-----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, HMY2YuhrO0nvFJVE+Ok59pn4iZKPFQSP+5QOdVxYKpKTkmKF/GaB9HFzxXPQVhb2 YbBFO7//vPVN41rik+Q2uA== 0001031523-98-000004.txt : 19980520 0001031523-98-000004.hdr.sgml : 19980520 ACCESSION NUMBER: 0001031523-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980519 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TJ INTERNATIONAL INC CENTRAL INDEX KEY: 0000099974 STANDARD INDUSTRIAL CLASSIFICATION: MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS [2430] IRS NUMBER: 820250992 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07469 FILM NUMBER: 98627754 BUSINESS ADDRESS: STREET 1: 200E MALLARD DRIVE CITY: BOISE STATE: ID ZIP: 83706 BUSINESS PHONE: 2083643300 MAIL ADDRESS: STREET 1: 200E MALLARD DRIVE CITY: BOISE STATE: ID ZIP: 83706 FORMER COMPANY: FORMER CONFORMED NAME: TRUS JOIST CORP DATE OF NAME CHANGE: 19880927 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. For Quarter Ended April 4, 1998 Commission file number 0-7469 TJ INTERNATIONAL, INC. - ------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 82-0250992 - ------------------------------- ---------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 E. Mallard Drive Boise, Idaho 83706 - ---------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (208) 364-3300 ---------------------- 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 and Exchange Act of 1934 during the preceding 12 months (or for each 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. May 11, 1998, 17,019,275 shares of $1 par value common stock. EXHIBIT INDEX ON PAGE 16 TJ INTERNATIONAL, INC. PART I. Financial Information The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments necessary to present fairly the results for the periods presented have been included therein. The adjustments made were of a normal, recurring nature. Certain information and footnote disclosure normally included in financial statements have been condensed or omitted in accordance with such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is recommended that these condensed financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. The results of operations for the periods presented are not necessarily indicative of the results that might be expected for the fiscal year ending January 2, 1999. TJ INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(AMOUNTS IN THOUSANDS) ASSETS April 4, January 3, March 29, 1998 1998 1997 Current assets Cash and cash equivalents $ 97,192 $119,087 $ 21,516 Marketable securities --- 40,751 --- Receivables, less allowances of $398, $397 and $447 123,790 55,369 103,866 Inventories 72,882 68,954 51,644 Other 12,988 10,923 11,545 -------- -------- --------- 306,852 295,084 188,571 Property Property and equipment 609,848 603,693 572,124 Less - Accumulated depreciation (233,333) (223,207) (192,835) -------- -------- --------- 376,515 380,486 379,289 Goodwill 19,240 19,500 20,280 Other assets 17,244 17,034 23,133 -------- -------- --------- $719,851 $712,104 $611,273 -------- -------- --------- -------- -------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ --- $ --- $ 2,505 Accounts payable 31,221 25,238 36,434 Accrued liabilities 43,808 50,641 32,535 -------- -------- --------- 75,029 75,879 71,474 Long-term debt 142,390 142,390 88,140 Other long-term liabilities 19,770 18,336 6,050 Reserve for discontinued operations 14,448 17,482 20,757 Minority interest in Partnership 222,344 216,605 199,287 Stockholders' equity ESOP Convertible Preferred Stock, $1.00 par value, authorized 10,000,000 shares, issued 1,140,319, 1,147,219, and 1,160,993 13,454 13,535 13,698 Guaranteed ESOP Benefit (8,188) (8,188) (9,204) Common stock, $1.00 par value, authorized 200,000,000 shares, issued 17,893,134, 17,807,142, and 17,654,009 17,893 17,807 17,654 Paid-in capital 155,798 153,936 149,013 Retained earnings 91,995 86,116 67,546 Other (1,866) (1,730) (1,663) Accumulated other comprehensive (3,858) (3,805) (3,179) income (loss) Treasury stock, 888,782, 761,152 and 419,300, shares, at cost (19,358) (16,259) (8,300) -------- -------- -------- 245,870 241,412 225,565 -------- -------- -------- $719,851 $712,104 $611,273 -------- -------- -------- -------- -------- -------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
T J INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(amounts in thousands except per share figures) For the fiscal quarter ended ------------------------ April 4, March 29, 1998 1997 -------- -------- Sales $185,829 $161,263 -------- -------- Costs and expenses Cost of sales 135,523 117,923 Selling expenses 19,575 17,083 Administrative expenses 9,610 8,562 --------- -------- 164,708 143,568 --------- -------- Income from operations 21,121 17,695 Investment income, net 1,959 412 Interest expense (2,316) (1,549) Minority interest in Partnership (9,847) (7,795) ---------- -------- Income before income taxes 10,917 8,763 Income taxes 4,094 3,286 ---------- ------- Net income 6,823 5,477 ---------- ------- ---------- ------- Net income per common share Basic $ 0.39 $ 0.30 --------- -------- --------- -------- Diluted $ 0.36 $ 0.28 --------- -------- --------- -------- Dividends declared per common share $ 0.0550 $ 0.0550 --------- -------- --------- -------- Weighted average number of common shares outstanding during the periods Basic 16,958 17,501 --------- ------- --------- ------- Diluted 18,556 19,025 --------- ------- --------- ------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
