Document:

Exhibit 10.8

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

 

Indemnification Agreement (this “Agreement”), dated as of [·], 2018, by and among US LBM Holdings, Inc., a Delaware corporation (“US LBM”), LBM Midco, LLC (“LBM LLC”), LBM Borrower, LLC (“LBM Borrower”) and US LBM Holdings, LLC (“Holdings”, and together with US LBM, LBM LLC and LBM Borrower, the “Companies”) and [·] (“Indemnitee”).

 

WHEREAS, qualified persons are reluctant to serve corporations as directors or otherwise unless they are provided with appropriate indemnification and insurance against claims arising out of their service to and activities on behalf of the Companies; and

 

WHEREAS, the Companies have determined that attracting and retaining such persons is in the best interests of the Companies and their respective stockholders or members and that it is reasonable, prudent and necessary for the Companies to indemnify such persons to the fullest extent permitted by applicable law and to provide reasonable assurance regarding insurance;

 

NOW, THEREFORE, the Companies and Indemnitee hereby agree as follows:

 

1. Defined Terms; Construction.

 

(a) Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

 

“Affiliate” means, with respect to any person, any other person directly or indirectly controlling, controlled by or under common control with such first person.  For these purposes, “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person by reason of ownership of voting securities, by contract or otherwise.

 

“Change in Control” means, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) 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 (A) a trustee or other fiduciary holding securities under an employee benefit plan of US LBM or any of its Subsidiaries acting in such capacity, or (B) an entity owned directly or indirectly by the stockholders of US LBM in substantially the same proportions as their ownership of stock of US LBM, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of US LBM representing more than 50% of the total voting power represented by US LBM’s then outstanding Voting Securities, (ii) during any period of two consecutive years commencing from and after the date hereof,

 

 

individuals who at the beginning of such period constitute the Board of Directors (the “Board”) of US LBM and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in (i), (iii) or (iv) herein) whose appointment or election by the Board or nomination for election by US LBM’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose appointment, election or nomination for election was previously so approved or recommended, cease for any reason to constitute a majority of the members of the Board, (iii) the stockholders of US LBM approve a merger or consolidation of US LBM with any other corporation or entity other than a merger or consolidation that would result in the Voting Securities of US LBM outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity, or an entity that controls directly or indirectly, such surviving entity) at least 50% of the total voting power represented by the Voting Securities of US LBM or such surviving entity outstanding immediately after such merger or consolidation, (iv) the stockholders of US LBM approve a plan of complete liquidation of US LBM or an agreement for the sale or disposition by US LBM of (in one transaction or a series of related transactions) all or substantially all of its assets, or (v) US LBM shall file or have filed against it, and such filing shall not be dismissed, any bankruptcy, insolvency or dissolution proceedings, or a trustee, administrator or creditors committee shall be appointed to manage or supervise the affairs of US LBM.

 

“Corporate Status” means the status of a person who is or was a director (or a member of any committee of a board of directors), officer, employee or agent (including without limitation a manager of a limited liability company) of any of the Companies or any of their Subsidiaries, or of any predecessor thereof, or is or was serving at the request of any of the Companies as a director (or a member of any committee of a board of directors), officer, employee or agent (including without limitation a manager of a limited liability company), of another entity, or of any predecessor thereof, including service with respect to an employee benefit plan.

 

“Determination” means a determination that either (x) there is a reasonable basis for the conclusion that indemnification of Indemnitee is proper in the circumstances because Indemnitee met a particular standard of conduct (a “Favorable Determination”) or (y) there is no reasonable basis for the conclusion that indemnification of Indemnitee is proper in the circumstances because Indemnitee met a particular standard of conduct (an “Adverse Determination”). An Adverse Determination shall include the decision that a Determination was required in connection with indemnification and the decision as to the applicable standard of conduct.

 

“DGCL” means the General Corporation Law of the State of Delaware, as amended from time to time.

 

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“Expenses” means all attorneys’ fees and expenses, retainers, court, arbitration and mediation costs, transcript costs, fees and expenses of experts, witnesses and public relations consultants, bonds, costs of collecting and producing documents, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, appealing or otherwise participating in a Proceeding.

 

“Independent Legal Counsel” means an attorney or firm of attorneys competent to render an opinion under the applicable law, selected in accordance with the provisions of Section 6(e), who has not performed any services (other than services similar to those contemplated to be performed by Independent Legal Counsel under this Agreement) for any of the Companies or any of their Subsidiaries or for Indemnitee within the last three years.

 

“Proceeding” means a threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including without limitation a claim, demand, discovery request, formal or informal investigation, inquiry, administrative hearing, arbitration or other form of alternative dispute resolution, including an appeal from any of the foregoing.

 

“Subsidiary” means any corporation, limited liability company, partnership or other entity, a majority of whose outstanding voting securities is owned, directly or indirectly, by a Company.

 

“Voting Securities” means any securities of US LBM that vote generally in the election of directors.

 

(b) Construction. For purposes of this Agreement,

 

(i) References to a Company and any of its Subsidiaries shall include any corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise that before or after the date of this Agreement is party to a merger or consolidation with such Company or any such Subsidiary or that is a successor to such Company as contemplated by Section 9(e) (whether or not such successor has executed and delivered the written agreement contemplated by Section 9(e)).

 

(ii) References to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan.

 

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(iii) References to a “witness” in connection with a Proceeding shall include any interviewee or person called upon to produce documents in connection with such Proceeding.

 

2. Agreement to Serve.

 

Indemnitee agrees to serve as a director of any of the Companies or one or more of their Subsidiaries and in such other capacities as Indemnitee may serve at the request of any of the Companies from time to time, and by their execution of this Agreement each Company confirms its request that Indemnitee so serve as a director and in such other capacities. Indemnitee shall be entitled to resign or otherwise terminate such service with immediate effect at any time, and neither such resignation or termination nor the length of such service shall affect Indemnitee’s rights under this Agreement. This Agreement shall not constitute an employment agreement, supersede any employment agreement to which Indemnitee is a party or create any right of Indemnitee to continued employment or appointment.

