exv10w20



 



Exhibit 10.20



AGREEMENT RELATING TO RETIREMENT



     This Agreement Relating to Retirement (this “Agreement”), dated January
15, 2004, but effective as of the 1st day of November, 2003, is by and between
Johnie Schulte, an individual resident of the State of Texas (“Schulte”), and
NCI Buildings Systems, Inc., a Delaware corporation with its principal office
in the State of Texas (the “Company”), and joined herein for the limited
purposes described herein by the Schulte Investment Trust (the “Trust”), Karen
Rene Rosales, Trustee, and Karen Rene Rosales, individually.


WITNESSETH:


     WHEREAS, Schulte has served as an employee, officer and director of the
Company, including its Chief Executive Officer, since 1984; and


     WHEREAS, Schulte desires to retire as an employee and officer of the
Company and all of its subsidiary entities, including the positions of
President and Chief Executive Officer of the Company; and


     WHEREAS, Schulte has agreed to remain a director of the Company at least
until the annual meeting of stockholders of the Company to be held in 2004 and
Schulte has agreed to assist the Company in the orderly transition of his
duties to his replacement for a period of time; and


     WHEREAS, the Company and the Trust have entered into that certain
Split-Dollar Life Insurance Agreement, dated October 13, 1998 (the “Insurance
Agreement”), pursuant to which the Trust has insured the life of Schulte and
his spouse, the Company has agreed to make at least eleven (11) annual premium
payments on the Policy (as defined in the Insurance Agreement) and, as security
for the repayment of such premiums, the Trust has assigned the Policy to the
Company; and


     WHEREAS, NCI Building Systems, L.P., a Texas limited partnership and
indirect wholly owned subsidiary of the Company (“NCI LP”), and Schulte are
parties to that certain Amended and Restated Employment Agreement, dated
January 29, 2003 (the “Employment Agreement”), pursuant to which Schulte is
employed by NCI LP; and


     WHEREAS, the Company and Schulte are parties to that certain Supplemental
Benefit Agreement, dated December 13, 2002 (the “Supplemental Agreement”) (the
Insurance Agreement, the Employment Agreement and the Supplemental Agreement
are sometimes collectively referred to herein as the “Schulte Benefit
Agreements”), pursuant to which the Company agreed to provide Schulte with
certain retirement benefits;


     WHEREAS, the Company and Schulte are parties to that certain
Indemnification Agreement, dated October 13, 2000 (the “Indemnification
Agreement”), pursuant to which the Company has agreed, under certain
circumstances, to indemnify Schulte in his capacity as an officer and director
of the Company; and


     WHEREAS, the Company and Schulte desire by this Agreement to set forth
their covenants and promises regarding the terms and provisions of his
retirement;


     NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises set forth and intending to be legally bound, hereby
covenant and agree as follows:


 







 


     1. Retirement. Schulte hereby retires as an officer of the Company and
all of its subsidiary entities, including the positions of President and Chief
Executive Officer of the Company, effective as of the close of business on
November 1, 2003 (the “Effective Time”), such retirement to become effective at
the Effective Time without any further action on the part of Schulte or the
Company. Schulte hereby agrees to provide consulting advice and assist in the
transition of his responsibilities and duties from the Effective Time through
the close of business on December 31, 2003, at which time Schulte will
terminate all of his consulting activities on behalf of the Company and all
relationships between Schulte and the Company, other than his relationship as a
director and a shareholder of the Company, shall terminate (the “Termination
Time”), such termination to become effective at the Termination Time without
any further action on the part of Schulte or the Company. During the period
from the Effective Time until the Termination Time, Schulte’s salary shall
continue at the same rate as in effect for the Company’s fiscal 2003 year. The
Company and Schulte hereby agree that Schulte’s participation in the Company’s
Bonus Program shall terminate at the Effective Time, provided, however, that
the Company and Schulte hereby agree that based on Schulte’s employment and
service during all of fiscal 2003, Schulte shall be eligible to receive a bonus
at Level 1 under the Company’s Bonus Program for fiscal 2003, which bonus, if
any, will be based on the Company’s performance for fiscal 2003, will be
determined in the manner prescribed by the Bonus Program applicable to all
Level 1 bonus participants and will be paid at the time and in the manner
provided by the Bonus Program and the Compensation Committee of the Board of
Directors.


