension and the date by which the Company expects to render its decision. The notice of the decision shall contain the specific reason or reasons for the denial of the claim, specific references to pertinent provisions of this Agreement on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim, an explanation of why such additional material or information is necessary and an explanation of the claims review procedure in this Agreement. If notice of the denial is not furnished in accordance with the above procedure, the claim shall be deemed denied and the claimant shall be permitted to proceed with the review procedure. A claimant or his duly authorized representative may appeal the denial of a claim by making a written application to the Company requesting a review. The claimant or his duly authorized representative may, in connection with the appeal, review pertinent documents and submit issues and comments to the Company in writing. The request for a review of a denied claim must be made to the Company within 60 days after receipt by the claimant of written notification of denial of a claim. A decision by the Company shall be made no later than 60 days after its receipt of a request for a review, SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 6 unless special circumstances require an extension of time for processing the request, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent Agreement provisions on which the decision is based. If the decision on review is not furnished within the appropriate time, the claim shall be deemed denied on review. All interpretations, determinations, and decisions by the Company in respect of any matter hereunder will be final, conclusive, and binding upon the Company, Employee, Beneficiaries, and all other persons claiming any interest in this Agreement. 3.9 Arbitration. If Employee or Beneficiary has completed the claims procedures set forth in Section 3.8 and decides to pursue his or her claim further, Employee or Beneficiary shall comply with the following procedures: (a) The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement shall be arbitration. Arbitration shall be held in Houston, Texas by three arbitrators, one to be appointed by the Company, a second to be appointed by Employee (or Beneficiary, if applicable), and a third to be appointed by those two arbitrators. The third arbitrator shall act as chairman. Any arbitration may be initiated by Employee (or Beneficiary) by written notice to the Company specifying the subject of the requested arbitration and appointing Employee's (or Beneficiary's) arbitrator ("Arbitration Notice"). (b) If (i) the Company fails to appoint an arbitrator by written notice to Employee (or Beneficiary) within ten days after the Arbitration Notice is given, or (ii) the two arbitrators appointed by the parties herein fail to appoint a third arbitrator within ten days after the date of the appointment of the second arbitrator, then the American Arbitration Association in Houston, Texas, upon application of Employee (or Beneficiary) shall appoint an arbitrator to fill that position. (c) The arbitration proceeding shall be conducted in accordance with the rules of the American Arbitration Association. A determination or award made or approved by at least two of the arbitrators shall be the valid and binding action of the arbitrators. The costs of arbitration (exclusive of the expense of a party in obtaining and presenting evidence and attending the arbitration and of the fees and expense of legal counsel to a party, all of which shall be borne by that party) shall be borne by the Company if Employee (or Beneficiary) receives substantially the relief sought by Employee (or Beneficiary) in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne equally by the parties. The arbitration determination or award shall be final and conclusive on the parties, and judgment upon such award may be entered and enforced in any court of competent jurisdiction. ARTICLE IV ADMINISTRATION 4.1 Authority of Company. The Administrator may adopt rules and procedures regarding the operation of this Agreement and shall have full power and authority to interpret, SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 7 construe and administer this Agreement. The Administrator's interpretation and construction hereof, and actions hereunder, including any determination of the amount or recipient of any payment to be made under this Agreement, shall be binding and conclusive on all persons and for all purposes. The Board may request that certain employees assist the Administrator in its administration of this Agreement. The Administrator may employ attorneys, accountants, actuaries and other professional advisors to assist the Administrator in its administration of this Agreement. The Company shall pay the reasonable fees of any such advisor employed by the Administrator. To the extent permitted by law, no member of the Board or any employee or officer of the Company shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to his or her own willful misconduct or lack of good faith. 4.2 Indemnification of Employees of the Company. The Company hereby agrees to indemnify, jointly and severally, all members of the Board and all employees of the Company against any and all claims, losses, damages, expenses, including counsel fees, incurred by them, and any liability, including any amounts paid in settlement with their approval arising from their action or failure to act with respect to any matter relating to this Agreement, except when the same is judicially determined to be attributable to their willful misconduct or lack of good faith. The indemnification provided by this Section 4.2 shall survive the termination of this Agreement and shall be binding upon the Company's successors and assigns. 4.3 Cost of Administration. The cost of this Agreement and the expenses of administering this Agreement shall be paid by the Company. ARTICLE V NON-COMPETITION AND NON-SOLICITATION In consideration for participation in this Agreement, Employee hereby covenants and agrees as follows: (a) At all times during the period in which he receives Retirement Benefits pursuant to Section 3.2 hereof, Employee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, engage in or be an owner, director, officer, employee, agent, consultant or other representative of or for any business that manufactures, engineers, markets, sells or provides, in any state of the United States of America, metal building systems or components (including, without limitation, primary and secondary framing systems, roofing systems, end or side wall panels, doors, windows or other metal components of a building structure), coated or painted steel or metal coils, coil coating or painting services, or any other products or services that are the same as or similar to those manufactured, engineered, marketed, sold or provided by the Company or its subsidiaries and affiliates during the period of employment of Employee by the Company. Ownership by Employee of equity securities of the Company, or of equity securities in other publicly owned companies constituting less than 1% of the voting securities in such companies, shall be deemed not to be a breach of this covenant. SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 8 (b) At all times during the period in which he receives Retirement Benefits pursuant to Section 3.2 hereof, Employee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, either hire, seek to hire or solicit the employment of any employee of the Company or in any manner attempt to influence or induce any employee of the Company or its subsidiaries and affiliates to leave the employment of the Company or its subsidiaries and affiliates, or use or disclose to any person, partnership, association, corporation or other entity any information concerning the names and addresses of any employees of the Company or its subsidiaries and affiliates unless required by due process of law. ARTICLE VI AMENDMENT AND TERMINATION 6.1 Amendment. The Company, by action of the Board, shall have the right to amend this Agreement at any time and from time to time, including a retroactive amendment, by resolution adopted by the Board. Any such amendment shall become effective upon the date stated therein, except as otherwise provided in such amendment; provided, however, that no such action shall affect any benefit adversely to which Employee would be entitled had his employment terminated immediately before such amendment was effective. 6.2 Termination. The Company has entered into this Agreement with the bona fide intention and expectation that from year to year it will deem it advisable to continue it in effect. However, the Board, in its sole discretion, reserves the right to terminate this Agreement in its entirety at any time; provided, however, that (i) Employee's benefits hereunder shall not be affected by the termination where the event giving rise to the benefit (Employee's termination of employment, death or disability, or a Change in Control) has occurred and (ii) no such action shall affect any benefit adversely to which Employee would be entitled had his employment terminated immediately before such termination was effective. ARTICLE VII GENERAL PROVISIONS 7.1 Rights Against the Company. This Agreement shall not be deemed to constitute an employment contract between the Company and Employee or to be a consideration for, or an inducement for, the employment of Employees by the Company. Nothing contained in this Agreement shall be deemed to give Employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge Employee at any time, without regard to the effect such discharge may have on any rights under this Agreement. 7.2 Payment Due an Incompetent. If the Company shall find that any person to whom any payment is payable under this Agreement is unable to care for his affairs because of mental or physical illness, accident, or death, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister or any person deemed by the Company, in its sole discretion, to have incurred expenses for such person otherwise entitled to payment, in such manner and proportions as the Company may determine. Any such payment shall be a SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 9 complete discharge of the liabilities of the Company under this Agreement, and the Company shall have no further obligation to see to the application of any money so paid. 7.3 Spendthrift Clause. No right, title or interest of any kind in this Agreement shall be transferable or assignable by Employee or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in this Agreement shall be void. 7.4 Severability. In the event that any provision of this Agreement shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Agreement but shall be fully severable and this Agreement shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 7.5 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of this Agreement. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender. 7.6 Governing Law. The validity and effect of this Agreement, and the rights and obligations of all persons affected hereby, shall be construed and determined in accordance with the laws of the State of Texas unless superseded by federal law. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. EMPLOYEE: NCI BUILDING SYSTEMS, INC. /s/ A.R. Ginn, Jr. By: /s/ Robert J. Medlock - ---------------------------------- ------------------------------------- A. R. Ginn, Jr. Robert J. Medlock, Executive Vice President and Chief Financial Officer SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 10 EXHIBIT "A" SUPPLEMENTAL BENEFIT AGREEMENT
Retirement Benefit Preretirement Survivor Benefit ------------------ ------------------------------ $200,000 per year $200,000 per year
SUPPLEMENTAL BENEFIT AGREEMENT - A.R. GINN, JR. Page 11 EX-10.10 9 d02830exv10w10.txt SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE EXHIBIT 10.10 SUPPLEMENTAL BENEFIT AGREEMENT This Supplemental Benefit Agreement (this "Agreement"), dated December 13, 2002, is by and between NCI Building Systems, Inc. (the "Company"), and Johnie Schulte ("Employee"). ARTICLE I PURPOSE The purpose of this Agreement is to provide retirement and survivor benefits to or on behalf of a member of senior management or highly compensated Employee on the terms and conditions set forth herein to reward Employee for loyal service to the Company and to provide an incentive to remain in the employ of the Company. The Company intends that this Agreement shall constitute an unfunded deferred compensation arrangement for a member of a select group of senior management or highly compensated employee for purposes of the Internal Revenue Code of 1986, as amended (the "Code") and of the Employee Retirement Income Security Act of 1974, as amended, and that Employee or Beneficiary shall have the status of an unsecured general creditor of the Company in the event the Company becomes Insolvent as to this Agreement and any trust fund that may be established by the Company, or asset identified specifically by the Company, as a reserve for the discharge of its obligations under this Agreement. Benefits provided under this Agreement are in addition to any other benefit plans or programs of the Company. The existence of this Agreement does not limit or otherwise affect Employee's participation in any other plan sponsored by the Company. ARTICLE II DEFINITIONS Unless the context otherwise requires, capitalized terms used herein shall have the meanings set forth below: 2.1 "Administrator" means the Company or such other person or committee as may be appointed from time to time by the Board to administer this Agreement. 2.2 "Agreement" means this Agreement, as it may be amended from time to time. 2.3 "Beneficiary" means the Beneficiary designated in writing by Employee on Exhibit "A" hereto to receive benefits due under this Agreement after his or her death. If Employee fails to designate a Beneficiary or if the designated Beneficiary predeceases Employee, Employee's Beneficiary shall be his or her spouse, if living, and if no such spouse is living, Employee's estate. 2.4 "Board" means the Board of Directors of the Company, or any committee of the Board or person authorized to act on its behalf. 2.5 "Cause" shall be determined by the Board, in its sole and absolute discretion, and means the occurrence of any or all of the following: SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 1 (a) Employee's conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony; or (b) The willful engaging by Employee in gross misconduct materially and demonstrably injurious to the Company, as determined by the Company. However, no act or failure to act, on Employee's part shall be considered "willful" unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company; or (c) The failure or inability for any reason of Employee to devote his full business time to the Company's business. 2.6 "Change in Control" of the Company means the occurrence of one or more of the following conditions: (a) Any "Person", [as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and used in Sections 13(d) and 14(d) thereof], including a "group" as defined in Section 13(d) of the Exchange Act, (other than those Persons in control of the Company, as of the effective date of this Agreement, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the "Beneficial Owner", [as described in Rule 13d-3 of the General Rules and Regulations under the Exchange Act], directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (b) During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who are in the beginning of such period constitute the Board (and any new members of the Board, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Board members then still in office who either were Board members at the beginning of the period or whose election or nomination for election was so approved), cease for any reason to constitute a majority thereof; or (c) The stockholders or Directors of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. However, in no event shall a Change in Control be deemed to have occurred, with respect to Employee if Employee is part of a purchasing group that consummates the Change in Control transaction. Employee shall be deemed "part of a purchasing group" for purposes of the preceding sentence if Employee is an equity participant in the purchasing company or group SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 2 (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Board members). 2.7 "Disabled" or "Disability" means the physical or mental incapacity of Employee which, in the opinion of a physician approved by the Company, will permanently prevent Employee from performing the principal duties of his or her employment with the Company. 2.8 "Employee" means any person employed by the Company who is included on the Federal Insurance Contribution Act rolls of the Company. 2.9 "Insolvent" means (i) the Company is unable to pay its debts as they become due or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 2.10 "Preretirement Survivor Benefit" means with respect to Employee, the amount designated by the Board and listed on Exhibit "A" to this Agreement to which Employee's Beneficiary will be entitled in the event Employee dies prior to terminating employment with the Company. A Preretirement Survivor Benefit will be payable in accordance with Section 3.3. 2.11 "Normal Retirement Age" means, with respect to Employee, the date Employee attains age 65. 2.12 "Normal Retirement Date" means, with respect to Employee, the later of (i) the first day of the month following the date Employee attains Normal Retirement Age or (ii) the first day of the month following the termination of Employee's employment with the Company. 2.13 "Year of Participation" means (i) each calendar year during which Employee performs at least 1,000 hours of service for the Company, and (ii) each other calendar year, or portion thereof, commencing May 1, 1998, during which Employee performs at least 1,000 hours of service for the Company. 2.14 "Retirement Benefit" means, with respect to Employee, the amount designated by the Board on Exhibit "A" to this Agreement to which Employee will be entitled in the event of Employee's termination of employment, subject to the vesting provisions of Section 3.4. Employee's Retirement Benefit will be payable in accordance with Section 3.2. ARTICLE III CONTRIBUTIONS AND BENEFITS 3.1 Amount of Benefits. The amount of Retirement Benefit and Preretirement Survivor Benefit to which Employee shall be entitled under this Agreement are set forth on Exhibit "A," attached hereto and incorporated by reference herein. The Company shall establish a separate bookkeeping account for Employee and such account shall be credited with the amounts awarded to Employee. SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 3 3.2 Retirement Benefits. Except as provided in Section 3.5, the Retirement Benefit credited to Employee's bookkeeping account pursuant to Section 3.1, to the extent vested under Section 3.4, shall become payable in the form described herein to Employee. Employee's Retirement Benefit shall be paid in equal annual installments over a period of seven (7) years commencing on the fourth anniversary of the earlier of Employee's Normal Retirement Date or the date Employee ceases active employment with the Company due to his Disability; provided that on each annual payment date Employee has not breached or violated any of his or her covenants set forth in Article V hereof. If Employee dies prior to receiving the entire Retirement Benefit to which he or she is entitled and has not breached or violated any of his or her covenants set forth in Article V hereof, Employee's Beneficiary shall receive the unpaid portion of Employee's Retirement Benefit in equal annual payments during the remainder of the 7-year period. Notwithstanding any other provision of this Agreement to the contrary, if Employee breaches or violates any of his or her covenants set forth in Article V hereof, Employee immediately shall forfeit his or her rights to any remaining Retirement Benefit under this Agreement. 3.3 Preretirement Survivor Benefit. If Employee dies while employed by the Company, Employee shall not be entitled to a Retirement Benefit and Employee's Beneficiary shall receive the Preretirement Survivor Benefit credited to Employee's bookkeeping account under Section 3.1 payable in equal annual installments over a period of 7 years. Payment of the Beneficiary's Preretirement Survivor Benefit shall commence on the fourth anniversary of the date of death of Employee. If Employee's Beneficiary dies prior to the payment of the entire Preretirement Survivor Benefit, the then present value of Beneficiary's remaining Preretirement Survivor Benefit, determined in accordance with Section 3.5(c) hereof, shall be paid to Beneficiary's estate in a single sum distribution within 30 days after the date of Beneficiary's death. 3.4 Vesting. (a) If, at the time of execution of this Agreement, Employee has ten or more years until he reaches Normal Retirement Age, Employee's right to a Retirement Benefit shall vest over a period of 10 years, at the rate of 10% for each Year of Participation by Employee. If, at the time of execution of this Agreement, Employee has three or fewer years until he reaches Normal Retirement Age, Employee's right to a Retirement Benefit shall vest over a period of three (3) years, at the rate of 33-1/3% for each Year of Participation by Employee. In addition, Employee shall become fully vested in his or her Retirement Benefit upon the occurrence of his or her death, Disability or a Change in Control. Notwithstanding any other provision of this Agreement to the contrary, if Employee's employment with the Company is terminated for Cause, Employee shall forfeit his or her rights to any benefits under this Agreement. (b) Employee acknowledges and agrees that during the vesting period described in Section 3.4(a) above, the Company may, from time to time, be required by applicable law to withhold amounts for certain federal employment taxes related to or incurred in connection with the amount of the benefit vested during each Year of Participation (the "Employment Taxes"). Employee may elect, in his sole discretion, to pay such Employment Taxes by either (i) delivering to the Company a check, cash or other readily available funds in an amount equal to the Employment Taxes no later than 30 days prior to the end of the applicable Year of Participation, or SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 4 (ii) executing such documentation as the Company may require authorizing the Company to, beginning July 1 of the applicable Year of Participation, withhold from the Employee's compensation, in substantially equal amounts per pay period, the Employment Taxes. Notwithstanding the foregoing, if Employee terminates service with the Company subsequent to receiving a Year of Participation for vesting purposes under the Plan but prior to paying the entire amount of Employment Taxes applicable to such Year of Participation, Employee agrees, in the sole discretion of the Company, to either (i) execute such documentation as the Company may require authorizing the Company to withhold from the Employee's final paycheck the balance of the Employment Taxes due or (ii) deliver to the Company a check, cash or other readily available funds in an amount equal to the Employment Taxes no later than the date of termination of Employee's employment with the Company. 3.5 Timing of Certain Payments. Notwithstanding the provisions of Section 3.2, benefits will be paid to Employee or if applicable his or her Beneficiary upon the following terms: (a) If Employee's employment with the Company is terminated without Cause on or after the occurrence of a Change in Control (irrespective of whether such termination is initiated by Employee or the Company and without regard to the reason therefor), the present value of Employee's Retirement Benefit, determined in accordance with Section 3.5(c) hereof, shall be paid to Employee in a single sum distribution within 30 days after Employee's termination of employment. (b) If Employee's employment with the Company is terminated without Cause prior to the occurrence of a Change in Control (irrespective of whether such termination is initiated by Employee or the Company and without regard to the reason therefor), Employee shall become fully vested in his or her Retirement Benefit, which Retirement Benefit shall be paid as provided in Section 3.2. If a Change in Control occurs while Employee is entitled to receive his Retirement Benefit, the then present value of Employee's remaining Retirement Benefit, determined in accordance with Section 3.5(c) hereof, shall be paid to Employee in a single sum distribution within 30 days after such Change in Control. (c) For purposes of this Agreement, whenever the Company is required to calculate the present value of any benefit to be paid to Employee or Beneficiary hereunder, the Company shall calculate the present value of such benefit using a discount rate equal to the prime rate reported by the Company's principal bank lender on the date on which such payment became payable (i.e., the date of termination of Employee's employment with the Company or the occurrence of a Change in Control), but in no event shall such discount rate exceed 8%. (d) The Administrator may make payments from this Agreement before they would otherwise be due if, based on a change in the federal or applicable state tax or revenue laws, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury, a decision by a court or competent jurisdiction involving Employee or a Beneficiary, or a closing agreement made under Code section 7121 that is approved by the Internal Revenue Service and involves Employee, the Administrator determines that Employee has or will recognize income for federal or state income tax purposes with respect to amounts that are or will be payable under this Agreement before they otherwise would be paid. SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 5 The amount of any payments made from this Agreement pursuant to this Section 3.5 shall not exceed the lesser of (i) the amount in the trust properly allocable to Employee or (ii) the amount of taxable income with respect to which the tax liability is assessed or determined. 3.6 Financing this Agreement. All benefits under this Agreement shall be paid or provided directly by the Company. Such benefits shall be general obligations of the Company which shall not require the segregation of any funds or property therefor. Notwithstanding the foregoing, in the discretion of the Company, the Company's obligations hereunder may be satisfied from a grantor trust established by the Company or from an insurance contract, annuity or similar funding vehicle owned by the Company. The assets of any such trust, insurance contract, or other funding vehicle shall continue for all purposes to be a part of the general funds of the Company, shall be considered solely a means to assist the Company to meet its contractual obligations under this Agreement and shall not create a funded account or security interest for the benefit of Employee under this Agreement. All such assets shall be subject to the claims of the general creditors of the Company in the event the Company is Insolvent. To the extent that any person acquires a right to receive a payment from the Company under this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company. 3.7 Death of Employee. In the event of Employee's death, the Company shall make any payments called for hereunder to his or her Beneficiary in the manner described in Section 3.2 or 3.3, as applicable, following his or her death. Any payment made by the Company in good faith shall fully discharge the Company from its obligations with respect to such payment, and the Company shall have no further obligation to see to the application of any money so paid. 3.8 Claims Procedure. Employee or Beneficiary may make a claim for specific benefits under this Agreement by filing a written request with the Company. If a claim is wholly or partially denied, notice of the decision shall be furnished to the claimant within 60 days after receipt of the claim by the Company, unless special circumstances require an extension of time for processing the claim, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the claim. Written notice of the extension shall be furnished to the claimant prior to the termination of the initial 60-day period, and shall indicate the circumstances requiring the extension and the date by which the Company expects to render its decision. The notice of the decision shall contain the specific reason or reasons for the denial of the claim, specific references to pertinent provisions of this Agreement on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim, an explanation of why such additional material or information is necessary and an explanation of the claims review procedure in this Agreement. If notice of the denial is not furnished in accordance with the above procedure, the claim shall be deemed denied and the claimant shall be permitted to proceed with the review procedure. A claimant or his duly authorized representative may appeal the denial of a claim by making a written application to the Company requesting a review. The claimant or his duly authorized representative may, in connection with the appeal, review pertinent documents and submit issues and comments to the Company in writing. The request for a review of a denied claim must be made to the Company within 60 days after receipt by the claimant of written notification of denial of a claim. A decision by the Company shall be made no later than 60 days after its receipt of a request for a review, unless special circumstances require an extension of time for processing the request, in which case SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 6 a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent Agreement provisions on which the decision is based. If the decision on review is not furnished within the appropriate time, the claim shall be deemed denied on review. All interpretations, determinations, and decisions by the Company in respect of any matter hereunder will be final, conclusive, and binding upon the Company, Employee, Beneficiaries, and all other persons claiming any interest in this Agreement. 3.9 Arbitration. If Employee or Beneficiary has completed the claims procedures set forth in Section 3.8 and decides to pursue his or her claim further, Employee or Beneficiary shall comply with the following procedures: (a) The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement shall be arbitration. Arbitration shall be held in Houston, Texas by three arbitrators, one to be appointed by the Company, a second to be appointed by Employee (or Beneficiary, if applicable), and a third to be appointed by those two arbitrators. The third arbitrator shall act as chairman. Any arbitration may be initiated by Employee (or Beneficiary) by written notice to the Company specifying the subject of the requested arbitration and appointing Employee's (or Beneficiary's) arbitrator ("Arbitration Notice"). (b) If (i) the Company fails to appoint an arbitrator by written notice to Employee (or Beneficiary) within ten days after the Arbitration Notice is given, or (ii) the two arbitrators appointed by the parties herein fail to appoint a third arbitrator within ten days after the date of the appointment of the second arbitrator, then the American Arbitration Association in Houston, Texas, upon application of Employee (or Beneficiary) shall appoint an arbitrator to fill that position. (c) The arbitration proceeding shall be conducted in accordance with the rules of the American Arbitration Association. A determination or award made or approved by at least two of the arbitrators shall be the valid and binding action of the arbitrators. The costs of arbitration (exclusive of the expense of a party in obtaining and presenting evidence and attending the arbitration and of the fees and expense of legal counsel to a party, all of which shall be borne by that party) shall be borne by the Company if Employee (or Beneficiary) receives substantially the relief sought by Employee (or Beneficiary) in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne equally by the parties. The arbitration determination or award shall be final and conclusive on the parties, and judgment upon such award may be entered and enforced in any court of competent jurisdiction. ARTICLE IV ADMINISTRATION 4.1 Authority of Company. The Administrator may adopt rules and procedures regarding the operation of this Agreement and shall have full power and authority to interpret, construe and administer this Agreement. The Administrator's interpretation and construction SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 7 hereof, and actions hereunder, including any determination of the amount or recipient of any payment to be made under this Agreement, shall be binding and conclusive on all persons and for all purposes. The Board may request that certain employees assist the Administrator in its administration of this Agreement. The Administrator may employ attorneys, accountants, actuaries and other professional advisors to assist the Administrator in its administration of this Agreement. The Company shall pay the reasonable fees of any such advisor employed by the Administrator. To the extent permitted by law, no member of the Board or any employee or officer of the Company shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to his or her own willful misconduct or lack of good faith. 4.2 Indemnification of Employees of the Company. The Company hereby agrees to indemnify, jointly and severally, all members of the Board and all employees of the Company against any and all claims, losses, damages, expenses, including counsel fees, incurred by them, and any liability, including any amounts paid in settlement with their approval arising from their action or failure to act with respect to any matter relating to this Agreement, except when the same is judicially determined to be attributable to their willful misconduct or lack of good faith. The indemnification provided by this Section 4.2 shall survive the termination of this Agreement and shall be binding upon the Company's successors and assigns. 4.3 Cost of Administration. The cost of this Agreement and the expenses of administering this Agreement shall be paid by the Company. ARTICLE V NON-COMPETITION AND NON-SOLICITATION In consideration for participation in this Agreement, Employee hereby covenants and agrees as follows: (a) At all times during the period in which he receives Retirement Benefits pursuant to Section 3.2 hereof, Employee shall not, directly or indirectly and whether on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, engage in or be an owner, director, officer, employee, agent, consultant or other representative of or for any business that manufactures, engineers, markets, sells or provides, in any state of the United States of America, metal building systems or components (including, without limitation, primary and secondary framing systems, roofing systems, end or side wall panels, doors, windows or other metal components of a building structure), coated or painted steel or metal coils, coil coating or painting services, or any other products or services that are the same as or similar to those manufactured, engineered, marketed, sold or provided by the Company or its subsidiaries and affiliates during the period of employment of Employee by the Company. Ownership by Employee of equity securities of the Company, or of equity securities in other publicly owned companies constituting less than 1% of the voting securities in such companies, shall be deemed not to be a breach of this covenant. (b) At all times during the period in which he receives Retirement Benefits pursuant to Section 3.2 hereof, Employee shall not, directly or indirectly and whether on his own SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 8 behalf or on behalf of any other person, partnership, association, corporation or other entity, either hire, seek to hire or solicit the employment of any employee of the Company or in any manner attempt to influence or induce any employee of the Company or its subsidiaries and affiliates to leave the employment of the Company or its subsidiaries and affiliates, or use or disclose to any person, partnership, association, corporation or other entity any information concerning the names and addresses of any employees of the Company or its subsidiaries and affiliates unless required by due process of law. ARTICLE VI AMENDMENT AND TERMINATION 6.1 Amendment. The Company, by action of the Board, shall have the right to amend this Agreement at any time and from time to time, including a retroactive amendment, by resolution adopted by the Board. Any such amendment shall become effective upon the date stated therein, except as otherwise provided in such amendment; provided, however, that no such action shall affect any benefit adversely to which Employee would be entitled had his employment terminated immediately before such amendment was effective. 6.2 Termination. The Company has entered into this Agreement with the bona fide intention and expectation that from year to year it will deem it advisable to continue it in effect. However, the Board, in its sole discretion, reserves the right to terminate this Agreement in its entirety at any time; provided, however, that (i) Employee's benefits hereunder shall not be affected by the termination where the event giving rise to the benefit (Employee's termination of employment, death or disability, or a Change in Control) has occurred and (ii) no such action shall affect any benefit adversely to which Employee would be entitled had his employment terminated immediately before such termination was effective. ARTICLE VII GENERAL PROVISIONS 7.1 Rights Against the Company. This Agreement shall not be deemed to constitute an employment contract between the Company and Employee or to be a consideration for, or an inducement for, the employment of Employees by the Company. Nothing contained in this Agreement shall be deemed to give Employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge Employee at any time, without regard to the effect such discharge may have on any rights under this Agreement. 7.2 Payment Due an Incompetent. If the Company shall find that any person to whom any payment is payable under this Agreement is unable to care for his affairs because of mental or physical illness, accident, or death, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative) may be paid to the spouse, a child, a parent, a brother or sister or any person deemed by the Company, in its sole discretion, to have incurred expenses for such person otherwise entitled to payment, in such manner and proportions as the Company may determine. Any such payment shall be a complete discharge of the liabilities of the Company under this Agreement, and the Company shall have no further obligation to see to the application of any money so paid. SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 9 7.3 Spendthrift Clause. No right, title or interest of any kind in this Agreement shall be transferable or assignable by Employee or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in this Agreement shall be void. 7.4 Severability. In the event that any provision of this Agreement shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Agreement but shall be fully severable and this Agreement shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 7.5 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of this Agreement. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender. 7.6 Governing Law. The validity and effect of this Agreement, and the rights and obligations of all persons affected hereby, shall be construed and determined in accordance with the laws of the State of Texas unless superseded by federal law. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. NCI BUILDING SYSTEMS, INC. /s/ Johnie Schulte By: /s/ A.R. Ginn - ---------------------------------- -------------------------------------- Johnie Schulte, Employee A. R. Ginn, Chairman of the Board SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 10 EXHIBIT "A" SUPPLEMENTAL BENEFIT AGREEMENT
