Document:

EmploymentAgreementBall

EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of October 9, 2014 (the “Effective Date”) between C. LOWELL BALL (“Executive”) and STOCK BUILDING SUPPLY HOLDINGS, INC., a Delaware corporation (the “Company”).
RECITALS
WHEREAS, Executive is currently employed by the Company as its Senior Vice President, General Counsel and Corporate Secretary; and 
WHEREAS, Executive and the Company desire to enter into this Agreement to set forth the terms and conditions of Executive’s ongoing employment with the Company.
NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration, including Executive’s agreement to sign a Separation Agreement and General Release as provided in SECTION 6.10 below in the event of a termination of Executive’s employment with the Company, the Company and Executive hereby agree as follows:
TERMS AND CONDITIONS
SECTION 1 
EMPLOYMENT
1.1    Employment.  The Company hereby employs Executive and Executive hereby accepts such employment by the Company for the period and upon the terms and conditions contained in this Agreement.
1.2    Position and Duties.  Executive shall serve the Company as its Senior Vice President, General Counsel and Corporate Secretary.  Executive shall have all of the powers and duties in such capacity that are customary to the powers and duties of those of a Senior Vice President, General Counsel and Corporate Secretary of a company within the industry in which the Company operates, including specifically the following: overall management responsibility for the Company and its subsidiaries for (i) the legal and regulatory affairs including without limitation corporate and commercial transactions, resolution of disputed (including litigated and non-litigated matters and management of regulatory compliance, (ii) corporate governance, and (iii) the placement of insurance for the Company and management of insurer and brokerage relationships.  The foregoing powers and duties shall be subject to the direction of the Company’s Board of Directors (the “Board”) and its Chief Executive Officer.  Executive shall report to the Chief Executive Officer of the Company or his successor.  Executive shall devote Executive’s full business time and attention and full diligence and vigor and good faith efforts to the affairs of the Company and Executive shall not engage in any other material business duties or pursuits or render any services of a professional nature to any other entity or person (other than rendering incidental legal advice, arbitration or mediation services to third parties unrelated to the Company’s business or operations, provided that the foregoing does not (a) create a fiduciary or business conflict with the interests of the Company 

or (b) materially interfere with Executive’s performance of his duties hereunder), or serve on any other board of directors (other than a not for profit board of directors), without the prior written consent of the Chief Executive Officer.  Executive will be based at the Company’s headquarters in Raleigh, North Carolina or at such other location as agreed by Executive and the Company’s Chief Executive Officer.
1.3    Effective Date; Indefinite Term.  Executive’s employment under this Agreement shall continue for an indefinite term, until terminated in accordance with SECTION 3 below.  Certain provisions, however, as more fully set forth in SECTION 4, SECTION 5 and SECTION 6 below, continue in effect beyond the date of the termination of Executive’s employment (the “Termination Date”).
SECTION 2     
COMPENSATION AND BENEFITS
2.1    Compensation.
(a)    Base Salary.  The Company shall pay to Executive an annual base salary at the rate not less than $200,000 each calendar year (“Base Salary”), payable in accordance with the Company’s ordinary payroll and withholding practices from time to time in effect for its employees.  During the term of employment hereunder, the Executive’s salary shall be reviewed from time to time (but no less than annually) to determine whether an increase in Executive’s salary is appropriate.  Any such increase shall be at the sole discretion of the Board. 
(b)    Annual Cash Bonus.  During the term of employment, Executive shall be eligible to receive an annual cash bonus (“Annual Cash Bonus”) under the Company’s incentive award plan for management and executives as from time to time adopted by the Board (the “Incentive Plan”).  The Annual Cash Bonus shall be determined based on a target bonus equal to 75% of Base Salary (the “Target Bonus”). The actual amount of the Annual Cash Bonus to be determined by the Board based upon percentage achievement of certain Company-wide and individual performance goals or milestones for each respective calendar year (or any portion thereof), as established in the Incentive Plan, and may be greater or lesser than the Target Bonus.
(c)    Annual Equity Grant.  During the term of employment, Executive shall be eligible to receive an annual grant of equity (the “Annual Equity Grant”) under the Company’s Incentive Plan.  The actual award and amount of any Annual Equity Grant will be determined by the Board or the Compensation Committee of the Board, as appropriate, based upon any of the factors described in the Incentive Plan in addition to general factors relating to retention of talent.
2.2    Benefit.
(a)    Generally.  Executive shall be eligible to participate, to the extent it is legal and permitted by the applicable benefits plans, policies or contracts, in all employee benefits programs that the Company may adopt for its U.S. employees generally providing for sick or other leave, vacation, group health, disability and life insurance benefits.  Executive shall be eligible to participate in the Company’s 401(k) plan on the terms and conditions and qualifications of such plan from time 

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to time in effect, with a Company match (if any) no less favorable than that provided to any other Company executive.
(b)    Executive.  Executive shall be eligible to participate, to the extent it is legal and permitted by the applicable plans, policies or contracts, in all benefits or fringe benefits which are in effect generally for the Company’s executive personnel from time to time.
2.3    Expense Reimbursement.  The Company shall pay or reimburse Executive for all reasonable expenses incurred in connection with performing his duties upon presentation of documents in accordance with the reasonable procedures established by the Company. 
SECTION 3 
TERMINATION
3.1    By the Company:
(a)    For Cause.  The Company shall have the right at any time, exercisable upon written notice, to terminate the Executive’s employment for Cause.  As used in this Agreement, “Cause” shall mean that the Executive:
(i)    has been convicted of, or has entered a pleading of guilty or nolo contendre to, a felony (other than DUI or similar felony) or any crime involving fraud, theft, embezzlement or other act of dishonesty involving the Company;
(ii)    has knowingly and intentionally participated in fraud, embezzlement, or other act of dishonesty involving the Company;
(iii)    materially fails to attempt in good faith to perform Executive’s duties required under Executive’s employment by or other relationship with the Company (it being agreed that failure of the Company to achieve operating results or similar poor performance of the Company shall not, in and of itself, be deemed a failure to perform Executive’s duties);
(iv)    fails to attempt in good faith to comply with a lawful directive of the CEO or the Board that is consistent with the Company’s business practices and Code of Ethics;
(v)    engages in willful misconduct for which Executive receives a material and improper personal benefit at the expense of the Company, or accidental misconduct resulting in such a benefit which Executive does not promptly report to the Company and redress promptly upon becoming aware of such benefit;
(vi)    in carrying out his duties under this Agreement, has engaged in acts or omissions constituting gross negligence or willful misconduct resulting in, or which, in the good faith opinion of the Board, could be expected to result in, substantial economic harm to the Company; 
(vii)    has failed for any reason to correct, cease or alter any action or omission that (A)  materially violates or does not conform with the Company’s policies, standards or 

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regulations in a material way, (B) constitutes a material breach of this Agreement or the Confidentiality Agreement (as defined below), or (C) constitutes a material breach of his duty of loyalty to the Company; or
(viii)    has disclosed any Proprietary Information (as defined below) without authorization from the Board, Chief Executive Officer or General Counsel except as otherwise permitted by this Agreement, another agreement between the parties or any Company policy in effect at the time of disclosure.
For purposes of the definition of “Cause”, “Company” shall include any subsidiary, business unit or affiliate of the Company with respect to which Executive performs Executive’s duties.
The Company shall provide written notice to Executive of any act or omission that the Company believes constitutes grounds for “Cause” pursuant to clause (iii), (iv) or (vii) above, and no such act or omission shall constitute “Cause” unless Executive fails to remedy such act or omission within ten (10) days of the receipt of such notice; provided that such ten (10) day cure period shall not apply with respect to any matter that is incapable of cure within such period.  
(b)    Due to Death or Disability.  Executive’s employment shall terminate upon Executive’s death and the Company may terminate Executive’s employment due to Executive’s Disability.  As used in this Agreement, “Disability” shall mean any physical or mental disability or incapacity that renders Executive incapable of fully performing the services required of Executive by the Company for a period of 180 consecutive days or for shorter periods aggregating 180 days during any twelve (12) month period.  For purposes of the definition of “Disability”, “Company” shall include any subsidiary, business unit or affiliate of the Company with respect to which Executive performs Executive’s duties.  Any question as to the existence of a Disability upon which Executive and the Company cannot agree shall be determined by a qualified independent physician selected by Executive (or, if Executive is unable to make such selection, a selection shall be made by Executive’s spouse, if available, or if such spouse is unavailable due to death or incapacity, any other adult member of Executive’s immediate family), with the consent of the Company, which consent shall not be unreasonably withheld.  The determination of such physician made in writing to the Company and Executive shall be final and conclusive for all purposes of determining Disability under this Agreement.
(c)    Without Cause.  The Company may terminate Executive’s employment under this Agreement at anytime Without Cause.  As used in this Agreement, a termination “Without Cause” shall mean the termination of Executive’s employment by the Company other than (i) for Cause pursuant to SECTION 3.1(a) above or (ii) due to death or Disability pursuant to SECTION 3.1(b) above.  
3.2    By the Executive:
(a)    Without Good Reason.  Executive may terminate his employment under this Agreement at any time Without Good Reason.  As used in this Agreement, a termination “Without Good Reason” shall mean termination of Executive’s employment by Executive other than For Good Reason pursuant to SECTION 3.2(b) below.

