Item 5.02. Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of
Jeffrey S. Lee as Chief Financial Officer of the Company
On January 7,
2019, Cornerstone Building Brands, Inc. (formerly known as NCI Building Systems, Inc., the “
Company
”)
issued a press release announcing the retirement of its Executive Vice President, Chief Financial Officer, Shawn K. Poe,
effective May 31, 2019. On June 3, 2019, in connection with Shawn K. Poe’s retirement, the Board of Directors of the
Company appointed Jeffrey S. Lee as Executive Vice President, Chief Financial Officer (“CFO”) of the Company,
effective June 17, 2019.
Mr. Lee, age 50,
was employed by Wilsonart International Holdings LLC (“Wilsonart”) from 2014 to 2019, where he served as Vice President and Chief Financial Officer and was responsible for the accounting and finance functions as well as providing
overall financial guidance and support for the company. Prior to joining Wilsonart, Mr. Lee served as Senior Vice
President, Chief Financial Officer for Contech LLC from 2007 to 2014 and was responsible for the accounting, finance and
information technology functions. Mr. Lee has a B.S. from University of Utah in Accounting and an M.B.A. from Duke Fuqua
School of Business.
There are no family
relationships between Mr. Lee and any director or executive officer of the Company, and Mr. Lee has no direct or indirect material
interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
In connection with
his commencement of employment as CFO of the Company, Mr. Lee is expected to enter into an employment agreement with the Company
(the “
Employment Agreement
”). The terms below are the expected material terms of the Employment Agreement.
The term of the Employment
Agreement runs for a period of two years from Mr. Lee’s commencement of employment with the Company, subject to automatic
one-year extensions thereafter, unless either party gives notice of non-renewal. The Employment Agreement specifies Mr. Lee’s
position as CFO, as well as his general duties with the Company during his term of employment. In addition, the Employment Agreement
provides Mr. Lee with (i) an annual base salary of $560,000; (ii) a target annual bonus opportunity under the Company's cash annual
incentive plan equal to 80% of his annual base salary, with a maximum payout of 160% of his annual base salary, based on performance
goals to be established by the Compensation Committee of the Board of Directors of the Company (subject to a minimum payment of
$400,000 for 2019); (iii) an initial long-term equity incentive award, expected to be granted on June 17, 2019, having a total
target grant date fair value equal to $1.5 million, comprised 40% of stock options, 40% of restricted stock units and 20% of performance
share units; (iv) an annual long-term incentive grant for 2020 having a total target grant date fair value equal to $1,500,000,
comprised of the same combination of equity awards, granted at the same time and having the same terms and conditions as the equity
awards granted to other senior executives of the Company in 2020; (v) a one-time cash signing bonus equal to $25,000; and (vi) a right to participate in the Company’s employee benefit plans and perquisite programs on
the same terms as other Company executives. The Employment Agreement also includes a perpetual confidentiality covenant, and customary
restrictive covenants (non-competition, non-solicitation, non-disparagement, and non-interference) that apply during Mr. Lee’s
employment and for a period of one year thereafter.
The Employment Agreement
provides for severance payments and termination benefits upon a future termination of Mr. Lee’s employment by the Company
without “cause” or by Mr. Lee for “good reason” (each, a “
Qualifying Termination
”).
Upon a Qualifying Termination (other than within 24 months after a change in control of the Company or during the pendency of a
change in control transaction), the Employment Agreement provides for: (i) payment of one times Mr. Lee’s then-current base
salary, payable in equal installments on regular payroll dates over the course of the one year period immediately following the
date of termination; (ii) a pro-rated annual bonus based on actual performance in the year of termination, paid in a lump sum no
later than March 15
th
following the year of termination; and (iii) up to twelve months of continued medical and dental
COBRA coverage at active employee rates.
Upon a Qualifying Termination
within 24 months following a change in control (or during the pendency of a change in control transaction), the Employment Agreement
provides for: (i) the same cash severance payment due upon a qualifying termination prior to a change in control (except that,
to the maximum extent practicable, such payment is to be made in a lump sum); (ii) an additional lump-sum cash severance payment
in an amount equal to the sum of (x) one times the executive’s then-current base salary and (y) two times Mr. Lee’s
target annual bonus for the fiscal year in which the termination occurs; (iii) a pro-rated annual bonus payment based on actual
performance in the year of termination, paid in a lump sum no later than March 15
th
following the year of termination;
and (iv) up to eighteen months of continued medical and dental COBRA coverage at active employee rates.
In all cases, the severance
payments are conditioned on Mr. Lee executing a general release and waiver of claims.
If Mr. Lee’s
payments and benefits under the Employment Agreement are subject to the 20% excise tax under Section 4999 of the Internal Revenue
Code, then he will either receive all such payments and benefits subject to the excise tax or such payments and benefits will be
reduced so that the excise tax does not apply, depending on which of these two approaches yields the best after tax outcome for
Mr. Lee as determined by a third-party accounting firm.