 

3. Indemnification.

 

(a) General Indemnification. The Companies shall indemnify Indemnitee, to the fullest extent permitted by applicable law in effect on the date hereof or as amended to increase the scope of permitted indemnification, against Expenses, losses, liabilities, judgments, fines, penalties and amounts paid in settlement (including all interest, taxes, assessments and other charges in connection therewith) incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding in any way connected with, resulting from or relating to Indemnitee’s Corporate Status.

 

(b) Additional Indemnification Regarding Expenses. Without limiting the foregoing, in the event any Proceeding is initiated by Indemnitee, any of the Companies, any of the Companies’ Subsidiaries or any other person to enforce or interpret this Agreement or any rights of Indemnitee to indemnification or advancement of Expenses (or related obligations of Indemnitee) under any of the Companies’ or any such Subsidiary’s certificate of incorporation, bylaws or other organizational agreement or instrument, any other agreement to which Indemnitee and any of the Companies or any of their Subsidiaries is party, any vote of stockholders or directors of any of the Companies or any of their Subsidiaries, the DGCL, any other applicable law or any liability insurance policy, the Companies shall indemnify Indemnitee against Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding in proportion to the success achieved by Indemnitee in such Proceeding, as determined by the court presiding over such Proceeding.

 

(c) Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Companies for a portion of any Expenses, losses, liabilities, judgments, fines, penalties and amounts paid in settlement incurred by

 

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Indemnitee, but not for the total amount thereof, the Companies shall nevertheless jointly and severally indemnify Indemnitee for such portion.

 

(d) Nonexclusivity. The indemnification and advancement rights provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may now or in the future be entitled under the certificate of incorporation, bylaws or other organizational agreement or instrument of any of the Companies or any of their Subsidiaries, any other agreement, any vote of stockholders or directors, the DGCL, any other applicable law or any liability insurance policy; provided that to the extent that Indemnitee is entitled to be indemnified by any or all of the Companies under this Agreement and by any stockholder of US LBM or any Affiliate of any such stockholder (other than the Companies and their Subsidiaries) under any other agreement or instrument, or by any insurer under a policy maintained by any such stockholder or Affiliate, (i) the obligations of the Companies hereunder shall be primary, and the obligations of such stockholder, Affiliate or insurer secondary, and (ii) Indemnitee shall proceed first against the Companies and any insurer under any policy maintained by the Companies, second, if indemnification is not provided by the Companies or any such insurer on a timely basis, against any insurer under a policy maintained by any such stockholder or Affiliate, and third, if indemnification is not provided by the Companies or any such insurer on a timely basis, against any such stockholder or Affiliate. Any such stockholder or Affiliate shall be entitled to enforce the Companies’ obligation to provide indemnification in accordance with the priorities set forth in this Section 3(d) directly against the Companies, and each such stockholder or Affiliate shall constitute an express intended third-party beneficiary under this Agreement for such purpose. In the event that any such stockholder or Affiliate makes indemnification payments or advances to Indemnitee in respect of any Expenses, losses, liabilities, judgments, fines, penalties or amounts paid in settlement for which any of the Companies would also be obligated pursuant to this Agreement, the Company or Companies shall reimburse such stockholder or Affiliate in full on demand.

 

(e) Exceptions. Any other provision herein to the contrary notwithstanding, the Companies shall not be obligated under the Agreement to indemnify Indemnitee:

 

(i) For Expenses incurred in connection with Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, counterclaim or crossclaim, except (x) as contemplated by Section 3(b), (y) in specific cases if the Board has approved the initiation or bringing of such Proceeding, and (z) as may be required by law.

 

(ii) For an accounting of profits arising from the purchase and sale by the Indemnitee of securities within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

 

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(f) Subrogation. In the event of payment under this Agreement, the Companies shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute such documents and do such acts as any of the Companies may reasonably request to secure such rights and to enable the Companies effectively to bring suit to enforce such rights; provided that the Companies shall not be entitled to contribution or indemnification from or subrogation against any stockholder of US LBM, any Affiliate of any such stockholder or any insurer under a policy maintained by any such stockholder or Affiliate.

 

(g) Companies’ Obligations Joint and Several. The Companies shall be jointly and severally liable for all of their obligations to Indemnitee under this Agreement.

 

4. Contribution.

 

(a) The Companies hereby agree to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of any of the Companies, other than Indemnitee, who may be jointly liable with Indemnitee.

 

(b) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Companies, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, Employee Retirement Income Security Act of 1974, as amended, excise taxes or penalties and amounts paid or to be paid in settlement), in connection with any Proceeding, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Companies and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Companies (and their directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

5. Advancement of Expenses.

 

The Companies shall pay all Expenses incurred by Indemnitee in connection with any Proceeding in any way connected with, resulting from or relating to Indemnitee’s Corporate Status, other than a Proceeding initiated by Indemnitee for which the Companies would not be obligated to indemnify Indemnitee pursuant to Section 3(e)(i), in advance of the final disposition of such Proceeding and without regard to whether Indemnitee will ultimately be entitled to be indemnified for such Expenses and without regard to whether an Adverse Determination has been made, except as contemplated by the last sentence of Section 6(f). Indemnitee shall repay such amounts advanced only if and to the extent that it shall ultimately be determined by a court of competent jurisdiction in a final and non-appealable decision that Indemnitee is not entitled to be

 

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indemnified by the Companies for such Expenses. Such repayment obligation shall be unsecured and shall not bear interest. The Companies shall not impose on Indemnitee additional conditions to advancement or require from Indemnitee additional undertakings regarding repayment. The Companies agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to any of the Companies in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable shall be presumed conclusively to be reasonable.

 

6. Indemnification Procedure.

 

(a) Notice of Proceeding; Cooperation. Indemnitee shall give the Companies notice in writing as soon as practicable of any Proceeding for which indemnification will or could be sought under this Agreement; provided that any failure or delay in giving such notice shall not relieve the Companies of their obligations under this Agreement unless and to the extent that (i) none of the Companies or their Subsidiaries are party to or otherwise aware of such Proceeding and (ii) the Companies are materially prejudiced by such failure.