Retirement Benefit Preretirement Survivor Benefit ------------------ ------------------------------ $200,000 per year $200,000 per year
SUPPLEMENTAL BENEFIT AGREEMENT - JOHNIE SCHULTE Page 11 EX-10.11 10 d02830exv10w11.txt SPLIT-DOLLAR LIFE INSURANCE AGREEMENT - KOETTING EXHIBIT 10.11 SPLIT-DOLLAR LIFE INSURANCE AGREEMENT This Agreement is entered into as of the February 1, 1996, by and between NCI Building Systems, Inc., a Delaware corporation (hereinafter referred to as the "Corporation") and Fred D. Koetting (the "Employee"). RECITALS: WHEREAS, the Employee is a key employee of the Corporation and the Corporation desires to encourage the Employee to remain an employee of the Corporation; and WHEREAS, to encourage the Employee to remain an employee of the Corporation, the Corporation desires to assist the Employee in establishing a life insurance program; and WHEREAS, the Employee has insured his life under a life insurance policy described herein; and WHEREAS, the Corporation and the Employee desire to enter into a contractual arrangement to establish their respective rights with respect to such policy; NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Designation of Policy. The life insurance policy which is the subject of this Agreement is Policy No. 13-716-906 (the "Policy") issued by The Northwestern Mutual Life Insurance Company (the "Insurer") on the life of the Employee. 2. Ownership of Insurance. The Employee shall be the sole owner of the Policy and the Employee may exercise all the rights of ownership with respect to the Policy, except as otherwise hereinafter provided. 3. Dividends. All dividends declared or distributions made by the Insurer on the Policy shall be applied to purchase additional paid-up insurance on the life of the Employee. 4. Premium Payments. On or before the due date, the Corporation will pay to the Insurer the full amount of each premium on the Policy. The aggregate amount of premiums paid by the Corporation on the Policy on or after April 1, 1996 shall, as of any determination date, be referred to as the "Corporation Premiums". 5. Tax Reporting By Employee. During the term of this Agreement, the Employee shall report as compensation each year an amount equal to the one-year term cost of the Policy, including insurance purchased by dividends, as such cost is determined pursuant to Revenue Rulings 64-328 and 66-110 issued by the Internal Revenue Service,which shall be the lesser of the P.S. 58 cost under the tables contained in Revenue Ruling 55-747 or the Insurer's individual initial issue one-year term life insurance rates. If during the term of this Agreement, the method SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 1 FRED D. KOETTING for determining the Employee's annual compensation associated with the Policy is different than the method described in the preceding sentence due to changes in the tax laws applicable to this Agreement or the issuance of rulings or regulations by the Internal Revenue Service, the Employee shall report as compensation an amount consistent with the requirements of such laws, rulings or regulations. 6. Employee's Obligation to Corporation. The Employee shall be obligated to repay to the Corporation the Corporation Premiums. The Employee's repayment obligation to the Corporation described in this Section 6 shall be payable as prescribed in Sections 10 and 13 of this Agreement. 7. Collateral Assignment of Policy. As security for the repayment to the Corporation of the Corporation Premiums paid pursuant to Section 4 of this Agreement, the Employee has executed an assignment of the Policy (the "Assignment"), which Assignment is attached hereto as Exhibit A. During the term of this Agreement, the Employee's rights of ownership with respect to the Policy shall be limited to those specified in the Assignment. Except as provided in this Agreement, the Assignment will not be altered without the written consent of the Corporation. 8. Right to Obtain Policy Loans. The Corporation shall have the right to obtain Policy loans or advances on the Policy equal to the amount of the Corporation Premiums paid to the date of the loan or advance. 9. Assignment of Employee's Interest. Except as provided otherwise in this Section 9, the Employee may not transfer or assign his rights in the Policy (other than the rights assigned to the Corporation pursuant to this Agreement and the Assignment). Notwithstanding the preceding sentence, with the consent of the Corporation, Employee may assign his rights in the Policy (other than rights assigned to the Corporation pursuant to this Agreement and the Assignment) to a life insurance trust established by Employee. 10. Death of Employee. Upon the death of the Employee, the Corporation shall be entitled to receive, from the proceeds of the Policy, an amount equal to the Corporation Premiums paid pursuant to Section 4 of this Agreement, less any Policy loans or other indebtedness incurred by the Corporation and secured by the cash surrender value of the Policy. The balance, if any, of the proceeds of the Policy will be paid directly by the Insurer to the beneficiary designated in the Policy by the Employee. If, pursuant to the terms of the Assignment, the Insurer pays the Corporation amounts in excess of the Corporation Premiums in connection with the death of the Employee, the Corporation shall pay such excess amounts to the beneficiary designated in the Policy by the Employee, as determined and communicated to the Corporation by the Insurer. 11. Designation of Beneficiaries Under Policy. The Employee shall have the right to designate and change direct and contingent beneficiaries to receive the balance of any Policy proceeds payable on account of the Employee's death following payment of Corporation Premiums to the Corporation pursuant to Section 4 of this Agreement and to elect a payment SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 2 FRED D. KOETTING plan for such beneficiaries, subject to the Assignment and the rights of the Corporation thereunder. 12. Termination of Agreement. Subject to the provisions of Section 13, this Agreement shall terminate on the occurrence of any of the following events: (a) After payment of the amounts specified in Section 10 following the death of the Employee; (b) Cessation of the Corporation's business; (c) Termination of the Employee's employment with the Corporation; or (d) Upon the election of the Corporation, provided that the Corporation gives written notice of the Corporation's election to terminate this Agreement pursuant to this paragraph (d) at least ninety (90) days prior to the effective date of such termination. 13. Disposition of Policy on Termination of Agreement. If this Agreement is terminated under Section 12, the Corporation will no longer be obligated to pay the premium on the Policy pursuant to Section 4. The following provisions shall apply in the event of a termination of the Agreement pursuant to Section 12: (a) Termination of Agreement on Account of Cessation of Business of Corporation, Employee's Voluntary Termination of Employment, or at the Election of the Corporation. If this Agreement is terminated on account of (i) the cessation of the Corporation's business under paragraph (b) of Section 12; (ii) the Employee's voluntary termination of employment under paragraph (c) of Section 12; or (iii) termination of the Agreement by the Corporation pursuant to paragraph (d), the Employee shall have the right for a period of sixty (60) days following the termination event to repay the Corporation the Corporation Premiums. The Employee may elect to repay such premiums by surrendering the Policy and reimbursing the Corporation for such costs from the cash surrender value of the Policy. Alternatively, the Employee may elect to reimburse the Corporation for the Corporation Premiums paid as of the termination date without surrendering the Policy. Upon receipt of this amount, the Corporation shall release the Assignment of the Policy, and the Employee shall become the sole and absolute owner of the Policy. The Employee may thereafter elect to continue to keep the Policy in effect by paying the premiums thereon, or alternatively, may elect to surrender the Policy pursuant to the terms thereof. If the Employee fails to repay the Corporation the amount of the Corporation Premiums within this sixty (60) day period, the Employee shall execute any and all documents necessary to vest ownership of the Policy in the Corporation. Thereafter, Employee shall have no interest in the Policy. (b) Termination of Agreement on Account of the Involuntary Termination of Employee's Employment. If this Agreement is terminated on account of the involuntary termination of Employee's employment by the Corporation for reasons other than for "Cause" (as hereinafter defined) under paragraph (c) of Section 12, the Corporation shall waive its right to SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 3 FRED D. KOETTING repayment of the Corporation Premiums. Within sixty (60) days of such involuntary termination of employment, the Corporation shall release the Assignment of the Policy and pay the amount of any Policy loans or other indebtedness incurred by the Corporation on the Policy, and the Employee shall become the sole and absolute owner of the Policy with all rights of ownership therein. The Employee may thereafter elect to continue to keep the Policy in effect by paying the premiums thereon, or alternatively, may elect to surrender the Policy pursuant to the terms thereof. If the Employee's employment is terminated by the Corporation for Cause, the Employee shall have no interest in the Policy and shall not be entitled to any benefits thereunder or any portion of the Policy's cash surrender value. In such event, the Corporation may take any action it deems appropriate with respect to the disposition of the Policy. As used in this Agreement, "Cause" shall be determined by the Board, in its sole and absolute discretion, and means the occurrence of either or both of the following: (i) The Employee's conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony; or (ii) The willful engaging by the Employee in gross misconduct materially and demonstrably injurious to the Corporation, as determined by the Corporation. However, no act or failure to act, on the Employee's part shall be considered "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Corporation. 14. Insolvency of Corporation. In the event the Corporation becomes insolvent during the term of the Agreement, the cash surrender value of the Policy shall be subject to the claims of the Corporation's creditors and the Employee shall have the status of an unsecured creditor of the Corporation with respect to the portion of cash surrender value of the Policy, if any, otherwise payable to Employee under this Agreement. For purposes of the preceding sentence, the Corporation shall be considered as "insolvent" if (i) the Corporation is unable to pay its debts as they become due or (ii) the Corporation is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 15. Paid-Up Additional Life Insurance. Any payments under the Policy to the Corporation in connection with the rights granted to the Corporation in the Assignment shall first be made from the cash surrender value under the Policy attributable to the paid-up additional life insurance purchased by Policy dividends. The Employee shall have no interest in the paid-up additional life insurance protection to the extent the death benefit or cash value thereof exceeds the total amount which must be paid to the Corporation under this Agreement. 16. Named Fiduciary. The Board of Directors of the Corporation (the "Board") is designated as the "Named Fiduciary," as defined under section 402 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of the split-dollar life insurance arrangement set forth in this Agreement. The business address and telephone number of the Named Fiduciary are: SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 4 FRED D. KOETTING Chairman of the Board of Directors c/o Bob Medlock, Chief Financial Officer NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 (713) 466-7788 The Named Fiduciary shall have full power and authority to control and manage the operation and administration of this Agreement and to interpret and construe the terms hereof. The Named Fiduciary's interpretation and construction hereof and actions hereunder shall be binding and conclusive on all persons for all purposes. However, the Named Fiduciary may allocate its responsibilities for the operation and administration of this Agreement, including the designation of persons who are not named fiduciaries, to carry out all or a portion of its responsibilities under the Agreement. The Named Fiduciary shall be responsible for making timely delivery of any required premiums under the Policy to the Insurer during the term of this Agreement. A copy of the Assignment and the Policy has been provided to Employee upon the execution of this Agreement. 17. Claims Procedure. Any person claiming a benefit under the Agreement (a "Claimant") shall present the claim in writing to the Board and the Board shall respond thereto in writing in accordance with this Section 17. If a claim is wholly or partially denied, notice of the decision shall be furnished to the Claimant within 60 days after receipt of the claim by the Board, unless special circumstances require an extension of time for processing the claim, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the claim. Written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60-day period, and shall indicate the circumstances requiring the extension and the date by which the Board expects to render its decision. The notice of the decision shall contain the specific reason or reasons for the denial of the claim, specific references to pertinent provisions of the Agreement on which the denial is based, a description of any additional material or information necessary for the Claimant to perfect the claim, an explanation of why such additional material or information is necessary and an explanation of the Agreement's claims review procedure. If notice of the denial is not furnished in accordance with the above procedure, the claim shall be deemed denied and the Claimant shall be permitted to proceed with the review procedure. A Claimant or his duly authorized representative may appeal the denial of a claim by making a written application to the Board requesting a review. The Claimant or his duly authorized representative may, in connection with the appeal, review pertinent documents and submit issues and comments to the Board in writing. The request for a review of a denied claim must be made to the Board within 60 days after receipt by the Claimant of written notification of denial of a claim. A decision by the Board shall be made no later than 60 days after its receipt of a request for a review, unless special circumstances require an extension of time for processing the request, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 5 FRED D. KOETTING provisions of the Agreement on which the decision is based. If the decision on review is not furnished within the appropriate time, the claim shall be deemed denied on review. All interpretations, determinations, and decisions by the Board in respect of any matter hereunder will be final, conclusive, and binding upon the Board, Employees, beneficiaries, and all other persons claiming any interest under the Agreement. 18. Arbitration. If an Employee or his beneficiary has completed the claims procedures set forth in Section 17 and decides to pursue his claim further, the Employee or beneficiary shall comply with the following procedures: (a) The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement shall be arbitration. Arbitration shall be held in Houston, Texas by three arbitrators, one to be appointed by the Board, a second to be appointed by the Employee (or beneficiary, if applicable), and a third to be appointed by those two arbitrators. The third arbitrator shall act as chairman. Any arbitration may be initiated by the Employee (or beneficiary) by written notice to the Board specifying the subject of the requested arbitration and appointing the Employee's (or beneficiary's) arbitrator ("Arbitration Notice"). (b) If (i) the Board fails to appoint an arbitrator by written notice to the Employee (or beneficiary) within ten days after the Arbitration Notice is given, or (ii) the two arbitrators appointed by the parties herein fail to appoint a third arbitrator within ten days after the date of the appointment of the second arbitrator, then the American Arbitration Association in Houston, Texas, upon application of the Employee (or beneficiary) shall appoint an arbitrator to fill that position. (c) The arbitration proceeding shall be conducted in accordance with the rules of the American Arbitration Association. A determination or award made or approved by at least two of the arbitrators shall be the valid and binding action of the arbitrators. The costs of arbitration (exclusive of the expense of a party in obtaining and presenting evidence and attending the arbitration and of the fees and expense of legal counsel to a party, all of which shall be borne by that party) shall be borne by the Board if the Employee (or beneficiary) receives substantially the relief sought by the Employee (or beneficiary) in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne equally by the parties. The arbitration determination or award shall be final and conclusive on the parties, and judgment upon such award may be entered and enforced in any court of competent jurisdiction. 19. Amendment of Agreement. This Agreement shall not be amended except by mutual written agreement between the Employee and the Corporation which shall be signed by the Employee on behalf of the Employee and by the Corporation. 20. Successors and Assigns. This Agreement shall bind and inure to the benefit of the Corporation and its successors and assigns and the Employee and the Employee's successors and assigns. SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 6 FRED D. KOETTING 21. Notice. Whenever any notice is required or permitted under this Agreement, such notice must be in writing and personally delivered or sent by registered or certified mail. Any notice required or permitted to be delivered under this Agreement shall be deemed to be delivered on the date which it is personally delivered, or, actually received at the address which such person has previously specified by written notice to the other. Until changed in accordance with this Agreement, the Corporation and the Employee specify their respective addresses as set forth below: Corporation: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Employee: Fred D. Koetting 14 Petalcup Woodlands, Texas 77381 22. Insurer Not a Party. The Insurer: (a) shall not be deemed to be a party to this Agreement for any purpose; (b) shall not be obligated to inquire as to the distribution of any monies payable or paid by it under the Policy; and (c) shall be fully discharged from any and all liability under the terms of the Policy upon payment or other performance of its obligations in accordance with the terms of the Policy and the terms of this Agreement. 23. Applicable Law. This Agreement shall be subject to and shall be construed under the laws of the State of Texas unless superseded by federal law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written, the Company acting by and through its duly authorized officers. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock -------------------------------------- Title: Vice President and CFO ----------------------------------- Print Name: Robert J. Medlock ------------------------------ /s/ Fred D. Koetting ----------------------------------------- Fred D. Koetting, EMPLOYEE SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 7 FRED D. KOETTING EX-10.12 11 d02830exv10w12.txt SPLIT-DOLLAR LIFE INSURANCE AGREEMENT - ROSALES EXHIBIT 10.12 SPLIT-DOLLAR LIFE INSURANCE AGREEMENT This Agreement is entered into as of the 13th day of October, 1998, by and between NCI Building Systems, Inc., a Delaware corporation (the "Corporation") and Karen Rene Rosales, as Trustee (the "Trustee") of the Schulte Investment Trust (the "Trust"). RECITALS: WHEREAS, the Trustee desires to insure the lives of the Johnie Schulte, Jr. (the "Employee") and Barbara C. Schulte, the spouse of Employee ("Spouse"), for the benefit and protection of the Trust and its beneficiaries and, to encourage the Employee to remain an employee of the Corporation, the Corporation desires to assist the Trust with the Trust's life insurance program; and WHEREAS, the Trust is the owner of the life insurance policy described herein maintained pursuant to the terms of this Agreement, subject to the assignment of the policy to the Corporation as described herein as security for the repayment of amounts the Corporation contributes toward the payment of premiums on the policy; and WHEREAS, the Corporation and the Trustee, on behalf of the Trust, desire to enter into a contractual arrangement to establish their respective rights with respect to such policy; NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Designation of Policy. The life insurance policy which is the subject of this Agreement is Policy No. 1A2348839 (the "Policy") issued by Pacific Life (the "Insurer") on the joint lives of the Employee and the Spouse. 2. Ownership of Insurance. The Trust shall be the sole owner of the Policy and the Trustee may exercise all the rights of ownership with respect to the Policy on behalf of the Trust, except as otherwise hereinafter provided. 3. Dividends. All dividends declared or distributions made by the Insurer on the Policy shall be applied to purchase additional paid-up insurance on the joint lives of the Employee and Spouse. The parties hereto agree that the dividend election provisions of the Policy will conform to the provisions hereof. 4. Premium Payments. On or before the due date, the Corporation will pay to the Insurer the full amount of each premium on the Policy, except as provided in Section 5 of this Agreement. The Corporation hereby agrees to pay at least eleven (11) annual premium payments on the Policy. The aggregate amount of premiums paid by the Corporation on the Policy shall, as of any determination date, be referred to as the "Corporation Premiums". SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 1 SCHULTE INVESTMENT TRUST 5. Trust's Obligation to Corporation. The Trust shall be obligated to repay to the Corporation the Corporation Premiums. The Trust's repayment obligation to the Corporation described in this Section 5 shall be payable as prescribed in Sections 9 and 12 of this Agreement. In addition, on or before the due date of each Policy premium, the Trust will pay the Insurer (or, alternatively, in the discretion of the Corporation, will pay to the Corporation as reimbursement for the Corporation's payment) an amount equal to (i) the one-year term cost of the insurance protection received by the Trust with respect to the joint lives of the Employee and Spouse, measured by the U.S. Life Table 38, while both are alive, and (ii) after the first to die of the Employee and Spouse, the lesser of the P.S. 58 cost under the tables contained in Revenue Ruling 55-747 or the Insurer's individual initial issue one-year term life insurance rates. The Corporation shall notify the Trustee of the amount due from the Trust hereunder at least thirty (30) days prior to the due date of each Policy premium. If during the term of this Agreement, the method for determining the one-year term cost of the insurance protection received by the Trust is different than the method described in the preceding sentence due to changes in the tax laws applicable to this Agreement or the issuance of rulings or regulations by the Internal Revenue Service, the Trust shall pay an amount under this Section 5 consistent with the requirements of such laws, rulings or regulations. 6. Collateral Assignment of Policy. As security for the repayment to the Corporation of the Corporation Premiums paid pursuant to Section 4 of this Agreement, the Trustee on behalf of the Trust has executed an assignment of the Policy (the "Assignment"), which Assignment is attached hereto as Exhibit A. During the term of this Agreement, the Trust's rights of ownership with respect to the Policy shall be limited to those specified in the Assignment and in this Agreement. Except as provided in this Agreement, the Assignment will not be altered without the written consent of the Corporation. 7. Right to Obtain Policy Loans. The Corporation shall have the right to obtain Policy loans or advances on the Policy equal to the amount of the Corporation Premiums paid to the date of the loan or advance. 8. Assignment of Trust's Interest. Except as provided otherwise in this Section 8, the Trust may not transfer or assign its rights in the Policy (other than the rights assigned to the Corporation pursuant to this Agreement and the Assignment). Notwithstanding the preceding sentence, with the consent of the Corporation and subject to the provisions of the Trust, the Trustee may assign its rights in the Policy (other than rights assigned to the Corporation pursuant to this Agreement and the Assignment) to another trust established by Employee. 9. Death of Employee and Spouse. Upon the last to die of the Employee and Spouse, the Corporation shall be entitled to receive, from the proceeds of the Policy, an amount equal to the Corporation Premiums paid pursuant to Section 4 of this Agreement, less any Policy loans or other indebtedness incurred by the Corporation and secured by the cash surrender value of the Policy. The balance, if any, of the proceeds of the Policy will be paid directly by the Insurer to the Trust in the settlement option elected by the Trustee. If, pursuant to the terms of the Assignment, the Insurer pays the Corporation amounts in excess of the Corporation SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 2 SCHULTE INVESTMENT TRUST Premiums in connection with the death of the Employee or, if applicable, Spouse, the Corporation shall pay such excess amounts to the Trust, as determined and communicated to the Corporation by the Insurer. 10. Beneficiary Under Policy. The Trust shall be the beneficiary under the Policy to receive the balance of any Policy proceeds payable on account of the Employee's death following payment of Corporation Premiums to the Corporation pursuant to Section 4 of this Agreement. The Trustee shall elect a settlement option on behalf of the Trust. 11. Termination of Agreement. Subject to the provisions of Section 12, this Agreement shall terminate on the occurrence of any of the following events: (a) After payment of the amounts specified in Section 9 following the death of the last to die of the Employee and the Spouse; (b) Cessation of the Corporation's business; (c) The first day following the expiration of fifteen (15) years from the date the Policy was issued, May 20, 1998 (the "Policy Date"); or (d) Subject to the Corporation's obligations under Section 4 hereof, upon the election of the Corporation, provided that the Corporation gives written notice of the Corporation's election to terminate this Agreement pursuant to this paragraph (d) at least ninety (90) days prior to the effective date of such termination. 12. Disposition of Policy on Termination of Agreement. If this Agreement is terminated under Section 11, the Corporation will no longer be obligated to pay the premium on the Policy pursuant to Section 4. If this Agreement is terminated on account of (i) the cessation of the Corporation's business under paragraph (b) of Section 11; (ii) the expiration of fifteen (15) years from the Policy Date under paragraph (c) of Section 11; or (iii) termination of the Agreement by the Corporation pursuant to paragraph (d), the Trust shall have the right for a period of sixty (60) days following the termination event to repay the Corporation the Corporation Premiums. The Trust may elect to repay such premiums by surrendering the Policy and reimbursing the Corporation for such costs from the cash surrender value of the Policy. Alternatively, the Trust may elect to reimburse the Corporation for the Corporation Premiums paid as of the termination date without surrendering the Policy. Upon receipt of this amount, the Corporation shall release the Assignment of the Policy, and the Trust shall become the sole and absolute owner of the Policy. The Trust may thereafter elect to continue to keep the Policy in effect by paying the premiums thereon, or alternatively, may elect to surrender the Policy pursuant to the terms thereof. If the Trust fails to repay the Corporation the amount of the Corporation premiums within this sixty (60) day period, the Trustee on behalf of the Trust shall execute any and all documents necessary to vest ownership of the Policy in the Corporation. Thereafter, the Trust shall have no interest in the Policy. SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 3 SCHULTE INVESTMENT TRUST 13. Insolvency of Corporation. In the event the Corporation becomes insolvent during the term of the Agreement, the cash surrender value of the Policy shall be subject to the claims of the Corporation's creditors and the Trust shall have the status of an unsecured creditor of the Corporation with respect to the portion of cash surrender value of the Policy, if any, otherwise payable to the Trust under this Agreement. For purposes of the preceding sentence, the Corporation shall be considered as "insolvent" if (i) the Corporation is unable to pay its debts as they become due or (ii) the Corporation is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 14. Paid-Up Additional Life Insurance. Any payments under the Policy to the Corporation in connection with the rights granted to the Corporation in the Assignment shall first be made from the cash surrender value under the Policy attributable to the paid-up additional life insurance purchased by Policy dividends. The Trust shall have no interest in the paid-up additional life insurance protection to the extent the death benefit or cash value thereof exceeds the total amount which must be paid to the Corporation under this Agreement. 15. Named Fiduciary. The Board of Directors of the Corporation (the "Board") is designated as the "Named Fiduciary," as defined under section 402 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of the split-dollar life insurance arrangement set forth in this Agreement. The business address and telephone number of the Named Fiduciary are: Chairman of the Board of Directors c/o Bob Medlock, Chief Financial Officer NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 (713) 466-7788 The Named Fiduciary shall have full power and authority to control and manage the operation and administration of this Agreement and to interpret and construe the terms hereof. The Named Fiduciary's interpretation and construction hereof and actions hereunder shall be binding and conclusive on all persons for all purposes. However, the Named Fiduciary may allocate its responsibilities for the operation and administration of this Agreement, including the designation of persons who are not named fiduciaries, to carry out all or a portion of its responsibilities under the Agreement. The Named Fiduciary shall be responsible for making timely delivery of any required premiums under the Policy to the Insurer during the term of this Agreement. A copy of the Assignment and the Policy has been provided to Employee and the Trust on behalf of the Trust upon the execution of this Agreement. 16. Claims Procedure. Any person claiming a benefit under the Agreement (a "Claimant") shall present the claim in writing to the Board and the Board shall respond thereto in writing in accordance with this Section 16. If a claim is wholly or partially denied, notice of the decision shall be furnished to the Claimant within 60 days after receipt of the claim by the Board, SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 4 SCHULTE INVESTMENT TRUST unless special circumstances require an extension of time for processing the claim, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the claim. Written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60-day period, and shall indicate the circumstances requiring the extension and the date by which the Board expects to render its decision. The notice of the decision shall contain the specific reason or reasons for the denial of the claim, specific references to pertinent provisions of the Agreement on which the denial is based, a description of any additional material or information necessary for the Claimant to perfect the claim, an explanation of why such additional material or information is necessary and an explanation of the Agreement's claims review procedure. If notice of the denial is not furnished in accordance with the above procedure, the claim shall be deemed denied and the Claimant shall be permitted to proceed with the review procedure. A Claimant or his duly authorized representative may appeal the denial of a claim by making a written application to the Board requesting a review. The Claimant or his duly authorized representative may, in connection with the appeal, review pertinent documents and submit issues and comments to the Board in writing. The request for a review of a denied claim must be made to the Board within 60 days after receipt by the Claimant of written notification of denial of a claim. A decision by the Board shall be made no later than 60 days after its receipt of a request for a review, unless special circumstances require an extension of time for processing the request, in which case a decision shall be rendered as soon as possible, but in no event later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The decision on review shall be in writing and shall include specific reasons for the decision and specific references to the pertinent provisions of the Agreement on which the decision is based. If the decision on review is not furnished within the appropriate time, the claim shall be deemed denied on review. All interpretations, determinations, and decisions by the Board in respect of any matter hereunder will be final, conclusive, and binding upon the Board, the Trustee, the Employee, beneficiaries, and all other persons claiming any interest under the Agreement. 