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(b)    For Good Reason.  Executive shall have the right at any time to resign his employment under this Agreement For Good Reason.  As used in this Agreement, “For Good Reason” shall mean any of the following: (i) a material diminution in the Executive’s Base Salary or Target Annual Cash Bonus, (ii) a material diminution in Executive’s title, authority, duties and responsibilities as compared to Executive’s title, authority, duties and responsibilities measured immediately after the Effective Date, (iii) any requirement that the Executive report to anyone but (A) the Chief Executive Officer of the ultimate parent entity, or (B) if the Company becomes a subsidiary or a division of another entity not engaged predominantly in the same business as the Company, the most senior executive of such subsidiary or division, (iv) any material breach by the Company or related entities of this Agreement or the Executive’s other agreements with the Company or related entities, (v) the failure of any successor to all or substantially all of the Company’s business or assets to promptly assume and continue this Agreement, whether contractually or as a matter of law, within fifteen (15) days of the transaction which gives rise to the successor’s rights in this Agreement and (vi) any requirement by the Company that Executive relocate his personal residence to any city more than 50 miles from Raleigh, North Carolina. 
Notwithstanding the foregoing, no event shall be a Good Reason event unless the Executive gives the Company written notice thereof within ninety (90) days of the first occurrence thereof, the Company does not cure such event within thirty (30) days of the giving of such notice and the Executive does not terminate employment prior to sixty (60) days after the end of the cure period.
3.3    Compensation Upon Termination.  Upon termination of Executive’s employment with the Company, the Company’s obligation to pay compensation and benefits under SECTION 2 hereof shall terminate, except that the Company shall pay to the Executive or, if applicable, the Executive’s heirs, all earned but unpaid Base Salary under SECTION 2.1(a) and accrued vacation under SECTION 2.2, in each case, through the Termination Date.  If the Company terminates Executive’s employment Without Cause, for Executive’s death, for Executive’s Disability, or if Executive terminates his employment for Good Reason, then, in addition, to the foregoing compensation, upon execution and delivery (and non-revocation) by Executive of the Separation Agreement and General Release as set forth in SECTION 6.11, the Company shall pay severance benefits pursuant to SECTION 3.4 below.  No other payments or compensation of any kind shall be paid in respect of Executive’s employment with or termination from the Company.  In addition, Executive shall be entitled to receive any amounts or benefits due under any plan or program in accordance with the term thereof, and, other than on termination for Cause or a voluntary termination by Executive without Good Reason, his annual bonus for any completed fiscal year at the same time annual bonuses would have been paid if he had continued in employment (it being understood that in the event of any such termination Executive is not entitled to an Annual Bonus for the then-current Fiscal Year).  Notwithstanding any contrary provision contained herein, in the event of any termination of Executive’s employment, the exclusive remedies available to the Executive shall be the amounts due under this SECTION 3, which are in the nature of liquidated damages, and are not in the nature of a penalty.  

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3.4    Severance Benefits.  
(a)    Termination without Cause or for Good Reason.  Subject to the terms and conditions of eligibility for Executive’s receipt of severance benefits under this Agreement, including the timely execution and delivery (and non-revocation) by Executive of the Separation Agreement and General Release as set forth in SECTION 6.11, the Company shall pay to Executive, as severance benefits:
(i)    An amount equal to the product of (a) the applicable Severance Multiple (as defined below) and (b) the sum of (x) the highest annual Base Salary rate for Executive in effect over the prior two (2) years and (y) the highest amount of Executive’s Target Bonus or Annual Cash Bonus actually paid over the prior two (2) years, whichever is greater, which total payment shall be paid to Executive on a salary continuation basis according to the Company’s normal payroll practices over the 18 month period following the date the Executive incurs a Separation from Service, but in no event less frequently than monthly.  As used herein, the “Severance Multiple” shall be 2.5 if the termination without Cause or resignation for Good Reason occurs within ninety (90) days preceding or twelve (12) months following a “Change in Control” (as defined below) and 1.5 in the case of any other termination without Cause or resignation for Good Reason.  
(ii)    Subject to (1) the Executive’s timely election of continuation coverage  under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and (2) the Executive’s continued copayment of premiums at the same level and cost to the Executive as if the Executive were an employee of the Company (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars), continued participation in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan) which covers the Executive (and the Executive’s eligible dependents) for a period of 18 months at the Company’s expense, provided that the Executive is eligible and remains eligible for COBRA coverage.  The Company may modify its obligation under this SECTION 3.4(a)(ii) to the extent reasonably necessary to avoid any penalty or excise taxes imposed on it in connection with the continued payment of premiums by the Company under the Patient Protection and Affordable Care Act of 2010, as amended.
(iii)    In addition to the benefits described in Section 3.4(a)(i) and (ii), in the event that such termination occurs within ninety (90) days preceding or twelve (12) months following a “Change in Control” (as defined below), the Company shall accelerate the vesting of the Executive’s then-outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such awards become vested in full.
(b)    Termination for Executive’s Death or Disability.  In the event of Executive’s death or Disability, the Company shall accelerate the vesting of the Executive’s then-outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have 

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vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such awards become vested in full.
(c)    Notwithstanding any other provision of this Agreement, any severance benefits that would otherwise have been paid before the Company’s first normal payroll payment date falling on or after the thirtieth (30th) day after the date on which the Executive incurs a Separation from Service (the “First Payment Date”) shall be made on the First Payment Date.  Each separate severance installment payment and each other payment that Executive may be eligible to receive under this Agreement shall be a separate payment under this Agreement for all purposes. 
(d)    Notwithstanding anything to the contrary in this Agreement, with respect to any severance benefits or amounts payable to the Executive under this Agreement, in no event shall a termination of employment occur under this Agreement unless such termination constitutes a Separation from Service.  For purposes of this Agreement, a “Separation from Service” shall mean the Executive’s “separation from service” with the Company as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto.
(e)    Notwithstanding anything to the contrary in this Agreement, to the maximum extent permitted by applicable law, amounts payable to the Executive pursuant to this SECTION 3.4 shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals).  However, to the extent any such payments are treated as non-qualified deferred compensation subject to Section 409A of  the Internal Revenue Code of 1986, as amended (the “Code”), then if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of Executive’s death.  Upon the earlier of such dates, all payments deferred pursuant to this SECTION 3.4(e) shall be paid in a lump sum to the Executive.  Thereafter, payments will resume in accordance with this Agreement.  The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treas. Reg. Section 1.409A-1(i) and any successor provision thereto).
(f)    The Executive shall have no duty or obligation to mitigate the amounts due under SECTION 3.4(a) above and any amounts earned by Executive from other employment shall not be offset or reduce the amounts due hereunder.
(g)    The term “Change in Control” shall mean the occurrence of any of the following events: (i) the Board approves a plan of liquidation, dissolution or winding-up of the Company, (ii) the consummation of a sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries, (iii) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, Gores Building Holdings, 

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LLC. or its affiliates, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities or otherwise acquiring the power to elect or designate a majority of the members of the Board, (iv) a merger or consolidation of the Company with any other corporation or entity (a “Merger Partner”), as a result of which (A) the voting securities of the Merger Partner outstanding immediately prior thereto  represent (either by remaining outstanding or by being converted into voting securities of a surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) the shareholders of the Merger Partner immediately prior thereto have the power to elect or designate a majority of the members of the Board of the Company or such surviving entity; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in clause (iii) above) acquires more than 50% of the combined voting power of the Company’s then outstanding securities or the power to elect or designate a majority of the members of the Board shall not constitute a Change in Control of the Company.  For the avoidance of doubt  Gores Building Holdings, LLC or any of its affiliates reducing its equity holdings in the Company, directly or indirectly, shall not, in and of itself, constitute a Change in Control hereunder, unless such reduction in equity holdings is part of a transaction that constitutes a Change in Control pursuant to clauses (iii) or (iv) of this definition..
SECTION 4 
CERTAIN AGREEMENTS
4.1    Confidentiality.  Executive acknowledges that the Company owns and shall own and has developed and shall develop proprietary information concerning its business and its customers and clients (“Proprietary Information”).  Such Proprietary Information includes, among other things, trade secrets, financial information, product plans, customer lists, marketing plans, systems, manuals, training materials, forecasts, inventions, improvements, know-how and other intellectual property, in each case, relating to the Company’s business.  Executive shall, at all times, both during employment by the Company and thereafter, keep all Proprietary Information in confidence and trust and shall not use or disclose any Proprietary Information without the written consent of the Company, except as necessary in the ordinary course of Executive’s duties.  Executive shall keep the terms of this Agreement in confidence and trust and shall not disclose such terms, except to Executive’s family, accountants, financial advisors, or attorneys, or as otherwise authorized or required by law.  Executive agrees to execute the Company’s standard form of confidentiality agreement (the “Confidentiality Agreement”) applicable to all employees on the Effective Date.
4.2    Company Property.  Executive recognizes that all Proprietary Information, however stored or memorialized, and all identification cards, keys, flash drives, computers, mobile phones, Personal Data Assistants, telephone numbers, access codes, marketing materials, documents, records and other equipment or property which the Company provides are the sole property of the Company.  Upon termination of employment, Executive shall (1) refrain from taking 