 

(b) Settlement. The Companies will not, without the prior written consent of Indemnitee, which may be provided or withheld in Indemnitee’s sole discretion, effect any settlement of any Proceeding against Indemnitee or which could have been brought against Indemnitee unless such settlement solely involves the payment of money by persons other than Indemnitee and includes an unconditional release of Indemnitee from all liability on any matters that are the subject of such Proceeding and an acknowledgment that Indemnitee denies all wrongdoing in connection with such matters. The Companies shall not be obligated to indemnify Indemnitee against amounts paid in settlement of a Proceeding against Indemnitee if such settlement is effected by Indemnitee without the Companies’ prior written consent, which shall not be unreasonably withheld.

 

(c) Request for Payment; Timing of Payment. To obtain indemnification payments or advances under this Agreement, Indemnitee shall submit to the Companies a written request therefor, together with such invoices or other supporting information as may be reasonably requested by the Companies and reasonably available to Indemnitee. The Companies shall make indemnification payments to Indemnitee no later than 30 days, and advances to Indemnitee no later than 10 days, after receipt of the written request (and such invoices or other supporting information) of Indemnitee.

 

(d) Determination. The Companies intend that Indemnitee shall be indemnified to the fullest extent permitted by law as provided in Section 3 and that no Determination shall be required in connection with such indemnification. In no event shall a Determination be required in connection with advancement of Expenses pursuant to

 

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Section 5 or in connection with indemnification for Expenses incurred as a witness or incurred in connection with any Proceeding or portion thereof with respect to which Indemnitee has been successful on the merits or otherwise (including, without limitation, settlement of Proceeding with or without payment of money or other consideration or the termination of any issue or matter in such Proceeding by dismissal, with or without prejudice). Any decision that a Determination is required by law in connection with any other indemnification of Indemnitee, and any such Determination, shall be made within 30 days after receipt of Indemnitee’s written request for indemnification, as follows:

 

(i) If no Change in Control has occurred, (x) by a majority vote of the directors of US LBM who are not parties to such Proceeding, even though less than a quorum, with the advice of Independent Legal Counsel, or (y) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, with the advice of Independent Legal Counsel, or (z) if there are no such directors, or if such directors so direct, by Independent Legal Counsel in a written opinion to the Companies and Indemnitee.

 

(ii) If a Change in Control has occurred, by Independent Legal Counsel in a written opinion to US LBM and Indemnitee.

 

US LBM shall pay all Expenses incurred by Indemnitee in connection with a Determination.

 

(e) Independent Legal Counsel. If there has not been a Change in Control, Independent Legal Counsel shall be selected by the Board and approved by Indemnitee (which approval shall not be unreasonably withheld or delayed). If there has been a Change in Control, Independent Legal Counsel shall be selected by Indemnitee and approved by US LBM (which approval shall not be unreasonably withheld or delayed). The Companies shall pay the fees and expenses of Independent Legal Counsel and indemnify Independent Legal Counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to its engagement.

 

(f) Consequences of Determination; Remedies of Indemnitee. The Companies shall be bound by and shall have no right to challenge a Favorable Determination. If an Adverse Determination is made, or if for any other reason the Companies do not make timely indemnification payments or advances of Expenses, Indemnitee shall have the right to commence a Proceeding before a court of competent jurisdiction to challenge such Adverse Determination and/or to require the Companies to make such payments or advances. Indemnitee shall be entitled to be indemnified for all Expenses incurred in connection with such a Proceeding in accordance with Section 3(b) and to have such Expenses advanced by the Companies in accordance with Section 5. If Indemnitee fails to timely challenge an Adverse Determination, or if Indemnitee challenges an Adverse Determination and such Adverse Determination has been upheld by a court of competent

 

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jurisdiction in a final and non-appealable decision, then, to the extent and only to the extent required by such Adverse Determination or final decision, the Companies shall not be obligated to indemnify or advance Expenses to Indemnitee under this Agreement.

 

(g) Presumptions; Burden and Standard of Proof. In connection with any Determination, or any review of any Determination, by any person, including a court:

 

(i) It shall be a presumption that a Determination is not required.

 

(ii) It shall be a presumption that Indemnitee has met the applicable standard of conduct and that indemnification of Indemnitee is proper in the circumstances.

 

(iii) The burden of proof shall be on the Companies to overcome the presumptions set forth in the preceding clauses (i) and (ii), and each such presumption shall only be overcome if the Companies establish that there is no reasonable basis to support it.

 

(iv) The termination of any Proceeding by judgment, order, finding or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that indemnification is not proper or that Indemnitee did not meet the applicable standard of conduct or that a court has determined that indemnification is not permitted by this Agreement or otherwise.

 

(v) Neither the failure of any person or persons to have made a Determination nor an Adverse Determination by any person or persons shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee did not meet the applicable standard of conduct, and any Proceeding commenced by Indemnitee pursuant to Section 6(f) shall be de novo with respect to all determinations of fact and law.

 

7. Directors and Officers Liability Insurance.

 

(a) Maintenance of Insurance. So long as any of the Companies or any of their Subsidiaries maintains liability insurance for any directors, officers, employees or agents of any such person, the Companies shall ensure that Indemnitee is covered by such insurance in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Companies’ and their Subsidiaries’ then current directors and officers. If at any date (i) such insurance ceases to cover acts and omissions occurring during all or any part of the period of Indemnitee’s Corporate Status or (ii) neither the Companies nor any of their Subsidiaries maintains any such insurance, the Companies shall ensure that Indemnitee is covered, with respect to acts and omissions prior to such date, for at least six years (or such shorter period as is available on commercially reasonable terms) from such date, by other directors and officers liability insurance, in amounts and on terms (including the portion of the period of Indemnitee’s Corporate Status covered) no less favorable to Indemnitee than the amounts and terms of the liability insurance maintained by the Companies on the date hereof.

 

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(b) Notice to Insurers. Upon receipt of notice of a Proceeding pursuant to Section 6(a), the Companies shall give or cause to be given prompt notice of such Proceeding to all insurers providing liability insurance in accordance with the procedures set forth in all applicable or potentially applicable policies. The Companies shall thereafter take all necessary action to cause such insurers to pay all amounts payable in accordance with the terms of such policies, unless the Companies shall have paid in full all indemnification, advancement and other obligations payable to Indemnitee under this Agreement.