17. Arbitration. If a Claimant has completed the claims procedures set forth in Section 16 and decides to pursue his claim further, the Claimant shall comply with the following procedures: (a) The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement shall be arbitration. Arbitration shall be held in Houston, Texas by three arbitrators, one to be appointed by the Board, a second to be appointed by the Claimant, and a third to be appointed by those two arbitrators. The third arbitrator shall act as chairman. Any arbitration may be initiated by the Claimant by written notice to the Board specifying the subject of the requested arbitration and appointing the Claimant's arbitrator ("Arbitration Notice"). (b) If (i) the Board fails to appoint an arbitrator by written notice to the Claimant within ten days after the Arbitration Notice is given, or (ii) the two arbitrators appointed by the parties herein fail to appoint a third arbitrator within ten days after the date of SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 5 SCHULTE INVESTMENT TRUST the appointment of the second arbitrator, then the American Arbitration Association in Houston, Texas, upon application of the Claimant shall appoint an arbitrator to fill that position. (c) The arbitration proceeding shall be conducted in accordance with the rules of the American Arbitration Association. A determination or award made or approved by at least two of the arbitrators shall be the valid and binding action of the arbitrators. The costs of arbitration (exclusive of the expense of a party in obtaining and presenting evidence and attending the arbitration and of the fees and expense of legal counsel to a party, all of which shall be borne by that party) shall be borne by the Board if the Claimant receives substantially the relief sought by the Claimant in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne equally by the parties. The arbitration determination or award shall be final and conclusive on the parties, and judgment upon such award may be entered and enforced in any court of competent jurisdiction. 18. Amendment of Agreement. This Agreement shall not be amended except by mutual written agreement between the Trustee and the Corporation which shall be signed by such parties. 19. Successors and Assigns. This Agreement shall bind and inure to the benefit of the Corporation and its successors and assigns and the Trust and its successors and assigns. 20. Notice. Whenever any notice is required or permitted under this Agreement, such notice must be in writing and personally delivered or sent by registered or certified mail. Any notice required or permitted to be delivered under this Agreement shall be deemed to be delivered on the date which it is personally delivered, or, actually received at the address which such person has previously specified by written notice to the other. Until changed in accordance with this Agreement, the Corporation and the Trust specify their respective addresses as set forth below: Corporation: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Employee: Karen Rene Rosales, Trustee Schulte Investment Trust ----------------------------------- Houston, Texas --------- 21. Insurer Not a Party. The Insurer shall not be deemed to be a party to this Agreement for any purpose, but it is the intent of the parties that the Insurer pay amounts under the Policy in accordance with the terms of the Assignment and this Agreement. The Insurer shall be fully discharged from any and all liability under the terms of the Policy upon payment or other performance of its obligations in accordance with the terms of the Policy and the terms of this Agreement. SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 6 SCHULTE INVESTMENT TRUST 22. Applicable Law. This Agreement shall be subject to and shall be construed under the laws of the State of Texas unless superseded by federal law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the 13th day of October, 1998, effective as of October 13, 1998, the Company acting by and through its duly authorized officers and the Trustee acting on behalf of the Trust. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock ------------------------------------------- Title: Vice President and CFO ---------------------------------------- Print Name: Robert J. Medlock ----------------------------------- SCHULTE INVESTMENT TRUST /s/ Karen Rene Rosales ---------------------------------------------- Karen Rene Rosales, Trustee SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 7 SCHULTE INVESTMENT TRUST EX-10.13 12 d02830exv10w13.txt MANAGEMENT INCENTIVE TRUST AGREEMENT EXHIBIT 10.13 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________________ This Management Incentive Trust Agreement is made effective the 8th day of May, 1998, by and among MBCI Operating, L.P., a Texas Limited Partnership and Metal Coaters Operating, L.P., a Texas Limited Partnership (hereinafter referred to as "MBCI"), and NationsBank of Texas, N.A. (hereinafter referred to as "Trustee"). WITNESSETH WHEREAS, MBCI has adopted a Management Incentive Scheme (hereinafter referred to as the "Plan"), an executed copy of which is attached hereto as Exhibit "A" and hereby incorporated by reference, in which certain employees have been allowed to participate; and WHEREAS, MBCI has designated _________________________, as a Participant under the Plan; and WHEREAS, MBCI has incurred or expects to incur liability under the terms of such Plan; and WHEREAS, MBCI desires to establish an irrevocable grantor trust (hereinafter referred to as the "Trust"), and shall transfer to such Trust certain assets which shall be held therein for the purposes and under the direction and constraints contained in this document, until such time as they may be distributed under the Plan; and WHEREAS, it is the intention of MBCI to transfer and contribute assets to the Trust under the Plan, for the Trustee to act as a repository for and to safeguard such assets, and, the Trustee is willing to act as Trustee under the terms of this document and hold such assets for the purposes herein contained; and WHEREAS, MBCI shall appoint one or more of its employees to act as the Trust and Plan Recordkeeper (hereafter referred to as the "Recordkeeper") to perform such accounting and administrative services as are required by this Trust and the Plan, and further is willing to provide said services under the direction and requirements of this Trust or the Plan; NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, the parties do hereby establish this Trust, agree to be bound by and operate under the terms of this Trust Agreement, and further agree that the assets of the Trust shall be held, administered, accounted for and distributed under the terms and conditions enumerated herein, as follows: MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ SECTION 1. ESTABLISHMENT OF TRUST A. MBCI hereby agrees to deposit with Trustee in trust the sum of exactly _________________________ ($_______________), in cash, in kind, or in other forms to be administered and together with all income and accumulations to be disposed of as provided in this Trust Agreement, which shall become the principal and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan Participant or beneficiary shall have any right to compel any additional deposits. B. The Trust hereby established is irrevocable by MBCI subject to the terms and conditions of the Plan. C. The Trust is intended to be a grantor trust, of which MBCI is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. D. The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of MBCI and shall be used exclusively for the uses and purposes of Plan Participants and general creditors as herein set forth. Plan Participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan(s) and this Trust Agreement shall be mere unsecured contractual rights of Plan Participants and their beneficiaries against MBCI. Any assets held by the Trust will be subject to the claims of MBCI's general creditors under federal and state law in the event of Insolvency, as defined in Section 3A herein. SECTION 2. PAYMENTS FOR THE BENEFIT OF PLAN PARTICIPANTS AND THEIR BENEFICIARIES. A. Annual Earnings. The Trustee shall retain, for the benefit of each Plan Participant, all of the annual earnings of the Trust. 1. All retained, undistributed earnings shall be accumulated with and become a part of the undistributed corpus of the Trust. B. Vested Portion. During the term of this Trust and the Plan, MBCI may deliver to the Trustee a schedule directing the Trustee to distribute all of the corpus and earnings of the Trust to MBCI for the benefit of the Participant. Upon receipt of such instruction, the Trustee shall distribute the amount indicated by MBCI to MBCI for the benefit of the Participant. MBCI shall pay to _________________________ all distributions of earnings in excess of the amount required to be withheld and paid to taxing authorities. MBCI shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of the vested portion and shall pay amounts withheld to the appropriate taxing authorities. MBCI shall, upon request from the Trustee, provide verification that such amounts have been reported, withheld and paid by MBCI or the Participant. 2 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ C. The entitlement of a Plan Participant or his or her beneficiaries to benefits under the Plan(s) shall be determined by MBCI or such party as it shall designate under the Plan(s), and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan(s). SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN MBCI IS INSOLVENT. A. Trustee shall cease payment for the benefit of Plan Participant and his beneficiaries if MBCI is Insolvent. MBCI shall be considered "Insolvent" for purposes of this Trust Agreement if (1) MBCI is unable to pay its debts as they become due, or (2) MBCI is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. B. At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of MBCI under federal and state law as set forth below: 1. The Chief Executive Officer of MBCI shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of MBCI alleges in writing to Trustee that MBCI has become Insolvent, Trustee shall determine whether MBCI is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan Participants or their beneficiaries. 2. Unless Trustee has actual knowledge of MBCI's Insolvency, or has received notice from MBCI or a person claiming to be a creditor alleging that MBCI is Insolvent, Trustee shall have no duty to inquire whether MBCI is Insolvent. Trustee may in all events rely on such evidence concerning MBCI's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning MBCI's solvency. 3. If at any time Trustee has determined that MBCI is Insolvent, Trustee shall discontinue payments for the benefit of Plan Participant or his beneficiaries and shall hold the assets of the Trust for the benefit of MBCI's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan Participant or his beneficiaries to pursue their rights as general creditors of MBCI with respect to benefits due under the Plan(s) or otherwise. 4. Trustee shall resume the payment of benefits for the benefit of Plan Participant or his beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). C. Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3B hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due for the benefit of Plan Participant or his beneficiaries under the terms of the Plan(s) for the period of such discontinuance, less the aggregate amount of any payments made 3 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ to Plan Participant or his beneficiaries by MBCI in lieu of the payments provided for hereunder during any such period of discontinuance. SECTION 4. INVESTMENT AUTHORITY A. In no event may Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by MBCI or any entity owning all or part of MBCI; provided, however, that the Trustee may invest in the 9 1/4% senior subordinated notes due 2009 issued by NCI Building Systems, Inc, a Delaware corporation and ultimate parent company of the Company. All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable or rest with MBCI or the Plan Participant. B. Subject to the exception in Paragraph A above, investments of the Trust funds, including principal and earned and undistributed income, shall be made by the Trustee in accordance with the instructions delivered to the Trustee, in writing, by an officer designated, in writing, by the board of directors of NCI Operating Corp., a Nevada corporation, which is the general partner of MBCI. SECTION 5. ACCOUNTING BY TRUSTEE Trustee shall keep accurate and detailed records of all earnings, investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between MBCI and Trustee. Within thirty (30) days following the close of each calendar quarter and within thirty (30) days after the removal or resignation of Trustee, Trustee shall deliver to MBCI a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all earnings, investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. SECTION 6. RESPONSIBILITY OF TRUSTEE A. Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by MBCI which is contemplated by, and in conformity with, the terms of the Plan(s) or this Trust and is given in writing by MBCI. The Trustee shall not be liable to the Trust or to any person having a beneficial interest in the Trust for any losses or decline in value which may be incurred in any investment of the Trust, so long as the Trustee acts, without negligence, in good faith and in accordance with the terms of this 4 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ Trust Agreement. In the event of a dispute between MBCI and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. B. If Trustee undertakes or defends any litigation arising in connection with this Trust, MBCI agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. However, MBCI's obligations to indemnify Trustee for its costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) shall be expressly conditioned upon a timely, written notification of a claim submitted by Trustee to MBCI with the express understanding and agreement that upon receipt from MBCI of its written statement of intention to accept the claim for indemnification, MBCI shall have the sole right to retain counsel to prosecute or defend the claim and shall, thereafter, have no obligation to the Trustee, for its costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) incurred by Trustee. Additionally, MBCI's obligations to indemnify Trustee are conditioned upon Trustee's full cooperation in the defense of any claim tendered for indemnification. C. Trustee may, at its expense, consult with legal counsel (who may also be counsel for MBCI generally) with respect to any of its duties or obligations hereunder. D. Trustee may, at its expense, hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. E. Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. F. Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 201.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. SECTION 7. COMPENSATION AND EXPENSES OF TRUSTEE A. Trustee shall be entitled to a reasonable and customary fee for serving as Trustee. B. Any and all expenses, costs or fees, incurred by the Trustee in the administration of this Trust or in its capacity as Trustee hereunder, shall be borne wholly by the Trustee without charge to or reimbursement from MBCI, the Trust or any person having a beneficial interest in 5 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ the Trust or its assets. The fee payable to the Trustee, which may upon agreement of MBCI and the Trustee be from time-to-time adjusted, shall be the only sums due and payable to the Trustee. SECTION 8. RESIGNATION AND REMOVAL OF TRUSTEE A. Trustee may resign at any time by written notice to MBCI, which shall be effective thirty (30) days after receipt of such notice unless MBCI and Trustee agree otherwise. B. Trustee may be removed by MBCI on thirty (30) days notice or upon shorter notice accepted by Trustee. C. Upon an event of Termination of the Plan or an event of Good Reason, both of which are defined in the Plan, Trustee may not be removed by MBCI for two (2) years. D. If Trustee resigns or is removed in accordance with the terms of this Trust Agreement, MBCI shall appoint a successor Trustee. E. Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within thirty (30) days after receipt of notice of resignation, removal or transfer and the appointment of a successor Trustee, unless MBCI extends the time limit. F. Notwithstanding anything to the contrary contained in 9B or 9E above, if MBCI removes the Trustee because of Trustees failure to act in accordance with the Terms of this Trust Agreement, the applicable notice period and time for delivery of records and assets shall be shortened to ten (10) days. G. If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 9 hereof, by the effective date of resignation or removal in accordance with the terms of this Trust Agreement. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. SECTION 9. APPOINTMENT OF SUCCESSOR. A. If Trustee resigns [or is removed] in accordance with the terms of this Trust Agreement, MBCI may appoint any third party, such as a bank trust department or other party that may be granted corporate trust powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by MBCI or the successor Trustee to evidence the transfer. 6 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ SECTION 10. AMENDMENT OR TERMINATION A. This Trust Agreement may be amended by a written instrument executed by Trustee and MBCI. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan(s), provided, however, that any such amendment or reformation shall be void to the extent that it adversely affects the Participants in the Plan as a group; and B. The Trust shall not terminate until the date on which Plan Participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan(s). Upon termination of the Trust any assets remaining in the Trust, after all distributions to Plan Participants, shall be returned to MBCI. C. Upon written approval of Participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan(s), MBCI may terminate this Trust prior to the time all benefit payments under the Plan(s) have been made. All assets in the Trust at termination shall be returned to MBCI. SECTION 11. MISCELLANEOUS A. Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. B. Benefits payable to Plan Participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. C. This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Texas. D. If this Trust Agreement conflicts, or is held or deemed to conflict, with any of the terms of the Plan, the terms of the Plan shall control and this Trust Agreement shall be automatically amended to the extent necessary to remove or resolve the conflict. The Trustee acknowledges that it has received a copy of the Plan, as currently constituted, and agrees to promptly provide the Trustee with all amendments to the Plan as soon as possible after their adoption. E. In the event any section of this document shall become in fact or by operation of law illegal or ineffective, it shall become a nullity without invalidating the remaining sections. To the extent permitted by law, no benefits under this Trust shall be subject to assignment, attachment, garnishment, levy, execution or other legal process. No benefit, with the exception of an obvious error, actually paid to any beneficiary shall be subject to reclaim by either the Trustee or MBCI. 7 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ F. The headings, subheadings and paragraph identifiers are provided for convenience only and as such are not part of this Trust Agreement. This Trust may be executed in multiple counterparts, each of which shall constitute an original of this instrument. G. Any notice to any party required by this instrument shall be in writing, signed by the party giving notice, and shall be effective seven (7) days after it is deposited, deemed given the United States Mail, postage paid, return receipt requested, to the last known address of the party to whom the notice need be given. SECTION 12. EFFECTIVE DATE The effective date of this Trust Agreement shall be May 8, 1998. SECTION 13. DUTIES OF THE RECORDKEEPER A. The Recordkeeper shall keep and maintain detailed records of each Plan Participant's account. With respect to the individual account of each Plan Participant, the Recordkeeper shall provide to MBCI and each Participant a report on an annual basis which details the contributions, distributions, changes in specific assets, cost and fair market value of assets, and earnings thereon, which occurred during the calendar year. The report shall be distributed within thirty (30) days after the end of each calendar year. B. The Recordkeeper shall, upon notice from MBCI that benefits are due to any Participant under the Plan, calculate the amount and notify the Trustee in a timely manner so the Trustee may distribute the benefit due. Upon notification to the Trustee and confirmation of payment from the Trustee, the Recordkeeper shall charge the account of the Participant accordingly. C. The Recordkeeper shall make its books, records and calculations open and available for inspection by any Participant at all reasonable times and upon reasonable notice; provided, however, that each Participant shall only be entitled to inspect the books, records and calculations which pertain to that Participant's individual account. D. The Recordkeeper shall prepare filings required by the Internal Revenue Service and any other federal, state or local government agency relating to the Trust. E. If MBCI utilizes the services of a third-party recordkeeper, then a copy of the agreement with such recordkeeper shall be provided to Trustee. 8 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ EXECUTED ON THIS 8TH DAY OF MAY, 1998. METAL COATERS OPERATING, L.P. MBCI OPERATING, L.P. BY: /s/ Kenneth W. Maddox BY: /s/ Kenneth W. Maddox ------------------------------ -------------------------------- Printed Printed Name: Kenneth W. Maddox Name: Kenneth W. Maddox ---------------------------- ------------------------------ Title: Vice President/CFO Title: Vice President/CFO --------------------------- ----------------------------- NATIONSBANK OF TEXAS, N.A. BY: /s/ Dennis A. Young -------------------------------- Printed Name: Dennis A. Young ------------------------------ Title: Senior Vice President ----------------------------- ACCEPTED BY: - --------------------------------------- , Participant - -------------------------- 9 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. MANAGEMENT INCENTIVE TRUST AGREEMENT FOR THE BENEFIT OF _________________ EX-10.14 13 d02830exv10w14.txt LONG-TERM MANAGEMENT INCENTIVE PLAN EXHIBIT 10.14 MBCI OPERATING, L.P. AND METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN ARTICLE I - PURPOSE AND DEFINITIONS SECTION 1.01: PURPOSE. It is the purpose of the Plan to ensure the continuation of a stable, senior management team necessary to assure and accomplish continued and dynamic growth for the Company and to focus the attention of senior management on all details of the consolidated operations of the Company including operating profits and the costs of providing the working capital and fixed capital needs of the Company. SECTION 1.02: DEFINITIONS. The following terms shall have the meanings indicated for the purposes of the Plan. a) "Annual Realized Earnings" shall mean those earnings of the Trust other than unrealized appreciation in value of assets. b) "Beneficiary" shall mean the person(s) or entity(ies) designated by the Participant, in writing, to receive any remaining unpaid amounts to which the Participant is entitled hereunder at the time of the Participant's death or disability. In the event that the Participant fails to so designate a Beneficiary, the Participant's estate shall be the Beneficiary. c) "Change in Control" shall mean (i) the sale of all or substantially all of the assets of the Company or any division thereof for which the Participant has managerial responsibility, or (ii) the sale of 50% or more of the partnership interests in or capital stock of the Company or any subsidiary of the Company for which the Participant has managerial responsibility; unless such sale is to another person or entity within the Organization, or (iii) a change in voting control of NCI Building Systems, Inc. d) "Company" shall mean MBCI Operating, L. P. and Metal Coaters, L.P. (each of which are Texas limited partnerships) considered together as a consolidated or single entity, and their respective successors and assigns. e) "Contribution" shall mean the sum of exactly ________________________ Dollars and _________________ Cents ($__________) which is being contributed to the Plan on a one-time basis by the Company on the Effective Date. MBCI OPERATING, L.P. AND Page 1 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN f) "Deferral Period" shall mean the period during which payment of the Earned Award is deferred, beginning with the Anniversary and ending with the Maturity Date. g) "Earned Value" shall mean the Contribution and all appreciation and undistributed accumulated earnings on the Contribution. h) "Earned Value Account" shall mean the separate account for each Participant with respect to such Participant's Earned Value. i) "Effective Date" shall mean the effective date of the Plan, being May 8, 1998. j) "Executive" shall mean any common law employee of the Company, its subsidiaries or divisions, who is a member of executive or senior management. k) "Good Cause" shall mean: 1) the Executive's commission of an act involving fraud, embezzlement or a felony; or 2) the repeated refusal or failure by the Executive, after receiving written notice specifying the refusal or failure, to follow the lawful directives of the Organization; or 3) the Executive's gross dereliction of duties to the Organization or its affiliates, which continues after the Executive receives written notice specifying which duties are at issue; or 4) the commission by the Executive of an act involving moral turpitude which causes a material harm to the customer relations, operations and business practices of the Organization or any of its affiliates; or 5) a material breach by the Executive of any of the Executive's agreements with the Organization, or any of its affiliates which continues after receipt of specific written notice. l) "Good Reason" shall exist if, without the Participant's express written consent: 1) the Organization or the Company shall assign to the Executive duties which materially change and diminish the Executive's duties that the Executive was required to perform at the time that the Executive becomes a Participant hereunder; or 2) the Organization or the Company shall, without the Executive's consent, require the Executive to relocate the Executive's principal business office outside the Executive's present state of residency immediately prior to such action or assign the Executive duties that would reasonably require such relocation; or MBCI OPERATING, L.P. AND Page 2 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN 3) the Organization or the Company materially and adversely alters total compensation; or 4) the Organization or the Company violates, requires or causes a Participant to violate any laws, regulations or ordinances which cause the continuing viability of the Company or the Organization to be in jeopardy; or 5) the Organization or the Company violates, requires or causes a Participant to violate any material financial loan covenant of its financing arrangements or agreements without obtaining a waiver or consent from the lender(s) within ten (10) days from the violation; or 6) there occurs a Change in Control. m) "Maturity Date" shall mean the date as of which a Participant's Account first becomes payable under Section 2.04, unless accelerated as herein stated. All valuations shall be made as of a Maturity Date. n) "MBCI" shall mean MBCI Operating, L.P., a Texas limited partnership. o) "NCI" shall mean NCI Building Systems, Inc., a Delaware corporation. p) "Non-Competition Agreement" shall mean that certain Confidentiality, Non-Competition and Non-Solicitation Agreement, dated as of May 1, 1998, between and among NCI and each of the Participants. q) "Organization" shall mean the Company and/or its parent, affiliates or subsidiaries, collectively or individually. r) "Participant" shall mean the individuals referred to on Schedule 1 attached hereto and incorporated by reference each of whom is a Participant under the Plan. s) "Permanently Disabled" shall mean a condition resulting from bodily injury or disease or mental disorder such that the Participant is prevented from performing the Participant's principal duties of employment by the Company or the Organization. A Participant shall be presumed to be Permanently Disabled if the Participant qualifies to receive Social Security disability benefits (totally and permanently disabled) or if the Participant qualifies to receive initial disability benefits under any long-term disability benefit plan maintained by the Company or the Organization. In the event the Participant does not qualify for either such benefit, MBCI, in its sole discretion and based upon competent medical advice, nevertheless may determine that the Participant is and continues to be Permanently Disabled; provided, however, a Participant shall not be considered Permanently disabled under this definition until such condition shall have continued uninterrupted for a period of six (6) months. MBCI OPERATING, L.P. AND Page 3 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN t) "Permanently and Critically Disabled" shall mean a Permanent Disability which is of such a character and nature that it renders the Participant unable to manage his or her own financial affairs. u) "Plan Year" shall mean the fiscal year of the Company, being the period beginning November 1 and ending the following October 31. v) "Plan" shall mean the MBCI Operating, L.P. and Metal Coaters, L.P. Long-Term Management Incentive Plan as set forth herein and as amended from time to time. w) "Trust" shall mean the irrevocable trust arrangement established by the Company to fund its obligations to pay the Earned Value to which a Participant becomes entitled under Article II. x) "Vesting Date" shall mean May 1, 2003. ARTICLE II - PARTICIPATION, EARNED VALUE AND PAYMENT OF EARNED VALUE ACCOUNT SECTION 2.01: PARTICIPATION. In accordance with the Plan, the Company has selected certain Executives to become Participants in the Plan. On the Effective Date, the Participants shall be given a copy of the Plan with an Exhibit A attached stating that Participant's percentage share of the total Contribution payable by the Company. SECTION 2.02: EARNED VALUE. For each Plan Year, the Earned Value shall be calculated for each Participant and reported to each Participant on an Earned Value Statement. SECTION 2.03: EARNED VALUE ACCOUNT. On or before May 8, 1998, an amount equal to the Participant's total Contribution shall be deposited by the Company into the Trust for the benefit of the Participant and shall be separately accounted for under the Participant's Earned Value Account as set forth under Article III. During the Deferral Period, the Earned Value Account shall be invested and reinvested by the Trustee in accordance with Article III and the Trust. A separate Earned Value Account shall be established and maintained for each Participant. SECTION 2.04: PAYMENT OF EARNED VALUE ACCOUNT. The Trustee shall retain for the benefit of a Participant, one hundred percent (100%) of the Annual Realized Earnings of the Trust on a Participant's Earned Value Account. The entire MBCI OPERATING, L.P. AND Page 4 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN undistributed vested Earned Value Account of a participant shall be paid by the Trustee, in cash in a single lump sum (unless the Trust holds an investment in the 9 1/4% senior subordinated notes due 2009 (the "Notes") issued by NCI Building Systems, Inc, a Delaware corporation and ultimate parent company of the Company, in which case the Notes shall be distributed to the Participant in kind) as soon as reasonably practicable following the Vesting Date with respect thereto, but in no event later than thirty (30) days after the value of the Earned Value Account has been determined; provided, however, that the Participant on or before the last day of the calendar year immediately preceding the calendar year in which benefits otherwise would become payable hereunder, shall have the right to make a one-time irrevocable election to receive the Earned Value Account over a two-year period as follows: (a) 50% of the Earned Value Account on the first anniversary of the Vesting Date and (b) 100% of the then remaining Earned Value Account on the second anniversary of the Vesting Date. The Participant shall exercise this right by delivering to the Company and the Trustee a written notice that states his election to defer the payment of the Earned Value Account pursuant to the terms of this Section 2.04. The Company shall proceed with the determination of the value of the Earned Value Account of a Participant prudently and efficiently, in order to determine the amount thereof that is to be paid at Maturity Date. Each Participant shall sign and deliver to the Trustee and the Company a statement confirming that the Participant has received the Earned Value that has been paid on the Maturity Date. SECTION 2.05: VESTING. The Earned Value shall become 100% vested on the Vesting Date if, on the Vesting Date: a) The Participant is then and has, since the Effective Date, continuously been employed by the Organization and has not, during such period, breached or violated any of his covenants set forth in Sections 2 through 9 of the Non-Competition Agreement; or b) The Participant is not employed by the Organization but either: 1) the Participant terminated his employment for Good Reason or 2) the employment of the Participant terminated as a result of his being Permanently Disabled, and the Participant has not breached or violated any of his covenants set forth in Sections 2 through 9 of the Non-Competition Agreement during the period from the Effective Date until the Vesting Date. Each Participant shall have ownership of such Participant's percentage share of the total Earned Values, subject to the vesting provisions of this Plan. Any and all Earned Values which do not become 100% vested shall be forfeited and revert to the Company. MBCI OPERATING, L.P. AND Page 5 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN SECTION 2.06: CERTAIN TERMINATIONS. Any of the foregoing to the contrary notwithstanding, in the event the Participant's employment is terminated by the Company without Good Cause, or where it is by reason of either the Participant's death or Participant's becoming Permanently and Critically Disabled, any unmatured Deferral Period shall be deemed to have reached its Maturity Date immediately upon such termination and the corresponding Earned Value Account shall be 100% vested and paid in accordance with Section 2.04. In the event that a Participant is terminated for Good Cause, the Participant shall immediately cease participation in the Plan, with such Participant's Earned Value being forfeited to the Company. SECTION 2.07: CHANGE IN CONTROL. Any of the foregoing to the contrary notwithstanding, in the event that a Change in Control occurs, any unmatured Deferral Period shall be deemed to have reached its Maturity Date immediately prior thereto and the corresponding Earned Value Accounts shall be paid in accordance with Section 2.04, regardless of the Participant's employment status. SECTION 2.08: BENEFICIARY. In the event of the Participant's death prior to the Maturity Date, all unpaid amounts in the Earned Value Account or Trust shall be paid to the Beneficiary in the same manner as they would have been paid to the Participant. ARTICLE III - FUNDING SECTION 3.01: ESTABLISHMENT OF TRUST. The Company has established a Trust for the purpose of formally funding the Company's obligations to pay the Earned Value Account. SECTION 3.02: TRUST DEPOSITS. The Company shall deposit with the Trustee pursuant to the Trust an amount equal to each Earned Value of each Participant. Such deposits shall be separately accounted for by the Trustee with respect to each Participant and with respect to each Earned Value, under the Earned Value Account(s). SECTION 3.03: TRUST INVESTMENT. The Trustee shall invest and reinvest the deposits under Section 3.02 in the manner provided under the Trust. MBCI OPERATING, L.P. AND Page 6 