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any such property from the Company’s premises, and (2) return any such property in Executive’s possession within ten (10) business days.
4.3    Assignment of Inventions to the Company.  Executive shall promptly disclose to the Company all improvements, inventions, formulas, processes, computer programs, know-how and trade secrets developed, whether or not patentable, made or conceived or reduced to practice or developed by Executive, either alone or jointly with others, during and related to Executive’s employment and the Company’s business or while using the Company’s equipment, supplies, facilities or trade secret information (collectively, “Inventions”).  All Inventions, and other intellectual property rights shall be the sole property of the Company and shall be “works made for hire.”  Executive hereby assigns to the Company any rights Executive may have or acquire in all Inventions and agrees to perform, during and after employment with the Company, at the Company’s expense including reasonable compensation to Executive, all acts reasonably necessary by the Company in obtaining and enforcing intellectual property rights with respect to such Inventions.  Executive hereby irrevocably appoints the Company and its officers and agents as Executive’s attorney-in-fact to act for and in Executive’s name and stead with respect to such Inventions.
SECTION 5
COVENANT NOT TO ENGAGE IN CERTAIN ACTS
5.1    General.  The parties understand and agree that the purpose of the restrictions contained in this Section 5 is to protect the goodwill and other legitimate business interests of the Company, and that the Company would not have entered into this Agreement in the absence of such restrictions.  Executive acknowledges and agrees that the restrictions are reasonable and do not, and will not, unduly impair his ability to make a living after the termination of his or her employment with the Company.  The provisions of this SECTION 5 shall survive the expiration or sooner termination of this Agreement.  For purposes of this SECTION 5, “Company” shall include any subsidiary, business unit or affiliate of the Company with respect to which Executive performs Executive’s duties.
5.2    Non-Compete; Non-Diversion.  In consideration for this Agreement to employ Executive and other valuable consideration provided hereunder, Executive agrees and covenants that during the term of employment and for a period of twelve (12) months after the Termination Date, Executive shall not, directly or indirectly, for himself or any third party, or alone or as a member of a partnership or limited liability company, or as an officer, director, shareholder, member or otherwise, engage in the following acts:
(i)    divert or attempt to divert any existing business of the Company provided that after the Termination Date this shall not prevent normal competitive sales for a non-Listed Company (as defined below);
(ii)    solicit, induce or entice, or seek to solicit, induce or entice, or otherwise interfere with the Company’s business relationship with, any customer of the Company, provided that after the Termination Date this shall not prevent normal competitive sales activities for a non-Listed Company;

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(iii)    (A) during the term of employment, render any services  (whether as an independent contractor or otherwise) on behalf of any company or line of business that competes anywhere in the United States with the Company (a “Competing Business”), and (B) for a period of twelve months after the Termination Date, render any services other than legal services (whether as an independent contractor or otherwise) on behalf of any Listed Company  (as defined below);
(iv)    own or control any interest in (except as a passive investor of less than two percent (2%) of the capital stock or publicly traded notes or debentures of a publicly held company), or become an officer, director, partner, member, or joint venturer of, any Competing Business, provided that after the Termination Date this shall only apply to the Listed Companies;
(v)    advance credit or lend money to any third party for the purpose of establishing or operating any Competing Business, provided that after the Termination Date this shall only apply to the Listed Companies; or
(vi)    with respect to any substantially full time independent contractor of the Company, employee of the Company or individual who was, at any time during the three months prior to the Termination Date, an employee of the Company: (A) hire or retain, or attempt to hire or retain, such individual to provide services for any third party; or (B) encourage, induce, solicit or attempt to solicit, divert, cause or attempt to cause, such individual to (1) terminate and/or leave his or her employment, (2) accept employment with any person or entity other than the Company, or (3) terminate his or her relationship with the Company or devote less than his or her full time efforts to the Company.
As used herein, “Listed Company” means one of nine (9) companies that are material competitors as identified by the Company, provided that the Company may at any time change such nine (9) companies to alternative competitors so long as the number does not exceed nine (9), no change can be effective after the termination of Executive’s employment with the Company and any change shall be effective thirty (30) days after Executive is given written notice thereof and only if at the end of such thirty (30) day period the Executive is employed by the Company.  As of the Effective Date, the Listed Companies are Pro Build Holdings, Inc., 84 Lumber Co., Builders FirstSource, Inc., BMC Select, HD Supply, Inc., Ganahl Lumber Co., US LBM Holdings, LLC, Carter Lumber Company and McCoy Corporation (dba McCoy’s Building Supply).  The parties acknowledge and agree that clause (vi) above shall not be violated by general advertising not targeted at the foregoing people nor serving as a reference upon request of the foregoing with regard to an entity with which Executive is not associated.  The parties acknowledge and agree that the term “Competing Business” does not include (i) builders of light frame (wood) commercial and new residential homes or (ii) any manufacturer of lumber, building materials or equipment or appliances.  Further, the Parties hereby acknowledge and agree that if Executive becomes employed by any company described in the preceding sentence, Executive shall be permitted to contact, solicit, sell to or otherwise do business with such Competing Businesses and that such activities shall not violate the terms of this Section.  

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5.3    Cessation/Reimbursement of Payments.  If Executive violates any provision of this SECTION 5, the Company may, upon giving written notice to Executive, immediately cease all payments and benefits that it may be providing to Executive pursuant to SECTION 2 or SECTION 3, and Executive shall be required to reimburse the Company for any payments received from, and the cash value of any benefits provided by, the Company between the first day of the violation and the date such notice is given; provided, however, that the foregoing shall be in addition to such other remedies as may be available to the Company and shall not be deemed to permit Executive to forego or waive such payments in order to avoid his or her obligations under this SECTION 5; and provided, further, that any release of claims by Executive pursuant to SECTION 6.11 shall continue in effect.
5.4    Survival; Injunctive Relief.  Executive agrees that the provisions of this SECTION 5 shall survive the termination of this Agreement and the termination of the Executive’s employment.  Executive acknowledges that a breach by him of the covenants contained in this SECTION 5 cannot be reasonably or adequately compensated in damages in an action at law and that such breach will cause the Company immeasurable and irreparable injury and damage.  Executive further acknowledges that he possesses unique skills, knowledge and ability and that competition in violation of this SECTION 5 would be extremely detrimental to the Company.  By reason thereof, each of the Company and Executive agrees that the other shall be entitled, in addition to any other remedies it may have under this Agreement, at law or in equity, or otherwise, to temporary, preliminary and/or permanent injunctive and other equitable relief to prevent or curtail any actual or threatened violation of this SECTION 5, without proof of actual damages that have been or may be caused to the Company by such breach or threatened breach, and waives to the fullest extent permitted by law the posting or securing of any bond by the other party in connection with such remedies.
SECTION 6 
MISCELLANEOUS
6.1    Notices.  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by certified or registered mail, postage prepaid, with return receipt requested, telecopy (with hard copy delivered by overnight courier service), or delivered by hand, messenger or overnight courier service, and shall be deemed given when received at the addresses of the parties set forth below, or at such other address furnished in writing to the other parties hereto:
		
	To the Company:
	Stock Building Supply Holdings, Inc. 
8020 Arco Corporate Drive, Ste. 400 
Raleigh, NC  27617 
Attn:  Chief Executive Officer 
Fax:919-431-1180

		
	To Executive:
	at the home address of Executive maintained in the human resource records of the Company.