 

8. Exculpation, etc.

 

(a) Limitation of Liability. Indemnitee shall not be personally liable to any of the Companies or any of their Subsidiaries or to the stockholders of any of the Companies or any such Subsidiary for monetary damages for breach of fiduciary duty as a director of any of the Companies or any such Subsidiary; provided, however, that the foregoing shall not eliminate or limit the liability of the Indemnitee (i) for any breach of the Indemnitee’s duty of loyalty to a Company or such a Subsidiary or the stockholders thereof; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (iii) under Section 174 of the DGCL or any similar provision of other applicable corporations law; or (iv) for any transaction from which the Indemnitee derived an improper personal benefit. If the DGCL or such other applicable law shall be amended to permit further elimination or limitation of the personal liability of directors, then the liability of the Indemnitee shall, automatically, without any further action, be eliminated or limited to the fullest extent permitted by the DGCL or such other applicable law as so amended.

 

(b) Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of any of the Companies or any of their Subsidiaries against Indemnitee or Indemnitee’s estate, spouses, heirs, executors, personal or legal representatives, administrators or assigns after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of any of the Companies shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period, provided that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

 

9. Miscellaneous.

 

(a) Non-Circumvention. None of the Companies shall seek or agree to any order of any court or other governmental authority that would prohibit or otherwise interfere, and shall not take or fail to take any other action if such action or failure would reasonably be expected to have the effect of prohibiting or otherwise interfering, with the

 

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performance of the Companies’ indemnification, advancement or other obligations under this Agreement.

 

(b) Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

(c) Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (ii) on the first business day following the date of dispatch if delivered by a recognized next-day courier service or (iii) on the third business day following the date of mailing if delivered by domestic registered or certified mail, properly addressed, or on the fifth business day following the date of mailing if sent by airmail from a country outside of North America, to Indemnitee at the address shown on the signature page of this Agreement, to the Companies at the address shown on the signature page of this Agreement, or in either case as subsequently modified by written notice.

 

(d) Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by all the parties hereto. No waiver of either of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

 

(e) Successors and Assigns. This Agreement shall be binding upon the Companies and their respective successors and assigns, including without limitation any acquiror of all or substantially all of any of the Companies’ assets or business and any survivor of any merger or consolidation to which any of the Companies is party, and shall inure to the benefit of and be enforceable by Indemnitee and Indemnitee’s estate, spouses, heirs, executors, personal or legal representatives, administrators and assigns. Each Company shall require and cause any such successor, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement as if it were named as a Company herein, and the Companies shall not permit any such

 

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purchase of assets or business, acquisition of securities or merger or consolidation to occur until such written agreement has been executed and delivered. No such assumption and agreement shall relieve any of the Companies of their obligations hereunder, and this Agreement shall not otherwise be assignable by any the Companies.

 

(f) Duration.  All agreements and obligations of the Companies contained herein shall continue during the period that Indemnitee is a director or officer of any of the Companies (or is serving at the request of any of the Companies as a director, officer, employee, member, trustee or agent of another company) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Proceeding relating to Indemnitee’s Corporate Status (including any rights of appeal thereto) and (ii) throughout the pendency of any Proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Proceeding.

 

(g) Choice of Law; Consent to Jurisdiction. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware, without regard to the conflict of law principles thereof. The Companies and Indemnitee each hereby irrevocably consents to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any Proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

 

(h) Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto, provided that the provisions hereof shall not supersede the provisions of the certificate of incorporation, bylaws or other organizational agreement or instrument of the Companies and their Subsidiaries, any employment or other agreement, any vote of members, managers, stockholders or directors, the DGCL or other applicable law, to the extent any such provisions shall be more favorable to Indemnitee than the provisions hereof.

 

(i) Counterparts. This Agreement may be executed in one or more counterparts (including facsimile counterparts), each of which shall constitute an original.

 

[Remainder of this page intentionally left blank.]

 

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

 

	
 
    	
US LBM   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
LBM MIDCO, LLC
    
	
 
    	
By: LBM Acquisition,   LLC, its sole member
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
LBM Borrower, LLC
    
	
 
    	
By its Sole Member, LBM   Midco, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
US LBM HOLDINGS, LLC
    
	
 
    	
By its Sole Member, LBM   Borrower, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

[Signature Page to Director Indemnification Agreement]

 

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AGREED TO   AND ACCEPTED:
    	
 
    
	
 
    	
 
    
	
INDEMNITEE:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
Director
    	
 
    
	
 
    	
 
    
	
Address:
    	
 
    

 

[Signature Page to Director Indemnification Agreement]

 

14Exhibit 10.9

 

FORM OF

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (as it may be amended from time to time in accordance with the terms hereof, the “Agreement”), dated as of [            ], 2018, is made by and among US LBM Holdings, Inc., a Delaware corporation (“IPOco”), LBM Midco, LLC, a Delaware limited liability company (“US LBM LLC”), and the holders of Units (as defined herein) and shares of Class B Common Stock (as defined herein) from time to time party hereto (each, a “Holder”).

 

WHEREAS, the parties hereto desire to provide for the exchange of Units, together with the transfer to IPOco of a corresponding number of shares of Class B Common Stock, for shares of Class A Common Stock (as defined herein) or cash at IPOco’s option, on the terms and subject to the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

Section 1.1.                                 Definitions.

 

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

“Affiliate” means, with respect to a specified Person, any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the specified Person.  As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York City.

 

“Cash Exchange Payment” means an amount in cash equal to the product of (x) the number of Units exchanged, (y) the then-applicable Exchange Rate, and (z) the average of the daily volume weighted average price (“VWAP”) of a share of Class A Common Stock for the five (5) Trading Days immediately prior to the Exchange Date; provided that in calculating such average, (i) the VWAP shall be determined by calculating the arithmetic average price of a share of Class A Common Stock on the principal U.S. securities exchange or automated or electronic quotation system on which Class A Common Stock trades, as reported by Bloomberg, L.P., or its successor, for each of the five (5) consecutive full Trading Days ending on and including the last full Trading Day immediately prior to the Exchange Date, subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the

 

 

Class A Common Stock; and (ii) if the Class A Common Stock no longer trades on a securities exchange or automated or electronic quotation system, then a majority of the independent members of the board of directors of IPOco shall determine the fair market value of a share of Class A Common Stock in good faith.