     2. Vesting. Notwithstanding anything to the contrary in the Employment
Agreement and the Supplemental Agreement, at the Termination Time, without any
further action necessary on the part of Schulte or the Company, 100% of the
benefits provided to Schulte in the Employment Agreement and the Supplemental
Agreement dependent upon the lapse of time will become vested; i.e. Schulte
shall be vested in and, subject to Section 9 hereof, shall be entitled to
receive seventy-five percent (75%) of his 2003 base salary, or $337,500 a year,
for the calendar years 2004, 2005 and 2006 under the Employment Agreement and
100% of the Retirement Benefit (as defined in the Supplemental Agreement), or
$200,000 a year, for the calendar years 2007 through 2013 under the
Supplemental Agreement.


     3. Payment of Salary and Supplemental Benefits. Subject to the provisions
of Section 9 hereof, after the Termination Time, the Company will, or will
cause NCI LP to, pay Schulte the Vested Payments (as defined in the Employment
Agreement) on the terms and at the times, subject to applicable withholding,
set forth in the Employment Agreement and the Company will pay Schulte the
Retirement Benefit on the terms and at the times, subject to applicable
withholding, set forth in the Supplemental Agreement.


     4. Stock Options. The Company and Schulte acknowledge and agree that
Schulte’s retirement as an officer and employee of the Company and its
subsidiaries will not affect Schulte’s outstanding options so long as Schulte
continues to serve as a director of the Company. If and when Mr. Schulte
retires from his directorship with the Company, all of his then outstanding
stock options shall immediately become 100% vested and Mr. Schulte will have
either (i) one year from the date of his retirement as a director if such stock
options were granted before May 30, 2002, or (ii) five years from the date of
his retirement as a director if such stock options were granted on or after May
30, 2002, to exercise such stock options, unless in each instance, the stock
option agreement relating to such stock option provides for an expiration date
that is earlier than the expiration of such one- or five-year period.


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     5. Payment of Insurance Premiums.


         (a) Immediately following Schulte’s resignation as a director of the
Company or the election of his successor if Schulte decides not to stand for
re-election as a director of the Company, and subject to the provisions of
Section 9 hereof, the Company agrees to resume making annual premium payments
(which shall be deemed for all purposes to be “Corporation Premiums” as defined
in the Insurance Agreement) on the Policy in accordance with the terms and
limitations of the Insurance Agreement; provided, however, that if the terms
and provisions of the Sarbanes-Oxley Act of 2002 prohibit the Company’s payment
of such annual premiums, the Company will provide Schulte with a comparable
benefit permitted by applicable laws and the rules and regulations of the
Securities and Exchange Commission and the New York Stock Exchange.


         (b) If, at any time, the Company is relieved of its obligations to make
annual premium payments on the Policy pursuant to the provisions of Section 9
hereof, then notwithstanding anything to the contrary in the Insurance
Agreement, the Company shall offer to sell to Schulte or the Trust the
Company’s interest in the Policy at a purchase price equal to the aggregate
amount of Corporation Premiums paid on the Policy pursuant to this Agreement
and the Insurance Agreement. If Schulte or the Trust does not purchase the
Company’s interest in the Policy as provided in this subsection, then
notwithstanding anything to the contrary in the Insurance Agreement, the
Company shall have the right, in its absolute and sole discretion, to continue
to make annual premium payments (until such time as the Company elects, in its
sole and absolute discretion, to stop making such payments) and/or to surrender
the Policy to the Insurer (as defined in the Insurance Agreement) in exchange
for the then current cash surrender value of the Policy (the “Cash Value”).
The Company and Schulte agree that the Company shall retain that portion of the
Cash Value received from the Insurer necessary to repay the Company for the
Corporation Premiums. The Company and Schulte further agree that (a) if the
Corporation Premiums exceed the Cash Value, neither Schulte nor the Trust shall
have any further obligation to the Company with respect to the repayment of the
Corporation Premiums; and (b) if the Cash Value exceeds the Corporation
Premiums, the Company shall within thirty (30) days of its receipt of the Cash
Value, distribute to the Trust the amount by which the Cash Value exceeds the
Corporation Premiums.


         (c) Each of Schulte and the Trust hereby irrevocably constitutes and
appoints the Company his and its true and lawful attorney-in-fact, with full
power of substitution and resubstitution, in the name of Schulte, the Trust or
the Company but on behalf and for the benefit of the Company to take any and
all action to carry out the terms and conditions of this Agreement and to do
all such other acts and things that relate to the Insurance Agreement and the
Policy that the Company, in its sole discretion, deems desirable. Each of
Schulte and the Trust agrees that the foregoing powers are coupled with an
interest and shall not be revocable by Schulte or the Trust for any reason
whatsoever. Each of Schulte and the Trust acknowledges and agrees that the
rights granted by the Trust to the Company pursuant to this subsection are
solely for the purpose of taking the actions expressly set forth in subsection
5(b).