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN SECTION 3.04: PAYMENTS BY TRUSTEE. The Trustee shall pay the Earned Value Account(s) of each Participant at such time and in such manner as provided under Article II and the terms of the Trust. SECTION 3.05: WAIVER AND INDEMNIFICATION. The partners, directors and employees of the Organization, and the Company and each entity comprising a part of the Organization, are hereby indemnified and held harmless from any and all claims, liabilities, judgments or costs, including reasonable attorneys fees, which may be asserted or incurred arising out of their action or inaction in adopting and administering this Plan or in the investment of all Earned Values other than damage or loss occasioned by intentional wrongdoing or intentional malfeasance. This indemnity shall include all costs of defense, including attorneys fees, as they are incurred. Each Participant in executing this Plan and accepting any benefits hereunder hereby WAIVES ANY AND ALL CLAIMS, LIABILITIES, RIGHT TO SUE OR DEMANDS AGAINST ANY PARTNER, DIRECTOR OR EMPLOYEE OF THE ORGANIZATION OR THE COMPANY OR ANY OTHER ENTITY COMPRISING A PART OF THE ORGANIZATION ARISING OUT OF ANY ACTION OR INACTION IN ADOPTING OR ADMINISTERING THIS PLAN AND HEREBY AGREES THAT THIS WAIVER IS A VOLUNTARY RELINQUISHMENT OF THE RIGHTS OF THE PARTICIPANT TO ASSERT A CLAIM, ENFORCE LIABILITY, OR MAKE DEMAND FROM THE PARTNERS, DIRECTORS OR EMPLOYEES OF THE ORGANIZATION OR THE COMPANY OR ANY OTHER ENTITY COMPRISING A PART OF THE ORGANIZATION. This waiver shall not constitute or be construed to be a waiver of any claim, liability, right to sue or demand against the Trustee selected by the Company. ARTICLE IV - PLAN ADMINISTRATION SECTION 4.01: AUTHORITY OF MBCI. MBCI shall administer the Plan. SECTION 4.02: DELEGATION. MBCI may, in its sole discretion, delegate any duties hereunder to an officer or employee (or committee thereof) of the Organization or the Company, who shall serve in such capacity at its pleasure. SECTION 4.03: RECORDS AND RULES. The Company shall keep written records sufficient to reflect the identity of Participants, and the Earned Values. The Company shall adopt such rules as it shall deem reasonable and appropriate to the administration of the Plan. MBCI OPERATING, L.P. AND Page 7 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN ARTICLE V - MISCELLANEOUS PROVISIONS SECTION 5.01: EMPLOYMENT AND OTHER RIGHTS. Nothing contained herein shall require the Company or the Organization to continue any Participant or Executive in the Company's or Organization's employ, or require any Participant or Executive to continue in the employ of the Company or Organization, nor does the Plan create any rights of any Participant, Executive or Beneficiary or any obligations on the part of the Company or Organization other than those set forth herein. The benefits payable under this Plan shall be independent of, and in addition to, any other agreements that may exist from time to time concerning any other compensation or benefits payable by the Company or the Organization; provided, however, all amounts paid or payable to a Participant (or Beneficiary) under the Plan shall be excluded for purposes of calculating the benefit or other entitlement of any person under any other employee benefit or compensation plan, program, practice, or policy maintained by the Company or the Organization. SECTION 5.02: NON-ALIENATION OF BENEFITS. Except as otherwise provided by law, no benefit, payment or distribution under this Plan shall be subject either to the claim of any creditor or a Participant or Beneficiary, or to attachment, garnishment, levy, execution or other legal or equitable process, by any creditor of such person, and no such person shall have any right to alienate, commute, anticipate, or assign (either at law or equity) all or any portion of any benefit, payment or distribution under this Plan. The Plan shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder. In the event that any Participant's or Beneficiary's benefits are garnished or attached by order of any court, the Company or Organization may elect to bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid by the Plan. During the pendency of said action, any benefits that become payable may be paid into the court as they become payable, to be distributed by the court to the recipient as it deems proper at the close of said action. SECTION 5.03: WITHHOLDING AND DEDUCTIONS. All payments made by the Trustee under the Plan to any Participant or Beneficiary shall be subject to applicable withholding and to such other deductions as shall at the time of such payment be required under any income tax or other law, whether of the United States or any other jurisdiction, and, in the case of payments to a Beneficiary, the delivery to the Trustee of all necessary waivers, qualifications and other documentation. The Company shall withhold, from the Earned Value, all applicable state and Federal tax under any income tax or other law, whether of the United States or any other jurisdiction, unless MBCI OPERATING, L.P. AND Page 8 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN the Participant provides to the Company the required form indicating an exemption from such withholding. SECTION 5.04: AMENDMENT AND TERMINATION. The Plan may be terminated or amended at any time by MBCI, in its sole discretion, subject to the following limitations: a) In the event of any Plan termination, or in the event of an amendment which shall adversely affect the right, title or interest of the Participant (or Beneficiary) with respect to such Earned Value Account, any unmatured Deferral Period shall be deemed to have reached its Maturity Date on the date of such termination or amendment, and the Earned Value Account shall thereupon be paid in accordance with Section 2.04. b) Any of the foregoing to the contrary notwithstanding, in the event of a Plan termination or amendment as described under item (a) above, where the Organization provides a replacement of the terminated Plan or adversely affected portion thereof of equivalent value, the Maturity Date with respect to any then unmatured Deferral Period shall not be accelerated as provided under said items but shall occur on its originally scheduled date. SECTION 5.05: CONSTRUCTION. In the construction of the Plan, the masculine shall include the feminine and the singular the plural in all cases where such meanings would be appropriate. SECTION 5.06: CONTROLLING LAW. The law of the State of Texas shall be the controlling state law in all matters relating to the Plan and shall apply to the extent that it is not preempted by the laws of the United States of America. SECTION 5.07: EFFECT OF INVALIDITY OF PROVISION. If any provision of this Plan is held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provision had not been included. SECTION 5.08: INUREMENT. This Plan shall be binding upon and inure to the benefit of the Organization and its successors and assigns and the Participant and any Beneficiary, or their successors, heirs, executors, administrators and beneficiaries. MBCI OPERATING, L.P. AND Page 9 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN EXECUTION IN WITNESS WHEREOF, the Company hereby adopts this Plan by causing this Plan to be signed by its duly authorized officers this 8th day of May, 1998. MBCI OPERATING, L.P. Attest: /s/ Connie Wood By: /s/ Kenneth W. Maddox -------------------------- -------------------------------- Title: Vice President/CFO ------------------------------ METAL COATERS OPERATING, L.P. Attest: /s/ Connie Wood By: /s/ Kenneth W. Maddox -------------------------- -------------------------------- Title: Vice President/CFO ----------------------------- MBCI OPERATING, L.P. AND Page 10 METAL COATERS OPERATING, L.P. LONG-TERM MANAGEMENT INCENTIVE PLAN EX-13 14 d02830exv13.txt 2002 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13 [NCI BUILDING SYSTEMS, INC. LOGO] [NCI PICTURE] 2002 ANNUAL REPORT [NCI BUILDING SYSTEMS, INC. LOGO] A&S [LOGO] ABC [LOGO] AAS [LOGO] CLASSIC [LOGO] DBCI [LOGO] DOUBLECOTE [LOGO] IPS [LOGO] MBCI [LOGO] MIDLAND MESCO [LOGO] METALLIC [LOGO] METALS [LOGO] METAL COATERS METAL COATERS OF CALIFORNIA, INC. [LOGO] OF GEORGIA [LOGO] METAL PREP [LOGO] MID-WEST STEEL [LOGO] STEEL SYSTEMS [LOGO]
PLANT LOCATIONS [MAP] [PICTURE OF ANNUAL REPORT COVER] ON THE COVER: Payton Construction of Boston built Campanelli Stadium in Brockton, MA. Steel was supplied by Barnes Buildings & Management Group, a Metallic Builder. Photos(C) 2002. Courtesy of Warren Patterson Photography. Used by permission. NCI TODAY o One of the largest producers of engineered metal building systems. o The largest producer/distributor of components for building construction. o The largest supplier of metal roofs in a multi-billion dollar roofing industry. o A leading provider of metal and painting services. o An industry leader in growth, profitability and innovation. o A low-cost supplier. BUSINESS DESCRIPTION CONTINUED SUCCESS NCI Building Systems is one of the largest manufacturers and marketers of metal building components and engineered metal building systems in North America. NCI offers one of the most metal product lines in the building industry, well-recognized brand names. Through internal growth and strategic acquisitions, the company has compiled a record of revenue earnings growth well above the industry average. NCI is a leader in each of its key markets. The Company is benefiting from a larger customer base, broader product lines, expanded geographic distribution, and increased manufacturing capacity. NCI's long term targets are 10% annual revenue 15% earnings growth and 25% return on assets based on its sound growth strategy and a relatively stable economic environment. SELECTED FINANCIAL DATA
FISCAL YEAR 1993 1994 1995 1996 1997 1998(1) 1999 2000 2001 2002 -------- -------- -------- -------- -------- -------- -------- ---------- -------- -------- Sales $134,506 $167,767 $234,215 $332,880 $407,751 $675,331 $936,550 $1,018,324 $954,877 $953,442 Income before extraordinary loss and cumulative effect 6,333 10,256 17,032 24,814 27,887 37,318(2,4) 45,578(4) 44,407(4) 16,535(2,4) 32,122(4) Income before extraordinary loss and cumulative effect per diluted share(3) .48 .77 1.26 1.51 1.64 2.05(2,4) 2.39(4) 2.43(4) .91(2,4) 1.72(4) Working Capital 15,511 16,885 31,687 51,958 76,746 58,393 59,254 56,913 49,461 80,157 Total Assets 46,733 63,373 83,082 158,326 196,332 823,537 856,367 868,921 838,812 721,265 Long-Term Debt (Noncurrent portion) 1,899 326 278 1,730 1,679 444,477 397,062 374,448 321,250 291,050 Shareholders' Equity(5) $ 28,655 $ 39,682 $ 57,682 $116,175 $147,815 $223,612 $275,994 $ 305,280 $330,343 $303,459 Average Common Shares (Assuming dilution)(3) 13,156 13,390 13,530 16,455 17,085 18,192 19,100 18,286 18,265 18,692
(1) 1998 data includes the acquisition of MBCI in May 1998. (2) Includes restructuring charges of $2.1 million ($1.3 million after tax, or $0.07 per diluted share) in 1998; and $2.8 million ($1.8 million after (3) Share and per share data adjusted for effect of 3/2 stock split in October 1993 and 2/1 Goodwill stock split amortization of $5.9 million, $10.9 million, $10.6 million and $11.2 million (net of tax effect), or $0.32, $0.57,in July 1998. (4) share, is included in income before extraordinary loss and cumulative effect of change in accounting principal in fiscal 1998, 1999, 2000 and 2001. Goodwill is no longer amortized beginning in fiscal 2002 in 3 to the Consolidated Financial Statements for additional information. (5) Historically, the Company has not paid dividends. SHAREHOLDER LETTER [PICTURE] FELLOW SHAREHOLDERS... [NCI BUILDING SYSTEMS LOGO] Any investor looking at the Selected Financial Data inside the front cover of this annual report would probably reach the conclusion that fiscal 2002 was a very good year for NCI in which we achieved a noteworthy improvement in operating earnings compared with fiscal 2001. We would agree with that summary, but the year-to-year gain actually does not give fair credit to our performance when viewed against the competitive backdrop of perhaps the most difficult environment in recent memory for the metal construction industry. SHAREHOLDER LETTER 1 [BAR GRAPH] TEN YEAR SALES (IN MILLIONS) Certainly, the recent demand for construction materials has been challenging; but fiscal 2002 was a year that began with clear signs of a recession and ended without much, if any, sustained improvement in the general tone of incoming orders. It was a year in which industry shipments were off by at least 10%, a decline that was sufficient to cause a number of our competitors to report losses and to force some to downsize and cutback their production and selling activities to conserve cash and in some cases, just to survive. KEY COMPETITIVE ADVANTAGES HIGHLIGHTED We were not immune to the pressures that this slowdown created, but NCI has some fundamental advantages that enabled us to offset these forces and still show an increase in operating earnings, admittedly with revenues that were essentially unchanged from fiscal 2001. Those basic attributes that played such a pivotal role in our strong relative performance included the following: o A decentralized organization focused on delivering consistently high customer service and operating as cost efficiently as possible. o A nationwide network of plants and distribution centers designed to minimize transportation costs and place NCI close to our major markets. o An integrated manufacturing process, including coil painting and coating, that provides not only significant, incremental profits but also valuable flexibility to meet demanding delivery schedules. o The broadest line of metal construction products available from any single company, enabling us to be a single-source supplier for an extremely wide range of customers. o Competitive leadership in marketing both entire systems for metal buildings as well as metal components used in repair and modernization projects and in new construction. o A record of innovation in introducing new products that have enhanced the intrinsic advantages of metal construction techniques versus conventional building processes. o A strong financial position with cash flow well in excess of our ongoing capital spending needs. NCI's competitive advantages position us to provide meaningful value to our customers and were especially important in our ability to achieve sustained profitability during fiscal 2002. We started the fiscal year with indications that the recession in the non-residential building industry was going to persist for at least several quarters. That indeed proved to be the case even after we entered spring 2002 when the seasonal factors that typically stimulate an increased pace of construction were not sufficient to reverse the slide in the industry figures. Still, we achieved a record for the year that included year-to-year gains in diluted earnings per share in each of the last three quarters. The required adoption of SFAS No. 142, a new accounting standard relating to the amortization of goodwill, did contribute to our bottom-line growth from a year ago; but even excluding that factor, we achieved higher earnings per share in each of those three periods versus the comparable year-earlier results. Even in the fourth quarter with revenues down 6 percent, we were aided by the cost reduction steps taken and reported a recovery in operating earnings per diluted share to $0.62 versus $0.29 in the fourth quarter of fiscal 2001. RESOURCE REALLOCATION AND EXPANSION CONTRIBUTE TO EARNINGS IMPROVEMENT During fiscal 2002 we realized further benefits 2 NCI BUILDING SYSTEMS, INC. o 2002 ANNUAL REPORT SHAREHOLDER LETTER during the industrywide slowdown to rationalize as a result of our efforts to rationalize capacity and lower operating expenses. This was not the typical downsizing alternative that many companies have been forced to execute because of the necessity of enhancing cash flow. For NCI, it was a series of actions intended...to realign our resources, gain more operating efficiency and improve customer service. We were careful to communicate to customers that this was not a retrenchment from any market but rather an opportunity, while incoming orders were soft, to shift certain equipment to other facilities and rationalize our operating scope by closing five of our then-40 facilities. In some areas where we closed a plant, our sales for fiscal 2002 were actually up from the prior year, affirming our intent to use this program to aid, not impede, our growth. In terms of operating efficiency, the facility changes implemented did lower costs and generate higher economies of scale. This was particularly noticeable in our coil painting line that serves not only NCI, but other customers as well. Having the capacity to paint and coat coil steel has proven to be a very important investment for NCI, enabling us to avoid an outsourcing process for others which significantly complicates their ability to guarantee delivery schedules. We also took advantage of our financial position to expand our geographical scope by opening a new components plant during the third fiscal quarter in Big Rapids, Michigan. This is an attractive area for our business where we already had established a marketing presence through shipments from other plants. Having a facility there is allowing us to offer improved customer service and thereby increase our penetration. This expansion is contributing positively to our growth. Against the backdrop of plant closures and operational cutbacks by others, this step also underscores our enthusiasm for the metal construction industry and the competitive edge our strong balance sheet affords us to expand selectively and economically, in this case by purchasing an existing building and moving available manufacturing equipment into it. COMPONENTS COMPLEMENT METAL SYSTEMS AND FACILITATE CUSTOMER GROWTH The addition of a strong metal components business four years ago through the acquisition of Metal Buildings Components, Inc. (MBCI) is continuing to prove a substantial positive assist to our overall marketing program. The benefit of being able to sell metal components to the market for repair and renovation projects has been especially helpful during the downturn in the pace of new construction that we are currently experiencing. We are also using this product breadth, which ranges from the largest steel structures to individual metal roof and wall components, to expand our customer base. Our business, like most, is one in which the best accounts are successful at least in part because they have a strong, well-established team of suppliers. At the same time, there are always opportunities to start new relationships. For fiscal 2002 as a whole, we added a significant number of new component customers and a 13% increase in new builders. We were coming off strong momentum from this same type of sales effort in fiscal 2001 and are very gratified with this ongoing trend that includes promising penetration with our national accounts program. The real significance of this effort is not so much what the incremental business totaled in fiscal 2002. Rather, we are optimistic about what the increasing business with these new accounts will mean to future sales. If we are successful in delivering value, NCI will supply more of these needs and increase our sales regardless of what the overall industry trends may be. [BAR GRAPH] SHAREHOLDERS' EQUITY (IN MILLIONS) SHAREHOLDER LETTER 3 POSITIVE CASH FLOW FUNDS FURTHER DEBT REDUCTION One of our key strategic goals for fiscal 2002 was to use our positive cash flow to reduce our debt further, while still funding the projects necessary to support future operations. We successfully reduced our debt by $70 million in fiscal 2002, following a reduction of $50 million in fiscal 2001. Borrowings at the close of the fiscal year were $297 million, equivalent to a reasonable debt-to-capital ratio of 49%. It is significant to note that our debt is down from $368 million at the end of fiscal 2001 and has declined 47% from $558 million in fiscal 1998, only four years ago. We should generate at least $50 million in free cash flow during fiscal 2003, providing options for managing our balance sheet and ensuring our flexibility to seize any business opportunities that satisfy our acquisition criteria and add to our long-term potential. FURTHER IMPROVEMENTS EXPECTED IN FISCAL 2003 As was the case a year ago, we face an uncertain, near-term outlook for non-residential construction spending. The upside leverage in our operating structure compounds the difficulty in translating any macro-economic picture into one for NCI. The 41% gain in diluted earnings per share in the fourth quarter of fiscal 2002, excluding the extraordinary loss on debt refinancing and the effect of SFAS No. 142, underscores how quickly that leverage can translate into significant year-to-year gains. One should especially note that the fourth quarter gain was achieved on 6% lower sales from the prior year, reflecting primarily the cost savings we realized from various actions during the year. We certainly remain positive about NCI's longer term potential and expect to participate fully in any sustained recovery in commercial construction. Our best guide for investors regarding annual earnings is that we believe our success in maintaining a low-cost operating structure and our active marketing programs should enable us in the next few years to achieve record yearly earnings, above the $2.39 per diluted share we attained as recently as three years ago. This is not a realistic target for fiscal 2003, but we believe it is definitely attainable at some future point for NCI. In closing, we would like to note that within the climate of new standards being promulgated for certification of financial statements, NCI's goal has always been to provide clear, straightforward and accurate guidance simultaneously to all investors. Finally, we would like to extend a sincere "thank you" to our shareholders, customers and our suppliers for your continued support. And, of course, thank you to the employees within NCI who were challenged by a year that was truly unlike any other that they have experienced while being a part of this Company. They responded well in a difficult environment, and we are very pleased with the high level of confidence and commitment that is being openly expressed within NCI about our potential for further recovery and for setting new highs in sales and income in the years ahead. Growth is indeed an integral part of the NCI culture, and we fully share this optimism about our longer term potential! /s/ A. R. Ginn /s/ Johnie Schulte, Jr. A. R. Ginn Johnie Schulte, Jr. Chairman of the Board President and Chief Executive Officer 4 NCI BUILDING SYSTEMS, INC. o 2002 ANNUAL REPORT COMPANY REVIEW [PICTURE] THE IMPORTANCE OF CHANGE [NCI BUILDING SYSTEMS, INC. LOGO] Virtually all companies affirm the importance of change, and many even embrace that concept by stating it explicitly in their corporate mission statements. At NCI change is a way of life. From an adjustment in the US interest rates to a new regime in a foreign land, the economic and political winds of change continually create new scenarios for American business. The evolution of the NCI business paradigm prompts the implementation of new procedures and new products to keep NCI on course for growth. Our history tells that story. We have embraced the concept of change and established open avenues of discussion for better ways to conduct business at NCI. COMPANY REVIEW 5 [PICTURE] 6 NCI BUILDING SYSTEMS, INC. o 2002 ANNUAL REPORT COMPANY REVIEW [PICTURES] NCI, a leader in the well-established, multi-billion dollar metal construction industry, has a record embracing change as a positive force. We too certainly struggle with identifying where change should occur and at times with implementing new processes, but we have not been reluctant to take steps that included a number of significant acquisitions, the introduction of new products and a realignment of facilities and personnel to have the strongest team possible. Founded as a marketer of complete systems for metal buildings, we are now one of the largest suppliers in the metal construction industry with a comprehensive product line covering not only systems for buildings exceeding one million square feet in size, but also a full line of metal components used for metal roof and wall systems, overhead doors and various trim accessories. Our growth through internal expansion as well as strategic acquisitions has included the addition of capacity for coating and painting metal coils that serves all of our needs and is marketed to other companies as well. NCI's integrated manufacturing operations provide a distinct competitive advantage over most of our competitors, reducing our costs and providing valuable flexibility for us to meet customers delivery requirements, regardless of how demanding they may be. One of the newly popular corporate maxims is total quality management where a business recognizes that the standards to be regarded as important are those set by its customers and not by its own strategic planners. This is not a new concept at NCI. We have long held that delivering a consistently high level of customer service was the vital factor in the equation for long-term growth and financial success. We work hard to listen to our customers who frequently identify new market niches which we can enter through innovative products. Our ability to respond to these needs, however, depends on several critical attributes including the following: ONE-STOP SHOPPING With the broadest array of steel construction products, we provide "one- stop shopping" for anyone in the steel construction market. Our goal is delivering value; namely, providing consistently high quality products at competitive prices with dependable service. "Value" is an easy word to state but a deceptively difficult concept to execute. COMPANY REVIEW 7 [PICTURE] 8 NCI BUILDING SYSTEMS, INC. o 2002 ANNUAL REPORT COMPANY REVIEW [PICTURES] At NCI we recognize price as an important factor, but are committed to building relationships with our customers that recognize the role of other variables such as product innovation, consistent quality and dependable shipping schedules. We are proud of the long-term business dealings we have developed with some of the nation's largest builders who recognize that we must generate a sufficient return on our investments to allow us to support their very growth by maintaining modern facilities, up-to-date information systems and a record of product innovations. NATIONWIDE MARKET COVERAGE Our 35 manufacturing plants and distribution centers provide virtually nationwide market coverage for both our metal components and metal building systems products. During fiscal 2002 we shifted resources within our plants to generate higher economies of scale and still maintain the same high level of market service. We were one of the few companies in our industry to expand during this period. Through our new metal components facility in Michigan, we are increasing our share in that market in a move that strongly reinforces our confidence in the additional growth potential of the overall metal construction market. METAL COIL COATING/PAINTING AND INTEGRATION As we have grown, one of our goals has been to become vertically integrated by adding capacity to the areas that play a major role in the production of our products. One of the most important of these areas is the coating and painting of light gauge steel coils. Although building such capacity requires a considerable investment, we have successfully added sufficient manufacturing equipment to meet our own needs and to market these services to others. We allocate a majority of our capacity to meet NCI's own requirements; and by owning our coating/painting assets, we can better control our inventories and meet customers' delivery needs. During fiscal 2002, we shifted certain equipment to gain higher economies of scale from our coating/painting equipment and were rewarded by a positive contribution to earnings from this portion of our business. Having sufficient demand to operate these facilities continuously is essential to achieving a positive return, and we COMPANY REVIEW 9 [PICTURE] 10 NCI BUILDING SYSTEMS, INC. o 2002 ANNUAL REPORT COMPANY REVIEW [PICTURES] believe that NCI's market position in coil painting and coating now affords us a strong competitive position in this service area that will account for an increasing share of our sales and earnings in the future. MARKETING INNOVATION Our history includes the introduction of numerous new products and services that not only added incremental sales, but also expanded the basic use of metal construction products. One of the best examples of this is the "pier and header" technique introduced in fiscal 2001 for constructing self-storage warehouses. The lower cost and added convenience of metal construction products have been essential to the fast-growing popularity of these storage facilities, and our proprietary system allows customers to erect these warehouses more quickly and safely with features that allow more storage room. In the metal components area, another good example of our innovation is our development of processes to manufacture larger panels as well as insulated ones that make metal buildings practical alternatives to panels built with conventional techniques in colder geographic regions. During fiscal 2002, we added the ability to manufacture these insulated panels with an acrylic-based, textured finish that increases architectural appeal. Other examples of NCI's drive to increase our market share include the introduction of structural beams and trusses for large structures. As metal continues to grow in popularity within the entire building industry, items such as these beams and trusses will facilitate the construction of large buildings such as major distribution centers and sports arenas. We entered the growing market for entire, large-scale building systems through our Long Bay System, first marketed three years ago. Although the recession has slowed the growth in new construction of these facilities, most consider this a temporary pause in a long-term record of growth. Our Long Bay System is supporting our national accounts program, designed to build relationships between NCI and major customers. We have long worked with a variety of builders and are confident about the opportunity for us to gradually build a strong position in this market niche. COMPANY REVIEW 11 COMPANY REVIEW [PICTURES] CHANGING FOR THE FUTURE Helping our employees realize their full potential is imperative to NCI's future. We continue to emphasize the importance of ongoing training for all of our managers and have more recently extended these classes to customers seeking to learn more about using metal construction products. Although no one activity or initiative ensures our future success as a corporation, investing in programs that challenge our employees to do their best - and equipping them with the tools to execute their responsibilities - is perhaps the best way to guarantee that NCI will surmount its future challenges. Most analysts expect metal products to continue accounting for an increasing share of the total market for construction products. We concur with that assessment and have proven the flexibility of the NCI organization not just to adapt to different market conditions but to be a catalyst for change. We are indeed excited about the longer term outlook for NCI. [PICTURE] 12 NCI BUILDING SYSTEMS, INC o 2002 ANNUAL REPORT Return on Assets is defined as operating income divided by average operating assets used in the business. NCI's management and directors are thoroughly convinced that this ratio is the best measure of operating performance. Tight control over inventory, receivables, and fixed investments is as important as, and interrelated to, the income statement. Return on Assets is a proxy for cash flow, which can reward shareholders with undiluted growth. FINANCIAL REVIEW 13 CONSOLIDATED STATEMENTS OF INCOME NCI BUILDING SYSTEMS, INC. (IN THOUSANDS, EXCEPT PER SHARE DATA)
Fiscal year ended... October 31, 2000 October 31, 2001 NOVEMBER 2, 2002 - -------------------- ---------------- ---------------- ---------------- Sales ................................................................... $ 1,018,324 $ 954,877 $ 953,442 Cost of sales ........................................................... 761,702 741,674 740,577 -------------- -------------- -------------- Gross profit ...................................................... 256,622 213,203 212,865 Selling, general and administrative expenses ............................ 131,484 133,331 140,641 Goodwill amortization ................................................... 11,468 12,232 -- Restructuring charge .................................................... -- 2,815 -- -------------- -------------- -------------- Income from operations ............................................ 113,670 64,825 72,224 Interest expense ........................................................ (39,069) (33,090) (21,591) Other income, net ....................................................... 2,672 951 1,459 -------------- -------------- -------------- Income before income taxes, extraordinary loss and cumulative effect of change in accounting principle ............... 77,273 32,686 52,092 Provision for income taxes .............................................. 32,866 16,151 19,970 -------------- -------------- -------------- Income before extraordinary loss and cumulative effect of change in accounting principle .......................... 44,407 16,535 32,122 Extraordinary loss on debt financing, net of tax ........................ -- -- (808) Cumulative effect of change in accounting principle, net of tax ......... -- -- (65,087) -------------- -------------- -------------- Net income (loss) ....................................................... $ 44,407 $ 16,535 $ (33,773) ============== ============== ============== Income (loss) per share: Basic: Income before extraordinary loss and cumulative effect of change in accounting principle .......................... $ 2.48 $ .91 $ 1.74 Extraordinary loss on debt refinancing, net of tax ................ -- -- (0.04) Cumulative effect of change in accounting principle, net of tax ... -- -- (3.52) -------------- -------------- -------------- Net income (loss) ................................................. $ 2.48 $ .91 $ (1.82) ============== ============== ============== Diluted: Income before extraordinary loss and cumulative effect of change in accounting principle .......................... $ 2.43 $ .91 $ 1.72 Extraordinary loss on debt refinancing, net of tax ................ -- -- (0.04) Cumulative effect of change in accounting principle, net of tax ... -- -- (3.49) -------------- -------------- -------------- Net income (loss) .................................................. $ 2.43 $ .91 $ (1.81) ============== ============== ==============
See accompanying notes to the consolidated financial statements. 14 2002 ANNUAL REPORT CONSOLIDATED BALANCE SHEETS NCI BUILDING SYSTEMS, INC. (IN THOUSANDS)
October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- ASSETS Current assets: Cash and cash equivalents ......................................................... $ 21,125 $ 9,530 Accounts receivable, net .......................................................... 107,981 94,956 Inventories ....................................................................... 72,464 68,445 Deferred income taxes ............................................................. 5,884 7,448 Prepaid expenses .................................................................. 5,553 6,129 -------------- -------------- Total current assets ......................................................... 213,007 186,508 Property, plant and equipment, net .................................................... 224,593 205,334 Excess of cost over fair value of acquired net assets ................................. 387,268 318,247 Other assets .......................................................................... 13,944 11,176 -------------- -------------- Total assets ................................................................. $ 838,812 $ 721,265 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ................................................. $ 46,250 $ 6,250 Accounts payable .................................................................. 72,426 49,012 Accrued compensation and benefits ................................................. 11,897 22,418 Other accrued expenses ............................................................ 32,973 28,671 -------------- -------------- Total current liabilities .................................................... 163,546 106,351 Long-term debt, noncurrent portion .................................................... 321,250 291,050 Deferred income taxes ................................................................. 23,673 20,405 Shareholders' equity: Preferred stock, $1 par value, 1.0 million shares authorized, none outstanding .... -- -- Common stock, $.01 par value, 50.0 million shares authorized; 18.6 million shares and 18.7 million shares issued in 2001 and 2002, respectively ......... 186 187 Additional paid-in capital ........................................................ 95,649 97,903 Retained earnings ................................................................. 239,461 205,688 Treasury stock; (0.3 million and 0.02 million shares in 2001 and 2002, respectively), at cost ................................... (4,953) (319) -------------- -------------- Total shareholders' equity ................................................... 330,343 303,459 -------------- -------------- Total liabilities and shareholders' equity ................................... $ 838,812 $ 721,265 ============== ==============