 

“Class A Common Stock” means the Class A common stock, par value $0.01 per share, of IPOco.

 

“Class B Common Stock” means the Class B common stock, par value $0.0001 per share, of IPOco.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Continuing LLC Owner” means LBM Acquisition, LLC, a Delaware limited liability company.

 

“Continuing LLC Owner Tax Receivable Agreement” means the Tax Receivable Agreement, dated on or about the date hereof, between IPOco, Continuing LLC Owner, US LBM LLC and any other person from time to time a party thereto; as such agreement may be amended or supplemented from time to time.

 

“Election of Exchange” has the meaning set forth in Section 2.1(b) of this Agreement.

 

“Exchange” has the meaning set forth in Section 2.1(a) of this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange Date” means the date of delivery of the relevant Election of Exchange.

 

“Exchange Rate” means the number of shares of Class A Common Stock for which one Unit (together with the cancellation of a share of Class B Common Stock) is entitled to be Exchanged. On the date of this Agreement, the Exchange Rate shall be 1, subject to adjustment pursuant to Section 2.2 of this Agreement.

 

“First Exchange Time” means six months from the date hereof.

 

“Governmental Entity” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including any court, in each case, having jurisdiction over US LBM LLC or any of its Subsidiaries or any of the property or other assets of US LBM LLC or any of its Subsidiaries.

 

“Holder” has the meaning set forth in the preamble.

 

“IPOco” has the meaning set forth in the preamble hereto.

 

“IPOco Charter” means the certificate of incorporation of IPOco in effect on the date hereof, as may be amended from time to time.

 

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“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of US LBM LLC, dated on or about the date hereof, as amended from time to time.

 

“Paired Interest” means one Unit together with one share of Class B Common Stock.

 

“Permitted Transferee” has the meaning given to such term in Section 4.1 of this Agreement.

 

“Person” means an individual, a partnership (including a limited partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.

 

“Registration Rights Agreement” means the registration rights agreement by and among IPOco and the stockholders party thereto, dated as of the date hereof, as amended from time to time.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

“Stockholders Agreement” means the stockholders agreement by and among IPOco and the stockholders party thereto, dated as of the date hereof, as amended from time to time.

 

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall control the management of any such limited liability company, partnership, association or other business entity. For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of US LBM LLC.

 

“Trading Day” means a day on which the New York Stock Exchange or such other principal United States securities exchange on which the shares of Class A Common Stock is listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day), or if the shares of Class A Common Stock are not listed or

 

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admitted to trading on such an exchange, on the automated quotation system on which the shares of Class A Common Stock are then authorized for quotation.

 

“Units” means the Common Units (as such term is defined in the LLC Agreement).

 

“US LBM LLC” has the meaning set forth in the preamble.

 

“Voting Securities” mean any securities which are entitled to vote generally in matters submitted for a vote of stockholders or generally in the election of the board of directors.

 

ARTICLE II

 

Section 2.1.                                 Exchange of Units for Class A Common Stock.

 

(a)                                 Subject to Section 2.1(g), from and after the First Exchange Time, each Holder shall be entitled at any time and from time to time, upon the terms and subject to the conditions hereof, to transfer and surrender Paired Interests free and clear of all liens, encumbrances, rights of first refusal, and the like, to IPOco. Upon such surrender and transfer, the shares of Class B Common Stock shall be canceled and each Unit surrendered will be exchangeable for, at the option of IPOco, (i) a Cash Exchange Payment made to such Holder calculated with respect to such surrendered Units, payable in accordance with the instructions provided in the Election of Exchange or (ii) a number of shares of Class A Common Stock issued to such Holder that is equal to the product of the number of Units surrendered by such Holder multiplied by the Exchange Rate (such exchange, an “Exchange”). As any such existing owner exchanges its Units (together with the cancellation of a corresponding number of shares of Class B Common Stock), the number of Units owned by IPOco will increase. Each such exchange of Units for Class A Common Stock shall, to the extent permitted by law, be treated for U.S. federal income tax reporting purposes as a taxable exchange of the Holder’s Units for Class A Common Stock and corresponding payments under the Continuing LLC Owner Tax Receivable Agreement.

 

(b)                                 A Holder shall exercise its right to effect an Exchange as set forth in Section 2.1(a) above by delivering to IPOco all certificates and instruments representing the Paired Interests that are being surrendered, together with a written election of exchange in respect of the Units to be Exchanged substantially in the form of Exhibit A hereto (the “Election of Exchange”), duly executed by such Holder or such Holder’s duly authorized attorney, in each case delivered to IPOco at its address set forth in Section 4.2(a). Each Exchange shall be deemed to be effective immediately prior to the close of the business on the date on which the Election of Exchange is delivered to IPOco and IPOco shall cause the transfer agent and registrar to reflect the Exchange on its records and, if IPOco does not elect a Cash Exchange Payment, the exchanging Holder shall be deemed to be a holder of Class A Common Stock from and after that time; provided, however, that if the Holder has specified that the Exchange shall be contingent upon the consummation of a purchase by another Person or effective upon a specified future date in accordance with Section 2.1(c), such Exchange shall be deemed to be effective immediately prior to the close of the business on the date on which such contingency is met or at such specified future date, as applicable, and, if IPOco does not elect a Cash Exchange Payment, the exchanging Holder shall be deemed to be a holder of Class A Common Stock from and after that time or date. As promptly as practicable following the delivery of the Election of Exchange,

 

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IPOco shall deliver or cause to be delivered to the exchanging Holder the number of shares of Class A Common Stock deliverable upon such Exchange, registered in the name of such Holder, or cash, as applicable.

 

(c)                                  An Election of Exchange from a Holder may specify that the Exchange is to be (x) contingent (including as to the timing) upon the consummation of a purchase by another Person (whether in a tender or exchange offer, an underwritten offering or otherwise) of shares of Class A Common Stock into which the Units are exchangeable and/or (y) effective upon a specified future date.