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6.2    Severability.  The parties agree that it is not their intention to violate any public policy or statutory or common law.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.  Without limiting the foregoing, if any portion of Section 5 is held to be unenforceable, the maximum enforceable restriction of time, scope of activities and geographic area will be substituted for any such restrictions held unenforceable.
6.3    Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of North Carolina without regard to its principles of conflicts of laws.  Executive agrees to submit to the jurisdiction of the State of North Carolina; agrees that any dispute concerning the interpretation or application of this Agreement shall be heard by A JUDGE AND NOT A JURY; and agrees that any dispute shall be brought exclusively in a state or federal court of competent jurisdiction in North Carolina.  Executive waives any and all objections to jurisdiction or venue.
6.4    Survival.  The covenants and agreements of the parties set forth in Sections 4, 5 and 6 are of a continuing nature and shall survive the expiration, termination or cancellation of this Agreement, irrespective of the reason therefor. 
6.5    Entire Agreement.  This Agreement contains the entire understanding between the parties hereto with respect to the terms of employment, compensation, benefits, and covenants of Executive, and supersede all other prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, between Executive and the Company relating to the subject matter of the Agreement, which such other prior and contemporaneous agreements and understandings, inducements or conditions shall be deemed terminated effective immediately. For the avoidance of doubt, the parties agree that any and all indemnification agreements between Executive and the Company shall continue in full force unimpaired by this Agreement. Notwithstanding the foregoing, Executive acknowledges that the Confidentiality Agreement shall continue in effect during the term of Executive’s employment. 
6.6    Binding Effect, Etc.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and the Company’s successors and assigns, including any direct or indirect successor by purchase, merger, consolidation, reorganization, liquidation, dissolution, winding up or otherwise with respect to all or substantially all of the business or assets of the Company, and the Executive’s spouse, heirs, and personal and legal representatives.
6.7    Counterparts; Amendment.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may be amended or modified only by written instrument duly executed by the Company and Executive.
6.8    Voluntary Agreement.  Executive has read this Agreement carefully and understands and accepts the obligations that it imposes upon Executive without reservation.  No other promises or representations have been made to Executive to induce Executive to sign this Agreement.  Executive is signing this Agreement voluntarily and freely.

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6.9    Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns (including any direct or indirect successor, spouses, heirs and personal and legal representatives.  Any such successor or assign of the Company shall be included in the term “Company” as used in this Agreement.
6.10    Release of Claims.  In consideration for the compensation and other benefits provided pursuant to this Agreement, Executive agrees to execute a “Separation Agreement and General Release” form substantially in the form of Exhibit A attached hereto and incorporated herein by this reference.  The Company’s obligation to pay severance benefits pursuant to SECTION 3.4 is expressly conditioned on Executive’s execution and delivery of such Separation Agreement and General Release no later than forty-five (45) days after the date the Executive incurs a Separation from Service without revoking it for a period of seven (7) days following delivery.  Executive’s failure to execute and deliver such Separation Agreement and General Release within such forty-five (45) day time period (or Executive’s subsequent revocation of such Separation Agreement and General Release) will void the Company’s obligation to pay severance benefits under this Agreement.
6.11    Confidentiality Of Previous Employers’ Information.  The Company acknowledges that the Executive may have had access to confidential and proprietary information of his previous employer(s) and that Executive may be obligated to maintain the confidentiality of such information, not use such information or not to provide certain services to the Company, in each case pursuant to applicable law and/or any contractual relationship between Executive and a previous employer.  The Company hereby instructs Executive as follows: (1) Executive shall not disclose any such confidential or proprietary information to the Company or any of its affiliates, (2) Executive shall not use any such confidential or proprietary information in connection with his employment with the Company, and (3) Executive shall not perform any services for the benefit of the Company that would cause Executive to be in breach of his obligations owed to any previous employer or other third party.  If the Company requests Executive to provide any such services or to disclose any such information, Executive will advise the Company that he or she is prohibited from doing so.  Executive agrees to indemnify, defend and hold the Company and its affiliates harmless from and against any claims, losses or liabilities (including reasonable attorneys’ fees) incurred by the Company or any of its affiliates as a result of any breach by Executive of this SECTION 6.11.
6.12    In-kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to the Executive as soon as administratively practicable following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred.  In no event shall the Executive be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred.  This 

     13

SECTION 6.12 shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.
6.13    Section 409A.  This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under this Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties.  In no event shall the Company be required to provide a tax gross-up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties.  In the event that following the date hereof the Company reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
6.14    Indemnification, etc.  The Company shall indemnify and hold harmless Executive to the fullest extent permitted by law (including advance of legal fees) for any action or inaction he takes in good faith with regard to the Company or parent or any benefit plan of either.  Further, the Company shall cover Executive on its directors’ and officers’ liability insurance policies to no less extent than that which covers any other officer or director of the Company. 
[signatures on following page]

     14

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
	
				
	COMPANY:
	 
	EXECUTIVE: 

	 
	 
	 
	 

	STOCK BUILDING SUPPLY 
HOLDINGS, INC.
	 
	 

	 
	 
	 
	 

	By:
	/s/ Jeffrey G. Rea
	 
	/s/ C. Lowell Ball

	Name:
	Jeffrey G. Rea
	 
	C. LOWELL BALL

	Its:
	President and Chief Executive Officer
	 
	 

Signature Page to Employment Agreement

EXHIBIT A 
 
SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement and General Release (this “Agreement”) is made as of ________________________ by and between C. LOWELL BALL (“Executive”) and STOCK BUILDING SUPPLY HOLDINGS, INC. (the “Company”).  For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1.Termination of Employment.  The parties agree that Executive’s employment with the Company and all of its affiliates is terminated effective as of _____________ (the “Effective Date”).
2.    Payments Due to Executive.  Executive acknowledges receipt of $______________ from the Company, representing Executive’s accrued but unpaid Base Salary through the Effective Date.  Other than as expressly set forth in this Section, Executive is not entitled to any consulting fees, wages, accrued vacation pay, benefits or any other amounts with respect to his employment through the Effective Date.
3.    Severance Benefits and Continuing Health Insurance Coverage.  In consideration of Executive’s execution and non-revocation of this Agreement, the Company agrees to pay to Executive the amounts provided in SECTION 3.4 of that certain Employment Agreement, dated as of ____________ by and between the Executive and the Company.
4.    General Release.
(a)    Executive, on behalf of Executive, his or her heirs, executors, personal representatives, administrators and assigns, irrevocably, knowingly and unconditionally releases, remises and discharges the Company, its parents, all current or former affiliated or related companies of the Company and its parent, partnerships, or joint ventures, and, with respect to each of them, all of the Company’s or such related entities’ predecessors and successors, and with respect to each such entity, its officers, directors, managers, Executives, equity holders, advisors and counsel (collectively, the “Company Parties”) from any and all actions, causes of action, charges, complaints, claims, damages, demands, debts, lawsuits, rights, understandings and obligations of any kind, nature or description whatsoever, known or unknown (collectively, the “Claims”), arising out of or relating to the Executive’s employment with the Company and/or the separation of Executive from the Company.
(b)    This general release of Claims by Executive includes, without limitation, (i) all Claims based upon actions or omissions (or alleged actions or omissions) that have occurred up to and including the date of this Agreement, regardless of ripeness or other limitation on immediate pursuit of any Claim in the absence of this Agreement; (ii) all Claims relating to or arising out of Executive’s employment with and separation from the Company; (iii) all Claims (including Claims for discrimination, harassment, and retaliation) arising under any federal, state or local statute, regulation, ordinance, or the common law, including without limitation, Claims arising under Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination 

in Employment Act, as amended, the Family and Medical Leave Act and the Executive Retirement Income Security Act of 1974, the Civil Rights Act of 1991, the Equal Pay Act, the Fair labor Standards Act, 42 U.S.C. § 1981, and any other federal or state law, local ordinance or common law including for wrongful discharge, breach of implied or express contract, intentional or negligent infliction of emotional distress, defamation or other tort; and (iv) all Claims for reinstatement, attorney’s fees, interest, costs, wages or other compensation.
(c)    Executive agrees that there is a risk that each and every injury which he or she may have suffered by reason of his or her employment relationship might not now be known, and there is a further risk that such injuries, whether known or unknown at the date of this Agreement, might become progressively worse, and that as a result thereof further damages may be sustained by Executive; nevertheless, Executive desires to forever and fully release and discharge the Company Parties, and he or she fully understands that by the execution of this Agreement no further claims for any such injuries may ever be asserted.    
(d)    This general release does not release any Claim that relates to: (i) Executive’s right to enforce this Agreement; (ii) any rights Executive may have to indemnification from personal liability or to protection under any insurance policy maintained by the Company, including without limitation any general liability, EPLI, or directors and officers insurance policy or any contractual indemnification agreement; (iii) Executive’s right, if any, to government-provided unemployment and worker’s compensation benefits; or (iv) Executive’s rights under any Company Executive benefit plans (i.e. health, disability or retirement plans), which by their explicit terms survive the termination of Executive’s employment.
(e)    Executive agrees that the consideration set forth in Paragraph 3 above shall constitute the entire consideration provided under this Agreement, and that Executive will not seek from the Company Parties any further compensation or other consideration for any claimed obligation, entitlement, damage, cost or attorneys’ fees in connection with the matters encompassed by this Agreement.
(f)    Executive understands and agrees that if any facts with respect to this Agreement or Executive’s prior treatment by or employment with the Company are found to be different from the facts now believed to be true, Executive expressly accepts, assumes the risk of, and agrees that this Agreement shall remain effective notwithstanding such differences.  Executive agrees that the various items of consideration set forth in this Agreement fully compensate for said risks, and that Executive will have no legal recourse against the Company in the event of discovery of a difference in facts.
(g)    Executive agrees to the release of all known and unknown claims, including expressly the waiver of any rights or claims arising out of the Federal Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. (“ADEA”), and in connection with such waiver of ADEA claims, and as provided by the Older Worker Benefit Protection Act, Executive understands and agrees as follows: 
		
	i
	Executive has the right to consult with an attorney before signing this Agreement, and is hereby advised to do so; 