         (d) Immediately after the surrender of the Policy to Insurer in exchange
for the Cash Value of the Policy and the distribution of the Cash Value in
accordance with this Agreement, (a) all rights granted to the Company, Schulte,
the Trust or Rosales pursuant to the Insurance Agreement shall immediately
cease and terminate and the Insurance Agreement shall have no further force or
effect and (b) the Company, Schulte, the Trust and Rosales shall immediately be
released from any other obligations on the part of each accruing pursuant to
the Insurance Agreement.


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         (e) Schulte, the Trust and the Company acknowledge that the Insurance
Agreement requires the Company to make at least eleven (11) annual premium
payments with respect to the Policy but does not specify the amount of the
annual premiums to be paid by the Company or which of the annual premiums that
become due are to be paid by the Company. In order to clarify these
requirements, the parties acknowledge and agree that the amount of the annual
premiums to be paid by the Company is $200,000 a year, that the Company has
made an aggregate of five annual premium payments totaling $1.0 million as of
the date of this Agreement and that, subject to the proviso set forth in
Section 5(a) above, the Company will make the next five annual premium payments
totaling $1.0 million over the next five calendar years, with the first of the
next five annual premium payments being made in 2004 and the fifth in 2008.
With regard to the eleventh annual premium payment, the parties intend and
agree that such $200,000 amount shall be paid in 2009, or spread across and
paid in any one or more later years, if (i) either Johnie Schulte or Barbara
Schulte is living on the premium due date in 2009 or a later year and (ii) the
cash value of the Policy on that date is not sufficient to pay the annual
premium necessary to ensure that the Policy continues in full force and effect
for one more policy year with at least a $5.0 million death benefit under the
Policy (the “Necessary Premium”). In that case, the Company shall make a
premium payment in an amount equal to the difference between the Necessary
Premium for that policy year and the cash value of the Policy on the premium
due date; provided, however, that the Company shall not be required to pay more
than an aggregate of $200,000 in premium payments for 2009 and later policy
years. At such time as both Johnie Schulte and Barbara Schulte are deceased,
or the Company has paid an aggregate of $200,000 in premium payments for 2009
and later policy years, whichever first occurs, the Company’s obligations under
the Insurance Agreement with respect to the payment of premiums shall be deemed
to be satisfied in full and the Company shall have no further obligation to
make premium payments under the Insurance Agreement.


         (f) Each of the Trust and Rosales hereby agree to be bound by all of the
terms and conditions of this Agreement that affect, impact or pertain or relate
to the Insurance Agreement.


     6. Group Health and Welfare Plans. The Company will continue to provide
all group health, medical, dental, disability and other health benefit programs
to Schulte on the same basis as now provided until the Termination Time, at
which time his participation in those benefit programs will terminate except:
(a) the right to payment or reimbursement of covered claims arising during the
coverage period; and (b) Schulte’s right to continue his health and medical
insurance coverage at his own expense pursuant to and in accordance with COBRA
requirements. Schulte will be separately notified of his COBRA rights by the
Company’s human relations manager.


     7. Indemnification Agreement. The Company and Schulte acknowledge and
agree that the Indemnification Agreement shall not be affected by the
retirement of Schulte hereunder and that the Indemnification Agreement shall
continue in full force and effect in accordance with the terms and conditions
of the Indemnification Agreement.


     8. Mutual Release.


         (a) The Company, on the one hand, and Schulte, on the other hand, on
behalf of themselves and each of their respective past and present affiliated
companies, agents, representatives, successors, assigns and attorneys, do
hereby finally and forever release, relinquish and discharge each other and
each of their respective past and present agents, representatives, successors,
assigns and attorneys, from each and every right, claim, demand, cause of
action, suit, debt, account, covenant, contract, controversy, judgment, damage,
loss, obligation, and/or liability


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of whatsoever nature or character, at law or in equity, whether of a
contractual or fiduciary nature or otherwise, which any of the parties hereto
have had or now have that relates to or arises out of or in connection with any
matter, fact or circumstance known to the Company as of the date hereof or any
matter, fact or circumstance known to Schulte as of the date hereof, including,
but not limited to, all matters between the Company and Schulte, whether as an
employee, officer, director or otherwise. Notwithstanding anything to the
contrary contained in this Agreement, the Company and Schulte hereby agree that
the release contained in this Section only applies to claims resulting from
anything that has occurred up to the date hereof and that the release contained
in this Section does not affect the rights, liabilities and obligations of the
Company and Schulte under this Agreement, the Schulte Benefit Agreement, the
Indemnification Agreement and other contracts, documents or agreements
currently in place between the Company and Schulte.