 

(d)                                 Notwithstanding anything herein to the contrary, a Holder may withdraw or amend an Election of Exchange, in whole or in part, at any time prior to the effectiveness of the Exchange by delivery of a written notice of withdrawal to IPOco and US LBM LLC specifying (1) the number of withdrawn Paired Interests, (2) if any, the number of Paired Interests as to which the Election of Exchange remains in effect and (3) if the Holder so determines, revised timing of the Exchange or any other new or revised information permitted in the Election of Exchange.

 

(e)                                  Subject to Section 2.3(c), the shares of Class A Common Stock issued upon an Exchange, other than any such shares issued in an Exchange subject to a registration statement, shall bear a legend in substantially the following form:

 

THE TRANSFER OF THESE SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (OR OTHER APPLICABLE LAW), OR AN EXEMPTION THEREFROM.

 

(f)                                   If (i) any shares of Class A Common Stock may be sold pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission, (ii) all of the applicable conditions of Rule 144 under the Securities Act are met, or (iii) if a Holder otherwise requests removal of the legend, IPOco, upon the written request of the Holder thereof and, in the case of clauses (ii) and (iii), receipt of an opinion of counsel to such Holder reasonably acceptable to IPOco, shall take all necessary action promptly to remove such legend and, if the shares of Class A Common Stock are certificated, issue to such Holder new certificates evidencing such shares of Class A Common Stock without the legend and, if not certificated, shall provide any notice required by applicable law.

 

(g)                                  Subject to Section 2.3 and the terms of the Registration Rights Agreement, IPOco and each exchanging Holder shall bear their own respective expenses in connection with the consummation of any Exchange by such Holder, whether or not any such Exchange is ultimately consummated; provided, however, that IPOco will pay any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange; provided, further, that, subject to Section 2.3, if any shares of Class A Common Stock are to be delivered in a name other than that of the Holder that requested the Exchange or its permitted transferee (or The Depository Trust Company or its nominee for the account of a participant of The Depository

 

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Trust Company that will hold the shares for the account of such Holder or its permitted transferee), then such Holder and/or the person in whose name such shares are to be delivered shall pay to IPOco the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of IPOco that such tax has been paid or is not payable.

 

(h)                                 Notwithstanding anything to the contrary in this Article II, a Holder shall not be entitled to effect an Exchange (and, if attempted, any such Exchange shall be, to the fullest extent permitted by applicable law, void ab initio), and IPOco shall have the right to refuse to honor any request to effect an Exchange, at any time or during any period, if IPOco shall reasonably determine that such Exchange (i) would be prohibited by any applicable law or regulation (including the unavailability of any requisite registration statement filed under the Securities Act or any exemption from the registration requirements thereunder), provided this subsection Section 2.1(h) shall not limit IPOco’s or US LBM LLC’s obligations under Section 2.3(c), (ii) could cause US LBM LLC to be treated as a “publicly traded partnership” under section 7704 of the Code or (iii) would not be permitted under (x) the LLC Agreement, (y) other agreements with IPOco or its Subsidiaries to which such Holder may be subject or (z) any written policies of IPOco or any of its Subsidiaries related to unlawful or inappropriate trading applicable to its directors, officers or other employees to which the Holder or its directors and officers are subject. Upon such determination, IPOco shall notify the Holder requesting the Exchange of such determination, which such notice shall include an explanation in reasonable detail as to the reason that the Exchange has not been effected.

 

Section 2.2.                                 Adjustment.

 

(a)                                 The Exchange Rate and/or the components of a Paired Interest shall be adjusted accordingly if there is: (i) any subdivision (by any stock or unit split, stock or unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock or unit split, reclassification, reorganization, recapitalization or otherwise) of the shares of Class B Common Stock or Units that is not accompanied by a substantially equivalent subdivision or combination of the Class A Common Stock; or (ii) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Class A Common Stock that is not accompanied by a substantially equivalent subdivision or combination of the shares of Class B Common Stock and Units. If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an exchanging Holder shall be entitled to receive the amount of such security, securities or other property that such exchanging Holder would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock are converted or changed into another security, securities or

 

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other property, this Section 2.2 shall continue to be applicable, with respect to such other security or property. To the fullest extent permitted by applicable law, this Agreement shall apply to the Paired Interests held by the Holders and their Permitted Transferees as of the date hereof, as well as any Paired Interests hereafter acquired by a Holder and his or her or its Permitted Transferees, subject to Section 4.1. This Agreement shall apply to, and all references to “Paired Interests” shall be deemed to include, any security, securities or other property of IPOco or US LBM LLC which may be issued in respect of, in exchange for or in substitution of shares of Class B Common Stock or Units, as applicable, by reason of any distribution or dividend, split, reverse split, combination, reclassification, reorganization, recapitalization, merger, exchange (other than an Exchange) or other transaction.

 

Section 2.3.                                 Class A Common Stock to be Issued; Class B Common Stock to be Cancelled.

 

(a)                                 IPOco shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon an Exchange, the maximum number of shares of Class A Common Stock as shall be deliverable upon the transfer and surrender of all then-outstanding Paired Interests; provided, that nothing contained herein shall be construed to preclude IPOco from satisfying its obligations in respect of an Exchange by delivery of shares of Class A Common Stock that are held in the treasury of IPOco or held by any of its Subsidiaries or by delivery of purchased shares of Class A Common Stock (which may or may not be held in the treasury of IPOco or held by any Subsidiary thereof). IPOco covenants that all shares of Class A Common Stock issued upon an Exchange will, upon delivery in accordance with this Agreement, be validly issued, fully paid and non-assessable.

 

(b)                                 When a Paired Interest has been transferred and surrendered in accordance with this Agreement, the share of Class B Common Stock corresponding to such Paired Interest shall be immediately cancelled and retired by IPOco and such shares shall not be reissued and the Unit corresponding to such Paired Interest shall be held by IPOco and be outstanding.