     17

		
	ii
	Executive shall have a period of forty-five (45) days from the Termination Date (or from the date of receipt of this Agreement if received after the Termination Date) in which to consider the terms of the Agreement (the “Review Period”).  Executive may at his or her option execute this Agreement at any time during the Review Period.  If the Executive does not return the signed Agreement to the Company prior to the expiration of the 45 day period, then the offer of severance benefits set forth in this Agreement shall lapse and shall be withdrawn by the Company; 

		
	iii
	Executive may revoke this Agreement at any time during the first seven (7) days following Executive’s execution of this Agreement, and this Agreement and release shall not be effective or enforceable until the seven-day period has expired (“Revocation Period Expiration Date”).  Notice of a revocation by the Executive must be made to the designated representative of the Company (as described below) within the seven (7) day period after Executive signs this Agreement.  If Executive revokes this Agreement, it shall not be effective or enforceable.  Accordingly, the “Effective Date” of this Agreement shall be on the eighth (8th) day after Executive signs the Agreement and returns it to the Company, and provided that Executive does not revoke the Agreement during the seven (7) day revocation period; 

In the event Executive elects to revoke this release pursuant to Paragraph 4(g)iii above, Executive shall notify Company by hand-delivery, express courier or certified mail, return receipt requested, within seven (7) days after signing this Agreement to: ATTN: General Counsel, Legal Department, Stock Building Supply Holdings, Inc., 8020 Arco Corporate Drive, Suite 400, Raleigh, North Carolina 27617.  In the event that Executive exercises his or her right to revoke this release pursuant to Paragraph 4(g)iii above, any and all obligations of Company under this Agreement shall be null and void.  Executive agrees that by signing this Agreement prior to the expiration of the forty-five (45) day period he or she has voluntarily waived his or her right to consider this Agreement for the full forty-five (45) day period.
EXECUTIVE AGREES THAT THE CONSIDERATION RECEIVED BY HIM OR HER UNDER THIS AGREEMENT, INCLUDING THE PAYMENTS DESCRIBED ABOVE, IS IN FULL AND COMPLETE SATISFACTION OF ANY CLAIMS THAT EXECUTIVE MAY HAVE, OR MAY HAVE HAD, ARISING OUT OF EXECUTIVE’S EMPLOYMENT WITH COMPANY (INCLUDING FOR THE AVOIDANCE OF DOUBT, ALL OF ITS SUBSIDIARIES OR AFFILIATES) OR THE TERMINATION OF THAT EMPLOYMENT, UP TO THE DATE OF EXECUTION OF THIS AGREEMENT.  EXECUTIVE ACKNOWLEDGES THAT HE OR SHE UNDERSTANDS THAT, BY ENTERING INTO THIS AGREEMENT, HE OR SHE NO LONGER HAS THE RIGHT TO ASSERT ANY CLAIM OR LAWSUIT OF ANY KIND ATTEMPTING TO RECOVER MONEY OR ANY OTHER REILEF AGAINST THE COMPANY PARTIES FOR ACTS OR INJURIES ARISING OUT OF EXECUTIVE’S FORMER EMPLOYMENT BY COMPANY (INCLUDING FOR THE AVOIDANCE OF DOUBT, ALL OF ITS SUBSIDIARIES OR AFFILIATES) OR THE TERMINATION OF THAT EMPLOYMENT.  Such claims further include any claims Executive may have pursuant to an internal grievance procedure at Company (including for the avoidance of doubt, all of its subsidiaries or affiliates).  Executive does not waive any rights or claims that may arise after the date this Agreement is executed. 

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5.    Review of Agreement; No Assignment of Claims.  Executive represents and warrants that he or she (a) has carefully read and understands all of the provisions of this Agreement and has had the opportunity for it to be reviewed and explained by counsel to the extent Executive deems it necessary, (b) is voluntarily entering into this Agreement, (c) has not relied upon any representation or statement made by the Company or any other person with regard to the subject matter or effect of this Agreement, (d) has not transferred or assigned any Claims and (e) has not filed any complaint or charge against any of the Company Parties with any local, state, or federal agency or court.
6.    No Claims.  Each party represents that it has not filed any Claim against the other Party with any state, federal or local agency or court and that it will not file any Claim at any time regarding the matters covered by this Agreement; provided, however, that nothing in this Agreement shall be construed to prohibit Executive from filing a Claim, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission; provided, further, that Executive acknowledges that he will not be entitled to recover any monetary or other damages in connection with or as a result of any such EEOC or state FEP agency proceeding.
7.    Interpretation.  This Agreement shall take effect as an instrument under seal and shall be governed and construed in accordance with the laws of the State of North Carolina without regard to provisions or principles thereof relating to conflict of laws.
8.    Agreement as Defense.  This Agreement may be pleaded as a full and complete defense to any subsequent action or other proceeding arising out of, relating to, or having anything to do with any and all Claims, counterclaims, defenses or other matters capable of being alleged, which are specifically released and discharged by this Agreement.  This Agreement may also be used to abate any such action or proceeding and/or as a basis of a cross-complaint for damages.
9.    Nondisclosure of Agreement.  The terms and conditions of this Agreement are confidential.  Executive agrees not to disclose the terms of this Agreement to anyone except immediate family members and Executive’s attorneys and financial advisers.  Executive further agrees to inform these people that the Agreement is confidential and must not be disclosed to anyone else.  Executive may disclose the terms of this Agreement if compelled to do so by a court, but Executive agrees to notify the Company immediately if anyone seeks to compel Executive’s testimony in this regard, and to cooperate with the Company if the Company decides to oppose such effort.  Executive agrees that disclosure by Executive in violation of this Agreement would cause so much injury to the Company that money alone could not fully compensate the Company and that the Company is entitled to injunctive and equitable relief.  Executive also agrees that the Company would be entitled to recover money from Executive if this Agreement were violated.
10.    Ongoing Covenants.  Executive acknowledges that nothing in this Agreement shall limit or otherwise impact Executive’s continuing obligations of confidentiality to the Company in accordance with Company policy and applicable law, or any applicable Company policies or agreements between the Company and Executive with respect to non-competition or non-solicitation, and Executive covenants and agrees to abide by all such continuing obligations.

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11.    No Adverse Comments.  For two (2) years, Executive and the Company agree not to make, issue, release or authorize any written or oral statements, derogatory or defamatory in nature, about the other (which in the case of the Company shall include its affiliates or their respective products, services, directors, officers or Executives), provided that the foregoing shall not be violated by truthful testimony in response to legal process, normal competitive statements, rebuttal of statements by the other or actions to enforce the party’s rights.
12.    Integration; Severability.  The terms and conditions of this Agreement constitute the entire agreement between Company and Executive and supercede all previous communications, either oral or written, between the parties with respect to the subject matter of this Agreement.  No agreement or understanding varying or extending the terms of this Agreement shall be binding upon either party unless in writing signed by or on behalf of such party.  In the event that a court finds any portion of this Agreement unenforceable for any reason whatsoever, Company and Executive agree that the other provisions of the Agreement shall be deemed to be severable and will continue in full force and effect to the fullest extent permitted by law. 
EXECUTIVE ACKNOWLEDGES THE FOLLOWING: HE OR SHE HAS ENTERED INTO THIS AGREEMENT KNOWINGLY, VOLUNTARILY AND OF HIS OR HER OWN FREE WILL WITH A FULL UNDERSTANDING OF ITS TERMS; HE OR SHE HAS READ THIS AGREEMENT; THAT HE OR SHE FULLY UNDERSTANDS ITS TERMS; THAT EXECUTIVE IS ADVISED TO CONSULT AN ATTORNEY FOR ADVICE; THAT HE OR SHE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT; THAT HE OR SHE HAS HAD AMPLE TIME TO CONSIDER HIS OR HER DECISION BEFORE ENTERING INTO THE AGREEMENT. EXECUTIVE ACKNOWLEDGES THAT HE OR SHE IS SATISFIED WITH THE TERMS OF THIS AGREEMENT AND AGREES THAT THE TERMS ARE BINDING UPON HIM OR HER. 
IN WITNESS WHEREOF, the parties have executed this Agreement with effect as of the date first above written.