See accompanying notes to the consolidated financial statements. FINANCIAL REVIEW 15 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY NCI BUILDING SYSTEMS, INC. (IN THOUSANDS)
Common Additional Retained Treasury Shareholders' Stock Paid-In Capital Earnings Stock Equity ---------- --------------- ---------- ---------- ------------- Balance, October 31, 1999 ................ $ 186 $ 97,289 $ 178,519 $ -- $ 275,994 Treasury stock purchases ................. -- -- -- (20,416) (20,416) Proceeds from exercise of stock options ..................... -- 122 -- -- 122 Treasury stock used for stock option exercises ............... -- (843) -- 1,442 599 Tax benefit from stock option exercises .. -- 319 -- -- 319 Treasury stock used for contribution to 401(k) plan ....................... -- 337 -- 3,918 4,255 Net income ............................... -- -- 44,407 -- 44,407 ---------- --------------- ---------- ---------- ------------- Balance, October 31, 2000 ................ 186 97,224 222,926 (15,056) 305,280 Treasury stock purchases ................. -- -- -- (909) (909) Treasury stock used for stock option exercises ............... -- (3,219) -- 6,239 3,020 Tax benefit from stock option exercises .. -- 1,619 -- -- 1,619 Treasury stock issued for debt payment ... -- (48) -- 422 374 Treasury stock used for contribution to 401(k) plan ....................... -- 73 -- 4,351 4,424 Net income ............................... -- -- 16,535 -- 16,535 ---------- --------------- ---------- ---------- ------------- Balance, October 31, 2001 ................ 186 95,649 239,461 (4,953) 330,343 Treasury stock purchases ................. -- -- -- (175) (175) Treasury stock used for stock option exercises ..................... -- (1,007) -- 3,938 2,931 Tax benefit from stock option exercises .. -- 825 -- -- 825 Common stock issued for contribution to 401(k) plan ....................... 1 2,435 -- -- 2,436 Treasury stock used for contribution to 401(k) plan ....................... -- 1 -- 871 872 Net loss ................................. -- -- (33,773) -- (33,773) ---------- --------------- ---------- ---------- ------------- BALANCE, NOVEMBER 2, 2002 ................ $ 187 $ 97,903 $ 205,688 $ (319) $ 303,459 ========== =============== ========== ========== =============
See accompanying notes to the consolidated financial statements. 16 2002 ANNUAL REPORT CONSOLIDATED STATEMENTS OF CASH FLOWS NCI BUILDING SYSTEMS, INC. (IN THOUSANDS)
Fiscal year ended... October 31, 2000 October 31, 2001 NOVEMBER 2, 2002 - -------------------- ---------------- ---------------- ---------------- Cash flows from operating activities: Net income (loss) ........................................... $ 44,407 $ 16,535 $ (33,773) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of change in accounting principle, net of tax ................................... -- -- 65,087 Extraordinary loss on debt refinancing, net of tax ...... -- -- 808 Depreciation and amortization ........................... 33,487 36,646 24,928 (Gain) loss on sale of fixed assets ..................... (201) 166 (782) Restructuring charge .................................... -- 2,815 -- Provision for doubtful accounts ......................... 2,645 2,396 2,743 Deferred income tax provision (benefit) ................. 1,494 (799) (895) Changes in operating assets and liabilities, net of effect of acquisitions: Accounts, notes and other receivables ................... (7,403) 8,991 10,282 Inventories ............................................. (1,472) 16,181 4,019 Prepaid expenses ........................................ (2,056) 1,991 (576) Accounts payable ........................................ 7,856 (6,149) (23,414) Accrued expenses ........................................ (5,917) 2,921 11,330 ---------------- ---------------- ---------------- Net cash provided by operating activities ................... 72,840 81,694 59,757 Cash flows used in investing activities: Proceeds from sale of fixed assets ...................... 383 103 5,788 Proceeds from sale of joint venture ..................... -- 4,000 -- Acquisition of DOUBLECOTE, L.L.C ........................ (24,408) -- -- Acquisition of Midland Metals, Inc. ..................... -- (5,521) -- Changes in other noncurrent assets ...................... 2,780 145 (521) Capital expenditures .................................... (28,885) (15,026) (9,175) ---------------- ---------------- ---------------- Net cash used in investing activities ....................... (50,130) (16,299) (3,908) Cash flows used in financing activities: Proceeds from stock options exercised ..................... 721 3,020 2,931 Net borrowings (payments) on revolving lines of credit .... 20,145 (6,938) (75,450) Borrowings on long-term debt .............................. -- -- 125,000 Payments on long-term debt ................................ (36,250) (42,442) (119,750) Purchase of treasury stock ................................ (20,416) (909) (175) ---------------- ---------------- ---------------- Net cash used in financing activities ....................... (35,800) (47,269) (67,444) Net increase (decrease) in cash and cash equivalents ............ (13,090) 18,126 (11,595) Cash at beginning of period ..................................... 16,089 2,999 21,125 ---------------- ---------------- ---------------- Cash at end of period ........................................... $ 2,999 $ 21,125 $ 9,530 ================ ================ ================
See accompanying notes to the consolidated financial statements. FINANCIAL REVIEW 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NCI BUILDING SYSTEMS, INC. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting Entity These financial statements include the operations and activities of NCI Building Systems, Inc. and its subsidiaries (the "Company") after the elimination of intercompany accounts and balances. The Company designs, manufactures and markets metal building systems and components primarily for non-residential construction use. During 2002, the Company adopted a revised accounting calendar which incorporates a four-four-five week calendar each quarter with year end on the Saturday closest to October 31. The year end for fiscal 2002 is November 2, 2002. (b) Revenue Recognition The Company recognizes revenues when the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectibility is reasonably assured. Generally, these criteria are met at the time product is shipped or services are complete. Adequate provision is made, upon shipment, for estimated product returns and warranties. Costs associated with shipping and handling of products are included in cost of sales. (c) Accounts Receivable and Related Allowance The Company reports accounts receivable net of the allowance for doubtful accounts of $3.9 million and $5.7 million at October 31, 2001 and November 2, 2002, respectively. Trade accounts receivable are the result of sales of building systems and components to customers throughout the United States and affiliated territories including international builders who resell to end users. All sales are denominated in United States dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process. (d) Inventories Inventories are stated at the lower of cost or market value, using specific identification or the weighted-average method for steel coils and other raw materials. The components of inventory are as follows:
October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- (in thousands) Raw materials ......................... $ 55,310 $ 49,064 Work in process and finished goods .... 17,154 19,381 ---------------- ---------------- $ 72,464 $ 68,445 ================ ================
During fiscal 2002, the Company purchased approximately 76% of its steel requirements from National Steel Corporation, Bethlehem Steel Corporation and U.S. Steel. No other steel supplier accounted for more than 8% of steel purchases for the same period. (e) Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Computer software developed or purchased for internal use is depreciated using the straight-line method over its estimated useful life. Depreciation expense for the fiscal years ended 2000, 2001 and 2002 was $19.0 million, $22.4 million and $22.9 million, respectively. Property, plant and equipment consist of the following:
October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- (in thousands) Land .................................. $ 12,920 $ 11,700 Buildings and improvements ............ 113,918 111,991 Machinery, equipment and furniture .... 152,685 152,719 Transportation equipment .............. 4,008 3,679 Computer software and equipment ....... 31,552 32,325 ---------------- ---------------- 315,083 312,414 Less accumulated depreciation ......... (90,490) (107,080) ---------------- ---------------- $ 224,593 $ 205,334 ================ ================
18 2002 ANNUAL REPORT Estimated useful lives for depreciation are: Buildings and improvements........................ .... 10-40 years Machinery, equipment and furniture...................... 5-13 years Transportation equipment................................ 3-10 years Computer software and equipment.......................... 3-7 years (f) Statement of Cash Flows For purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Total interest paid for the fiscal years ended 2000, 2001 and 2002 was $37.2 million, $29.9 million and $28.9 million, respectively. Income taxes paid, including refunds and prepayments, for the years ended October 31, 2000, 2001 and November 2, 2002 was $42.9 million (of which $11.7 million related to 1999, but was payable in 2000), $12.1 million (of which $4.5 million related to 2000, but was payable in 2001) and $18.9 million (of which $3.5 million related to 2001, but was payable in 2002), respectively. Noncash investing or financing activities included: $2.3 million for the 2000 401(k) plan contributions through the third quarter of fiscal 2000, and $1.9 million for the related 1999 contributions which were paid in common stock in 2000; $2.5 million for the 2001 401(k) plan contributions through the third quarter of fiscal 2001, and $1.9 million for the related 2000 contributions which were paid in common stock in 2001; $2.4 million for the 2002 401(k) plan contributions through the third quarter of fiscal 2002, and $0.9 million for the related 2001 contributions which were paid in common stock in 2002. (g) Goodwill The Company reviews the carrying values of goodwill and identifiable intangibles whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually for goodwill as required by the Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. Unforeseen events, changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of the Company's assets and result in a non-cash impairment charge. Some factors considered important which could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of the Company's use of the acquired assets or the strategy for its overall business and significant negative industry or economic trends. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flow, or multiples of earnings or revenue performance measures. The fair value of the asset could be different using different estimates and assumptions in these valuation techniques. Refer to Note 3 for additional discussion of the adoption of SFAS No. 142. (h) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts, inventory reserves, accruals for employee benefits, warranties and certain contingencies. Actual results could differ from those estimates. (i) Advertising Costs Advertising costs are expensed as incurred. Advertising expense was $3.1 million, $3.5 million and $2.5 million in fiscal 2000, 2001 and 2002, respectively. (j) Long-Lived Assets Impairment losses are recognized when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the asset's carrying amount. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. Assets held for disposal are measured at the lower of carrying value or estimated fair value, less costs to sell. (k) Stock-Based Compensation The Company uses the intrinsic value method in accounting for its stock-based employee compensation plans. (l) Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. (m) Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company adopted SFAS No. 144 as of November 1, 2001, and the adoption of the statement did not have a significant impact on the Company's financial position and results of operations. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 will generally require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt. Extraordinary treatment will be required for certain extinguishments as provided in APB No. 30, Reporting the Results of Operations. Accordingly, gains or losses from FINANCIAL REVIEW 19 extinguishments of debt for fiscal years beginning after May 15, 2002 will not be reported as extraordinary items unless the extinguishment qualifies as an extraordinary item under the provisions of APB No. 30. Upon adoption, any gain or loss on extinguishment of debt previously classified as an extraordinary item in prior periods presented that does not meet the criteria of APB No. 30 for such classification will be reclassified to conform with the provisions of SFAS No. 145. During the fourth quarter of fiscal 2002, the Company refinanced their debt and wrote off $1.2 million ($0.8 million after tax) of unamortized deferred financing costs and classified the loss as an extraordinary item. Upon adoption of SFAS No. 145, the Company will evaluate the appropriateness of income statement classification of the loss. In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 with early application encouraged. The Company does not expect that the adoption of the statement will have a significant impact on the Company's financial position and results of operations. During November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-21, Multiple-Deliverable Revenue Arrangements, which addresses how to account for arrangements that may involve the delivery or performance of multiple products, services, and/or rights to use assets. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted. The Company does not expect that the adoption will have a significant impact on the Company's financial position and results of operations. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. While the Statement does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB No. 25, Accounting for Stock Issued to Employees. The Company is currently evaluating whether to adopt the provisions of SFAS No. 148 relating to the SFAS No. 123 fair value method of accounting for stock-based employee compensation. 2. LONG-TERM DEBT
October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- (in thousands) Five-year revolving credit line with banks bearing interest at rates of 30-day and 90-day LIBOR plus 1.375% (weighted average interest rate of 4.9% at October 2001), maturing on July 1, 2003 ..................................... $ 122,750 $ -- Five-year term loan payable to banks bearing interest at a rate of 90-day LIBOR plus 1.375% (4.0% at October 31, 2001) repayable beginning on October 31, 1998, in quarterly installments beginning with $7.5 million and gradually increasing to $12.5 million on the maturity date, July 1, 2003 ..................................... 83,750 -- Term note payable to banks bearing interest at a rate of 90-day LIBOR plus 1.375% (4.0% at October 31, 2001), maturing on July 1, 2003 ................. 36,000 -- Five-year revolving credit line with banks bearing interest at rates of 30-day and 90-day LIBOR plus 2.5% (weighted average interest rate of 4.7% at November 2, 2002), maturing on September 15, 2007 ....................... -- 47,300 Six-year term loan payable to banks bearing interest at a rate of 90-day LIBOR plus 3.25% (5.1% at November 2, 2002) repayable beginning on December 31, 2002, in quarterly installments of $1.6 million with a final payment of $89.1 million on the maturity date, September 15, 2008........................ -- 125,000 Unsecured senior subordinated notes bearing interest at a rate of 9.25%, maturing on May 1, 2009 .................. 125,000 125,000 ---------------- ---------------- 367,500 297,300 Current portion of long-term debt ........ (46,250) (6,250) ---------------- ---------------- $ 321,250 $ 291,050 ================ ================
Aggregate required principal reductions are as follows for the respective fiscal years (in thousands): 2003................................. $ 6,250 2004................................. 6,250 2005................................. 6,250 2006................................. 6,250 2007 and thereafter.................. 272,300 --------- $ 297,300 =========
On September 15, 2002, the Company had a senior credit facility with a syndicate of banks, which consisted of (i) a five-year revolving credit facility of up to $200 million (outstanding balance of $83.8 million at September 15, 2002), (ii) a five-year term loan facility in the original principal amount of $200 million (outstanding balance of $50.0 million at September 15, 2002) and (iii) a $40 million term note (outstanding balance of $34.1 million at September 15, 2002). 20 2002 ANNUAL REPORT On September 16, 2002, the Company completed a $250 million senior secured credit facility with a group of lenders and used the initial borrowings to repay in full the then existing credit facility. The new facility includes a $125 million, five-year revolving loan maturing on September 15, 2007 and a $125 million, six-year term loan maturing on September 15, 2008. The term loan requires mandatory prepayments of $1.6 million each quarter beginning in December 2002 with a final payment of $89.1 million at maturity. The new senior credit facility is secured by security interests in (1) accounts receivable, inventory and equipment and assets related thereto such as related software, chattel paper, instruments and contract rights of the Company (excluding foreign operations) and (2) 100% of the capital stock and other equity interests in each of the direct and indirect operating domestic subsidiaries of the Company. The new senior credit agreement includes covenants which, among other things, limit certain debt ratios and require minimum interest coverage and the maintenance of a minimum net worth. The new senior credit agreement also limits the amount of permitted spending for capital additions, the repurchase of stock, payment of dividends, the disposition of assets and the amount of investments and other indebtedness. Borrowings under the new senior credit facility may be prepaid and the voluntary reduction of the unutilized portion of the five-year revolver may be made at any time, in certain amounts, without premium or penalty but subject to LIBOR breakage costs. The Company is required to make mandatory prepayments on the new senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations. These prepayments must first be applied to the term loan and then to reduction of the revolving commitment. The Company also is required to reduce the capacity of the revolver by $25 million if it issues an additional series of its senior subordinated notes due May 1, 2009, and in any event by December 31, 2005. Loans on the new senior credit facility bear interest, at the Company's option, as follows: (1) base rate loans at the base rate plus a margin that fluctuates based on the Company's leverage ratio and ranges from 1.0% to 1.75% on the revolving loan and from 2.0% to 2.25% on the term loan and (2) LIBOR loans at LIBOR plus a margin that fluctuates based on the Company's leverage ratio and ranges from 2.0% to 2.75% on the revolving loan and from 3.0% to 3.25% on the term loan. Base rate is defined as the higher of Bank of America, N.A. prime rate or the overnight Federal Funds rate plus 0.5% and LIBOR is defined as the applicable London interbank offered rate adjusted for reserves. In addition, the Company has outstanding $125 million of unsecured senior subordinated notes, which mature on May 1, 2009. The notes bear interest at 9.25%. The indenture governing the Company's senior subordinated notes includes covenants which, among other things, limit the repurchase of stock, the payment of cash dividends, the disposition of assets and the amount of investments and other indebtedness. As a result of the September 16, 2002 refinancing of the senior credit facility, unamortized deferred financing costs of $1.2 million ($0.8 million after tax effect of $0.4 million) were written off during the fourth quarter of fiscal 2002. At October 31, 2001 and November 2, 2002, the remaining unamortized balance in deferred financing costs was $5.9 million and $5.8 million, respectively. At November 2, 2002, the Company had approximately $75 million in unused borrowing capacity (net of outstanding letters of credit of $3 million) under the new senior credit facility, of which a total of $20 million could be utilized for standby letters of credit. At November 2, 2002, the fair value of the Company's long-term debt, based on current interest rates and quoted market prices was $297.8 million, compared with the carrying amount of $297.3 million. 3. ADOPTION OF SFAS NO. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS" Effective November 1, 2001, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, which prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS No. 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, the Company historically evaluated goodwill for impairment by comparing the entity level unamortized balance of goodwill to projected undiscounted cash flows, which did not result in an indicated impairment. SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit level upon adoption and at least annually thereafter, utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss would be recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount, if any, of the impairment would then be measured in the second step. The Company determined the fair value of each reporting unit by using a combination of present value and multiple of earnings valuation techniques and compared it to each reporting unit's carrying value. The Company completed the first step during FINANCIAL REVIEW 21 the second quarter which indicated that goodwill recorded in the metal building components segment was impaired as of November 1, 2001. Due to the potential impairment, the Company then completed step two of the test to measure the amount of the impairment. Based on that analysis, a transitional impairment loss of $67.4 million ($65.1 million after tax effect of $2.3 million) was recognized as a cumulative effect of a change in accounting principle. The following tables reflects the Company's comparative income before the cumulative effect of the change in accounting principle and goodwill amortization under SFAS No. 142 (in thousands):
Fiscal year ended... October 31, 2000 October 31, 2001 NOVEMBER 2, 2002 - -------------------- ---------------- ---------------- ---------------- Reported income before cumulative effect of change in accounting principle(1) .............. $ 44,407 $ 16,535 $ 31,314 Add back: Goodwill amortization, net of tax .... 10,565 11,229 -- ---------------- ---------------- ---------------- Adjusted income before cumulative effect of change in accounting principle ................. 54,972 27,764 31,314 Cumulative effect of change in accounting principle, net of tax .......................... -- -- (65,087) ---------------- ---------------- ---------------- Adjusted net income (loss) ..................... $ 54,972 $ 27,764 $ (33,773) ================ ================ ================ Basic income (loss) per share: Reported income before cumulative effect of change in accounting principle(1) .............. $ 2.48 $ .91 $ 1.70 Add back: Goodwill amortization, net of tax ... .59 .62 -- ---------------- ---------------- ---------------- Adjusted income before cumulative effect of change in accounting principle ................. 3.07 1.53 1.70 Cumulative effect of change in accounting principle, net of tax .......................... -- -- (3.52) ---------------- ---------------- ---------------- Adjusted net income (loss) ..................... $ 3.07 $ 1.53 $ (1.82) ================ ================ ================ Diluted income (loss) per share: Reported income before cumulative effect of change in accounting principle(1) .............. $ 2.43 $ .91 $ 1.68 Add back: Goodwill amortization, net of tax .... .58 .61 -- ---------------- ---------------- ---------------- Adjusted income before cumulative effect of change in accounting principle ................. 3.01 1.52 1.68 Cumulative effect of change in accounting principle, net of tax .......................... -- -- (3.49) ---------------- ---------------- ---------------- Adjusted net income (loss) ..................... $ 3.01 $ 1.52 $ (1.81) ================ ================ ================
(1) For fiscal year ended November 2, 2002, reported income before cumulative effect of change in accounting principle includes an extraordinary loss on debt refinancing of $1.2 million ($0.8 million after tax) or $0.04 per diluted share. Refer to Note 2 for further discussion of the debt refinancing. The following table displays the changes in the carrying amount of goodwill by operating segment for the fiscal year ended November 2, 2002 (in thousands):
Balance Adjusted Balance Transitional BALANCE November 1, 2001 Allocation(2) November 1, 2001 Impairment Charge Other(3) NOVEMBER 2, 2002 ---------------- ------------- ---------------- ----------------- -------- ---------------- Engineered Building Systems .. $ 7,762 $ 110,920 $ 118,682 $ -- $ -- $ 118,682 Metal Building Components .... 6,919 261,667 268,586 (67,359) (1,662) 199,565 Corporate .................... 372,587 (372,587) -- -- -- -- ---------------- ------------- ---------------- ---------------- -------- ---------------- Total ........................ $ 387,268 $ -- $ 387,268 $ (67,359) $ (1,662) $ 318,247 ================ ============= ================ ================ ======== ================
(2) Allocation refers to the reclassification of goodwill from corporate to the engineered building systems segment and metal buildings components segment. SFAS No. 142 requires the review of prior acquisitions to determine reasonableness of goodwill. Prior to adoption of SFAS No. 142, goodwill resulting from acquisitions was considered on a consolidated basis. (3) Other refers to a purchase accounting adjustment to goodwill associated with a contingency that was resolved during fiscal 2002 relating to a specifically identified deferred tax asset from a prior acquisition. 22 2002 ANNUAL REPORT 4. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Taxes on income from continuing operations consist of the following:
Fiscal year ended... October 31, 2000 October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- ---------------- (in thousands) Current Federal ................ $ 28,501 $ 15,319 $ 18,821 State .................. 2,871 1,631 2,044 ---------------- ---------------- ---------------- Total current .......... 31,372 16,950 20,865 Deferred Federal ................ 1,378 (734) (833) State .................. 116 (65) (62) ---------------- ---------------- ---------------- Total deferred ......... 1,494 (799) (895) ---------------- ---------------- ---------------- Total provision ........ $ 32,866 $ 16,151 $ 19,970 ================ ================ ================
The reconciliation of income tax computed at the United States federal statutory tax rate to the effective income tax rate is as follows:
Fiscal year ended... October 31, 2000 October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- ---------------- Statutory federal income tax rate ........ 35.0% 35.0% 35.0% State income taxes ........ 2.7% 3.1% 2.5% Non-deductible goodwill amortization .. 4.1% 10.1% -- Other ..................... 0.7% 1.2% 0.8% ---------------- ---------------- ---------------- Effective tax rate ........ 42.5% 49.4% 38.3% ================ ================ ================
Significant components of the Company's deferred tax liabilities and assets are as follows:
October 31, 2001 NOVEMBER 2, 2002 ---------------- ---------------- (in thousands) Deferred tax assets: Inventory ........................... $ 1,095 $ 1,627 Bad debt reserve .................... 1,371 1,992 Accrued insurance reserves .......... 1,764 2,624 Warranty reserve .................... 1,050 1,405 Restructuring and impairment ........ 1,042 617 Accrued and deferred compensation ... 715 1,393 Other reserves ...................... 569 568 ---------------- ---------------- Total deferred tax assets .............. 7,606 10,226 Deferred tax liabilities: Depreciation and amortization ....... 22,094 21,061 Other ............................... 3,301 2,122 ---------------- ---------------- Total deferred tax liabilities ......... 25,395 23,183 ---------------- ---------------- Net deferred tax liability ............. $ (17,789) $ (12,957) ================ ================
Other accrued expenses include accrued income taxes of $1.1 million at October 31, 2001 and $2.1 million at November 2, 2002. 5. OPERATING LEASE COMMITMENTS Total rental expense incurred from operating non-cancelable leases for the fiscal years ended 2000, 2001 and 2002 was $7.0 million, $7.3 million and $6.9 million, respectively. Aggregate minimum required annual payments on long-term operating leases at November 2, 2002 were as follows for the respective fiscal years (in thousands): 2003 .............................. $ 4,106 2004 .............................. $ 3,090 2005 .............................. $ 2,135 2006 .............................. $ 1,128 2007 .............................. $ 729
6. SHAREHOLDERS' RIGHTS PLAN In June 1998, the Board of Directors adopted a Shareholders' Rights Plan in which one preferred stock purchase right ("Right") was declared as a dividend for each common share outstanding. Each Right entitles shareholders to purchase, under certain conditions, one one-hundredth (1/100th) of a share of newly authorized Series A Junior Participating Preferred Stock at an exercise price of $62.50. Rights will be exercisable only if a person or group acquires beneficial ownership of 20% or more of the common shares or commences a tender or exchange offer, upon consummation of which such person or group would beneficially own 20% or more of the common shares. In the event that a person or group acquires 20% or more of the common shares, the Rights enable dilution of the acquiring person's or group's interest by providing for a 50% discount on the purchase of common shares by the non-controlling shareholders. The Company will generally be entitled to redeem the Rights at $0.005 per Right at any time before a person or group acquires 20% or more of the common shares. Rights will expire on June 24, 2008, unless earlier exercised, redeemed or exchanged. 7. SHAREHOLDERS' EQUITY On November 3, 1999, the Company's Board of Directors authorized the repurchase of 1.0 million shares of the Company's common stock, and an additional 1.5 million shares on November 7, 2000. Subject to applicable federal securities law, such purchases occur at times and in amounts that the Company deems appropriate. No time limit was placed on the duration of the repurchase program. Shares FINANCIAL REVIEW 23 repurchased are reserved primarily for later re-issuance in connection with the Company's stock option and 401(k) profit sharing plans. As of November 2, 2002, the Company had repurchased 1.3 million shares of its common stock for $21.5 million since the inception of the repurchase program in November 1999. Changes in treasury common stock, at cost, were as follows:
Number of Shares Amount ---------------- ------------ (in thousands) Balance, October 31, 2000 ................ 893 $ 15,056 Purchases ............................. 63 909 Issued in exercise of stock options ... (370) (6,239) Issued for debt payment ............... (25) (422) Issued in 401(k) contributions ........ (260) (4,351) --------------- ------------ Balance, October 31, 2001 ................ 301 4,953 Purchases ............................. 12 175 Issued in exercise of stock options ... (240) (3,938) Issued in 401(k) contributions ........ (53) (871) --------------- ------------ BALANCE, NOVEMBER 2, 2002 ................ 20 $ 319 =============== ============
8. STOCK OPTION PLAN The Board of Directors has approved an employee stock option plan under which both statutory and non-statutory options may be granted. All options granted through November 2, 2002 are non-statutory options. This plan permits the future granting of stock options as an incentive and reward for key management personnel. At October 31, 2001 and November 2, 2002, a total of 1.4 million shares and 1.0 million shares, respectively, were available under this plan for the future grant of options. Shares subject to options that expire or terminate without exercise become available for further grants of options. Options expire ten years from date of grant. Generally, the right to acquire the option shares is earned in 25% increments over the first four years of the option period. Stock option transactions during 2000, 2001 and 2002 are as follows (in thousands, except per share amounts):
Number Weighted Average of Shares Exercise Price ------------ ---------------- Balance - October 31, 1999 ... 1,701 $ 15.23 Granted .................. 503 15.88 Cancelled ................ (217) (19.00) Exercised ................ (103) (7.02) ------------ ---------------- Balance - October 31, 2000 ... 1,884 $ 15.42 Granted .................. 313 16.60 Cancelled ................ (164) (19.83) Exercised ................ (370) (8.17) ------------ ---------------- Balance - October 31, 2001 ... 1,663 $ 16.82 Granted .................. 491 16.01 Cancelled ................ (53) (19.00) Exercised ................ (239) (12.21) ------------ ---------------- BALANCE - NOVEMBER 2, 2002 ... 1,862 $ 17.14 ============ ================
Options exercisable at fiscal years ended 2000, 2001 and 2002 were 1.1 million, 0.9 million and 1.0 million, respectively. The weighted average exercise prices for options exercisable at fiscal years ended 2000, 2001 and 2002 were $13.05, $16.29 and $17.98, respectively. Exercise prices for options outstanding at November 2, 2002 range from $6.25 to $28.13. The weighted average remaining contractual life of options outstanding at November 2, 2002 is 6.9 years. The following summarizes additional information concerning outstanding options as of November 2, 2002: Options Outstanding
Range of Number of Weighted Average Weighted Average Exercise Prices Options Remaining Life Exercise Price - --------------- --------- ---------------- ---------------- $ 6.25 - 11.50 93,500 1.8 years $ 8.25 $ 12.00 - 15.75 1,004,570 7.3 years $ 15.10 $ 16.38 - 28.13 764,152 7.0 years $ 20.90 --------- 1,862,222 =========
Options Exercisable
Range of Number of Weighted Average Exercise Prices Options Exercise Price - --------------- --------- ---------------- $ 6.25 - 11.50 93,500 $ 8.25 $ 12.00 - 15.75 404,124 $ 14.76 $ 16.38 - 28.13 460,298 $ 22.77 -------- 957,922 ========
In accordance with the terms of APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant, the Company records no compensation expense for its stock option awards. The following disclosure provides pro forma information as if the fair value based method had been applied in measuring compensation expense. The weighted average grant-date fair value of options granted during 2000, 2001 and 2002 was $9.49, $11.89 and $10.56, respectively. These values were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: no expected dividend, expected volatility of 50.0% for 2000, 71.8% for 2001, and 62.7% for 2002, risk-free interest rates ranging from 6.2% to 6.8% for 2000, 5.1% to 5.3% for 2001, and 4.6% to 4.9% for 2002 and expected lives of 7 years. 24 2002 ANNUAL REPORT The pro forma impact on income and earnings per share is as follows (in thousands, except per share data):
Fiscal year ended October 31, 2000 October 31, 2001 NOVEMBER 2, 2002 - ----------------- ---------------- ---------------- ---------------- Reported income before extraordinary loss and cumulative effect of change in accounting principle ....... 44,407 $ 16,535 $ 32,122 Pro forma compensation expense, net of tax ........... 1,490 1,690 2,170 ---------------- ---------------- ---------------- Pro forma income before extraordinary loss and cumulative effect of change in accounting principle ....... $ 42,917 $ 14,845 $ 29,952 ================ ================ ================ Pro forma basic income per share .............. $ 2.40 $ 0.82 $ 1.62 Pro forma diluted income per share .............. $ 2.36 $ 0.82 $ 1.62