         (b) For purposes of the release contained in subsection 8(a), the term
“any matter, fact or circumstance known to the Company” shall mean matters,
facts and circumstances personally known by the Company’s Chairman of the
Board, the Company’s Chief Financial Officer or members of the Company’s Board
of Directors and the term “any matter, fact or circumstance known to Schulte”
shall mean matters, facts and circumstances personally known by Schulte.


     9. Non-Competition and Non-Solicitation.


         (a) The Company and Schulte hereby agree that that notwithstanding
anything in the Employment Agreement or Supplemental Agreement to the contrary
the non-competition and non-solicitation covenants set forth in the Employment
Agreement and the Supplemental Agreement shall apply to Schulte (i) for a
period commencing at the Termination Time and continuing through the close of
business on December 31, 2004 (the “First Non-Competition Period”) and (ii)
from the end of the First Non-Competition Period through the date of the last
payment to be made by the Company to Schulte, or on behalf of the Trust,
pursuant to this Agreement or the Schulte Benefit Agreements (the “Second
Non-Competition Period”).


         (b) Schulte acknowledges and agrees that that notwithstanding anything in
the Employment Agreement or Supplemental Agreement to the contrary, a remedy at
law for any breach or attempted breach by him during the First Non-Competition
Period of this Agreement will be inadequate, and further acknowledges and
agrees that the Company shall be entitled to specific performance and
injunctive and other equitable relief, including (without limitation) the right
to seek an award of damages in excess of any amounts to be paid to Schulte
pursuant to this Agreement or the Schulte Benefit Agreements in case of any
such breach or attempted breach during the First Non-Competition Period, 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.


         (c) Schulte and the Company hereby agree that notwithstanding anything in
the Employment Agreement or Supplemental Agreement to the contrary, if Schulte
breaches the non-competition and non-solicitation covenants set forth in the
Employment Agreement and Supplemental Agreement during the Second
Non-Competition Period, the Company’s sole and exclusive remedy shall be to
permanently cease making payments to Schulte pursuant to this Agreement and the
Schulte Benefit Agreements.


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         (d) Schulte represents and warrants to the Company that (i) Schulte has
the full right, power and authority to enter into and perform this Agreement,
including (without limitation) the giving of the covenants in this Section,
(ii) Schulte acknowledges the giving of fair and adequate consideration for his
covenants in this Section, and that such covenants are necessary to protect the
business, operations and goodwill of the Company and to attract investment in
the Company, (iii) such covenants are not oppressive to Schulte in any respect,
and (iv) on the date hereof, Schulte is not engaged in a common calling.


     10. 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 Schulte:
	 	Johnie Schulte
	 	 	 	 	16021 Kube Ct.
	 	 	 	 	Houston, Texas 77040
	 	 	 	 	Facsimile:
	 	 	 	 	 
	 	 	
If to the Company:
	 	NCI Building Systems, Inc.
	 	 	 	 	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.


     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. Assignment. This Agreement may not be assigned by Schulte. Schulte
shall not 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, except as specifically proved in
the Schulte Benefit Agreements.


     13. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, Schulte’s heirs and personal representatives,
and the successors and assigns of the Company.


     14. 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.


     15. 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, except that the
terms and conditions in the Schulte Benefit


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Agreements not specifically amended, modified or superseded hereby shall
continue in full force and effect in accordance with their respective terms.


     16. Amendment; Waiver. This Agreement may not be amended or modified in
any respect except by a written instrument signed by the Company and Schulte.
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 members of the Board of Directors of the Company, with
Schulte abstaining.


     17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.


     18. 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.


     19. Replacement. This Agreement replaces and supersedes in its entirety
that certain Agreement Relating to Retirement, effective as of November 1,
2003, among the parties hereto (the “Original Agreement”). By executing this
Agreement, the parties hereto acknowledge and agree that the Original Agreement
shall have no further force or effect.


     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, INC.
	 	 	 	 	 
	 	 	
By:
	 	/s/ A.R. Ginn
	 	 	 	 	

	 	 	 	 	A.R. Ginn, Chairman of the Board
	 	 	 	 	 
	 	 	/s/ Johnie Schulte
	 	 	

	 	 	JOHNIE SCHULTE





     The undersigned hereby execute this Agreement for the limited purposes
expressly set forth in Section 4(f) of this Agreement.



	 	 	 	 	 
	 	 	SCHULTE INVESTMENT TRUST
	 	 	 	 	 
	 	 	
By:
	 	/s/ Karen Rene Rosales
	 	 	 	 	

	 	 	 	 	Karen Rene Rosales, TRUSTEE
	 	 	 	 	 
	 	 	/s/ Karen Rene Rosales
	 	 	

	 	 	Karen Rene Rosales, individually







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