     20

EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY THE COMPANY OF HIS ABILITY TO TAKE ADVANTAGE OF THE CONSIDERATION PERIOD AFFORDED BY PARAGRAPH 4 ABOVE AND THAT HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT. 
IN WITNESS WHEREOF, the parties have executed this Agreement with effect as of the date first above written.
	
			
	 
	 
	 

	 
	C. LOWELL BALL

	 
	 
	 

	 
	STOCK BUILDING SUPPLY HOLDINGS, INC.

	 
	 
	 

	 
	By:
	 

	 
	Name:
	 

	 
	Title:
	 

     21EX-10.1

 Exhibit 10.1 

AMENDMENT NUMBER SIX TO CREDIT AGREEMENT 

THIS AMENDMENT NUMBER SIX TO CREDIT AGREEMENT (this “Amendment”), dated as of October 24, 2014 and effective as
of the “Effective Date” set forth below, is entered into by and among WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), SABA SOFTWARE, INC., a Delaware corporation (“Borrower”), and the
undersigned Subsidiaries of Borrower party hereto as Subsidiary Guarantors, and in light of the following: 
 W I T
N E S S E T H 
 WHEREAS, Lender, Borrower and the Subsidiary Guarantors are
parties to that certain Amended and Restated Credit Agreement, dated as of June 27, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”); 

WHEREAS, Borrower has requested that Lender make certain amendments to the Credit Agreement; and 

WHEREAS, upon the terms and conditions set forth herein, Lender is willing to accommodate Borrower’s request. 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 
 1. Defined
Terms. All initially capitalized terms used herein (including the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Credit Agreement, as amended hereby. 

2. Amendments to Credit Agreement. Subject to the satisfaction or waiver of the conditions precedent set forth in
Section 3 hereof: 
 (a) Section 2.01(a)(i) of the Credit Agreement is hereby amended and modified by:

  

	 	(i)	replacing the reference to “Forty Million Dollars ($40,000,000.00)” contained therein with “Forty Five Million Dollars ($45,000,000)”; and 

 

	 	(ii)	replacing the reference to “May 31, 2013” contained therein with “October 24, 2014”. 

(b) Section 2.03(e) of the Credit Agreement is hereby amended and modified by replacing the reference to “2.75%”
with “Applicable Margin (as defined in the Line of Credit Note) for LIBOR” and “4.75% with “Applicable Margin (as defined in the Line of Credit Note) for LIBOR plus 2.00%”. 

(c) Exhibit D to the Credit Agreement is hereby amended and modified in its entirety in the form of Exhibit A
attached hereto. 
 3. Conditions Precedent to Amendment. Section 2 of this Amendment shall be effective as of
October 24, 2014 (the “Effective Date”), upon satisfaction of each of the following conditions precedent: 
 (a)
Lender shall have received this Amendment, duly executed and delivered by the parties hereto, and the same shall be in full force and effect. 

  
 1 

 (b) Lender shall have received a $25,000 amendment fee, which amendment fee is earned in full and
due and payable on the date hereof. 
 (c) Lender shall have received an updated Schedule 2 to each Security Agreement, current as of the
date hereof, and in form satisfactory to Lender. 
 (d) Lender shall have received an original of the Line of Credit Note in the form of
Exhibit A attached hereto, duly executed and delivered by Borrower, and the same shall be in full force and effect. 
 (e)
After giving effect to this Amendment, the representations and warranties herein and in the Credit Agreement and the other Loan Documents shall be true, correct and complete in all material respects (except that such materiality qualifier shall not
be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date hereof, as though made on such date (except to the extent that such representations and warranties
relate solely to an earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of such earlier date). 

(f) No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by any Governmental Authority against Borrower, any Subsidiary Guarantor, or Lender. 

(g) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing or shall result from the
consummation of the transactions contemplated herein. 
 4. Representations and Warranties. Each of Borrower and each Subsidiary
Guarantor hereby represents and warrants to Lender as follows: 
 (a) It has all requisite power and authority to enter into this Amendment
and to carry out the transactions contemplated hereby. 
 (b) The execution, delivery, and performance by it of this Amendment (i) has
been duly authorized by all necessary action of Borrower or such Subsidiary Guarantor, and (ii) do not and will not (A) violate any material provision of federal, state, or local law or regulation applicable to Borrower or such Subsidiary
Guarantor, the Organizational Documents of Borrower or such Subsidiary Guarantor, or any order, judgment, or decree of any court or other Governmental Authority binding on Borrower or such Subsidiary Guarantor, (B) conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default under any material agreement of Borrower or such Subsidiary Guarantor where any such conflict, breach or default could individually or in the aggregate reasonably be
expected to have a Material Adverse Effect, (C) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of Borrower or such Subsidiary Guarantor, other than Permitted Liens, or (D) require any
approval of any holder of Equity Interest of Borrower or such Subsidiary Guarantor or any approval or consent of any Person under any material agreement of Borrower or such Subsidiary Guarantor, other than consents or approvals that have been
obtained and that are still in force and effect and except, in the case of material agreements, for consents or approvals, the failure to obtain could not individually or in the aggregate reasonably be expected to cause a Material Adverse Effect.

  
 2 

 (c) This Amendment has been duly executed and delivered by Borrower and such Subsidiary
Guarantor. This Amendment is a party is the legally valid and binding obligation of Borrower or such Subsidiary Guarantor, enforceable against Borrower or such Subsidiary Guarantor in accordance with its respective terms, except as enforcement may
be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally. 

(d) No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein has been issued and remains in force by any Governmental Authority against Borrower, any Subsidiary Guarantor, or Lender. 

(e) After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing as of the date hereof. 

(f) After giving effect to this Amendment, the representations and warranties in the Credit Agreement and the other Loan Documents are true,
correct and complete in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date
hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true, correct and complete in all material respects as of
such earlier date). 
 (g) As of the date hereof, there is (i) no litigation pending that is related to any Restatement-Related Event,
the Restatement Completion, or the NASDAQ Listing Event, other than as disclosed in Schedule 3.04 to the Credit Agreement and (ii) no investigation or proceeding by any Governmental Authority that is related to any
Restatement-Related Event, the Restatement Completion, or the NASDAQ Listing Event, other than (x) the SEC Investigation and (y) any potential investigation arising in connection with Borrower’s self-disclosure pursuant to FAR Subpart
3.10. 
 5. Payment of Costs and Fees. Borrower agrees to pay all reasonable and documented out-of-pocket costs and expenses of
Lender (including, without limitation, the reasonable fees and disbursements of outside counsel to Lender) in connection with the preparation, negotiation, execution and delivery of this Amendment and any documents and instruments relating hereto.

 6. Release. 
 (a)
Borrower hereby acknowledges and agrees that as of October 23, 2014, the aggregate outstanding principal amount of the indebtedness under the Credit Agreement and the other Loan Documents (including the Line of Credit Note) was $39,076,570.53.
and that such principal amount is payable pursuant to the Credit Agreement and the other Loan Documents as modified hereby without defense, offset, withholding, counterclaim, or deduction of any kind. 

(b) Effective on the date hereof, each of Borrower and each Subsidiary Guarantor, for itself and on behalf of its successors, assigns, and
officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby waives, releases, remises and forever discharges Lender, each of its Affiliates, and each of their respective successors
in title, past, present and future officers, directors, employees, limited partners, general partners, investors, attorneys, assigns, subsidiaries, shareholders, trustees, agents and other professionals and all other persons and entities to whom any
member of the Lenders would be liable if such persons or entities were found to be liable to Borrower or such Subsidiary Guarantor (each a “Releasee” and collectively, the “Releasees”), from any and all past,
present and future claims, suits, liens, lawsuits, adverse consequences, amounts paid in 

  
 3 

 
settlement, debts, deficiencies, diminution in value, disbursements, demands, obligations, liabilities, causes of action, damages, losses, costs and expenses of any kind or character, whether
based in equity, law, contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law (each a “Claim” and collectively, the “Claims”), whether known or unknown, fixed or
contingent, direct, indirect, or derivative, asserted or unasserted, matured or unmatured, foreseen or unforseen, past or present, liquidated or unliquidated, suspected or unsuspected, which Borrower ever had from the beginning of the world to the
date hereof, or now has, against any such Releasee which relates, directly or indirectly to the Credit Agreement, any other Loan Document, or to any acts or omissions of any such Releasee with respect to the Credit Agreement or any other Loan
Document, or to the lender-borrower relationship evidenced by the Loan Documents, except for the duties and obligations set forth in any of the Loan Documents or in this Amendment. As to each and every Claim released hereunder, Borrower and each
Subsidiary Guarantor hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil
Code of California which provides as follows: 
 “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” 

As to each and every Claim released hereunder, Borrower and each Subsidiary Guarantor also waives the benefit of each other similar provision
of applicable federal or state law (including without limitation the laws of the state of California), if any, pertaining to general releases after having been advised by its legal counsel with respect thereto. 