Because options vest over several years and additional option grants are expected, the effects of these calculations are not likely to be representative of similar future calculations. 9. NET INCOME PER SHARE Basic and diluted net income per share computations were derived using the following information:
Fiscal year ended... Oct. 31, 2000 Oct. 31, 2001 NOV. 2, 2002 - -------------------- ------------- ------------- ------------- (in thousands, except per share data) Income before extraordinary loss and cumulative effect of change in accounting principle ............ $ 44,407 $ 16,535 $ 32,122 Extraordinary loss, net of tax ..... -- -- (808) Cumulative effect of change in accounting principle, net of tax ... -- -- (65,087) ------------- ------------- ------------- Net income (loss) ........... 44,407 16,535 (33,773) Interest, net of tax, on convertible debenture assumed converted .................. 66 27 -- ------------- ------------- ------------- Adjusted net income (loss) ......... $ 44,473 $ 16,562 $ (33,773) ============= ============= ============= Weighted average common shares outstanding ................. 17,904 18,075 18,512 Common stock equivalents: Stock options ........... 282 148 180 Convertible debenture ... 100 42 -- ------------- ------------- ------------- Weighted average common shares outstanding, assuming dilution ........................... 18,286 18,265 18,692 ============= ============= =============
10. EMPLOYEE BENEFIT PLAN The Company has a 401(k) profit sharing plan (the "Savings Plan") which covers all eligible employees. The Savings Plan requires the Company to match employee contributions up to a certain percentage of a participant's salary. No other contributions may be made to the Savings Plan. Contributions expense for the fiscal years ended 2000, 2001 and 2002 was $3.7 million, $3.5 million and $3.6 million, respectively, for contributions to the Savings Plan. 11. ACQUISITIONS On March 31, 2000, the Company acquired its partner's 50% share of DOUBLECOTE, L.L.C., a metal coil coating business that it developed and previously owned jointly with Consolidated Systems, Inc., a privately held company. The transaction was valued at approximately $24.4 million, and was accounted for using the purchase method. The excess of cost over the fair value of the acquired assets was approximately $10 million. 12. RESTRUCTURING In October 2001, management announced a plan to realign its manufacturing capabilities to increase efficiencies, raise productivity and lower operating expenses. The pretax restructuring charge of $2.8 million relates to the planned closing of five manufacturing facilities as part of this plan. This included a $2.1 million non-cash charge for an identified impairment to property, plant and equipment for the expected loss on the sale of two of the five facilities. The actions were substantially completed by the end of the first quarter of fiscal 2002. During fiscal 2002, the Company recognized a gain of $1.3 million ($0.8 million after tax) for the sale of certain real estate and equipment associated with the restructuring. The remaining two facilities, not yet sold, have a net carrying value of $2.9 million and the Company does not anticipate a selling price significantly different from this amount. 13. CONTINGENCIES The Company's primary steel suppliers, Bethlehem Steel Corporation and National Steel Corporation, filed for protection under Federal Bankruptcy laws on October 15, 2001, and March 6, 2002, respectively. During fiscal 2002, the Company purchased approximately 63%, respectively, of its steel requirements from these two suppliers. The Company does not maintain an inventory of steel in excess of its current production requirements. Should both companies cease operations, essential supply of primary raw materials could be temporarily interrupted. 25 FINANCIAL REVIEW The Company believes that its other primary steel supplier, U.S. Steel, can meet its demand for steel if its supply from Bethlehem Steel and/or National Steel is interrupted. As a result of the Company's restatement of its financial results for the last half of fiscal 1999, all of fiscal 2000 and the first quarter of fiscal 2001, several class action lawsuits were filed against the Company and certain of its current officers in the United States District Court for the Southern District of Texas, commencing in April 2001. The plaintiffs in the actions purport to represent purchasers of NCI common stock during various periods ranging from August 25, 1999 through April 12, 2001. The lawsuits were consolidated into one class action lawsuit on August 16, 2001. On January 10, 2002, the court appointed lead plaintiffs for the consolidated lawsuit. The lead plaintiffs filed a consolidated amended complaint on February 1, 2002. In the consolidated complaint the plaintiffs allege, among other things, that during the financial periods that were restated the Company made materially false and misleading statements about the status and effectiveness of a management information and accounting system used by its components division and costs associated with that system, failed to assure that the system maintained books and records accurately reflecting inventory levels and costs of goods sold, failed to maintain internal controls on manual accounting entries made to certain inventory-related accounts in an effort to correct the data in the system, otherwise engaged in improper accounting practices that overstated earnings, and issued materially false and misleading financial statements. The plaintiffs further allege that the individual defendants traded in the Company's common stock while in possession of material, non-public information regarding the foregoing. The plaintiffs in the consolidated complaint assert various claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and seek unspecified amounts of compensatory damages, interest and costs, including legal fees. On March 15, 2002, the Company filed its Motion to Dismiss Plaintiffs' Amended Consolidated Class Action Complaint and Memorandum in Support. The Motion to Dismiss is currently pending before the court. The Company and the individual defendants deny the allegations in the complaint and intend to defend against them vigorously. The consolidated lawsuit is at a very early stage. Consequently, at this time the Company is not able to predict whether it will incur any liability in excess of insurance coverages or to estimate the damages, or the range of damages, if any, that the Company might incur in connection with the lawsuit, or whether an adverse outcome could have a material adverse impact on its business, consolidated financial condition or results of operations. The Company is involved in various other legal proceedings and contingencies that are considered to be in the ordinary course of business. The Company believes that these legal proceedings will not have a material adverse effect on its business, consolidated financial condition or results of operations. 14. BUSINESS SEGMENTS The Company has divided its operations into two reportable segments: engineered building systems and metal building components, based upon similarities in product lines, manufacturing processes, marketing and management of its businesses. Products of both segments are similar in basic raw materials used. The engineered building systems segment includes the manufacturing of structural framing and supplies and value added engineering and drafting, which are typically not part of component products or services. The reporting segments follow the same accounting policies used for the Company's consolidated financial statements. Management evaluates a segment's performance based upon operating income. Intersegment sales are recorded based on weighted average costs, and consist primarily of products and services provided to the engineered building systems segment by the metal building components segment, including painting and coating of hot rolled material. The Company is not dependent on any one significant customer or group of customers. Substantially all of the Company's sales are made within the United States. Financial data for prior periods has been reclassified to conform to the current presentation. 26 2002 ANNUAL REPORT Summary Financial Databy Segment NCI BUILDING SYSTEMS, INC. (IN THOUSANDS, except percentages)
2000 % 2001 % 2002 % ------------ ----- ------------ ----- ------------ ----- Sales to outside customers: Engineered building systems ................... $ 337,849 33 $ 320,789 34 $ 317,926 33 Metal building components ..................... 680,475 67 634,088 66 635,516 67 Intersegment sales ............................ 51,869 5 43,620 5 44,725 5 Corporate/eliminations ........................ (51,869) (5) (43,620) (5) (44,725) (5) ------------ ----- ------------ ----- ------------ ----- Total net sales ........................... $ 1,018,324 100 $ 954,877 100 $ 953,442 100 ============ ===== ============ ===== ============ ===== Operating income:(1) Engineered building systems ................... $ 48,446 14 $ 43,827 14 $ 28,695 9 Metal building components ..................... 96,099 14 60,746 10 70,407 11 Restructuring charge .......................... -- -- (2,815) -- -- -- Corporate/eliminations ........................ (30,875) -- (36,933) -- (26,878) -- ------------ ----- ------------ ----- ------------ ----- Total operating income .................... $ 113,670 11 $ 64,825 7 $ 72,224 8 ============ ===== ============ ===== ============ ===== Property, plant and equipment, net: Engineered building systems ................... $ 48,530 21 $ 48,424 22 $ 44,006 21 Metal building components ..................... 161,733 70 156,977 70 144,971 71 Corporate ..................................... 20,779 9 19,192 8 16,357 8 ------------ ----- ------------ ----- ------------ ----- Total property, plant and equipment, net .. $ 231,042 100 $ 224,593 100 $ 205,334 100 ============ ===== ============ ===== ============ ===== Depreciation and amortization:(1) Engineered building systems ................... $ 8,134 24 $ 8,008 22 $ 6,401 26 Metal building components ..................... 13,208 39 13,367 36 13,859 56 Corporate ..................................... 12,145 37 15,271 42 4,668 18 ------------ ----- ------------ ----- ------------ ----- Total depreciation and amortization ....... $ 33,487 100 $ 36,646 100 $ 24,928 100 ============ ===== ============ ===== ============ ===== Capital expenditures: Engineered building systems ................... $ 12,813 44 $ 3,728 25 $ 1,589 17 Metal building components ..................... 9,217 32 8,689 58 6,691 73 Corporate ..................................... 6,855 24 2,609 17 895 10 ------------ ----- ------------ ----- ------------ ----- Total capital expenditures ................ $ 28,885 100 $ 15,026 100 $ 9,175 100 ============ ===== ============ ===== ============ ===== Total assets:(2) Engineered building systems ................... $ 102,322 12 $ 93,094 11 $ 206,429 29 Metal building components ..................... 380,312 44 343,112 41 468,667 65 Corporate/eliminations ........................ 386,287 44 402,606 48 46,169 6 ------------ ----- ------------ ----- ------------ ----- Total assets .............................. $ 868,921 100 $ 838,812 100 $ 721,265 100 ============ ===== ============ ===== ============ =====
(1) Operating income and depreciation and amortization were impacted in fiscal 2002 due to the adoption of SFAS No.142 which prohibits the amortization of goodwill. (2) Changes in total assets from 2001 to 2002 were primarily attributable to allocation of goodwill in accordance with SFAS No. 142 as discussed in Note 3. FINANCIAL REVIEW 27 REPORT OF INDEPENDENT AUDITORS NCI BUILDING SYSTEMS, INC. The Board of Directors and Shareholders NCI Building Systems, Inc. We have audited the accompanying consolidated balance sheets of NCI Building Systems, Inc. as of November 2, 2002 and October 31, 2001, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three fiscal years in the period ended November 2, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NCI Building Systems, Inc. at November 2, 2002 and October 31, 2001 and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended November 2, 2002, in conformity with accounting principles generally accepted in the United States. As discussed in Note 3 to the consolidated financial statements, effective November 1, 2001, the Company changed its method of accounting for goodwill. /s/ ERNST & YOUNG LLP Houston, Texas December 10, 2002 28 2002 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NCI BUILDING SYSTEMS, INC. RESULTS OF OPERATIONS The following table presents, as a percentage of sales, certain selected consolidated financial data for the Company for the periods indicated:
Fiscal year ended... Oct. 31, 2000 Oct. 31, 2001 NOV. 2, 2002 -------------- -------------- -------------- Sales ..................................... 100.0% 100.0% 100.0% Cost of sales ............................. 74.8 77.7 77.7 ============== ============== ============== Gross profit .......................... 25.2 22.3 22.3 Selling, general and administrative expenses ............... 12.9 13.9 14.7 Goodwill amortization ..................... 1.1 1.3 -- Restructuring Charge ...................... -- 0.3 -- -------------- -------------- -------------- Income from operations .................... 11.2 6.8 7.6 Interest expense .......................... (3.8) (2.3) (3.5) Other income, net ......................... 0.2 0.1 0.2 -------------- -------------- -------------- Income before income taxes, extraordinary loss and cumulative effect of change in accounting principle ............................. 7.6 3.4 5.5 Provision for income taxes ................ 3.2 1.7 2.1 -------------- -------------- -------------- Income before extraordinary loss and cumulative effect of change in accounting principle ............... 4.4 1.7 3.4 Extraordinary loss on debt refinancing, net of tax -- -- (0.1) Cumulative effect of change in accounting principle, net of tax ...... -- -- (6.8) -------------- -------------- -------------- Net income (loss) ......................... 4.4 %1.7% (3.5)% ============== ============== ==============
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION The Company's various product lines have been aggregated into two business segments: engineered building systems and metal building components. These aggregations are based on the similar nature of the products, distribution of products, and management and reporting for those products within the Company. Both segments operate primarily in the non-residential construction market. Sales and earnings are influenced by general economic conditions, the level of non-residential construction activity, roof repair and retrofit demand and the availability and terms of financing available for construction. The reporting segments follow the same accounting policies used for the Company's consolidated financial statements. Products of both business segments are similar in basic raw materials used. Engineered building systems include the manufacturing of structural framing and value added engineering and drafting, which are typically not part of component products or services. The Company believes it has one of the broadest product offerings of metal building products in the industry. Intersegment sales are based on weighted average costs, and consist primarily of products and services provided to the engineered buildings segment by the component segment, including painting and coating of hot rolled material. This provides better customer service, shorter delivery time and minimizes transportation costs to the customer. Segment information is included in the three-year comparison in Note 14 of the consolidated financial statements. RESULTS OF OPERATIONS FOR FISCAL 2002 COMPARED TO 2001 Consolidated sales for fiscal 2002 were $953.4 million compared with $954.9 million for fiscal 2001. Sales were flat despite a continued slowdown in non-residential construction. Many companies in the metal construction industry have shown declines in the past years and this trend has continued through fiscal 2002. Various trade reports have estimated that spending on non-residential construction declined at least 10% in 2002. The Company believes that it performed at a higher sales level than the FINANCIAL REVIEW 29 industry due to its continued ability to increase market penetration, the expansion of its structural operations and the growth in new products. Intersegment sales of $44.7 million represent products and services provided by the metal building components segment, principally components sales to the engineered buildings segment in fiscal 2002. Engineered Building Systems' sales were $317.9 million for fiscal 2002 compared with $320.8 million for fiscal 2001. The sales were down slightly due to the industry decline in non-residential construction. There has been an overall decline in larger, more expensive projects and increased focus on smaller, more complex projects. Operating income of the engineered building systems segment declined in fiscal 2002 by 35%, to $28.7 million, compared to $43.8 million in the prior year. This decline resulted from lower selling prices due to competition, higher cost of engineering and drafting due to an increase in the complexity of orders and higher freight costs. As a percent of sales, operating income in fiscal year 2002 was 9% compared to 14% in fiscal 2001. Metal Building Components' sales for fiscal 2002 were $635.5 million compared to $634.1 million for fiscal 2001. Sales were up slightly despite the double-digit decline in the industry due to additional market penetration. Operating income of the metal building components segment increased $9.7 million, or 16%, to $70.4 million, in fiscal 2002 compared to $60.7 million in the prior year. This increase was attributable to increased plant efficiencies resulting from the plant closures implemented in the first quarter. Selling, general and administrative expenses, consisting of engineering and drafting, selling and administrative costs, increased 5%, to $140.6 million in fiscal 2002 compared to $133.3 million in the prior year. This increase was mainly attributable to cost increases in the areas of employee benefits, particularly health care, general insurance, bonuses and engineering and drafting costs. As a percent of sales, selling, general and administrative expenses for fiscal 2002 were 15% compared to 14% for fiscal 2001, excluding goodwill amortization in the prior year. Consolidated interest expense for fiscal 2002 decreased by 35%, to $21.6 million compared to $33.1 million for the prior year. This decline resulted from lower average interest rates in fiscal 2002 and a decrease in outstanding debt for the period of $70.2 million. Other income, net includes a gain of $1.3 million ($0.8 million after tax) in fiscal 2002 resulting from the sale of three facilities and related equipment which were associated with the restructuring actions and closure of five plants in October 2001. Other matters Effective November 1, 2001, the Company adopted SFAS No. 142. In accordance with this standard, the Company ceased amortization of all goodwill as of the effective date. This resulted in a favorable impact to consolidated pre-tax income from operations of $12.2 million and to net income of $11.2 million ($.61 per diluted share) for the year ended November 2, 2002. During the second quarter of fiscal 2002, the Company completed the transitional review for goodwill impairment required under SFAS No. 142. This review indicated that goodwill recorded in the metal building components segment was impaired as of November 1, 2001. Accordingly, the Company measured and recognized a transitional impairment charge of $67.4 million ($65.1 million after tax) as a cumulative effect of a change in accounting principle. See Note 3 of the "Notes to Consolidated Financial Statements" for additional discussion of the impact of this statement on the Company's consolidated financial statements. On September 16, 2002, the Company completed a $250 million senior secured credit facility with a group of lenders and used the initial borrowings to repay in full the then existing credit facility. The new facility includes a $125 million, five-year revolving loan maturing on September 15, 2007 and a $125 million, six-year term loan maturing on September 15, 2008. The Company borrowed approximately $46 million under the new revolving loan and $125 million under the new term loan to repay the then current senior bank indebtedness outstanding. As a result of this debt restructuring of the senior credit facility, there were unamortized deferred financing costs of $1.2 million ($0.8 million after tax) written off during the fourth quarter of fiscal 2002. RESULTS OF OPERATIONS FOR FISCAL 2001 COMPARED TO 2000 Consolidated sales for fiscal 2001 of $954.9 million declined by 6% compared to the prior year. The decline in sales resulted from the general slowdown in non-residential construction, which began in March 2001 and the severe weather conditions which impacted sales in the first and second quarter of fiscal 2001. Based on available industry information, the Company believes that the industry decline was greater than 20% in 2001. Sales of $22.3 million were derived during fiscal 2001 from the inclusion of DOUBLECOTE for all of fiscal 2001 compared to only seven months in fiscal 2000 and the acquisition of Midland Metals in November 2000. The Company believes that it performed at a higher sales level than the industry due to increased market penetration and the addition of new customers, the expansion of its structural operations and the growth in new products, particularly its long bay building system. Intersegment sales of $43.6 million represent products and services provided by the 30 2002 ANNUAL REPORT metal building components segment, principally components sales to the engineered buildings segment in fiscal 2001. Engineered Building Systems sales declined by $17.1 million, or 5%, in fiscal 2001 as compared to fiscal 2000. This decline resulted from the industry decline in nonresidential construction. Although the industry declined by greater than 20%, the Company believes that increased market penetration and the increase in customer base allowed it to perform at a higher sales level than the industry in fiscal 2001. The expansion of the structural operations and growth of the long bay building systems product lessened the impact on the Company of the general decline in industry sales. Operating income of this segment declined by 10% in fiscal 2001 compared to fiscal 2000 as a result of the decline in volume and less efficient utilization of its manufacturing facilities and higher fixed costs per dollar of sales. As a percent of sales, operating income was 14% for fiscal years 2001 and 2000. Metal Building Components sales declined by $46.4 million, or 7%, in fiscal 2001 compared to fiscal 2000. The acquisition of DOUBLECOTE in the middle of fiscal 2000 and the acquisition of Midland Metals early in fiscal 2001 lessened the impact of the decline compared to general industry activity. Operating income of this segment declined by $35.4 million, or 37%, compared to fiscal 2000. The decline was greater than the sales decline due to heightened price competition, less efficient utilization of manufacturing facilities resulting from the lower sales volume and higher manufacturing costs, particularly utility costs in the coating operations which rose $3.4 million over the prior year. Consolidated operating expenses, excluding the restructuring charge, increased by $2.6 million, or 2%, in fiscal year 2000. This increase related primarily to costs associated with health care, professional services and payroll costs which were not offset by an increase in volume. In October 2001, management announced a plan to realign its manufacturing capabilities to increase efficiencies, raise productivity, and lower operating expenses. The pretax restructuring charge of $2.8 million relates to the planned closing of five manufacturing facilities as part of this plan. This included a $2.1 million noncash charge for an identified impairment to plant, property and equipment for the expected loss on the sale of two of the five facilities. The actions are scheduled to be completed by the end of the first quarter of fiscal 2002 and are expected to save approximately $5.0 million in costs on an annual basis. Consolidated interest expense of $33.1 million declined by $6.0 million compared to the prior year. This decline resulted from lower variable interest rates at October 31, 2001 compared to October 31, 2000 of 4.8% and 8.1%, respectively, and a decrease in outstanding debt for the period of $49.8 million. LIQUIDITY AND CAPITAL RESOURCES At November 2, 2002, the Company had working capital of $80.2 million compared to $49.5 million at the end of fiscal 2001. Net working capital at November 2, 2002 includes a reduction in current maturities of long-term debt of $40.0 million related to the debt refinancing discussed below and in Note 2 to the consolidated financial statements. Excluding this reduction, working capital would have been $40.2 million at November 2, 2002, a reduction of $9.3 million from the end of fiscal 2001. This decline resulted primarily from a cash reduction of $11.6 million used to reduce debt, an increase of $10.5 million in accrued compensation and benefits related to increased accruals for employee benefits, particularly bonuses, a decrease of $17.0 million to receivables and inventory, offset by a decrease in accounts payable of $23.4 million. During fiscal 2002, the Company generated cash flow from operations of $59.8 million. This cash flow, along with cash from the beginning of the period, was used to fund capital expenditures of $9.2 million and repay $70.2 million in debt under the Company's senior credit facilities. On September 15, 2002, the Company had a senior credit facility with a syndicate of banks, which consisted of (i) a five-year revolving credit facility of up to $200 million (outstanding balance of $83.8 million at September 15, 2002), (ii) a five-year term loan facility in the original principal amount of $200 million (outstanding balance of $50.0 million at September 15, 2002) and (iii) a $40 million term note (outstanding balance of $34.1 million at September 15, 2002). On September 16, 2002, the Company completed a $250 million senior secured credit facility with a group of lenders and used the initial borrowings to repay in full the then existing credit facility. The new facility includes a $125 million, five-year revolving loan maturing on September 15, 2007 and a $125 million, six-year term loan maturing on September 15, 2008. The term loan requires mandatory prepayments of $1.6 million each quarter beginning in December 2002 with a final payment of $89.1 million at maturity. The new senior credit facility is secured by security interests in (1) accounts receivable, inventory and equipment and related assets such as software, chattel paper, instruments and contract rights of the Company (excluding foreign operations) and (2) 100% of the capital stock and other equity interests in each of the direct and indirect operating domestic subsidiaries of the Company. The new senior credit agreement includes covenants which, among other things, limit certain debt ratios and require minimum interest coverage and the maintenance of a minimum net worth. The new FINANCIAL REVIEW 31 senior credit agreement also limits the amount of permitted spending for capital additions, the repurchase of stock, payment of cash dividends, the disposition of assets and the amount of investments and other indebtedness. Borrowings under the new senior credit facility may be prepaid and the voluntary reduction of the unutilized portion of the five-year revolver may be made at any time, in certain amounts, without premium or penalty but subject to LIBOR breakage costs. The Company is required to make mandatory prepayments on the new senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations. These prepayments must first be applied to the term loan and then to the reduction of the revolving commitment. The Company also is required to reduce the revolving commitment by $25 million if it issues an additional series of its senior subordinated notes due May 1, 2009, and in any event by December 31, 2005. Loans on the new senior credit facility bear interest, at the Company's option, as follows: (1) base rate loans at the base rate plus a margin that fluctuates based on the Company's leverage ratio and ranges from 1.0% to 1.75% on the revolving loan and from 2.0% to 2.25% on the term loan and (2) LIBOR loans at LIBOR plus a margin that fluctuates based on the Company's leverage ratio and ranges from 2.0% to 2.75% on the revolving loan and from 3.0% to 3.25% on the term loan. Base rate is defined as the higher of Bank of America, N.A. prime rate or the overnight Federal Funds rate plus 0.5% and LIBOR is defined as the applicable London interbank offered rate adjusted for reserves. Based on its current leverage ratios, the Company will pay a margin of 1.5% on base rate loans and 2.5% on LIBOR loans under the revolving loan and a margin of 2.25% on base rate loans and 3.25% on LIBOR loans under the term loan. At November 2, 2002, the Company had approximately $75 million in unused borrowing capacity (net of letters of credit outstanding of $3 million) under the new senior credit facility, of which a total of $20 million can be utilized for standby letters of credit. In addition, the Company has outstanding $125 million of unsecured senior subordinated notes, which mature on May 1, 2009. The notes bear interest at 9.25%. The indenture governing the Company's senior subordinated notes includes covenants which, among other things, limit the repurchase of stock, the payment of cash dividends, the disposition of assets and the amount of investments and other indebtedness. Under the most restrictive of the covenants limiting the Company's ability to pay cash dividends and repurchase capital stock, the Company had available approximately $4.8 million to use for those purposes at November 2, 2002. Inflation has not significantly affected the Company's financial position or operations. Metal building components and engineered building systems sales are affected more by the availability of funds for construction than interest rates. No assurance can be given that inflation or interest rates will not fluctuate significantly, either or both of which could have an adverse effect on the Company's operations. Liquidity in future periods will be dependent on internally generated cash flows, the ability to obtain adequate financing for planned capital expenditures of approximately $11 million and expansion when needed, and the amount of increased working capital necessary to support expected growth. Based on the current capitalization, it is expected that future cash flows from operations and availability of alternative sources of external financing should be sufficient to provide adequate liquidity for the foreseeable future. As of November 2, 2002, the Company had approximately $75 million (net of outstanding letters of credit of $3 million) in unused borrowing available under its senior credit facility, subject to compliance with the terms of these facilities. CRITICAL ACCOUNTING POLICIES The consolidated financial statements of the Company are prepared in accordance with United States generally accepted accounting principles, which require the Company to make estimates and assumptions. The significant accounting policies of the Company are disclosed in Note 1 to the consolidated financial statements. The following discussion of critical accounting policies addresses those policies which are both important to the portrayal of the Company's financial condition and results of operations and require significant judgment and estimates. The Company bases its estimates and judgment on historical experience and on various other factors that are believed to be reasonable. Actual results may differ from these estimates under different assumptions or conditions. Revenue recognition The Company recognizes revenues when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Generally, these criteria are met at the time product is shipped or services are complete. Adequate provision is made, upon shipment, for estimated product returns and other costs. Costs associated with shipping and handling of products are included in cost of sales. Accruals for employee benefits The Company is self insured for a substantial portion of the cost of employee group and medical insurance and for the cost of workers compensation benefits. The Company purchases insurance from 32 2002 ANNUAL REPORT third parties which provides individual and aggregate stop loss protection for these costs. For health and medical costs, the Company uses estimates for incurred but unreported claims as of each balance sheet date. These estimates are based on current and historical experience in claims costs, known trends in health care cost and other information available from the third party insurance company which administers claims. For workers compensation costs, the Company monitors the number of accidents and the severity of such accidents to develop appropriate reserves for expected costs to provide both medical care and benefits during the period an employee is unable to work. These reserves are developed using third party estimates of the expected cost and length of time an employee will be unable to work based on industry statistics for the cost of similar disabilities. This statistical information is trended to provide estimates of future expected cost based on the factors developed from the Company's experience of actual claims cost compared to original estimates. The Company believes that the assumptions and information used to develop these accruals provide the best basis for these estimates each quarter. However, significant changes in expected medical and health care costs, negative changes in the severity of previously reported claims or changes in legislative laws and statutes which govern the administration of these plans could have an impact on the determination of the amount of these accruals in future periods. For fiscal 2002, the Company expensed approximately $21 million for employee benefits and at November 2, 2002, the balance of the employee benefits accrual was $8.8 million. Goodwill The Company reviews the carrying values of its long-lived assets, including goodwill and identifiable intangibles, whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually for goodwill as required by SFAS No. 142. Unforeseen events, changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of the Company's assets and result in a non-cash impairment charge. Some factors considered important which could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of the Company's use of the acquired assets or the strategy for its overall business and significant negative industry or economic trends. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flow, or multiples of earnings or revenue performance measures. The fair value of the asset could be different using different estimates and assumptions in these valuation techniques. At November 2, 2002, the total value of goodwill was $318.2 million. As required by SFAS No. 142, goodwill must be tested for impairment at the reporting unit level upon adoption and at least annually thereafter, utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it to the carrying value, including goodwill, of such unit. The Company determined the fair value of each reporting unit by using a combination of present value and multiple of earnings valuation techniques and compared it to each reporting unit's carrying value. If the fair value exceeds the carrying value, no impairment loss would be recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount, if any, of the impairment would then be measured in the second step. The Company completed the first step during the second quarter of fiscal 2002 which indicated that goodwill recorded in the metal building components segment was impaired as of November 1, 2001. Due to the potential impairment, the Company then completed step two of the test to measure the amount of the impairment. Based on that analysis, a transitional impairment charge of $67.4 million ($65.1 million after tax) was recognized as a cumulative effect of a change in accounting principle. The Company updated this review at year end as required by SFAS No. 142 and identified no additional impairment of goodwill. See Note 3 of the consolidated financial statements for additional discussion of the adoption of SFAS No. 142. Allowance for Doubtful Accounts The Company's allowance for doubtful accounts reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. Management uses significant judgment in estimating uncollectible amounts. In estimating uncollectible amounts, management considers factors such as current overall economic conditions, industry-specific economic conditions, historical customer performance and anticipated customer performance. While the Company believes these processes effectively address its exposure for doubtful accounts and credit losses have historically been within expectations, changes in the economy, industry, or specific customer conditions may require adjustments to the allowance for doubtful accounts recorded by the Company. The Company had bad debt expense of $2.7 million for fiscal 2002 and at November 2, 2002, the balance of the consolidated allowance for doubtful accounts was $5.7 million. Contingencies As discussed in Note 13 to the consolidated financial statements, the Company is involved in various legal proceedings and other contingencies and the Company records liabilities for these types of matters in accordance with Statement of Financial Accounting 33 FINANCIAL REVIEW Standards No. 5, Accounting for Contingencies (SFAS No. 5). SFAS No. 5 requires a liability to be recorded based on the Company's estimates of the probable cost of the resolution of a contingency. The actual resolution of these contingencies may differ from the Company's estimates and an appropriate adjustment to income could be required in a future period. RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company adopted SFAS No. 144 as of November 1, 2001, and the adoption of the statement did not have a significant impact on the Company's financial position and results of operations. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 will generally require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt. Extraordinary treatment will be required for certain extinguishments as provided in APB No. 30, Reporting the Results of Operations. Accordingly, gains or losses from extinguishments of debt for fiscal years beginning after May 15, 2002 will not be reported as extraordinary items unless the extinguishment qualifies as an extraordinary item under the provisions of APB No. 30. Upon adoption, any gain or loss on extinguishment of debt previously classified as an extraordinary item in prior periods presented that does not meet the criteria of APB No. 30 for such classification will be reclassified to conform with the provisions of SFAS No. 145. During the fourth quarter of fiscal 2002, the Company refinanced their debt and wrote off $1.2 million ($0.8 million after tax) of unamortized deferred financing costs and classified the loss as an extraordinary item. Upon adoption of SFAS No. 145, the Company will evaluate the appropriateness of income statement classification of the loss. In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002 with early application encouraged. The Company does not expect that the adoption of the statement will have a significant impact on the Company's financial position and results of operations. During November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-21, Multiple-Deliverable Revenue Arrangements, which addresses how to account for arrangements that may involve the delivery or performance of multiple products, services, and/or rights to use assets. The final consensus will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted. The Company does not expect that the adoption will have a significant impact on the Company's financial position and results of operations. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. While the Statement does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS No. 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB No. 25, Accounting for Stock Issued to Employees. The Company is currently evaluating whether to adopt the provisions of SFAS No. 148 relating to the SFAS No. 123 fair value method of accounting for stock-based employee compensation. LEGAL PROCEEDINGS Commencing in April 2001, several class action lawsuits were filed against the Company and certain of our present officers in the United States District Court for the Southern District of Texas. The plaintiffs in the actions purport to represent purchasers of our common stock during various periods ranging from August 25, 1999 through April 12, 2001. The complaints assert various claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and seek unspecified amounts of compensatory damages, interest and costs, including legal fees. The Company denies the allegations in the complaints and intends to defend them vigorously. The lawsuits are at a very early stage. Consequently, it is not possible at this time to predict whether the Company will incur any liability or to estimate the damages, or the range of damages, if any, that the Company might incur in connection with such actions, or whether an adverse outcome could have a material adverse impact on our business, consolidated financial condition or results of operations. 34 2002 ANNUAL REPORT The Company is involved in various other legal proceedings and contingencies that are considered to be in the ordinary course of business. The Company believes that these legal proceedings will not have a material adverse effect on its business, consolidated financial condition or results of operations. MARKET RISK DISCLOSURE The Company is subject to market risk exposure related to changes in interest rates on its senior credit facility, which includes revolving credit notes and term notes. These instruments bear interest at a pre-agreed upon percentage point spread from either the prime interest rate or LIBOR. Under its senior credit facility, the Company may, at its option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At November 2, 2002, the Company had $172.3 million outstanding under its senior credit facility. Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $1.7 million on an annual basis. Based on October 31, 2001 outstanding floating rate debt, a one percent change in the interest rate would have caused a change in interest expense of approximately $2.4 million on an annual basis. The Company's objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall cost as compared to fixed-rate borrowings. GROWTH The company is dedicated to increasing its market share through strong marketing and low cost, quality manufacturing. Special niches that provide unusual profit and growth opportunities are sought. Overall profit growth of at least 15% per year is a strategic goal of the company with larger increments possible in the short-term. This growth may be internally generated or it may come from carefully selected acquisitions. DIVIDENDS The company's officers and directors are all significant stock or option holders. Thus, there is much sympathy for dividends. However, it is considered appropriate, at this stage of the company's development and in view of the available returns, to invest that money in the growth of the company and the repayment of debt as opposed to paying dividends. COMPENSATION The company believes in providing base salaries for its management on the low side of the industry norm with opportunities for performance based bonuses. Specifically, Return on Assets and growth in earnings per share are the criteria for the performance measurement. CORPORATE RESPONSIBILITY The company is committed to the goal of being an exemplary corporate citizen. Toward that end, we have an intense safety program ongoing in the workplace and some of the best safety records in our industry. We have proper awareness and concern for the overall environment. Besides employment, there are also advancement opportunities due to the growth of the company. Finally, we employ high quality engineering professionals to ensure that our products are designed using sound engineering practices and principles. FORWARD LOOKING STATEMENTS "This Annual Report contains forward-looking statements concerning the business and operations of the Company. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and other patterns, raw material pricing, competitive activity and pricing pressure, the ability to make strategic acquisitions accretive to earnings, and general economic conditions affecting the construction industry, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including its most recent annual and quarterly reports on Forms 10-K and 10-Q.The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations." 35 FINANCIAL REVIEW QUARTERLY FINANCIAL INFORMATION NCI BUILDING SYSTEMS, INC. (IN THOUSANDS, EXCEPT PER SHARE DATA)
First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- FISCAL YEAR 2001 Sales ..................................................... $ 216,562 $ 208,184 $ 259,114 $ 271,017 Gross profit .............................................. $ 50,130 $ 46,128 $ 59,421 $ 57,524 Income before extraordinary loss and cumulative effect of change in accounting principle .............. $ 2,842 $ 1,245 $ 7,109 $ 5,339 Income before extraordinary loss and cumulative effect of change in accounting principle per share:(1),(2) Basic ................................................. $ .16 $ .07 $ .39 $ .29 Diluted ............................................... $ .16 $ .07 $ .39 $ .29 FISCAL YEAR 2002 Sales ..................................................... $ 228,565 $ 213,224 $ 257,837 $ 253,816 Gross profit .............................................. $ 45,545 $ 45,519 $ 61,415 $ 60,386 Income before extraordinary loss and cumulative effect of change in accounting principle .............. $ 3,090 $ 4,817 $ 12,570 $ 11,645 Income before extraordinary loss and cumulative effect of change in accounting principle per share:(1) Basic ................................................. $ .17 $ .26 $ .68 $ .62 Diluted ............................................... $ .17 $ .26 $ .67 $ .62
(1) The sum of the quarterly income per share amounts may not equal the annual amount reported, as per share amounts are computed independently for each quarter and for the full year based on the respective weighted average common shares outstanding. (2) Includes restructuring charge of $2.8 million in the fourth quarter of 2001 ($1.8 million after tax). PRICE RANGE OF COMMON STOCK NCI BUILDING SYSTEMS, INC. The Company's common stock is listed on the NYSE under the symbol "NCS." As of January 15, 2003, there were 132 holders of record of the Company's common stock. The Company has over 8,500 beneficial owners. The following table sets forth the quarterly high and low sale prices of the Company's common stock, as reported by the NYSE, for the prior two years.
Fiscal Year 2001 High Low Fiscal Year 2002 High Low - ---------------- --------- --------- ---------------- --------- -------- January 31 .......................... $ 22.50 $ 15.44 February 2........................... $ 19.25 $ 12.75 April 30 ............................ $ 22.70 $ 9.30 May 4 ............................... $ 24.75 $ 16.53 July 31 ............................. $ 18.55 $ 12.56 August 3............................. $ 24.90 $ 15.05 October 31 .......................... $ 17.95 $ 11.00 November 2........................... $ 19.95 $ 16.85
36 2002 ANNUAL REPORT Edilberto Abarca Patsy Abbott Shirley Abbott James Abercrombie Paul Abercrombie Donnie Abernathy Harvel Abernathy Pamela Abney Isaac Abraham Fernando Abril Stacey Accuri Manuel Acencio Flavio Acosta Ramon Acosta Rufino Acosta Barbara Adair Ronnie Adair Jr Belinda Adams Floyd Adams Louis Adams Neal Adams Roddrick Adams Sammy Adams Daniel Adams Jerome Adamski Alexander Adkins Chester Adkins Michael Adkins Amma Adu Russell Agao Amy Agnew David Aguilar Edmundo Aguilar Enrique Aguilar Ernesto Aguilar Jose Aguilar Ramon Aguilar Sebastian Aguilar Sergio Aguinaga Benjamin Aguirre Felipe Aguirre Humberto Aguirre Martin Aguirre Raul Aguirre Nana Agyei Saeed Ahmadian Deandre Aikens Steven Akin Arturo Alanis Francisco Alarcon Julio Alarcon Ramone Albarran Jesus Alcala Susan Aldrich Demetrius Alexander James Alexander Jeff Alexander John Alexander Juan Alfaro David Alibrandi Billy Allen Harold Allen Kerry Allen Robert Allen Ron Allen Timothy Allen Carrie Allen Jason Allen Kenneth Allen Brenda Allred Alejandro Almazan Patricia Almazan Minnie Almazan Refugio Almeida Fernando Almontes Shelby Alred Jose Alvarado Antonio Alvarez Antonio Alvarez Francisco Alvarez Jessica Alvarez Jesus Alvarez Juan Alvarez Pedro Alvarez Ernesto Amaya Francisco Amaya Jose Amaya Ruben Ambriz Edgar Amezquita Isaac Amoah Vincent Ampofo Carl Anderson Gregory Anderson Jenny Anderson Jimmy Anderson Jimmy Anderson John Anderson Michael Anderson Richard Anderson Melecio Andres Christopher Andrew Arnold Andrews David Andrews Sophia Androwski Alvaro Angel Javier Anguiano Juan Anguiano Faustino Antunez Emmanuel Antwi Duane Appel Jose Aragon Jesus Arambula Brian Aranda Carlos Aravjo Shannon Archer Andy Arciba Robert Ardie Adrian Arellano Juan Arellano Wilfrido Arellano Luis Arenas Michael Arender Jose Argueta Cristian Arias Egetzain Arias Jose Arias Oscar Arias Jose Arias-Bonilla Monique Arismendez Jorge Armenta Phil Armenta Ramon Armenta-Osorio Randy Arms Joseph Arnold Dennis Arns Charly Arreaga Mario Arredondo Efrain Arriaga Emilio Arriaga Ubaldo Arriaga Carlos Arteaga Milton Arvie Raymond Arzu Edenilson Asencio Tony Ashy Jr Taiwo Asoro Sydney Atkinson James Atkinson Sr Steven Ausborn Jr Greg Auvenshine Ruben Avelar Windell Avery Florencio Avila Juan Avila Juan Avila Maria Avila Daniel Avilez Teresa Awbrey Mike Ayala Toribio Ayala Victor Ayala Maclean Ayerite Cheryl Ayers Christina Ayers Ronnie Ayers Bilal Ayhan Soner Ayhan Jesse Azevedo Martin Azevedo Astrid Azpeitia Octavio B Vaughn Bacon Robert Bacon Jr Rogelio Badillo Lorenzo Baez Roger Baggett Allen Bailey Craig Bailey James Bailey Joe Bailey Lloyd Bailey Ricky Bailey Thomas Bailey William Bailey Antonia Bailey Brian Bailey Pamela Bailey Richard Bails Shana Baird Kathryn Baird Donald Bajohr Clyde Baker Heather Baker Milton Baker Mitch Baker Roy Baker Thomas Baker Dale Baker Hale Baker Randal Baker Robert Baker Luis Balarezo Carl Baldwin Michael Baldwin James Ballew Jr Estevan Bana Eduardo Bananao Michael Bancerowski Caren Bancroft Dayrl Bancroft Kenneth Bandilla Riyazulla Bangarapet J Banister Taher Banker Mark Baragar Jose Barahona Ygnacio Barba David Barber Mazie Barber Michael Barber Wesley Barber Nailya Barenbaum Shane Barner Bradley Barnes Brian Barnes Charles Barnes Charles Barnes Rodney Barnes Leslie Barnett Mark Barnhart William Baron Felix Baroza Christopher Barrentine Abel Barrera Albertano Barrera Jose Barrera Jose Barrera Marcos Barrera Mariel Barrera Miguel Barrera Primitivo Barrera Fermin Barrios Natividad Barron Jody Bartkus Douglas Bartlow Guillermo Bartolon Bryan Barton Marcus Basher Michael Bastien Kalyan Basu Ruben Batangan Aaron Batchellor Elmer Batchelor Kevin Bate Ronald Bates Jake Bausman Jose Bautista Juan Bautista Michelle Baxley Alan Baxter Joseph Bay Thomas Beaird Jearl Beal Earl Bean Candice Beasley Charles Beasley Don Beasley Michael Beasley Lawrence Beasley Jr Robert Beatty Mary Beauchamp Hugo Becerra Juan Becerra Joseph Becker M Becker Arthur Bedolla Ronnie Beeler Seth Beeler Tony Begay Rene Behan Roy Belanger Jonathon Belcher Clyde Bell David Bell Matthew Bell Milton Bell Tammy Bell Steven Bell Gail Bellow Lauren Belt Melissa Beltrami Humberto Benavides Ignacio Benavides Henry Benavidez James Bender Wesley Bender Randy Benefield Jr Dennis Benge Ted Benic Edilberto Benitez Juan Benitez Luis Benitez Marcelino Benitez Santiago Benitez Donald Benkert Eddie Bennatt Amanda Bennett Anthony Bennett Charles Bennett John Bennett Leha Bennett Michael Bennett Tavi Bennett Larry Bennett Jr Jerry Benson Jerry Bentley Dave Beoman Arturo Bergantinos Maria rosa Bergantinos Mylene Bergantinos Roberto Bergantinos Willie Berlanga Fernando Bermudez Gustavo Bernal Odis Berrios Michael Berry Steven Berry Leroy Berry Jr Kelly Berryhill Jeffrey Berryman Kenneth Besson Beth Beswick Jerry Bevans Jr Rajesh Bhatt Saleem Bhujwala Joey Bickford Daniel Bidwell Dennis Biggs Jr Ronnie Bigham Kenneth Billanti Shannon Billings William Bills Charles Bing James Bingham Quentin Birdine Phillip Birdwell Tom Bishop Andy Bjorson Allan Black James Black Judy Black Timmy Black Tyrone Blades Thomas Blair Charles Blakely Tanis Blanchelande James Blaney Leroy Blankenburg Donald Blanks Robert Blaydes Debbie Bledsoe Kwabena Boadu Gabriel Boafo Joe Boatright Joe Boatright Teodoro Bobadilla Richard Bobbitt Tony Bobbitt Linda Bode Jeffery Bodiford Brenda Bogan Craig Bogan Bryan Bogan Bobby Bolden William Bolden Howard Boldt Jr William Bolinger Doreen Bolinger Jacqueline Bolton Martha Bon Bertran Bonilla Jose Bonilla Jose Bonilla Jimmy Bonner David Bonner Israel Borjas Kwasi Bortey Ralph Borunda Arthur Boshears Sammy Boshears Walter Boshears Gerald Bosler Larry Bostic Joseph Bouchard Bounmy Bounlom Murphy Bouquet Jr Jose Bourbois Jr Stacy Bovee James Bowden Morris Bowen Ronald Bowling Sammy Bowling Randy Bownds Royce Bownds Jr Darrell Boyd Illya Boyd Nicholas Boyd Quincey Boyd Stephen Boyd Steven Boyd Thomas Boyd Steward Boyd Ada Boyd Jonita Boyer Teddy Boyer David Brabec Michael Bradley Joseph Brady Claire Brady Robert Bragg Timothy Bramblett Kevin Bramer Gary Branham Jr Brian Brasher Scottie Brazil Tracy Brazil Timothy Breheny A Brehm Daniel Brenner Jesse Brewer Kenneth Brewer Robert Brewer Sam Brewer Jamie Brewster Timothy Bridgeforth Jr Phillip Bridgersii Darrell Bridges Tresa Bridges William Briedel Donald Bright Billy Brimer Joann Brimer Roger Brinson Karen Brisco Gregory Britt Paula Britt Valentina Brittain Rickey Brittain Edward Britton Oscar Briz Jr Anne Broaddus Everette Brock Johnny Brock Keith Brock Randell Brockett Guillermo Brol Brenda Brooks Jess Brooks Johnny Brooks Allen Broussard Allen Brown Carrie Brown David Brown Derek Brown Derrick Brown Earnest Brown Joseph Brown Kenneth Brown Mark Brown Michael Brown Patricia Brown Paul Brown Rickey Brown Robert Brown Rod Brown Tedi Brown Thomas Brown Timothy Brown Yolanda Brown James Brown Jerry Brown Christina Brown Gail Brown Kevin Brown Silas Brown III Jeffrey Bruce Garrick Brugeyroux Tedrick Brunson Billy Bryan Larry Bryan Jack Bryant Joseph Bryant Samuel Bryant June Bryant III Ken Buchinger Dan Buckner Timothy Budde Douglas Budnek Marvin Buesing Huong Bui Chris Buie Charles Bullock Eugene Bump Jeffery Bumphis Clinton Burden Sean Burden Betty Burgess Steven Burgess Teresa Burk Stephen Burke Jeffrey Burkett Teresa Burkett Craig Burman Larry Burnett Bryan Burningham James Burns Paul Burns Scott Burrous Cash Burthold Scott Burthold Mark Bush David Bushman Angel Bustillo Carol Busyczak Kimberly Bute Philip Butler Willie Butler Timothy Butler Greg Byers Steven Byers Anthony Bynum Arthur Byrd Finley Byrd Enoch Byrge Freeman Byrge Derek Byse Flavio Caballero Katrina Caballero Arthur Cabrera Channa Cacomanolis Jeffrey Caddel Albert Cade Robert Caggiano Solange Cailet Jacqulyn Cain Kevin Cain Angela Calabrese Gabriel Calderon Kevin Caldwell Jr Aroldo Calito Rodney Callaway Julie Camara Alfonso Camarena Jose Camarena Henry Camargo Luis Camarillo Roberto Camarillo Patricia Cameron Irene Campbell John Campbell Mark Campbell Marshall Campbell Paul Campbell Ezequiel Campos Jesus Campos Santos Campos Senovio Campos Yosihijro Campos Ricky Cancino Connie Cannon Janell Cannon Jose Cano Neil Cantor Alex Cantu Francisco Cantu Billy Caperton Joe Caperton Jimmy Caples Christopher Capley Gregorio Carbajal Pedro Carbajal Guillermo Carcamo Myriam Carcamo Jeremy Carden Francisco Cardenas Hector Cardenas Jaime Cardenas Pedro Cardenas Selvin Cardenas Jose Cardoza Daniel Carias Jerry Carlton Paula Carmany Gustavo Carnaval Judgeston Carnes Clifton Carney Gloria Carney Kenneth Carter Marc Carolan Paul Caron Mary Carpenter Joel Carranza Jose Carranza Ricardo Carranza Joe Carraway Brandon Carrell Agustin Carreto Ernest Carrier Antonio Carrion Lonnie Carroll Robert Carroll Stephen Carroll Gene Carroll Glenn Carstens Benjamin Carter Larry Carter Rex Carter Helen Casey Sean Cash Leopoldo Casillas Francisco Casillas-martin Oscar Casimiro Bernardo Castelan Miguel Castelano Sandra Castellano Fernando Castellanos Olvin Castellanos Reynaldo Castellanos Antonio Castillo Edgar Castillo Esteban Castillo Francisco Castillo Michael Castillo Larry Castleberry Anthony Castro Herbert Castro Jaime Castro Javier Castro Maria Castro Antonio Castro Jr Edward Catchings Caliste Catia Johnny Cattenhead Jr Bryan Caudle John Causley William Cavanaugh Nicky Cavazos Praxedis Cavazos Patricia Cavin Adrian Cazares Juan Cecenas Dustin Ceder Carlos Centeno Adam Cepeda Jose Cepeda Timothy Cerny Jesus Cervantes Perfecto Cervantez Albert Chadwell Mario Chagolla David Chambliss Lane Champagne Charles Chandler David Chandler Joe Chandler Jr Paul Chandrapal Darrell Chaney Fernando Chapa Victor Chapa Jackey Chapman Lyle Chapman Robert Chapman Thales Charchalac Patsy Chastain Ronald Chastain Sr William Chatterton Ernesto Chavez Felix Chavez Nelson Chavez Raul Chavez Ruben Chavez Mark Chavez Alvin Cherry Edward Childress Tim Childress Arlis Chowns Jeremy Chrislip Todd Christensen Jamie Christensen Gerald Chumley Felix Chun Lim Chung Moises Cinco Juan Ciriaco Gilbert Cisneros Arthur Clark Christian Clark Donald Clark Jerry Clark Trevor Clark Trisha Clark Gregory Clark Martin Clarke Antonio Claros Jerry Clary Adolfo Claudio Michael Clay Monte Clayton Terry Clayton Ryan Clear James Cleer Marlo Clegg Michael Clements Benny Clemments Marvin Cleveland Theodore Clifkoep Russell Clifton Edwin Clignett John Clough Virginia Clower Joe Cobb Anthony Coble Luis Cobos Russell Cochran Egetzain Cocuy Barney Cogswell Kirk Cole Randy Cole William Cole Joe Coleman Mikell Coleman Tracy Coleman William Coleman Geronimo Collazo Jeffrey Collier Larry Collier Bennie Collins Curtis Collins Donna Collins James Collins Kevin Collins James Collins Carlos Colon Jon Colston Theodore Combs Verna Combs Joan Comer Floyd Comerford Derek Conard Mark Condren Paul Cone William Cone Christopher Conn Levon Conner Ronald Conner Steven Conner Abdula Contek Anthony Contreras Basilio Contreras Eduardo Contreras Evaristo Contreras Frank Contreras Isabel Contreras Jesse Contreras Jesus Contreras Jose Contreras Rene Contreras Silvino Contreras Virgilio Contreras Jesse Coody Brandon Cook Candace Cook Donald Cook Gregory Cook Michelle Cook Nicholas Cook William Cook Freddie Cook Victor Cook Shanda Cook Carl Cooley Jennifer Cooley James Coone Calvin Cooper David Cooper Michael Cooper Darrell Coots Timothy Cope Robert Copenhaver Julie Coppage Rene Corado Richard Corbitt Jose Cordero Jack Cordes Reyna Cordova Jose Cornejo Marcos Cornejo William Cornejo Romulo Cornelio Kyle Cornett Javier Corona Sergio Corona Manuel Cortes Jaime Cortes-sanchez Francisco Cortez Jesus Cortez Salvador Cortez Naomi Cortez Jose Cortinas John Cosper Jr Brian Cosson Joe Costilla Gary Coursey David Covarrubias Enrique Covarrubias Hector Covarrubias Odilon Covarrubias Michael Cowan Marilyn Cox Warren Crabb Christopher Craft William Craft Randy Craig Gary Crausbay Anthony Cravalho John Craver James Crawford Randall Crawley Alan Creekmore Catherine Creel Charles Crist Andrew Croniser Justin Crook Jason Cross Gary Crotwell Josh Crouch Chad Crowe Curtis Crowe Samuel Crowe Alfredo Cruz Jerry Cruz Jose Cruz Jose Cruz Mirlando Cruz Sergio Cruz Mario Cuc Javier Cuello Victor Cuevas Ashli Cullins Rodney Culliver Harold Cunningham Tony Curtis Michael Custer Richard Dahlgren Esteban Dait Robert Dalton Elias Damian Rafael Danas Ralfael Danas Jr Samuel Dandy Dao Dang Kelly Danker Thomas Danley Daryl Darby Stanley Darrin Harold Daugherty Patrick Daugherty Renee Daughtry Lee David Jr Samuel Davidson Billy Davis Brandon Davis Brian Davis Christopher Davis Dajuana Davis Dennis Davis Derrick Davis Dorothy Davis Edward Davis James Davis Johnny Davis Rechard Davis Undara Davis Wilbert Davis Wilma Davis Robert Davis Jeffrey Davis Edwin Davis Jr Mike Davison Brenda Dawson Jesus De Jesus Reynaldo De la Cruz Ines De La Cruz Jr Alberto De La Garza Roberto De Leon Larry Dean Steven Dean Drew Dearman Ronda Deblance Christopher Debord David Debruler Lisa Deckard Leslie Decker Wilton Decuir Sr Barry Deese Tomas Degante Trinidad Degollado Jaime Del Gadillo Jr Cesar Delacruz Matias Delagarza Katheryn Delaney Patrick Delaney II Ronnie Delapaz Carlos Deleon Julio Deleon Marcos Delgado Mary Delgado Ramon Delgado Isidoro Delgado Francois Delien Waylon Dellingner Michael Deloach Eric Delvechio Boyd Mark Dempsey Frank Dennis Isaac Dennis Terance Dennis Adam Densmore Christopher Densmore Mark Denton Alexander Dercach Johnny Derossett Mark Detwiler Dennis Deville Carol Devine Adria Dewberry Everardo Diaz Hector Diaz Herminio Diaz Lopez Jose Diaz Luis Diaz Maynor Diaz Miguel Diaz Charles Dickinson Edward Dickinson Lonnie Dickson Jr Minh Diep Beth Dillard Gregory Dillard Charles Dillon William Dinkins Jacob Disciplina Robert Disney Kyle Dittl David Dixon Laytonga Dixon Don Dixon Rolando Dizon Khalinh Doan Mark Dobbins Anthony Dobson Keithdreath Dockery Tommy Doddridge James Dodson Richard Dodson Ronald Dodson Daniel Doherty Anthony Domicolo Alfonso Dominguez Jose Dominguez Hector Dominguez Derrick Donahue Robert Donahue Susan Donaldson Elmer Donley James Donovan Gary Donovan Yves Dorgilus Julie Doss Wallace Doss Ramona Dosser Wendi Dosser Aly Dosso Rebecca Dotson Stephen Dotson Tammie Doty Anna Douangmala Rick Doucet Chris Douglas Michael Douglas Craig Douglas Perry Douglass Gerald Dowd Theresa Downs Martin Doyle Derrick Drake Sladana Draskovic Fred Drilling Don Driver Larry Driver Kurt Drobisch Sheila Drown Harold Drum Julie Drummond Gene Dryden Sergio Duarte David Dubois Jerry Dubose Shawanda Dudley Gary Dukes Gerald Dukes Andrew Dumas Jr Henry Dumesnil Jackie Duncan Joe Duncan Shawn Duncan Daphne Duncan Daniel Dungan Ricky Dunlap Jeffrey Dunlap Christopher Dunn Michael Dunn Alvaro Duran Francisco Duran Santos Duran L Durand III Jessica Dusek A Dutton Cathy Duty Albert Duval Jr David Dye George Dye Larry Dye Michael Dyer Timothy Dykes James East Roberto Echeverria Chadrick Eddleman Eric Eddy George Eddy Diana Eder Boyd Eder Franklin Edgmon Jr Carl Edney Jr Kay Edson Derrick Edwards Jacqueline Edwards Owen Edwards Ronnie Edwards William Edwards Dennis Edwards Dawn Edwards Donna Edwards William Edwards Jr Aniceto Elias Jesus Elizalde John Eller Tamera Elliott David Ellis Hugh Ellis Timothy Ellis Walter Ellison Roberto Elorza James Elswick Alesha Emge Juan Encarnacion Albert Encinas Stephanie Enge Richard Engeldinger Louie Engelke Rhonda Engelman Lonnie England Michael England Steve England Jennifer Engel Cheryl Engle Robert Engler Jack English Joseph Ennis Juan Enriquez William Eoff Steven Epp Bonnie Erickson Kenneth Ernest Gabriel Escalante Pedro Escalante Ernesto Escalona Jose Escareno Alberto Escobar Jose Escobar Juan Escoto Vida Eshun Monica Espinosa Joe Esquivel John Esquivel Benito Estrada Costantino Estrada Jesus Estrada Maria Estrada Rodolfo Estrada Jr John Eubanks James Evans Ollie Evans M elita Evans Carl Evans Jr Edward Evans Jr Richard Everett Lisa Everroad Linda Eyeington Peggy Fairbank Mozell Fairley Jr Andre Falls George Farley Kenneth Farmer Thomas Farmer Brandy Farrar Debbie Farrister Debra Farrister Gerald Farrister Carol Fatheree Christopher Fatimiro James Fawcett Alfredo Fedelin Helen Feeney Jose Feliciano Marion Felipe John Felts Gayle Ferguson Sergio Fernandez Jeffrey Fero Marcelo Ferreyra Misael Ferrufino Lisa-marie Feyerabend Michael Ficker Clifton Fields Curtis Fields Thomas Fields Vernon Fields Rene Filiciano Zamor Fils Amanda Fink Jerry Finley Russell Finley William First Teodoro Fiscal Christopher Fischer Keith Fischer Alan Fisher Thomas Fisher Mary Fitzgerald Kevin Fleming Scott Fleming Debra Flippen Adan Flores Bertin Flores Carlos Flores Chad Flores Crecencio Flores Damion Flores Elias Flores Elias Flores Elodia Flores Jorge Flores Jose Flores Jose Flores Luis Flores Marcos Flores Raul Flores Ricardo Flores Rogelio Flores Sigfredo Flores Vicente Flores Annette Flores Manuel Flores Jr Raul Flores Jr Carolyn Flowers Jesse Flowers Archie Floyd Kenneth Floyd Troy Floyd Bob Flugrad Colt Foley Andrew Follett Thomas Fondren Norman Fontenot Thomas Ford Robert Fordham William Forest Dwayne Forrest Robert Forshee Jr Jennifer Fort Herman Foster Sharon Foster Randy Fouse Joel Fowler Kevin Fowler Michael Fowler Jerry Fowler Jr Dean Fox Grady Fox Russell Fox John Frank Paul Franklin Ted Franklin Brian Frantz Julia Frazee Charles Frazier Oscar Freeman Rogers Freeman Sampson Freeman Jr Tania Freitas Paul Freker Kofi Frempong John French Luis Frias Marco Frias Carl Fries Reed Froebel Randall Froehlich Richard Fucik Amilcar Fuentes Douglas Fuentes Hugo Fuentes Isidoro Fuentes Jose Fuentes Jose Fuentes Lesther Fuentes Juan Fuentes Jr Johnny Fulks Ronny Fulks Dennis Fuller Doug Fuller David Fulton Ann Fults Drayton Fults Jr Jose Funes David Fuqua Duane Furry Michael Fuselier Scott Fuselier Jimmy Gabriel Luis Gaeta Scott Gaffney Charles Gagne Jr Kristina Gahimer William Gaines Walter Galdamez Freddy Galindo Rigoberto Galindo Jorge Galindo-Castro Jorge Gallardo Marcial Gallardo Robert Gallaway Robert Galley Charles Galloway Lucio Galvan Manuel Galvan Luis Galvez Reynaldo Galvez Ruben Galvez Keny Galvez-galo Richard Gamble Wilson Gamboa Larry Gamel April Ganado Arlie Gandy Michael Gannon Arturo Gaona Ruben Garces Abraham Garcia Adrian Garcia Alan Garcia Albino Garcia Andres Garcia Arturo Garcia Brenda Garcia David Garcia Eleno Garcia Elmer Garcia Filiberto Garcia Jesus Garcia John Garcia Jorge Garcia Jorge Garcia Jose Garcia Jose Garcia Jose Garcia Jose Garcia Julian Garcia Kristine Garcia Mariano Garcia Mario Garcia Melesio Garcia Miguel Garcia Ricardo Garcia Samuel Garcia Urbano Garcia Valentin Garcia Joe Garcia Rudolph Garcia IV Raphael Gardella Eric Gardia Shendra Gardner Elton Gardner Heidi Gardner Lori Garlitch James Garmon James Garner Debra Garrett Brian Garry Alejandro Garza Daniel Garza David Garza Fidel Garza Gustavo Garza Heraldo Garza Homero Garza Juan Garza Ramiro Garza Robert Garza Victor Garza Betty Garza Gaspar Puentes-Mendez Laura Gates Thomas Gaughan Floyd Gauntt Jack Gay Joann Gay Earl Gay Jr Jerry Gazley Carol Geary Brian Geffre Donna Gendreau Charles Gentry Jerry Gernand Robert Geter James Giacomo James Gibbins Christopher Gibson Elizabeth Gibson James Gibson Jason Gibson Randall Gibson Randy Gibson Ronald Gibson Susan Gibson Judy Gibson Bruce Gilbreath John Gilbreath Greggory Giles James Gill Ronald Gill Jason Gilliam Albert Ginn Kelly Ginn Jeffery Girdler Alvaro Giron James Gladden Charles Glady Anthony Glass Charla Glass Daniel Glenn Darryl Glenn Jeffrey Glosser Pete Glover Paul Goad Phillip Goad Randal Gober Lakeram Gobin Gary Goble Gregory Godfrey Rafael Godinez Robert Godwin Gary Goelzer Jason Goff Darryl Goins Mark Goins Steven Goins Donald Golden Micheal Golden Dean Goldman Robert Goldman Dennis Golladay Baltazar Gomez Christobal Gomez Daniel Gomez Miguel Gomez Pedro Gomez Ricardo Gomez Gerber Gongora Arnulfo Gonzales Ismael Gonzales Manuel Gonzales Natalio Gonzales Danubio Gonzalez Francisco Gonzalez Hector Gonzalez Israel Gonzalez Joe Gonzalez Joel Gonzalez Jose Gonzalez Jose Gonzalez Jose Gonzalez Juan Gonzalez Juan Gonzalez Mario Gonzalez Mark Gonzalez Martin Gonzalez Porfirio Gonzalez Raul Gonzalez Rigoberto Gonzalez Eduardo Gonzalez III Phillip Goode Bradley Goodman Roy Goodman Russel Goodmen Barbara Goodson Gerald Goodson Philip Goodwin Gavin Gordon Walter Gordon Tina Gordon Meagan Goudeau Anthony Gracia Ryan Graff James Graham Walter Graham Abraham Granados Joe Granados Victor Granados Davudovich Grandez David Grant Stanley Grant Cristina Grasso Douglas Graves Catherine Graves Octavia Graves Jeremiah Graves Jay Greathouse Charles Green David Green Eileen Green Jeffrey Green Jimmy Green Kelvin Green Robert Green Scott Green Verily Green William Green Dan Greer Mark Greer Tiffany Gregg Paul Gregory Johnny Grein James Griffin Patrick Griffin Ronnie Griffin Allen Griffin Russell Griffith Jr Lovie Griggs Noe Grimaldo James Griner Tony Grise Henry Gross Michael Gross Debra Grow Jose Guardado Ramiro Guerra April Guerrero Juan Guerrero Elpidio Guevara Jesus Guevara Joaquin Guevara Jose Guevara Jose Guevara Jose Guevara Royce Guill Fred Guiterrez Jr Conrad Gullett Brian Gulley Jimmy Gulley Thomas Gunn Jr Raymond Gunsauley Jr Greg Gunter Scottie Gunter Mario Gurrola Agustin Gutierrez Alejandra Gutierrez Alejandro Gutierrez Federico Gutierrez Guadalupe Gutierrez Heliodoro Gutierrez Milton Gutierrez Noe Gutierrez Rene Gutierrez Serigo Gutierrez Brian Guy Dora Guzman Fortino Guzman Gerardo Guzman Hector Guzman Hilario Guzman Joseph Guzman Juan Guzman Luis Guzman Rodolfo Guzman Robert Gwynn Kyle Gwynn Yaw Gyamera Abena Gyamerah Earl Hacker Timothy Hackler Robert Hadden Isaac Hagans Jr James Hagen Kathy Hager John Hahn Robert Haigler Dustin Hall Floyd Hall Mark Hall Mark Hall Michael Hall Thomas Hall Bradley Hall Jesse Hall III James Hallberg Richard Ham John Hamburg Saad Hamdi Darryl Hamilton James Hamilton Jeffrey Hamilton George Hamm Bobbie Hammond Charles Hammond Dianne Hammond Roy Hammonds Dustin Hampton Harvey Hampton Allison Hand Michael Hand Kent Haney Rodney Hankins Charles Hanks Walt Hannath Roger Hansen Donald Hanson Joe Hanson Ron Hanson Christina Hanvey Steven Hanvey Daniel Happel Mike Harbour Robert Harbuck David Harden Phillip Hardesty Dora Harding Bryce Hardwick Josh Hardy Kenneth Hardy Luis Hardy Jenny Hare Richard Haren Michael Harendt Angela Harley Joseph Harnage Gary Harness David Harp Robert Harper Jerry Harpster Alean Harris Andrew Harris Kari Harris Ronnie Harris Anthony Harrison Charles Harrison Ronnie Harrison Leon Hart Leonard Hart Henry Hartley Franklin Hartman Jr Matthew Hartnup Adel Hasan Karen Haskins Dalton Hatcher Mark Hatfield Ricky Hatfield Kenneth Hatten Jr Joseph Haudey Debbie Hauptman Judy Havel Billy Havins Mark Hawkins Patrick Hawkins Marvin Hayden Penny Haynes Ralph Hays Ralph Hays Jr Roy Hearn Samuel Heatherly Chris Hebert Francis Heck Steven Heil Robert Heinemann Garrett Heinrich Kristi Heinrich William Heiser Frank Helton Ronald Helton Jr Jackie Hembree Johnnie Hembree Luis Hemerith Hector Hemmer Carlies Henderson Ernest Henderson Kelvin Henderson Sandra Henderson James Henderson Jr W Hendricks Ralph Hendrickson Sammie Hendrix Denise Henegar Braulio Henriquez Jaime Henriquez Jose Henriquez Kennard Henry Patricia Henry Randy Henry Renee Henry Donna Hensley E Hensley Mary Hensley Tony Hensley David Hensley Toy Henson Christopher Herd Charles Herman Anthony Hernandez Armando Hernandez Benis Hernandez Candelario Hernandez David Hernandez Dimas Hernandez Eduardo Hernandez Felix Hernandez Fermin Hernandez Gerardo Hernandez Gustavo Hernandez Hector Hernandez Hector Hernandez Ignacio Hernandez Ignacio Hernandez J Hernandez Jaime Hernandez Javier Hernandez Jessica Hernandez Jesus Hernandez Jose Hernandez Jose Hernandez Juan Hernandez Juan Hernandez Juan Hernandez Julio Hernandez Leodegario Hernandez Luis Hernandez Manuel Hernandez Manuel Hernandez Mauricio Hernandez Miguel Hernandez Miguel Hernandez Miguel Hernandez Pedro Hernandez Pedro Hernandez Ramiro Hernandez Rocki Hernandez Rony Hernandez Rurick Hernandez Sam Hernandez Ulises Hernandez Victor Hernandez Victor Hernandez Raymond Hernandez Pete Hernandez Jr Pete Hernandez Jr Jose Hernanes Shannon Herndon Cirilo Herrera Eduardo Herrera Edwin Herrera Jorge Herrera Jose Herrera Lorenzo Herrera Oscar Herrera Sergio Herrera Thomas Herrera Hilario Herrera Jr Arnold Herron Charles Herschlag Rosemary Hesskew Roy Hickenbottom John Hicklin III Delaine Hicks Don Hicks Jeffery Hicks Terrell Hicks Billy Higdon Bonnie Higgins Jeffrey Hildebrand John Hildebrand Bradford Hill Eddie Hill John Hill Kenneth Hill Alice Hill Sherry Hill Danny Hillard William Hilley Jeff Hillhouse David Hillstrom Steven Hines Fernando Hinojosa Donna Hise Raymond Hobbs John Hockenberry Casey Hodges Bruce Hodgson Robert Hoekstra Gordon Hoene Joan Hoesl Gailene Hofer Carl Hoffart Jaime Hoffman Jesus Hoffman Robert Hogan Douglas Holbert Paul Holden Richard Holiday Jr Bruce Holladay Lee Hollas Dwain Holliefield June Hollis Willie Holloman Maiani Holloway Orie Holly Edward Holm Ellard Holmbeck Christopher Holmes Jesse Holst Abraham Holt Alfonzo Holts J Honeycutt Rajesh Honnavara Buck Hood Jason Hood Kenneth Hood Lenard Hooker Christina Hooks Brian Hoover Harry Hoover Jr James Hope Jr Adam Horton Eric Horton Lacey Horton Lloyd Horton III Kevin Hoskins Marty Hoskins Ronnie Hoskins Ladonna Houston Joseph Hovater Donald Howard Kenneth Howard Willie Howard James Howard Linda Howard Michael Howell Jr Porfirio Huanca Jewell Hubbard Larry Hubbard David Hubbard Jr Jeffrey Huber Charles Hubert Adrian Hudson James Hudson Ralph Hudson Wendell Hudson Adan Huerta Juan Huerta David Huff Brian Huffaker Chad Huffman James Huffman Jeremy Huffmeister Mitchell Huffty Anthony Hughes Damian Hughes Jeffery Hughes Scott Hughes Roc Hughes Eric Hugo Bradford Hugunin Claude Hull Denise Hull Chad Hulsey Kenneth Hulsey Robert Hulsey Rodney Hulsey Ronald Hulsey Donnie Humphries Desi Hunt Donna Hunt Marie Hunt Johnny Hunter Kareen Hunter Karen Hunter Thomas Hunter Kelly Huntsman Joe Hurst Joshua Hurst Shawn Hurst Timothy Hurt Shan Hutchinson Cynthia Hutson Dorlesa Hutto Lovely Imarhia Oscar Inclan Jose Infante Steven Inge Shane Inglesby Chanpheng Inthavong Vilayphone Inthavong Bong Inthavongsa Kao Inthavongsa Soukkaseum