TJ INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL QUARTER ENDED APRIL 4, 1998 AND MARCH 29, 1997 (Unaudited) (amounts in thousands)
April 4, March 29, 1998 1997 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 6,823 $ 5,477 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,081 10,037 Minority interest in partnership 9,847 7,795 Other, net 1,201 895 Change in working capital items: Receivables (68,421) (29,973) Inventories (3,928) (95) Other current assets (2,065) (1,804) Accounts payable and accrued liabilities (326) 9,221 Other, net (1,062) 29 --------- -------- Net cash provided by (used in) operating activities $(46,850) $ 1,582 --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures $ (6,904) $ (7,326) Sales of marketable securities 40,751 --- Other, net (801) 401 --------- --------- Net cash provided by (used in) investing activities $ 33,046 $ (6,925) --------- ---------- --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid on common stock $ (938) $ (963) Cash dividends paid on preferred stock --- (1,245) Minority partners tax distributions (4,179) (2,133) Net borrowings under lines-of-credit --- 2,505 Purchase of treasury stock (3,099) (8,300) Other, net 125 194 --------- --------- Net cash used in financing activities $ (8,091) $ (9,942) --------- --------- --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS Net decrease in cash and cash equivalents $(21,895) $(15,285) Cash and cash equivalents at beginning of year 119,087 36,801 --------- -------- Cash and cash equivalents at end of period $ 97,192 $ 21,516 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest, net of amounts capitalized $ 2,659 $ 1,182 Income taxes $ 2,597 $ 736 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
TJ INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) INVENTORIES Inventories consisted of the following: (amounts in thousands) April 4, Jan. 3, March 29, 1998 1998 1997 --------- --------- --------- Finished goods $54,523 $51,737 $35,690 Raw materials and work-in-progress 18,359 17,217 15,954 --------- ------- --------- 72,882 68,954 51,644 Reduction to LIFO cost - - - --------- ------- --------- $72,882 $68,954 $51,644 --------- ------- --------- --------- ------- --------- The determination of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on the Company's estimates of expected year-end inventory levels and costs. Since these estimates are subject to many forces beyond the Company's control, interim results could possibly be affected by the final year-end LIFO inventory valuation. NET INCOME PER COMMON SHARE: Basic net income per common share is based on net income adjusted for preferred stock dividends and related tax benefits divided by the weighted average number of common shares outstanding. Diluted net income per common share assumes conversion of the Employee Stock Ownership Plan (ESOP) convertible preferred stock (ESOP preferred stock) into common stock at the beginning of the year and weighted average number of common shares outstanding after giving effect to stock options under the treasury stock method. Basic net income and diluted net income were calculated as follows:
For the fiscal quarter ended -------------------- April 4, March 29, 1998 1997 -------------------- BASIC NET INCOME Net income as reported $ 6,823 $ 5,477 Preferred stock dividends, net of related tax benefits (253) (248) ------- ------- Basic net income $ 6,570 $ 5,229 ------- ------- ------- ------- DILUTED NET INCOME Net income as reported $ 6,823 $ 5,477 Additional ESOP contribution payable upon assumed conversion of ESOP preferred stock, net of related tax benefits (166) (174) ------- ------- Diluted net income $ 6,657 $ 5,303 ------- ------- ------- ------- - ------------------------------------------------------------------- Weighted average shares outstanding used to determine basic earnings per common share 16,958 17,501 ESOP preferred stock 1,140 1,161 Stock Options 458 363 ------- ------- Weighted average shares used to determine diluted earnings per common share 18,556 19,025 ------- ------- ------- ------- - ------------------------------------------------------------------- COMPREHENSIVE INCOME (LOSS) Comprehensive income for the periods include the following: For the fiscal quarter ended ------------------ April 4 March 29, 1998 1997 ------------------ Net Income $ 6,823 $ 5,477 Other Comprehensive Loss (53) (399) ------------------ Comprehensive Income $ 6,770 $ 5,078 ------- ------- ------- ------- Accumulated other comprehensive income (loss) for each period ended was as follows: (amounts in thousands) April 4, Jan. 3, March 29, 1998 1998 1997 -------- -------- --------- Balances at beginning of period- cumulative translation adjustment $(3,805) $ (2,780) $ (2,780) Changes within periods- cumulative translation adjustment (53) (1,025) (399) -------- -------- --------- Balance at end of period- cumulative translation adjustment $(3,858) $ (3,805) $ (3,179) -------- -------- --------- -------- -------- ---------