Borrower and each Subsidiary Guarantor each acknowledges that it may hereafter discover facts different from or in addition to those now
known or believed to be true with respect to such Claims and agrees that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Borrower and each Subsidiary Guarantor understands,
acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in
breach of the provisions of such release. 
 (c) Each of Borrower and each Subsidiary Guarantor, for itself and on behalf of its successors,
assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee above
that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by such Person pursuant to the above release. If Borrower or any Subsidiary Guarantor or any
of its respective successors, assigns, or officers, directors, employees, agents or attorneys, or any Person acting for or on behalf of, or claiming through it violate the foregoing covenant, such Person, for itself and its successors, assigns and
legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Releasee as a result of such violation. 

7. Choice of Law; Arbitration. THIS AMENDMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING CHOICE OF LAW AND ARBITRATION SET FORTH IN
SECTIONS 8.12 AND 8.13 OF THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS. 

  
 4 

 8. Counterpart Execution. This Amendment may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Amendment. Delivery of an executed counterpart
of this Amendment by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Amendment but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding
effect of this Amendment. 
 9. Effect on Loan Documents. 

(a) The Credit Agreement, as amended hereby, and each of the other Loan Documents, as amended as of the date hereof, shall be and remain in
full force and effect in accordance with their respective terms and hereby are ratified and confirmed in all respects. The execution, delivery, and performance of this Amendment shall not operate, except as expressly set forth herein, as a waiver
of, consent to, or a modification or amendment of, any right, power, or remedy of Lender under the Credit Agreement or any other Loan Document. Except for the amendments to the Credit Agreement expressly set forth herein, the Credit Agreement and
the other Loan Documents shall remain unchanged and in full force and effect. The amendments, consents, waivers and modifications set forth herein are limited to the specified hereof, shall not apply with respect to any facts or occurrences other
than those on which the same are based, shall neither excuse future non-compliance with the Loan Documents nor operate as a waiver of any Default or Event of Default, shall not operate as a consent to any further or other matter under the Loan
Documents and shall not be construed as an indication that any future waiver of covenants or any other provision of the Credit Agreement will be agreed to, it being understood that the granting or denying of any waiver which may hereafter be
requested by Borrower remains in the sole and absolute discretion of Lenders. 
 (b) Upon and after the effectiveness of this Amendment,
each reference in the Credit Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to
“the Credit Agreement”, “thereunder”, “therein”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. 

(c) To the extent that any of the terms and conditions in any of the Loan Documents shall contradict or be in conflict with any of the terms
or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 

(d) This Amendment is a Loan Document. 

(e) Unless the context of this Amendment clearly requires otherwise, references to the plural include the singular, references to the singular
include the plural, the terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”. The words
“hereof”, “herein”, “hereby”, “hereunder”, and similar terms in this Amendment refer to this Amendment as a whole and not to any particular provision of this Amendment. Section, subsection, clause, schedule,
and exhibit references herein are to this Amendment unless otherwise specified. Any reference in this Amendment to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements,

  
 5 

 
substitutions, joinders, and supplements set forth herein). The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities, accounts, and contract rights. Any reference herein to any Person shall be construed to include such Person’s successors and assigns. 

10. Entire Agreement. This Amendment, and the terms and provisions hereof, the Credit Agreement and the other Loan Documents constitute
the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersede any and all prior or contemporaneous amendments or understandings with respect to the subject matter hereof, whether express or
implied, oral or written. 
 11. Reaffirmation of Obligations. Borrower and each Subsidiary Guarantor hereby reaffirms its
obligations under each Loan Document to which it is a party, as amended hereby. Borrower and each Subsidiary Guarantor hereby further ratifies and reaffirms the validity and enforceability of all of the liens and security interests heretofore
granted, pursuant to and in connection with the Security Agreements or any other Loan Document, to Lender, as collateral security for the obligations under the Loan Documents in accordance with their respective terms, and acknowledges that all of
such Liens and security interests, and all collateral heretofore pledged as security for such obligations, continue to be and remain collateral for such obligations from and after the date hereof. Each of Borrower and each Subsidiary Guarantor
hereby further does grant to Lender for the benefit of itself and the Bank Product Providers, a perfected security interest in the Collateral in order to secure all of its present and future obligations under the Loan Documents. 

12. Ratification. Borrower and each Subsidiary Guarantor hereby restates, ratifies and reaffirms each and every term and condition set
forth in the Credit Agreement and the other Loan Documents to which it is a party effective as of the date hereof and as amended hereby. 

13. Severability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable
from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

14. Subsidiary Guarantors. Each of the undersigned Subsidiary Guarantors consent to the amendments to the Credit Agreement and waiver
contained herein. Although the undersigned Subsidiary Guarantors have been informed of the matters set forth herein with respect to the Credit Agreement and have consented to same, each Subsidiary Guarantor understands that Lender has no obligation
to inform it of such matters in the future or to seek its acknowledgement or agreement to future consents or amendments related to the Credit Agreement (other than Section 8.06), and nothing herein shall create such a duty. 

[signature pages follow] 

  
 6 

 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and
delivered as of the date first above written. 
  

			
	SABA SOFTWARE, INC.,
	a Delaware corporation, as Borrower
		
	By:	 	 /s/ Mark Robinson

	Name:	 	 Mark Robinson

	Title:	 	 Chief Financial Officer

	
	 HAL ACQUISITION SUB INC.,
 a
Delaware corporation, as a Subsidiary Guarantor

		
	By:	 	 /s/ Peter E. Williams

	Name:	 	 Peter E. Williams

	Title:	 	 President

	
	 HUMANCONCEPTS, LLC,
 a
California limited liability company, as a Subsidiary Guarantor

		
	By:	 	 /s/ Peter E. Williams

	Name:	 	 Peter E. Williams

	Title:	 	 President

	
	 WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

		
	By:	 	 /s/ John Nocita

	Name:	 	 John Nocita

	Title:	 	 Managing Director

 Exhibit A 

EXHIBIT D TO 
 CREDIT AGREEMENT

 [FORM OF] FOURTH AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE 

 

			
	$45,000,000.00	  	 Palo Alto, California

October 24, 2014

 FOR VALUE RECEIVED, the undersigned SABA SOFTWARE, INC., a Delaware corporation (“Borrower”)
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”) to the Lender’s Account (as defined in the below-defined Credit Agreement), or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the principal sum of Forty Five Million Dollars ($45,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein. 
 DEFINITIONS: 

As used herein, the following terms shall have the meanings set forth after each definition, any other term defined in this Note shall have the
meaning set forth at the place defined, and any capitalized terms used herein without definition shall have the meaning set forth in that certain Amended and Restated Credit Agreement, dated as of June 27, 2011 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among Borrower, the Subsidiary Guarantors party thereto from time to time, and Lender: 

“Applicable Margin” means, as of any date of determination, 5.00 percentage points per annum for the Base Rate and 6.00
percentage points per annum for LIBOR; 
 provided that upon the occurrence of a Financial Statement Event, the applicable margin for
the Base Rate or LIBOR, as applicable, shall be set forth in the following table that corresponds to the most recent First Lien Leverage Ratio calculation delivered to Lender pursuant to Section 5.03 of the Credit Agreement (the
“First Lien Leverage Ratio Calculation”): 
  

							
	 Level
	  	 First Lien Leverage

Ratio Calculation
	  	 Applicable Margin for the

Base Rate
	  	 Applicable Margin for LIBOR

				
	I	  	If the First Lien Leverage Ratio is less than 2.0:1.0	  	3.75 percentage points	  	4.75 percentage points
				
	II	  	If the First Lien Leverage Ratio is greater than or equal to 2.0:1.0 and less than to 3.0:1.0	  	4.25 percentage points	  	5.25 percentage points
				
	III	  	If the First Lien Leverage Ratio is greater than or equal to 3.0:1.0	  	4.75 percentage points	  	5.75 percentage points

 provided further that upon the occurrence of a NASDAQ Listing Event, the applicable margin
for the Base Rate or LIBOR, as applicable, shall be set forth in the following table that corresponds to the most recent First Lien Leverage Ratio Calculation: 
  