Inthavongsa Jose Iraheta Brenda Irby Maurice Irby Troy Irby Chad Irwin Eric Irwin Glen Ivey Robert Ivey Jim Ivins Deciderio Ixmay-Chanchava Rick Jablonski Glenn Jackoviak Eugene Jackson Gerald Jackson Henry Jackson Henry Jackson Kirby Jackson Michael Jackson Scott Jackson Timothy Jackson Tommy Jackson Candido Jaimes Cayetano Jaimes Oscar Jaimes Raunel Jaimes Alvaro Jaime-Soto Brian Jaks Richard James Jamie Janacek Sheila Janot Thomas Jansen Kalpesh Jariwala Jimmy Jarrell Michael Jarrell Robert Jarrell Robert Jarrell Jr Bonnie Jarvis Elvir Jasaraj Linton Jason Mel Jastram Mohamed Jatip Gregory Jaussaud Ephraim Jaussi Bassam Jawhary Nathan Jay Jimmy Jeffers Larry Jeffers Calvin Jefferson Ladonna Jefferson George Jeffries Bassel Jelahej Nicholas Jellerson James Jenkins Larry Jennings Richard Jensen Timothy Jerkins David Jeror Procter Jesse Linda Jett Hernan Jimenez Juan Jimenez Saul Jimenez Stan Jimerson Jose Jiminez Jason Jobe Jarrod Johns James Johns Clara Johns Brad Johnson Damon Johnson Diron Johnson Elvin Johnson Fredrick Johnson Georganna Johnson Hazel Johnson Jeremy Johnson Jerry Johnson Jerry Johnson John Johnson Johnny Johnson Joseph Johnson Kent Johnson Luther Johnson Mcray Johnson Michael Johnson Pamela Johnson Richard Johnson Rickie Johnson Robert Johnson Rufus Johnson Steven Johnson Thomas Johnson Waylon Johnson Dale Johnson Elijah Johnson John Johnson M Johnson Thomas Johnson Christine Johnson Franklin Johnson Jr Joseph Johnson Jr Jane Johnston Timmy Jolley Cindy Jones James Jones Jeffrey Jones Keith Jones Kevin Jones Lois Jones Ronald Jones William Jones Willie Lee Jones C Jones David Jones David Jones Gary Jones Lynda Jones Mark Jones Terrell Jones Diane Jones-thome Michael Jordan Ray Jordan Steffanie Jordan Kenny Joslin Charles Joyner Jr Hector Juarez Dann Juntunen Garrett Jurgajtis Ty Kaase Scott Kaiser David Kalina Leslie Kane Fred Karnes Allen Keehnel Tracy Keeling Jerry Kees Harold Kees Steve Kehrli June Keith Brenda Kelley Penny Kelley Willie Kelley Tracy Kelley Frankie Kellum Jimmy Kellum Joey Kellum Susan Kelly William Kelly Frank Kempa Bonnita Kennedy John Kennedy Jon Kennedy Jr William Kern Jr Dann Kerns Joseph Kerr David Kerr Sr Robert Kesler Randall Ketcham Bounpanh Khamphoumy Phosy Khottavong Bouakeo Khounsavanh Veo Khounvichit Negassi Kidane James Kidwell Eric Kinard Bryan Kindall Clarence Kindall Chad Kiner Harold King James King Keith King Melvin King Richard King Robert King Thomas King Gerald King John King Lee Kinney Bradley Kinsey Kenneth Kipp Justin Kirby Korey Kirchner Andrea Kirkpatrick Lev Kitaynik Robert Kite Jerry Kitts Jenny Kizner Jurgen Klein Richard Klein Kevin Kleinhans Dustin Kluck Joshua Knight Lorie Knight Penny Knight Bobby Knight II Dennis Knighten Keith Knighton Kenneth Knighton Nathan Knox Bridget Kobler Jeffrey Koehoorn John Koenig Fredrick Koetting Kyle Kogge Crystal Kohutek Edwin Kohutek Jr Michael Kollmann Janet Konadu Bhasker Kondakalla Edward Kopech Mark Korhonen Jeremy Kost Randell Kotara Adolph Kovasovic Jr Mitchell Kowen Charles Kozlovsky Betty Kraber Angela Kralis Travis Kreger Randy Krile Kristina Krouse Ritesh Kumar John Kuzdal John La salle Bernie Laguna Jose Laguna Colin Lally Stephanie Lamb William Lamb Gary Lambdin Brandon Lambert Barry Laminack Glynn Laminack Edmond Lancaster Troy Lancaster Cecil Land Oscar Land Jr Dezola Landing Gloria Landrum Johnny Landrum Randall Landrum Michael Lane Donna Laney Lakheda Lang Robert Lang William Lange Charles Langley Billy Langston Faye Langston Larry Lanham Tina Lanham Samuel Lanier Joe Lanning Kimet Lansing Jose Lara Juan Lara William Largent Miguel Larios Jeremy Lariosa David Later David Latin Roger Latour Kimberly Lauraitis Tommy Laurent Mark Laverdiere Stephen Lavery Jenifer Lawrence William Lawrence David Lawson Kevin Lawson Larry Lawson Monica Lawson Ora Lawson James Lawson David Lay Jeff Lay John Lay Lewis Lay James Layton Francisco Lazo Bobby Lea Brian Leach Joseph Leach Brad Lebeter Joseph Lebuis Antonio Ledezma Maria Ledezma Blong Lee Cynthia Lee David Lee Gary Lee Gregory Lee Hue Lee Jabiari Lee Kenneth Lee Leng Lee Loy Lee Amanda Leffler Dianna Lehman Jeffrey Leist Timothy Lemkau Howard Lemmons Jr Raul Lemus Carel Lenoir Jeremy Leopard Barbara Letinich Robert Letsinger Edward Leverette Paula Levien Henry Lewis John Lewis Ken Lewis Teddy Lewis William Lewis Charles Lewis Jr Niem Liamvongdevane Lider Liang Sean Libbey Clinton Lighthall Jr Joel Lightsey Henry Lilie Jaime Lima Torbjorn Lindblad Brian Lindenberger Brenda Linderman Deborah Lindley Ezra Lindley Tammy Lindley Ava Lindsey Robert Lipham James Lipscomb Ramiro Lira David Little Robert Little K Littlefield Wayne Litzinger Daoyou Liu Brandon Lloyd James Lloyd Jeffrey Lloyd Rubin Lloyd Virgilio Lobrin Robert Lockey Charles Lockhart Mary Lockwood Kevin Logsdon Audie Long John Long Patti Long Vivian Long William Long Jr Eugene Longnecker Jr Abel Longoria Eddie Longoria Eugene Lonsdale Jr Abraham Lopes Ana Lopez Concepcion Lopez Dawn Lopez Delfino Lopez Eudelia Lopez Francisco Lopez Guadalupe Lopez Jose Lopez Jose Lopez Jose Lopez Juan Lopez Juan Lopez Juan Lopez Pablo Lopez Pedro Lopez Pedro Lopez Reinaldo Lopez Rolando Lopez Ruben Lopez Ruben Lopez Salvador Lopez Santos Lopez Victor Lopez Sabino Loredo Sengpheth Louangdara Richard Loudin Bobby Love Calvin Love Marcia Lovelady Billy Lowe Lee Lowe Sheila Lowe Terry Lowe Tania Lower James Lowery Jimmy Lowery Antionett Loyd Gerber Loza Javier Lozano Victor Lozano Jr Panh Luangxay Susan Luangxay Bonifacio Luax Bobby Lucas Gary Lucas Roger Lucas Juan Lucero Flavio Lucio Federico Lugo Gabriel Lugo Mario Lugo Mark Luigs Miguel Luis Alberto Lujan Hector Lujano Dawnyel Lumley Andres Luna Jose Luna Juan Luna Pablo Luna Leisha Lunceford Dung Luong Travis Lux Shelia Lyons Douglas Lyons Melissa Lytle Leonid Lyubimtsev Dennis Maas Gerald Mabey Howell Mabry Mauricio Macias Timothy Mack Max Madani Kenneth Maddox Michael Madron Steve Madron Wesley Madron Willard Madron William Madron Karen Madry Agustin Magallon Robert Magill Troy Mahaffey Carl Mahan Apolinar Maldon ado Jesus Maldonado Jose Maldonado Orlando Maldonado Otto Maldonado Ruben Maldonado John Malette Eric Malicoat Donald Mallory Shawn Malloy Donna Malone Timothy Malone Melvyn Mamula David Mancia Francisco Mancia Craig Mangold Benjamin Mangrum Christopher Mann Garland Mann Travis Manous Jose Manriquez Marcelino Marin Robert Marinella Juan Marines Rogelio Marines Pamela Markins Steve Marlow Robin Marlow Santos Marquez Julian Marquina Ralph Marten Alan Martin Bobby Martin Christopher Martin Jose Martin Joseph Martin Lance Martin Leslie Martin Matthew Martin Robert Martin Ronnie Martin Keith Martin Shannon Martindale Agustin Martinez Alberto Martinez Alfonso Martinez Alvino Martinez Anthony Martinez Antonio Martinez Arlos Martinez Arnold Martinez Carlos Martinez Cristobal Martinez Daniel Martinez Denys Martinez Domingo Martinez Edmundo Martinez Edwin Martinez Eliseo Martinez Ernestina Martinez Felipe Martinez Felix Martinez Filimon Martinez Gilber Martinez Hector Martinez Henry Martinez J Martinez Jaime Martinez Jose Martinez Juan Martinez Mario Martinez Michael Martinez Miguel Martinez Noe Martinez Oscar Martinez Patricio M artinez Pedro Martinez Rafael Martinez Ruben Martinez Stella Martinez Tomas Martinez Victor Martinez Charlie Marzahn Jr Edyvan Marzo Hafis Masha Anthony Mason Kenneth Mason Mark Mason Maurice Mason Jr Mark Massengale Michael Massengill Ashlie Massey Mark Massey Christopher Massie Peggy Massingill Eric Masterson Camerino Mata Larry Mathews Brian Mathis Carol Mathis Lori Mathis Maureen Mathis Sandra Matlock Anthony Matos Linda Matthews Michael Matulich Thomas Matusick Elton Maxwell Michael May Lisa May Tania Maynez Elvis Mays Mark Maytum Anthony Mbah Dewey McAdams Murphy McBrayer Jr Rocky McBurnett Teena McBurnett Lisa McCane Susan McCarty Virgil McCarty Daniel McClain Jerry McClarty Barry McClure Christopher McClure Gilbert McCormick John McCormick Lillian McCray Jeremy McDaniel Sharon McDaniel Terry McDaniel Timothy McDaniel Dennis McDeavitt Kimberly McDeerman John McDonald Ira McDonald Jr Carlos McDowell Michael McDuff Mark McElhinney John McElrath Micah McElroy Lowell McElwee James McEwen Shane McGaha Gregory McGee Jr Eugene McGhee Jeffery McGowan Hugh McGowan Scott McGregor Randy McGrone Scott McHugh Scott McIintyre Lester McIntyre III Chester McKamey Roger McKamey Brian McKamie Jason McKee Kevin McKee Shawn McKeel John McKenzie Maria McKinney Terry McKinney David McKinzey Amber McKnight Billy McManus Douglas McMullan Candace McNamee Willie McNeil Marianne McNeill James Mc Neill Jr Nicholas McPherson Stirling McPherson Marinda McRae William McReynolds III Mary McVaigh Bradley Meade Eugene Meadows Tom Meadows Ronald Meadows Aubria Mebane Francisco Medellin Hector Medellin Ruben Medina Robert Medlock Carlos Medrano Jaime Medrano Juan Medrano Manuel Medrano Clayton Meeks John Meeks Richard Mehringer Francisco Mejia Joel Mejia Jose Mejia Juan Mejia Manuel Mejia Reinaldo Mejia-Galvez Juan Mejia-Vicente Pablo Melendez Jr Leonel Mena Martin Mena Salvador Menchaca John Mendes Jr Carlos Mendez Heraclio Mendez Lorenzo Mendez Vidal Mendez Dav Mendoza Heriberto Mendoza Hipolito Mendoza Jorge Mendoza Jose Mendoza Pedro Mendoza Howard Menifee Jr William Meredith Jacqueline Merrell Wylle Merrill Patrick Merritt Walter Mershon Walter Mertens Jr Keith Messamore Brian Metcalf Ricky Metzler Christopher Meyers Melisa Meyers Noble Meyers Armando Meza David Meza Joseph Michalek Cynthia Midgett Royal Milam John Milani Luke Milbourne Myles Millard Albert Miller Bryan Miller Cameron Miller Danny Miller Deborah Miller Jeffrey Miller Karen Miller Kenneth Miller Larry Miller Mack Miller Keith Miller Christina Miller David Miller David Miller James Miller Shelley Miller David Mills Kenneth Mills Randy Mills Randy Mince Jose Minero Tanya Minnick Omar Miranda Kelly Mireles Charles Mitchell Cory Mitchell Chad Mitchell Luis Mixa Rocky Mixon Larry Mobley Deoborah Moffett Michael Moffett Larry Moffitt Jr Anthony Moise Farilio Moise Parra Moises Daniel Molina Fredy Molina Guillermo Molina Jose Molina Jose Molina Noe Molina Obdulio Molina Martin Molloy David Molnar Kenneth Monday Cirilo Mondragon Juan Mondragon Jose Monreal Randall Monroe Jose Monsivaiz Manolito Montana Ernesto Montero Jose Monterrosa Polidecto Monterrosa Wilkin Monterrosa Frederick Montgomery Guadalupe Montoya Jose Montoya Karla Montoya Brian Moody Bruce Moody Jucory Moon Alice Moore Carl Moore Grady Moore James Moore James Moore Michael Moore Michael Moore Misti Moore Peggy Moore Timothy Moore Todd Moore Inocencio Mora Julio Mora Luis Mora Carlos Morales Eribrto Morales Gregorio Morales Jose Morales Jose Morales Jose Morales Daniel Moran Phillip Moran Matthew Moreau Darryl Moreland Cesar Moreno Javier Moreno Patrick Moreno Manuel Moreno Jr Christopher Morgan Eric Morgan Jeffrey Morgan Jesse Morgan Kenneth Morgan Curtis Morgan Sr Laneia Morning Santos Morquez-Andrade Allen Morris Brantley Morris Leon Morris Linda Morris Marie Morris Michael Morris Roger Morris Christine Morris-Hart Clifford Morrison Greta Morrow Rick Morrow Keith Morton Jr Wilma Moser B Mosier Kitty Mosley Yolanda Mottu Matthew Mowery Jerry Moy Daniel Mozisek Steven Mueller Jerry Mullaney Jeff Mullaney Albert Muller III Amy Mullins Jesus Muniz Margaret Muniz Rafael Muniz Alejandro Munoz Fernando Munoz Javier Munoz Julio Munoz Roberto Munoz Teresa Munoz Victor Munoz Benny Murillo Ramon Murillo Joseph Murphy Rhonda Murphy Brad Murray Brandy Murray Jared Murray Thomas Murray Martin Murrell Anthony Myers Anwar Myers Kenneth Myers Dawn Mynatt Mark Myrick Jose Najera Patrick Nalley Anthony Nalls Krishna Nandakumar Savita Nangia Stephen Napier Charlie Naranjo Christina Narvaiz Jonathan Natera Imtiyaz Nathani Cathy Naus Silvia Nava Fidelmar Navarrete Jose Navarrete Melki Navarrete David Navarro Jorge Navarro Sundar Nayak James Neaderhiser Michael Neal Douglas Nease Alana Nedderman Vernon Needham Scott Neel Ronald Neeley Scott Neer Albert Neipling Darwin Nelson Debra Nelson Kenneth Nelson Stanley Nelson Joey Nelson James Nelson Jr Michael Nesbitt Daniel New John New Leslie Newborn Burt Newman Robert Newman Valerie Newman Francis Newman Paul Newport Thong Ngo Andy Nguyen John Nguyen Lam Nguyen Nga Nguyen Richard Nguyen Sonny Nguyen Vinh Nguyen Jeffrey Nicks James Niemi Southzay Nifong Andre Nitkowski Jack Nixon Deborah Noe Cathy Noel Michael Noel Windell Noel Gabino Nolasco Pedro Nolasco Roy Nolen Christopher Norman Woodard Norman Noah Norman Deborah Norris Charles Norton Carl Norvell W Norwood Jr Matthew Novosel Jerry Noyes Leo Nugent Martin Nunez Natividad Nunez Tofua-ofa Nuusi-Pututau Nena O'Brien Jesus Ocampo Francisco Ochoa Albert Ochoa Robert O'Connor Loren O'Connor Robert O'Dell Terry O'Dell Amos Odit Derrick Odom Deborah Odum Jason Oelschlegel Patrick Ofori Charles O'Hara Sherry O'Hara Steve Olagues Francis Oldham Michael O'Leary Francisco Oliba Wayne Oliphant Luis Olivo Jr Everardo Olvera Feliciano Olvera Reynaldo Olvera Santiago Olvera Pablo Onofre Jose Orellana Dodjie Oriondo Vincent Orlando Antonio Orozco Jose Orozco David Ortega Victor Ortega Carol Ortiz Isidro Ortiz Jose Ortiz Mauro Ortiz Maximo Ortiz Rick Orvis David Osborn Larry Osborne Joanna Osburg Lino Oseguera Emmanuel Osei Samuel Osei-nti Wendell O'Shields Mark Ostrander Alisha Otto Patricia Outlaw Ventura Ovalle Daryl Overbay Donny Overcast Paul Overman Hershel Owen Kerry Owen Sheila Owen James Owens Stephen Owens Stephen Owens Larry Owings Isaac Owusu Isaac Pabon Chester Pace Eliseo Padilla Jose Padilla Luis Padilla Martin Padilla Omar Padilla Edwardo Padron Jr Deanne Page Michael Page Robert Paige Jr Heraclio Palacios Nicasio Palencia Norma Palma Yuri Paltsev Luis Parada Benny Parker Charlene Parker Jeffrey Parker Leonard Parker Paul Parker Royal Parker James Parks Kristin Parlato Harold Parman Christopher Parr Roberto Parra Billy Parrish John Pate Tim Pate Robert Pate IV Dhiru Patel Kirit Patel Christine Patterson Larry Patterson Richard Patterson Derwood Patton Rick Patton Rebecca Paul Robert Pawelek Jana Payne Jerry Payne Mike Payne Sean Payne Emilio Paz Jacobo Paz Jerry Paz Dan Peak Mark Pearce Dennis Pearman Donald Pearson Kevin Pebley Dale Peck Ryan Peck J Pelaez Julio Pelico Desiderio Pena Eliu Pena Gabriel Pena Idalia Pena Joel Pena Maria Pena Pablo Pena Arturo Pena Jose Penado O Pendergraff Sheila Pendleton Gary Penn Marvin Penney Roy Pennington Linda Pentz Les Pepper III Federico Perales Jeremiah Perales Juan Peraza Alvaro Pereira Arturo Perez Carlos Perez Erik Perez Ernest Perez Federico Perez Francisco Perez Francisco Perez Gerasmo Perez Hector Perez Jeronimo Perez Jesus Perez Jose Perez Jose Perez Juan Perez Santiago Perez Shelly Perez Claude Perilli Brent Perkins Justin Perkins Missey Perkins Debetrio Perla Gary Perry Conrad Perry II Lloyd Perry III Tamara Peters Terry Peters Brian Peterson John Peterson Neil Petrillo Gerald Pettit Bret Pettit Leroy Pewee Alan Peyton George Pfeiffer Mark Pfeiffer Troy Pfeiffer Navinh Phangnivong Khonthong Phasavath William Phelps Aaron Phillips Brandi Phillips Darrell Phillips Denford Phillips Eric Phillips Michael Phillips Patricia Phillips Tabatha Phillips William Phillips Tammy Philpot Ren Phoeuk A-Fou Phong Somphorn Phothirat Florencio Piedra Charles Pierce James Pierce Tim Pierce Everett Pietras Brian Pike Kerry Pike Hugh Pilgrim Anthony Pillar Isreal Pineda Alberto Pinedo Seshu Pinnamaneni Adolphus Pinson Kathy Pitcock Daniel Pittman Jerry Pittman Kenny Pittman Derek Pitts Quincy Pitts Roy Pitts Elizabeth Pizzi Darun Platt Dennis Platt Hairon Pleitez Timothy Plotner Barbara Pointer Betty Polak Romeo Polio William Polio James Pollard Gonzalez Pompello Shelley Pool Regina Poole Stephen Poole Deborah Poparad Connye Pope Janice Pope John Pope Abundio Porcayo Miguel Portillo Jorge Posada Joyce Posey David Pounds Christina Pounds Christopher Powell John Powell Mark Powell Karen Powell Clyde Powers John Powers Pamela Powers Jesus Prado Chhunna Prak Albert Predmore Katrina Predmore James Prewitt Braddrick Price Charles Price Franklin Price Jr Greg Price James Price Nora Price Steve Price Ronnie Prokisch Vickie Prokisch Ricky Pryor Kenneth Puckett Keith Pudvah Ismael Pulido Juan Pulido Juan Pulido Jr Jose Punnachalil Andrea Purcell Alan Pyles Bill Pyles Larry Pyles Larry Pyles Terry Pyles Anthony Quarshie Miriam Quezada Johnny Quinn Jose Quintanilla Jose Quinteros Jose Quinteros Abbas Qureshi Mehmood Qureshi John Raines Jr Charles Rainwater Gregory Rainwater Mark Rainwater Raymond Rainwater Gloria Rakstis Amanda Ramage Juan Ramblas Roger Rambo Adrain Ramirez Alberto Ramirez Breondan Ramirez Dennie Ramirez Everardo Ramirez Ivan Ramirez Jesus Ramirez Jose Ramirez Jose Ramirez Kristin Ramirez Maria Ramirez Michelle Ramirez Ramiro Ramirez Rogelio Ramirez Rosendo Ramirez Teodoro Ramirez Vicente Ramirez Xavier Ramirez Veinna Ramirez Antonio Ramos Gregory Ramos Jose Ramos Juan Ramos Manuel Ramos Matthew Ramos Raul Ramos Billie Ramsey Sheldon Randolph Emily Ranesbottom Severino Rangel Lee Ransburg David Rape Mogor Raphael John Rapozo Mary Rashchke Donna Rascoe Nick Raso Gerard Rateau Randall Ratliff Rocky Rau Robbie Rau Scott Rawlings Joseph Ray Penny Ray Kelli Ray Barney Ray III Eddie Read Terri Readshaw Frederick Reardon Fortunato Rebollar Francisco Rebollar David Rector Kyle Rector Paul Reda James Redd Curtis Redmond Darrell Redmond Johnnie Reed Steven Reed Stephanie Reed Brian Reese James Reese James Reese Sr Austreberto Regino Robert Rehman Cody Reid Michael Reid Stanley Reid David Reinhart Larry Reis Larry Rejcek Larry Renney Jesse Renteria Juan Resendiz Pedro Retamal Arturo Reyes Bonifacio Reyes Dionicio Reyes Eugenio Reyes Francisco Reyes J Reyes Jose Reyes Michael Reyes Michael Reyes Pedro Reyes Rodolfo Reyes Armando Reyes-Maldonado Aaron Reyna Jose Reyna Chris Reynolds Fred Reynolds Terry Reynolds Rhonda Reynolds Kevin Rhine Charles Rhodes David Rhodes William Rhodes Daryl Rice Judy Rice Scott Rice Andrew Rice III Angela Richards Ross Richards Kimberly Richardson Richard Richardson Ronnie Richardson Kristopher Richey Alvan Richey Jr Kris Richmond Yancy Richmond Hubert Rickelman Gail Riddle George Rideout Don Riggs George Riggs Gildardo Rincon Steven Rinker Oria Rio Enrique Rios Erick Rios Ignacio Rios Jaime Rios Jose Rios Salome Rios Jack Ritchie Jr Hugo Rivas Adan Rivera Hector Rivera Heladio Rivera Israel Rivera Jose Rivera Jose Rivera Jose Rivera Jose Rivera Santos Rivera Cynthia Rivera John Rizzi Otis Roach Clint Roady Brian Roark Eula Robbins Russell Roberson Bryan Roberts Charles Roberts Joseph Roberts Linda Roberts Meredith Roberts Michael Roberts Corey Robertson David Robertson Keith Robertson John Robertson Robert Robertson Sr Bradley Robeson Jan Robichaux A Robinson Alonzo Robinson Bobby Robinson Brian Robinson David Robinson James Robinson John Robinson Matthew Robinson Willie Robinson Travis Robinson Jose Robles Armando Rocha Paul Rochester Edgar Rodas Jonathan Rodden John Rode Kevin Rodrigue Armando Rodriguez Artemio Rodriguez Carlos Rodriguez Charles Rodriguez Cheryl Rodriguez Deyni Rodriguez Filimon Rodriguez Hector Rodriguez Jacinto Rodriguez Jaime Rodriguez Jesus Rodriguez Jose Rodriguez Juan Rodriguez Manuel Rodriguez Mario Rodriguez Miguel Rodriguez Pedro Rodriguez Ray Rodriguez Refugio Rodriguez Rene Rodriguez Roberto Rodriguez Rodolfo Rodriguez Sandra Rodriguez Vicente Rodriguez Jesus Rodriguez Vincent Rodriguez Juan Rodriguez Jr Rodolfo Rodriguez Jr Carolyn Roe Billy Roehling Marvin Roehling Cassandra Rogers Cecil Rogers Daniel Rogers James Rogers Jason Rogers Michael Rogers Mike Rogers Michael Rogers Edward Rogowski Jose Rojas Ramiro Rojas Juan Rojas-cabrera Jeremy Romack Thomas Romack Emigdio Roman Inez Roman Misael Roman Santos Roman Sinforoso Roman Juan Romero Laura Romero Mariasela Romero Orlando Romero Osmin Romero Pauline Romero Reynaldo Romero Ricardo Romero Roberto Romero Victor Romero Reynaldo Romero Jr Thomas Rood Jason Rooks Randall Root Jarrod Roper Jason Roper Ramona Roque Howard Rosado Roberto Rosado Juan Rosales Nazario Rosales Frank Rosales Jr Felix Rosas Joe Rosas Jr Brian Rose John Rose Roy Rose Daniel Roselien John Ross Miguel Rostro Larry Rowden Danny Rowell Laura Royalty Kathleen Rubalcaba Angel Rubio Christopher Rubio Cristina Rubio Guadalupe Rubio Jesse Ruby Jr Natasha Rucker Roberto Rueda Mark Ruehl Bryan Ruggles Ernest Ruh Arturo Ruiz Danilo Ruiz Francisco Ruiz Hector Ruiz Everett Russell Gary Russell Gary Russell Linda Russell Rodney Russell William Russell Jeffrey Rutherford Thomas Rutherford Bobby Rutledge Donald Rutledge Latonia Rutledge Susan Ruybal John Ryder Mark Sabado Ronald Sabisch Ignacio Saenz Javier Saenz George Sago III Arturo Salazar Eduardo Salazar Erasmo Salazar Javier Salazar Javier Salazar Juan Salazar Leon Salazar Luis Salazar Marco Salazar Leonardo Salcido Daniel Saldana Ivan Saldana Tomas Saldana Sergio Saldivar Jose Sales Angel Salgado Rufino Salgado Vicki Salhus Acencio Salinas Rafael Salinas Simon Salinas Rafael Salinas Jose Salmeron Marcial Salmeron Walter Salmeron Dawn Salmons Ciro Samperi Dustin Sample Gwendolyn Sample Constantino Sanchez David Sanchez Gerardo Sanchez Jose Sanchez Jose Sanchez Juan Sanchez Luis Sanchez Ray Sanchez Rudolfo Sanchez Clay Sanders Dale Sanders Daryl Sanders Marcus Sanders Paul Sanders Patricia Sanders Edward Sanderson Mark Sanderson Greta Sandifer Andres Sandoval Juan Sandoval Noel San doval Sixto Sandoval Pheng Sanesomkane Joe Sanford Manuel Santamaria Isaias Santana Jorge Santana-Torres Maritza Santiago Eulalio Santivanes Loyle Sapaugh Liza Sapaugh Stephen Sapp Melinda Saranthus Loretto Saravia Christopher Sarte Michael Saturday Ignacio Saucedo Jose Saucedo Raunel Saucedo Raymundo Saucedo Glenn Saunders Keo Savavong Khamphouth Savavong Darrell Sawin Jeanette Saxon Thomson Sayavong Judy Sayavong Sherry Saylor Randy Sayre Jr Bounlai Saysombath Lester Scarbro Thomas Scarinza Richard Schaefer Edward Schattel III David Scheckler Raymond Schenk Fred Scherff Calvin Scheuermann Mary E. Schimmels Sharon Schippers Michael Schmidt Philip Schnur Christina Schoelen Melissa Schramm Judith Schroeder Scott Schroeder Vicky Schroeder Ronald Schroeder Fred Schubert Johnie Schulte Charles Schultz Jr Craig Schupp Sylvia Sciancalepore Doyle Scott Kenneth Scott Roderick Scott Jefferson Scoville Carl Scroggins Elvira Seamans Kevin Searcy Brian Seavey Felipe Sebastian Curtis Seber Jim Seber Kelli Seber Matthew Sebesta Raymond Sebesta Jr Gregory Sechrist Ernest Seideman Emmett Sellers Gerald Semien Harry Sengrath Sysai Sengrath Terry Sensing Jose Sequeiram Uvaldo Serna John Serrano Johnny Serrano Thomas Serrano III Apolonio Serrato Blas Serrato Domingo Serrato Froylan Serrato Jose Serrato Lazaro Serrato Pablo Serrato Thomas Sewell James Sexton Johnny Sexton Rick Shadden Dewayne Shaleen Zachary Shamp Denny Sharp Kevin Sharp Louise Sharp Terry Sharp Nelson Shaw Richard Shaw Jeryl Shaw Gary Shears Gary Shears Scott Shed Patty Sheely Roy Shelnutt Stephen Shelton Nelson Shepard Arash Shiehbeiki Rhonda Shifflett Scott Shimkus Jeffrey Shingler Tracy Shirels Christopher Shirrell Carl Shiveley Jr John Shivers Donald Shockey Jim Shockley David Shope Diane Shroyer Douglas Shull Josh Shultz W Shurtleff Scott Shutters Alla Shvarts Vincent Siegel Eduardo Sierra Jose Sierra Rodney Sifers Ricky Silcox Jose Silva Martin Silva Shelby Simmons James Simpson Brady Sims Jerrie Sims Kimberly Sims Beau Sinclair Sharon Sinclair Abijah Singer Derek Singleton Jeffrey Singleton Stephanie Singleton David Sipes Jacob Sipes Anthony Siriani Jr Kynoi Sisomboun Scott Siverly Soudaphone Sivilay Leslie Skaggs Carl Skeene Carl Skeene C Skillern Duane Slatter Elaine Slaughter Jimmy Slaughter Jr Jack Slauter John Sligh Michael Sloan Thomas Slovacek Billy Slover Samuel Slover Jr Ronald Sluder William Smedley David Smiddy Teddy Smiddy Alfred Smith Allen Smith Billy Smith Bobby Smith Bonnie Smith Brian Smith Brian Smith Chad Smith Craig Smith Deidra Smith Earlie Smith Gregory Smith James Smith Jason Smith Johnny Smith Justin Smith Leonard Smith Mark Smith Marvin Smith Melanie Smith Michael Smith Pat Smith Phyllis Smith Rhodney Smith Rickey Smith Robert Smith Robert Smith Rodney Smith Roger Smith Sherry Smith Steven Smith Tamara Smith Walter Smith Willie Smith Janet Smith Jill Smith Shirley Smith Millard Smith III Larry Smith Jr Willie Smith Jr Daniel Smith Jr Connie Smithson Danny Smock Joseph Smothers Thomas Smothers Charles Snodderly Steven Snodgrass Larry Snow Candy Snyder Anthony Soares Richard Sobetski Poch Soeun Larry Sofka Malcolm Sojourner Michael Sojourner Jose Solano Roy Solano Vernon Soley Cynthia Solis Ricardo Solis Charles Sonsteng Rolando Sontay Santiago Sontay Kerry Sorensen Erasmo Soria Regino Soria-Arenas Jose Sorto Aurelio Sosa Gaudencio Sosa Daniel Soto Jose Sotomayor Marcus Southern Kevin Spann Randall Spears Sandra Speck John Spence James Spence Gregory Spivey Gregory Spizer Tracy Spradlin Roland Stafford William Standefer III Marvin Stanford Michael Stanford Sr Charles Stanley Marlon Stanton Donna Stark Michael Stash Elton Steadham Acey Steel Aurbin Steel Aurbin Steel Jr Stacy Steele William Steelman Shirley Steen Daniel Steffen Steven Steffen Horace Stegall Sandra Steger Roger Steil Emil Stensland Todd Stephan Calvin Stephens David Stephens James Stephens Tommie Stephen Johnny Stephens Jr Daniel Sterrett Paula Stevens Ray Stevens Steven Stevens William Steward Charles Stewart Craig Stewart Karen Stewart Marshall Stewart Michael Stewart Mitchell Stewart Ralph Stewart Richard Stewart Robert Stewart Jr Ronnie Stiggers Gerald Stigler Caleb Stokes Matthew Stone Steven Stone Toney Stone David Stoneking Debra Storey Marlon Storey Vincent Storey Tracy Stout Galina Strakh Albert Strangfeld Jr Spencer Stratton Shelley Straub Robin Strickland Fred Strickler Jr Matthew Strong Charity Strong Jack Stroud Dorothy Styer Darwing Suarez Derwin Sullivan Arlene Sullivan John Summerall Dewey Summerville William Summerville Scott Sundin Jose Sura Jose Sura Anthony Surman Jasper Surmieda Michael Sussmann Yuthachai Suvunrungsi Steven Swancey Bill Swaney David Swearingen Chadwick Sweat Terry Swenson Steven Swierc Michael Szymanski James Tabor Don Tackett Tammy Tafoya Thonglith Taionkeo Jennifer Takasaki John Talbert Thomas Tanner Chhorn Tap Waldo Tappe Aaron Tarabori Billy Taylor David Taylor Dwight Taylor Gregory Taylor James Taylor Jason Taylor Kimberly Taylor Lawrence Taylor Leroy Taylor Melvin Taylor Michael Taylor Paul Taylor Randy Taylor Roger Taylor Roger Taylor Wade Taylor Brenda Taylor Rubin Taylor Jr Robert Tays Richard Teale Sherry Teasley James Teel Brian Teeter Martin Tellez Gerald Tennant Pedro Teodoro Arthur Terry Victor Terry Jana Thamm Amber Theall Stephen Theall Thomas Thelen Matthew Thiem Jimmy Thigpen Dennis Thomas Dwight Thomas Joel Thomas Larry Thomas Lovie Thomas Mary Thomas Robert Thomas William Thomas Valton Thomas Jr Nancy Thom-Fletcher Anthony Thompson Bernard Thompson Brandon Thompson Christopher Thompson Freddy Thompson James Thompson Jimmy Thompson Kimberly Thompson Laura Thompson Linda Thompson Mike Thompson Nathan Thompson Richard Thompson Richard Thompson Sandra Thompson M Thompson Michael Thompson Louis Thompson Jr Martin Thompson Jr Gary Thomsen Troy Thomson Forrest Thopson Penny Thorn Anna Thornton L Thornton Jr Khamphanh Thosychanh Tam Thudo Jimmy Thurman Robert Tibbs Arvle Tidwell Michael Tighe Christian Tijerina John Tillman Rella Tillman Keevan Timm Philip Todd Wiley Todd Darrin Togtman Claude Toler James Tollett James Tolly Jerry Tolly Linda Tolpa David Tomberlin Marsha Tomlinson Shari Tompkins Jerry Toney Yonel Torchon Jose Torres Sunny Torres Victor Torres Geoff Toune Jose Tovar Ignacio Tovias Jane Townsend Chieu Tran Ni Tran Quoc Tran Mark Travland Cherise Tredo Alfonso Trejo Jose Trejo Jorge Trevino Tiburcio Tristan Terry Trudell Samuel Trujillo Brad Tucker David Tucker Patrick Tucker Paul Tucker Harry Tucker Jr Buearl Tungate Maurice Tuohy Kimberly Tupman Pablo Turcios Benny Turner Benton Turner Charles Turner James Turner James Turner Kevin Turner Moses Turner Michael Turpin Randy Tweedt Richard Tyson Tana Tyson Donny Uherek Jose Ulloa Oscar Umana Martin Umanzor Jeffrey Underberg Becky Unger Percy Upshaw Patricia Urbanski Florentino Uribe Michael Utley Toni Vaccaro Jose Valdes Ramon Valdez Antonio Valdivia Jose Valentin Ron Valentine Oscar Valenzuela Bernardino Valero Jasper Valero Laura Valley Tim Vanzant Joseph Vanbebber Linnie Vance Ricky Vance Harvey Vandever Dau Vang Jack Vang Lau Vang Ma Vang William Vang Xiong Vang Charles Vanhuss John Vanlandingham Mark Vansaun Arturo Vargas Bertin Vargas Rene Vargas Joshua Varin Atanasio Vasquez Joaquin Vasquez Raul Vasquez Geri Vaughan James Vaughan Mary Vaughn Phyllis Vaughn Timothy Vaughn Wayne Vaughn Pamla Vaughn-Mitchell Simon Vayner Francisco Vazquez Jesus Vazquez Jose Vazquez Juan Vazquez Miguel Vazquez Rhonda Vazquez Jose Vega Rogelio Vega Jesus Vega Jr Raul Velasco Alfredo Velasquez Cruz Velasquez Jose Velasquez Jose Velasquez Mauro Velasquez Richard Ventrca Jr Delfino Ventura Inmar Ventura Jose Ventura James Venus Jr Jose Vera Raul Verdugo Ruben Verdugo Jerry Vess Troy Vest Armando Vicente Carlos Vicente Eleodoro Vicente Elicio Vicente Guillermo Vicente Leonidas Vicente Marco Vicente Margarito Vicente Ovidio Vicente Roberto Vicente Francisco Vicente-Pelico Carlos Vicente-Tzun Luis Vicente-Vicente Robert Vickers John Vickery Lucio Vidal-Guerrero Aurelio Vidals Joel Viechnicki Luis Viera Bonnie Vigdal Kheuavanh Vilaythong Outhay Vilaythong Phitsamy Vilaythong Serafin Villafuerte Perla Villagrana Jose Villanueva Julian Villanueva Martin Villanueva Rae Villar Lionzo Villareal Sr Adrian Villares Reynaldo Villarreal Carlos Villatoro Eusebio Villatoro Magdaleno Villatoro William Villatoro Manfredo Villeda Floriberto Villegas Marco Villegas Barry Vines Jerry Vines Randall Vines Scott Vinson Sergio Viveros Erica Voltes Aaron Vortis Farshad Vossoughi James Vowels Xuan Vu Jeffrey Waclawczyk Frank Wade Kristie Wagner Leslie Wagoner Charleston Walker Donna Walker George Walker George Walker Johnny Walker Theodore Walker Timothy Walker Tina Walker Wayne Walker Jeffrey Walker Kenneth Wallace Randy Walls Tommy Walshak Emily Walters Booker Walton James Walton David Ward Gerald Ward Kelvin Ward Lynn Ward Sonny Ward William Ward Jr Romelle Ware Leo Warneck Alex Warner Tarvis Warner Delvin Warner Deidre Warren William Warren Steven Wasson Richard Waters Gerald Watkins Saul Watkins Jeffrey Watson Daniel Watts Jr Sandra Wawarosky Samuel Waxman Tonia Way Ronald Weast Norma Weatherspoon Frances Weaver Stephen Weaver Wayland Webb Robert Webb Ronny Webb Daye Weber Juan Weira-garcia Anneliese Welch Daniel Welch Jackson Welch William Welch Cyrena Welch Angela Wells Billy Wells Kimball Wells Robbie Wells Deborah Wells Marty Wells Robert Wendorf Jr Jackie West Paul West William West John West Jamie Westbrooks Phil Wetherby Patrick Wetzig Rubalee Whatley Jeff Wheeler Stephanie Wheeler Julie Whitaker Brenda White Isaac White Jeanette White Jimmy White Margaret White Matthew White Vickie White William White Donna White Luverna White Raymond Whitehead Jr Ron Whiteley Annie Whiteside Janice Whitetree Robb Whitinger Angela Whittemore Gregory Wiatrek Connie Widmar Tracy Widner Lynn Widrick Robert Wiggins Robert Wikoff Michael Wilburn Randy Wilken Phillip Wilkerson Michael Willenborg Brandon Williams Cedric Williams Charles Williams Christopher Williams Christopher Williams Davis Williams Everette Williams Frank Williams Gary Williams George Williams James Williams Jerry Williams Jerry Williams Joel Williams Jonathan Williams Karl Williams Kenneth Williams Kenneth Williams Larry Williams Marcus Williams Michael Williams Orin Williams Patrick Williams Paul Williams Shirley Williams Thomas Williams Tina Williams Vincent Williams Wonderaye Williams Michael Williams Jr Brian Williamson Glenn Williamson James Williford Bobby Wilson Chad Wilson Darren Wilson Fannie Wilson Fate Wilson Harold Wilson James Wilson Jamie Wilson Kathy Wilson Richard Wilson Robert Wilson Scott Wilson Stephen Wilson Thad Wilson Joel Wilson William Wilson Donald Wilson Jr Billy Wingate Daryl Wingo Louis Winkelmann Arthur Winkler David Wirt Jr Keith Wishart Ted Wishart Alison Witham Michael Witt Travis Wittman John Wolf III Jeremy Wolford Charles Wolke H Womack Brian Wood Chadwick Wood Connie Wood Harriett Wood Joseph Wood Roger Wood Stephen Wood Charlotte Woodall Willie Woodard Michelle Woodring Stacy Woodring Corey Woods Kenneth Woods Kenneth Woods Michael Woods Warren Woods Robin Woodward Dennis Wooten Cynthia Wooten Flor Wordell Millard Wratten Crista Wrenn Don Wrenn Corey Wright Jimmy Wright Michael Wright Kenneth Wright Tina Wright James Wright Jr Nancy Wymore Lamphay Xayavong Raymundo Xilos Bee Xiong Pao Xiong Glen Yaeger Beverly Yahnke William Yarbrough Tony Ybanez Larry Yee Sheila Yee Gary Young Jerone Young Jess Young Michael Young O Young William Young Jian Yu Robert Zabcik Antonino Zamora David Zamora Eduardo Zamora Oscar Zamora Ahad Zangbari Melvin Zapalac Mario Zapata Marcelo Zarco Mary Zeagler Thomas Zeigler Roberto Zelaya Gary Zielstorf William Zietz Darald Zinger Nancy Znidarsic Martha Zuniga James Zunt Jon Zurn OFFICERS DIRECTORS SENIOR EXECUTIVES A.R. GINN A.R. GINN(1) JIMMY D. ANDERSON Chairman of the Board Chairman of the Board President, DBCI JOHNIE SCHULTE JOHNIE SCHULTE(1) CHARLES W. DICKINSON President & Chief President & Chief Executive Vice President Executive Officer Executive Officer Metal Components KENNETH W. MADDOX WILLIAM D. BREEDLOVE(2) MARK W. DOBBINS Executive Vice President, Vice Chairman Vice President, Metal Administration Hoak Breedlove Components Wesneski & Co. ROBERT J. MEDLOCK Executive Vice President SHELDON R. ERIKSON(2) KEITH E. FISCHER Chief Financial Officer, Chairman, President & Executive Vice President Treasurer Chief Executive Officer of Engineered Buildings Cooper Cameron Corporation WILLIAM A. LAWRENCE KELLY R. GINN Vice President and GARY L. FORBES(2) President, Metal Components Controller Vice President, EQUUS Incorporated RICHARD F. KLEIN DONNIE R. HUMPHRIES President, Metal Coaters Secretary W. BERNARD PIEPER(2) Private Investor FREDERICK D. KOETTING President, Engineered Buildings TODD R. MOORE Vice President, General Counsel KIM WELLS President, MESCO WILLIAM M. YOUNG President, A&S
(1) Executive Committee (2) Compensation Committee and Audit Committee - ---------- CORPORATE HEADQUARTERS NCI BUILDING SYSTEMS, INC. 10943 North Sam Houston Parkway West Houston, Texas 77064 281-897-7788 COMMON STOCK TRANSFER AGENT & REGISTRAR COMPUTER SHARE INVESTOR SERVICES 2 North Lasalle Avenue Chicago, Illinois 60602 LEGAL COUNSEL GARDERE WYNNE SEWELL LLP AUDITORS ERNST & YOUNG LLP FORM 10-K The Company's Annual Report on Form 10-K Report for the year ended November 2, 2002, as filed Exchange Commission, is available without charge upon request to Robert J. Medlock at the address The Company's common stock is traded on the New York Stock Exchange (NYSE) under the trading symbol NCS. ANNUAL MEETING The Annual Meeting of Shareholders of NCI Building Systems will be held at 10:00 a.m. on Friday, Schulte Conference Center in Houston, Texas. Shareholders of record as of January 2, 2003 will be entitled to vote at this time. [NCI PICTURE] [NCI BUILDING SYSTEMS, INC. LOGO] 10943 North Sam Houston Parkway West Houston, Texas 77064 281-897-7788 o www.ncilp.com EX-21 15 d02830exv21.txt LIST OF SUBSIDIARIES EXHIBIT 21 NCI BUILDING SYSTEMS, INC. List of Subsidiaries NCI Holding Corp. Delaware NCI Operating Corp. Nevada Metal Coaters of California, Inc. Texas NCI Building Systems, L.P. Texas A&S Building Systems, L.P. Texas Metal Building Components, L.P. Texas NCI Group, L.P. Texas Building Systems de Mexico, S.A. de C.V. Mexico
EX-23.1 16 d02830exv23w1.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-14957 and No. 33-52078) pertaining to the 401(k) Profit Sharing Plan of NCI Building Systems, Inc., Registration Statements (Form S-8 No. 333-34899, No. 33-52080 and No. 333-12921) pertaining to the Nonqualified Stock Option Plan of NCI Building Systems, Inc., and Registration Statement (Form S-4 No. 333-80029) of NCI Building Systems, Inc. and in the related Prospectus of our report dated December 10, 2002, with respect to the consolidated financial statements of NCI Building Systems, Inc. incorporated by reference in the Annual Report (Form 10-K) for the fiscal year ended November 2, 2002, and our report dated December 10, 2002 with respect to the financial statement schedule of NCI Building Systems, Inc. included in the Annual Report (Form 10-K) for the fiscal year ended November 2, 2002. /s/ ERNST & YOUNG LLP Houston, Texas January 28, 2003 EX-23.2 17 d02830exv23w2.txt REPORT OF INDEPENDENT AUDITORS EXHIBIT 23.2 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders NCI Building Systems, Inc. We have audited the consolidated financial statements of NCI Building Systems, Inc. as of November 2, 2002 and October 31, 2001, and for each of the three fiscal years in the period ended November 2, 2002, and have issued our report thereon dated December 10, 2002 (incorporated by reference in this Annual Report on Form 10-K). Our audits also included the financial statement schedule listed in the Index at Item 14(a) of this Annual Report on Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Houston, Texas December 10, 2002 -----END PRIVACY-ENHANCED MESSAGE-----