- ------------------------------------------------------------------- RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board issued Statement No. 131 Disclosures about Segments of an Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 requires publicly-held companies to report segment and other information which is utilized by the Chief Executive Officer and to reconcile the segment information to financial statement amounts. SFAS No. 131 is effective for the Corporation for the year ending January 2, 1999. The Company is evaluating the impact of this new standard on its reporting and disclosure. TJ INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL QUARTER ENDED APRIL 4, 1998 OPERATING RESULTS TJ International, Inc., (the Company) is the 51 percent owner and managing partner of Trus Joist MacMillan A Limited Partnership (TJM), the world's leading manufacture and marketer of engineered lumber products. Substantially all of the Company's operating assets are held and revenue generated by TJM. MacMillan Bloedel Limited (MB) owns a 49 percent interest in TJM. The following comments discuss material variations in the results of operations for the comparative periods presented in the condensed consolidated statements of income. SALES The Company's sales by quarter during the current year and for the preceding four years are as follows:
SALES BY QUARTER (amounts in thousands) Quarter 1998 1997 1996 1995 1994 - ------- ------- -------- -------- -------- -------- First $185,829 $161,263 $111,157 $109,941 $118,163 Second 185,730 155,050 123,882 128,773 Third 185,576 179,571 137,759 136,266 Fourth 173,747 131,388 113,263 112,858 -------- -------- -------- -------- $706,316 $577,166 $484,845 $496,060 -------- -------- -------- -------- -------- -------- -------- --------
FIRST QUARTER OF 1998 COMPARED WITH THE FIRST QUARTER OF 1997 First quarter sales increased $24.6 million or 15% from the prior year first quarter. The sales increase is due to the continued acceptance of engineered lumber products as a substitute for solid- sawn lumber in the marketplace. The Company believes this growing acceptance is achieved primarily through homebuilders' and homeowners' increasing awareness of engineered lumber's superior quality and value. Additionally, growth in product acceptance is achieved through the Company's on-going education and sales efforts in the builder and specifier communities, introduction of new products and the adoption of engineered lumber products as the product of choice in a growing number of regional markets. In both the first quarter of 1997 and 1998, the Company offered its Strategic Inventory Program to its customers. This program, which included rebates, extended terms and price protection was designed to encourage distribution customers to increase their inventory levels as the traditional building season begins. In the west prices for competing Douglas fir wide-dimension products began 1998 at a two year low but began to slowly increase during the quarter. Prices for competing wide-dimension southern yellow pine began the year at a two year high and have continued to increase slightly over year ago prices. The Company had increased unit volume sales of approximately 18%, compared to the prior year first quarter. Volume gains were strongest in the Company's TJI-Registered Trademark- Joist products. During the first quarter, the Company introduced its new TJI-Registered Trademark-/Pro-Registered Trademark- 120TS joist. This product is the first I-joist to include TimberStrand - -Registered Trademark- LSL as a flange material. This new product introduction, combined with increased marketing emphasis on its TimberStrand-Registered Trademark- LSL wall framing and header products are pursuant to the Company's goal to increase the proportion of higher value products in its TimberStrand-Registered Trademark- LSL sales mix. Gross margins for the first quarter were 27.1% compared with 26.9% in the first quarter of 1997. The Company was able to increase gross margin compared to the prior year despite increased costs for Oriented Strand Board (OSB). This increase in OSB costs was offset by lower veneer costs and increased operating efficiencies at many of the Company's manufacturing