							
	 Level
	  	 First Lien Leverage

Ratio Calculation
	  	 Applicable Margin for the

Base Rate
	  	 Applicable Margin for LIBOR

				
	I	  	If the First Lien Leverage Ratio is less than 2.0:1.0	  	3.50 percentage points	  	4.50 percentage points
				
	II	  	If the First Lien Leverage Ratio is greater than or equal to 2.0:1.0 and less than to 3.0:1.0	  	4.00 percentage points	  	5.00 percentage points
				
	III	  	If the First Lien Leverage Ratio is greater than or equal to 3.0:1.0	  	4.50 percentage points	  	5.50 percentage points

 If Applicable Margin is calculated based on the First Lien Leverage Ratio Calculation: (a) it shall be
based upon the most recent First Lien Leverage Ratio Calculation, which will be calculated as of the end of each fiscal quarter and (b) the Applicable Margin shall be re-determined quarterly on the first day of the month following the date of
delivery to Lender of the certified calculation of the First Lien Leverage Ratio pursuant to Section 5.03 of the Credit Agreement; provided, that if Borrower fails to provide such certification when such certification is
due, the Applicable Margin shall be set at the margin in the row styled “Level III” as of the first day of the month following the date on which the certification was required to be delivered until the date on which such certification is
delivered (on which date (but not retroactively), without constituting a waiver of any Default or Event of Default occasioned by the failure to timely deliver such certification, the Applicable Margin shall be set at the margin based upon the
calculations disclosed by such certification. In the event that the information regarding the First Lien Leverage Ratio contained in any certificate delivered pursuant to Section 5.03 of the Agreement is shown to be inaccurate, and such
inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin actually applied for such Applicable Period, then (i) Borrower shall
immediately deliver to Lender a correct certificate for such Applicable Period, (ii) the Applicable Margin shall be determined as if the correct Applicable Margin (as set forth in the table above) were applicable for such Applicable Period, and
(iii) Borrower shall immediately deliver to Lender full payment in respect of the accrued additional interest as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by Lender to the
affected obligations. 

 (a) “Base Rate” means, for any day, a fluctuating rate equal to the highest of:
(i) the Prime Rate in effect on such day, (ii) a rate determined by Lender to be one percent (1.00%) above Daily Three Month LIBOR in effect on such day, and (iii) the Federal Funds Rate plus one-half percent (0.50%). 

(b) “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are
authorized or required by law to close. 
 (c) “Daily Three Month LIBOR” means, for any day, the rate of interest equal to
LIBOR then in effect for delivery for a three (3) month period. 
 (d) “Federal Funds Rate” means, for any day, the
rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers for the immediately preceding day, as published by the Federal Reserve
Bank of New York; provided that if no such rate is so published on any day, then the Federal Funds Rate for such day shall be the rate most recently published. 

(e) “Fixed Rate Term” means a period commencing on a Business Day and continuing for one (1), two (2),
three (3), or six (6) months, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed
Rate Term may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day. 
 “LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula: 
  

			
	LIBOR =	  	 Base LIBOR

		  	100% - LIBOR Reserve Percentage.

 (i) “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Lender
(A) for the purpose of calculating effective rates of interest for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Lender for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to
the principal amount to which such Fixed Rate Term applies, or (B) for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, as the Inter-Bank Market Offered Rate in effect from
time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of such loans. Borrower understands and agrees that Lender may base its quotation of the Inter-Bank Market Offered Rate upon such
offers or other market indicators of the Inter-Bank Market as Lender in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market. 

(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Lender for expected changes in such reserve percentage during the applicable term of this Note.

 (f) “Prime Rate” means at any time the rate of interest most recently announced within Wells Fargo Bank, N.A. at its
principal office as its Prime Rate, with the understanding that the Prime 

 
Rate is one of Wells Fargo Bank, N.A.’s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by
the recording thereof after its announcement in such internal publication or publications as Lender may designate. 
 INTEREST: 

(a) Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days
elapsed) either (i) at a fluctuating rate per annum of the Applicable Margin plus the Base Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Lender to be Applicable Margin plus LIBOR in effect on the first
day of the applicable Fixed Rate Term. When interest is determined in relation to the Base Rate, each change in the rate of interest hereunder shall become effective on the date each Base Rate change is announced within Lender. With respect to each
LIBOR selection hereunder, Lender is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Lender’s books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. 
 (b)
Selection of Interest Rate Options. At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof
bears interest determined in relation to the Base Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion of this Note bears interest determined in relation to the Base Rate, Borrower may convert all or a portion
thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding
principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Lender notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR
selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone (or such other electronic method as Lender may permit) so long as, with respect to each LIBOR selection, (A) if requested by Lender, Borrower
provides to Lender written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Lender prior to 10:00 a.m. (California) on the first day of the Fixed Rate Term, or at
a later time during any Business Day if Lender, at its sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by Lender, the
quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Lender of the applicable fixed rate. If no specific designation of interest is made at the time any advance is requested hereunder or at
the end of any Fixed Rate Term, Borrower shall be deemed to have made a Base Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied. 

(c) Taxes and Regulatory Costs. (i) Borrower shall pay to Lender immediately upon demand, in addition to any other amounts due or
to become due hereunder, any and all (A) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and
(B) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in
the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, subject to clause (c)(ii) below, any reasonable allocation made by Lender among its operations shall be
conclusive and binding upon Borrower. 

 (ii) If claiming reimbursement or compensation under this clause (c), Lender shall deliver to
Borrower a notice of its intent to make such claim. Each such notice shall be delivered within the 120-day period commencing on the date the officer of Lender charged with the credit responsibility for Borrower and the Loan Documents first becomes
aware of the specific facts on which such claim is to be based and shall include a certificate setting forth in reasonable detail the amount payable to Lender under this clause (c). Notwithstanding any other provision in this Note or any other Loan
Document, Lender shall not be entitled to any reimbursement or compensation pursuant to this clause (c) for any period of time prior to such notice if Lender shall have not given notice within such 120-day period. The determination by Lender of
any amount due pursuant to this clause (c) as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the
parties hereto. 
 (iii) Notwithstanding any other provision of this Note or any other Loan Document, Borrower shall only be liable for
additional amounts pursuant to clause (c) to the extent that Lender has required similarly situated borrowers or obligors to pay comparable amounts in respect of such increased costs or reduced returns. 

(d) Payment of Interest. Interest accrued on this Note at the Base Rate shall be payable on the first day of each month, commencing
June 1, 2013. Interest accrued on this Note at LIBOR shall be payable on the last day of each Fixed Rate Term, but with respect to any Fixed Rate Term that is longer than three (3) months, interest shall be payable on each successive date
three (3) months after the first day of such Fixed Rate Term. 
 (e) Default Interest. From and after the maturity date of this
Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Lender’s option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to two percent (2%) above the rate of interest from time to time applicable to this Note. 

BORROWING AND REPAYMENT: 
 (a)
Borrowing and Repayment. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note, the Credit
Agreement, and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount permitted pursuant to
Section 2.01(a)(i) of the Credit Agreement. The unpaid principal balance of this Note at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which
balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on June 27, 2016. 

(b) Advances. Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or
written request of an Authorized Person in accordance with the Credit Agreement, any one acting alone, who are authorized to request Advances and direct the disposition of any Advances until written notice of the revocation of such authority is
received by the holder at the office designated above. The holder shall have no obligation to determine whether any person requesting an Advance is or has been authorized by Borrower. 

 (c) Application of Payments. All payments credited to principal of this Note shall be
applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Base Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first. 
 PREPAYMENT: 

(d) Base Rate. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Base Rate at
any time, in any amount and without penalty. 
 (e) LIBOR. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount,
the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Lender providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to
the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Lender immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows for each such month: 
 (i) Determine the amount of
interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto. 

(ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid. 

(iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above. 

Borrower acknowledges that prepayment of such amount may result in Lender incurring additional costs, expenses and/or liabilities, and that it
is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs,
expenses and/or liabilities of Lender. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.0%) above the Base Rate in effect from
time to time (computed on the basis of a 360- day year, actual days elapsed). 
 EVENTS OF DEFAULT: 

This Note is made pursuant to and is subject to the terms and conditions of the Credit Agreement. Any default in the payment or performance of
any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note. 

 MISCELLANEOUS: 

(f) Remedies. Upon the occurrence and during the continuance of any Event of Default, the holder of this Note, at the holder’s
option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived
by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs
and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s
rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter
or motion brought by Lender or any other person) relating to Borrower or any other person or entity. 
 (g) Governing Law. This Note
shall be governed by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of laws that would result in the application of the law of any other jurisdiction. 

 IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

  

			
	SABA SOFTWARE, INC.
		
	By:	 	  

	Name:	 	  

	Title:

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