 

(c)                                  Subject to the terms of the Registration Rights Agreement, IPOco covenants and agrees to deliver shares of Class A Common Stock, if requested, pursuant to an effective registration statement under the Securities Act with respect to any Exchange to the extent that a registration statement is effective and available for such shares. In the event that any Exchange in accordance with this Agreement is to be effected at a time when any required registration has not become effective or otherwise is unavailable, upon the request and with the reasonable cooperation of the Holders requesting such Exchange, IPOco shall use reasonable best efforts to promptly facilitate such Exchange pursuant to any reasonably available exemption from such registration requirements. IPOco shall use reasonable best efforts to list the Class A Common Stock required to be delivered upon Exchange prior to such delivery upon each national securities exchange or inter-dealer quotation system upon which the outstanding Class A Common Stock may be listed or traded at the time of such delivery.

 

(d)                                 IPOco agrees that it has taken all or will take such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and to be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions from, or dispositions to, IPOco of equity securities of IPOco (including derivative securities with respect

 

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thereto) and any securities that may be deemed to be equity securities or derivative securities of IPOco for such purposes that result from the transactions contemplated by this Agreement, by each executive officer (including the chief accounting officer) or director of IPOco.

 

ARTICLE III

 

Section 3.1.                                 Representations and Warranties of IPOco and of US LBM LLC. Each of IPOco and US LBM LLC represents and warrants that (i) it is a corporation or limited liability company duly incorporated or formed and is existing in good standing under the laws of Delaware, (ii) it has all requisite corporate or limited liability company power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby and, in the case of IPOco, to issue the Class A Common Stock in accordance with the terms hereof, (iii) the execution and delivery of this Agreement by it and the consummation by it of the transactions contemplated hereby (including without limitation, in the case of IPOco, the issuance of the Class A Common Stock) have been duly authorized by all necessary corporate or limited liability company action on its part and (iv) this Agreement constitutes a legal, valid and binding obligation of it enforceable against it in accordance with its 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.

 

Section 3.2.                                 Representations and Warranties of the Holders. Each Holder, severally and not jointly, represents and warrants that (i) if it is not a natural person, that it is duly incorporated or formed and, to the extent such concept exists in its jurisdiction of organization, is in good standing under the laws of such jurisdiction, (ii) it has all requisite legal capacity and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby, (iii) if it is not a natural person, the execution and delivery of this Agreement by it and the performance of the transactions contemplated hereby have been duly authorized by all necessary corporate or other entity action on the part of such Holder and (iv) this Agreement constitutes a legal, valid and binding obligation of such Holder enforceable against it in accordance with its 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.

 

ARTICLE IV

 

Section 4.1.                                 Additional Holders. To the extent a Holder validly transfers any or all of such Holder’s Paired Interests to another person in a transaction in accordance with, and not in contravention of, the LLC Agreement, the IPOco Charter, the Stockholders Agreement, the Continuing LLC Owner Tax Receivable Agreement or the Registration Rights Agreement, then such transferee (each, a “Permitted Transferee”) shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit B hereto, whereupon such Permitted Transferee shall become a Holder hereunder. To the extent US LBM LLC issues Units and IPOco issues Class B Common Stock to a Person in the future, then the holder of such Units and Class B Common Stock shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit B hereto, whereupon such holder shall become a Holder hereunder.

 

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Section 4.2.                                 Addresses and Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax (delivery receipt requested), by electronic mail or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be as specified in a notice given in accordance with this Section 4.2):

 

(a)                                 If to IPOco, to:

 

US LBM Holdings, Inc.

1000 Corporate Grove Drive
 Buffalo Grove, Illinois 60089
 Fax: 877-787-5269
 E-mail:        michelle.pollock@uslbm.com
 Attention: Michelle Pollock, Esq.

 

with a copy (which shall not constitute notice) to:

 

Debevoise and Plimpton LLP
  919 Third Avenue,

New York, New York 10022

E-mail:  mjhayes@debevoise.com
 Fax:  212 521 7483
 Attention:  Morgan J. Hayes, Esq.

 

(b)                                 If to US LBM LLC, to:

 

US LBM LLC
 c/o US LBM Holdings, Inc.
 1000 Corporate Grove Drive
 Buffalo Grove, Illinois 60089
 Fax: 877-787-5269
 E-mail:        michelle.pollock@uslbm.com
 Attention: Michelle Pollock, Esq.

 

with a copy (which shall not constitute notice) to:

 

Debevoise and Plimpton LLP
  919 Third Avenue,

New York, New York 10022

E-mail:  mjhayes@debevoise.com
 Fax:  212 521 7483
 Attention:  Morgan J. Hayes, Esq.

 

(c)                                  If to Continuing LLC Owner, addressed to it at:

 

Kelso & Company
 320 Park Avenue, 24th Floor

 

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New York, New York 10022
 E-mail:  jconnors@kelso.com
 Fax: 212 223 2379
 Attention:  James Connors, II, Esq.

 

and

 

with a copy (which shall not constitute notice) to:

 

Debevoise and Plimpton LLP
 919 Third Avenue,
 New York, New York 10022
 E-mail:  mjhayes@debevoise.com
 Fax:  212 521 7483
 Attention:  Morgan J. Hayes, Esq.

 

(d)                                 If to any Holder other than Continuing LLC Owner, to the address and other contact information set forth in the records of IPOco or US LBM LLC from time to time.

 

Section 4.3.                                 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 4.4.                                 Binding Effect. This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, executors, administrators, heirs, legal representatives and assigns.

 

Section 4.5.                                 Severability. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

Section 4.6.                                 Amendment. The provisions of this Agreement may be amended only by the affirmative vote or written consent of each of (i) IPOco, (ii) US LBM LLC, (iii) Continuing LLC Owner and (iv) the Holders of Units holding a majority of the then outstanding Units (excluding all Units held by IPOco), except that any amendment materially detrimental to any Holder shall require the written consent of such Holder.

 

Section 4.7.                                 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.