facilities. The Company's TimberStrand-Registered Trademark- LSL plants in Northern Minnesota and Eastern Kentucky continue to make incremental gains improving product properties, productivity, and operating costs. Selling expenses increased $2.5 million, from $17.1 million in the first quarter 1997 to $19.6 million in the first quarter of 1998, however, they declined as a percentage of sales to 10.5% from 10.6% in 1997. Total selling expenses rose primarily because of variable selling expense and sales commissions resulting from sales growth. The Company also increased spending for targeted advertising. General and administrative expenses increased $1.0 million, from $8.6 million in the first quarter of 1997 to $9.6 million in the first quarter 1998, however, they declined as a percentage of sales to 5.2% from 5.3% in 1997. This increase in spending is primarily driven by the Company's investment in business support software which is intended to provide the infrastructure for future growth. Minority interest expense increased $2.1 million from 1997 due to the increase in earnings at the Trus Joist MacMillan (TJM) Partnership. LIQUIDITY AND CAPITAL RESOURCES APRIL 4, 1998 COMPARED TO JANUARY 3, 1998 Working capital increased $12.4 million during the first quarter of 1998 to $232 million. Accounts receivable increased $68.4 million due to increased sales combined with the sales incentives offered in the first quarter of 1997 and 1998, as part of the Company's strategic inventory plan. APRIL 4, 1998 COMPARED TO MARCH 29, 1997 Working capital increased $115 million from the prior year, to $232 million at April 4, 1998. The increase is due to strong earnings combined with modest capital expansion spending. The Company completed construction in late 1997 of a TimberStrand- Registered Trademark- LSL - flange I line at its Eastern Kentucky location. The new production facility will allow the Company to produce traditional I-joist products, using TimberStrand-Registered Trademark- LSL as the top and bottom flange material. The plant ramp up is on schedule, with market introduction of this product in the first quarter 1998. The additional I-line required a capital investment of approximately $16.5 million in 1997. Also in 1997 the Company began construction of a Microllam- Registered Trademark- LVL, TJI-Registered Trademark- Joist plant located in Evergreen, Alabama, with production scheduled to begin late in the fourth quarter of 1998. The new production facility will allow the Company to produce traditional Microllam-Registered Trademark- LVL and TJI-Registered Trademark- Joist products. The plant will require a capital investment of approximately $45 million. Total spending on the project through the first quarter of 1998 was $5.2 million, including first quarter 1998 expenditures of $2.2 million. The Company is evaluating potential sites for an additional combination Microllam-Registered Trademark- LVL, Parallam- Registered Trademark- PSL and TJI-Registered Trademark- Joist plant or a third TimberStrand-Registered Trademark- LSL plant but has not determined whether or when to proceed with construction. The Company believes that current cash balances, cash generated from operations, and borrowing under a $150 million Revolving Credit Facility will be sufficient to meet the on-going operating and capital expansion needs of the Company. The Company also believes that additional or expanded lines of credit or appropriate long-term capital can be obtained to fund other major capital requirements as they arise, or to fund an acquisition. In the first quarter 1998, the Board of Directors authorized the Company to purchase $3.1 million of treasury stock. For 1997, the Company's Board of Directors authorized the purchase of up to $15 million of the Company's common stock at market prices. The Company purchased $8.3 million of treasury stock during the first quarter of 1997 and $6.7 million of stock during the second quarter of 1997 completing the stock purchase plan. In addition, the Board of Directors authorized and the Company purchased an additional $1.3 million of stock during the third quarter of 1997. In the fourth quarter of 1997, the Company issued $42.6 million of taxable notes to preserve the Company's ability in the future to issue additional industrial revenue bonds to help finance the East Kentucky TimberStrand-Registered Trademark- LSL plant. The taxable notes are due in a single maturity on November 15, 2001, subject to prepayment at the option of the Company, and are unsecured. In addition, during the second quarter of 1997, the Company issued $11.65 million of industrial revenue bonds associated with the construction of the East Kentucky plant. The bonds are due in a single maturity in 2027, with interest payable semi-annually at 6.55%. The Company sold its windows operations in 1996, however, it retained certain liabilities related to