 

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Section 4.8.                                 Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)                                 The parties irrevocably consent to the exclusive jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the state of Delaware in connection with any action relating to this Agreement and each party agrees (i) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party’s agent for acceptance of legal process and notify the other parties hereto of the name and address of such agent, and (ii) that, to the fullest extent permitted by applicable law, service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service, and that service made pursuant to (i) or (ii) above shall, to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such party personally within the State of Delaware. Any action against any party relating to the foregoing shall be brought in the Delaware Court of Chancery (or, solely if the Delaware Court of Chancery declines to accept jurisdiction over any action, to the exclusive jurisdiction of the Superior Court of the State of Delaware (Complex Commercial Division) or, if the subject matter jurisdiction over the action is vested exclusively in the federal courts of the United States of America, the United States District Court for the District of Delaware), and any appellate courts of any thereof.  To the extent not prohibited by applicable law, each party hereto waives and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in the above-named courts, any claim that such party is not subject personally to the jurisdiction of such courts, that such party’s property is exempt or immune from attachment or execution, that such proceeding is brought in an inconvenient forum, that the venue of such proceeding is improper, or that this Agreement or the subject matter thereof, may not be enforced in or by such courts.

 

(b)                                 TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 4.8(b) CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.8(b) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

Section 4.9.                                 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or by e-mail delivery of a “.pdf” format data file) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall

 

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constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy, by e-mail delivery of a “.pdf” format data file or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 4.9.

 

Section 4.10.                          Tax Treatment. For U.S. federal income tax purposes only, this Agreement shall be treated as part of the LLC Agreement as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations promulgated thereunder. As required by the Code and the Treasury Regulations, the parties shall report any Exchange consummated hereunder as a taxable sale of the Units and shares of Class B Common Stock by a Holder to IPOco, and no party shall take a contrary position on any income tax return or amendment thereof unless an alternate position is permitted under the Code and Treasury Regulations and IPOco consents in writing.

 

Section 4.11.                          Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that, to the fullest extent permitted by applicable law, the parties shall be entitled to specific performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

Section 4.12.                          Independent Nature of Holders’ Rights and Obligations. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder under hereunder. The decision of each Holder to enter into to this Agreement has been made by such Holder independently of any other Holder. Nothing contained herein, and no action taken by any Holder pursuant hereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby.

 

Section 4.13.                          Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule that would cause the application of the laws of any other jurisdiction. The parties hereto hereby declare that it is their intention that this Agreement shall be regarded as made under the laws of the State of Delaware and that the laws of said State shall be applied in interpreting its provisions in all cases where legal interpretation shall be required.  Each of the parties hereto agrees (a) that this Agreement involves at least $100,000.00, and (b) that this Agreement has been entered into by the parties hereto in express reliance upon 6 Del. C. § 2708.

 

[Signature Pages Follow]

 

12

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first set forth above.

 

	
 
    	
US LBM   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
LBM MIDCO, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
LBM ACQUISITION, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Exchange Agreement]

 

 

EXHIBIT A

 

[FORM OF] 
 ELECTION OF EXCHANGE

 

US LBM Holdings, Inc.
 1000 Corporate Grove Drive
 Buffalo Grove, Illinois  60089
 Attention:  Michelle Pollock, Esq.

 

LBM MIDCO, LLC
 US LBM Holdings, Inc.
 1000 Corporate Grove Drive
 Buffalo Grove, Illinois  60089
 Attention:  Michelle Pollock, Esq.

 

Reference is hereby made to the Exchange Agreement, dated as of [            ], 2018 (the “Exchange Agreement”), among US LBM Holdings, Inc., a Delaware corporation, LBM Midco, LLC, a Delaware limited liability company, and the holders of Paired Interests (as defined therein) from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

 

The undersigned Holder hereby transfers and surrenders to IPOco the number of Paired Interests set forth below, for purposes of (a) the cancellation of Class B Common Stock and (b) an Exchange of Units for a Cash Exchange Payment to the account set forth below or for shares of Class A Common Stock to be issued in its name as set forth below, in accordance with the terms of the Exchange Agreement.

 

	
Legal Name of Holder:
    	
 
    
	
 
    
	
Address:
    	
 
    
	
 
    
	
Number of Paired   Interests to be Transferred:
    	
 
    
	
 
    
	
Cash Exchange Payment   Instructions:
    	
 
    
	
 
    
	
Conditions of Exchange   (if any):
    	
 
    
						

 

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Election of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Election of Exchange has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the shares of Class B Common Stock and Units subject to this Election of Exchange are being transferred to IPOco free and clear of any pledge, lien, security interest, encumbrance, equities or claim; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having

 

 

jurisdiction over the undersigned or the shares of Class B Common Stock or the Units subject to this Election of Exchange is required to be obtained by the undersigned for the transfer of such shares of Class B Common Stock or Units to IPOco.

 

The undersigned hereby irrevocably constitutes and appoints any officer of IPOco as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to IPOco the shares of Class B Common Stock and Units subject to this Election of Exchange and to deliver to the undersigned the shares of Class A Common Stock or cash to be delivered in Exchange therefor.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Election of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney.

 

	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Dated:
    

 

 

EXHIBIT B

 

[FORM OF] 
 JOINDER AGREEMENT

 

This Joinder Agreement (“Joinder Agreement”) is a joinder to the Exchange Agreement, dated as of [            ], 2018 (the “Agreement”), among US LBM Holdings, Inc., a Delaware corporation (the “IPOco”), LBM Midco, LLC, a Delaware limited liability company (“US LBM LLC”), and the holders of Units (as defined therein) from time to time party thereto. Capitalized terms used but not defined in this Joinder Agreement shall have their meanings given to them in the Agreement. This Joinder Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. In the event of any conflict between this Joinder Agreement and the Agreement, the terms of this Joinder Agreement shall control.

 

The undersigned, having acquired shares of Class B Common Stock and Units, hereby joins and enters into the Agreement. By signing and returning this Joinder Agreement to IPOco, the undersigned (i) accepts and agrees to be bound by and subject to all of the terms and conditions of and agreements of a Holder contained in the Agreement, with all attendant rights, duties and obligations of a Holder thereunder and (ii) makes each of the representations and warranties of a Holder set forth in Section 3.2 of the Agreement as fully as if such representations and warranties were set forth herein. The parties to the Agreement shall treat the execution and delivery hereof by the undersigned as the execution and delivery of the Agreement by the undersigned and, upon receipt of this Joinder Agreement by IPOco and by US LBM LLC, the signature of the undersigned set forth below shall constitute a counterpart signature to the signature page of the Agreement.

 

	
Name:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Address   for Notices:
    	
 
    	
With   copies to:

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