these operations. Management believes that existing reserves are adequate to meet all subsequent liabilities that may arise related to the discontinued operations. Substantially all of the Company's operating assets are held, and revenue generated, by its TJM partnership. The partnership regularly distributes cash to the partners to fund the tax liabilities generated by the partnership at the corporate level. All other distributions of cash by the partnership are dependent on the affirmative votes of the representatives of the minority partner. Accordingly, there can be no assurance that such distributions will be approved and thereby be available for the payment of dividends or to fund other operations of the Company. INDUSTRY, COMPETITION, AND CYCLICALITY The Company's engineered lumber products continue to gain market acceptance as high-quality alternatives to traditional solid-sawn lumber products. Through the Company's intensive marketing efforts, the Company believes that builders and other wood users are increasingly recognizing the consistent quality, superior strength, lighter weight, and ease of installation of engineered lumber products. The Company believes that this trend will continue. No other company possesses the range of engineered lumber products, the levels of service and technical support, or the second generation technologies of TimberStrand-Registered Trademark- LSL or Parallam-Registered Trademark- PSL. There are, however, a number of companies, including several large forest products companies, that now produce look-alike wood I-joist and laminated veneer lumber products. Several of these companies have announced capacity expansions. These look-alike products are manufactured using processes similar to the Company's older generation technologies. The Company believes its network of manufacturing plants and multiple technologies position it as the low-cost producer of engineered lumber. While competition helps expand the market for engineered wood products, including those manufactured by the Company, it may also make the existing markets more price competitive. Traditional wide-dimension lumber, however, remains the predominant structural framing material used in residential construction and is the primary competitor of the Company's products. Commodity lumber prices historically have been subject to high volatility, and during periods of significant lumber price movements the Company's prices have trended in the same direction. The Company's operations are strongly influenced by the cyclicality and seasonality of residential housing construction. This industry experiences fluctuations resulting from a number of factors, including the state of the economy, consumer confidence, credit availability, interest rates, and weather patterns. Consistent with the seasonal pattern of the construction industry as a whole, the Company's sales have historically tended to be lowest in the first and fourth quarters and highest in the second and third quarters of each year. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards Board issued Statement No. 131 Disclosures about Segments of an Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 requires publicly-held companies to report segment and other information which is utilized by the Chief Executive Officer and to reconcile the segment information to financial statement amounts. SFAS No. 131 is effective for the Corporation for the year ending January 2, 1999. The Company is evaluating the impact of this new standard on its reporting and disclosure. FORWARD LOOKING STATEMENTS This Form 10-Q includes a number of "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding the adequacy of the Company's reserves for discontinued operations and other statements regarding the Company's beliefs. Investors are cautioned that forward-looking statements are subject to an inherent risk that actual results may vary materially from those described, projected or implied herein. Factors that may result in such variance include, among others: changes in interest rates, commodity prices, and other economic conditions; actions by competitors; changing weather conditions and other natural phenomena; actions by government authorities; technological developments; future decisions by management in response to changing conditions; and misjudgments in the course of preparing forward-looking statements. Other factors are discussed in the Company's filings with the Securities and Exchange Commission. Microllam-Registered Trademark-, Parallam-Registered Trademark-, TJI-Registered Trademark-, and TimberStrand-Registered Trademark- are registered trademarks of Trus Joist MacMillan A Limited Partnership, Boise, Idaho. TJ INTERNATIONAL, INC. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Filed as an exhibit to this report is the following: (10) Material Contract (27) Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter TJ INTERNATIONAL INC. SIGNATURE Pursuant to the requirements 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. TJ INTERNATIONAL, INC. /s/ Valerie A. Heusinkveld ---------------------------- Valerie A. Heusinkveld Vice President, Finance & Chief Financial Officer Date: May 19, 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS TO FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER COMMISSION FILE NUMBER 0-7469 ENDED APRIL 4, 1998 TJ INTERNATIONAL, INC. EXHIBIT INDEX Exhibits Page - -------- ------ (10) Form of Change of Control Employment Document 2 Agreement entered into by participants in the Long Term Incentive Plan in January 1998. (27) Financial Data Schedule Document 3 EX-10 2 EXHIBIT 10 CHANGE OF CONTROL EMPLOYMENT AGREEMENT AGREEMENT by and between TJ International, Inc., a Delaware corporation (the "Company") and __________________ (the "Executive"), dated as of the ___ day of January, 1998. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, -2- however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). -3- 4. TERMS OF EMPLOYMENT. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a -4- monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's most recently established target bonus under the Company's Incentive Program, or any comparable bonus under any predecessor or successor plan, before the public announcement of the transaction that resulted in the Change of Control (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (such target, the "Annual Bonus Amount"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, -5- policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. -6- (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. TERMINATION OF EMPLOYMENT. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give -7- to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed -8- to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. -9- For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination and (iii) if the -10- Executive's employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be. 6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Annual Bonus Amount and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) the Multiple (as defined below) and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Annual Bonus Amount; (ii) for a number of years equal to the Multiple after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility, and for purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed for a number of years equal to the Multiple after the Date of Termination and to have retired on the last day of such period; -11- (iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). For purposes of this Section 6(a), the "Multiple" shall mean (i) two, in case of a termination of employment by the Executive for "Good Reason" pursuant to the last sentence of Section 5(c), and (ii) three, in the case of any other termination of employment by the Executive for Good Reason or termination of employment by the Company other than for Cause or Disability. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. -12- (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) the Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other -13- Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 6(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability or entitlement under, any provision of this Agreement or any guarantee of -14- performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any corresponding provision of state or local tax laws, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt -15- of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the -16- Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment -17- of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an -18- amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. SUCCESSORS. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. -19- (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Idaho, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: -20- If to the Company: TJ International, Inc. 200 East Mallard Drive Boise, Idaho 83706 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this -21- Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. -------------------------------- [Executive] TJ INTERNATIONAL, INC. By -------------------------------- -22- EX-27 3 EXHIBIT 27
5 THIS DATA SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE TJ INTERNATIONAL, INC. BALANCE SHEET AT APRIL 4, 1998, AND FROM ITS STATEMENT OF INCOME FOR THE THREE MONTHS ENDED APRIL 4, 1998. THE INFORMATION PRESENTED IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-02-1999 JAN-04-1998 APR-04-1998 97,192 0 124,188 398 72,882 306,852 609,848 233,333 719,851 75,029 142,390 0 13,454 17,893 214,523 719,851 185,829 185,829 135,523 135,523 29,185 0 2,316 10,917 4,094 6,823 0 0 0 6,823 .39 .36
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