==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
COMMISSION FILE NUMBER 0-23688
----------------------
AMERICAN BUILDINGS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
----------------------
DELAWARE 63-0931058
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1150 State Docks Road, Eufaula, Alabama 36027
---------------------------------------------
(Address of principal executive offices)
(334) 687-2032
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $152,873,340 as of the close of business on
March 16, 1998.
The number of shares of Common Stock, $.01 par value, outstanding as of
March 16, 1998 was 5,275,087.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Stockholders to be held on April 28, 1998,
are incorporated by reference into Part III of this Report.
================================================================================
<PAGE>
ITEM 1. BUSINESS
American Buildings Company ("ABC" or the "Company") is a diversified
manufacturer and marketer of construction products and services for
non-residential and residential applications. The Company designs, manufactures
and sells metal building systems, which consist of structural framing and wall
and roof panels, for industrial, commercial and institutional markets. The
Company's metal building systems are generally custom-designed to meet the
specific needs of the end-user and to allow for easy on-site assembly by
builders and independent erectors. The Company's metal building systems average
approximately 12,300 square feet in size, although the Company frequently
provides larger buildings of up to one million square feet or more. The Company
markets its metal building systems nationwide through approximately 1,120
authorized builder/dealers. ABC has capitalized on its extensive builder/dealer
network and engineering expertise to expand into the emerging metal roofing
market. The Company has a separate roofing products' sales, engineering and
customer service organization, which markets and sells the Company's roofing
products to its builder/dealer network and approximately 375 preferred roofing
contractors. The Company also provides specialty engineering services for large,
complex building structures, manufactures and markets mini-warehouses to serve
the growing self-storage market and secondary building components to serve the
Company's builder/dealers and roofers as well as the general construction
industry, and paints steel coils. In addition, the Company manufactures and
markets steel sectional upward acting doors for residential and commercial
applications, as well as modular structures and residential steel framing
systems. The Company also operates an ICC-licensed trucking subsidiary. ABC
markets its products and services throughout North America and in selected
international countries. The Company derived 95.0% and 89.5% of its respective
1996 and 1997 net sales from the sale of metal building systems and roofing and
architectural products and secondary building components.
INDUSTRY OVERVIEW
Since the inception of the metal buildings industry in the 1940s, metal
building systems have become a highly accepted method of construction for
low-rise, non-residential structures, such as factories, warehouses,
distribution centers, athletic and event centers, office buildings, retail
establishments, banks and schools. Based upon information reported by the Metal
Building Manufacturers Association ("MBMA"), an industry trade association,
metal building systems accounted, on a square footage basis, for approximately
70% of low-rise, non-residential structures of up to 150,000 square feet
constructed in 1997, compared to 65% in 1995 and 54% in 1987. The Company
believes the cost of the metal building system generally represents
approximately 15% of the total cost of constructing the building. In 1996, the
non-residential market for metal buildings consisted primarily of three distinct
markets: (1) commercial buildings, which accounted for approximately 35% of
metal building systems industry sales; (2) manufacturing buildings, which
accounted for approximately 41% of such industry sales; and (3) institutional
buildings and other categories, which in the aggregate accounted for
approximately 24% of such industry sales.
Industry demand for metal building systems is cyclical and highly sensitive
to overall economic conditions, dependent to a large degree upon the level of
non-residential construction activity, the availability of financing for
construction projects, interest rates and other factors that affect the
construction industry. According to information reported by the MBMA, metal
buildings industry sales increased from approximately $1.0 billion in 1982 to
approximately $1.7 billion in 1989, but subsequently declined to approximately
$1.3 billion in 1991. Demand
-1-
<PAGE>
in the metal buildings industry was flat in 1992 at approximately $1.3 billion,
but increased to approximately $1.5 billion in 1993, $1.9 billion in 1994, $2.2
billion in 1995, $2.3 billion in 1996 and $2.5 billion in 1997.(1) The decline
in industry volume during 1990 and 1991 and flatness during 1992 adversely
impacted all manufacturers, and caused a number of them to close manufacturing
facilities. The five largest manufacturers of metal buildings in the United
States, including ABC, collectively accounted for approximately 69% of 1996
industry sales and approximately 68% of 1997 industry sales reported to the
MBMA; the balance of the manufacturers are predominantly small or regional
competitors.
In the early years of the industry, metal building systems were most often
used for factories, warehouses, distribution centers and other applications in
which the exterior appearance of the building was not as significant a
consideration to customers as construction cost, efficiency, speed of
construction and other factors. Technological advances in products and
materials, as well as the advent of modern computer-aided engineering and design
techniques, have led to the development of structural and roofing systems that
are compatible with more traditional construction materials. Architects and
designers now often combine a metal building system with masonry, glass and wood
exterior facades in order to meet the aesthetic requirements of building codes
and potential customers while preserving the inherent favorable characteristics
of metal building systems. As a result, the uses for metal building systems now
include office buildings, showrooms, retail stores, banks, schools and other
non-residential buildings for which aesthetics and architectural features are
important considerations. The Company believes that competing in markets where
customers seek unique aesthetic or functional features for a structure places a
premium on the manufacturer's custom design and engineering capabilities, as
well as the strength of its distribution network.
The Company believes that, as a result of improvements in metal building
design and engineering, metal systems construction have become more competitive
with the more traditional forms of construction, although some customers may
prefer other forms of construction for aesthetic reasons. Nevertheless, the
Company believes that metal building systems have gained market share from the
more traditional forms of construction for the following reasons:
Short Construction Time. In many instances, it takes less time to construct
a metal building system in comparison to other building types, in part due to
the fact that a contractor can prepare the building site while the manufacturer
designs and manufactures the building
- ----------
(1) The market share information of ABC in the metal buildings industry (which
is measured in terms of sales dollars shipped (as opposed to sales orders
received)) and sales information for the metal buildings industry,
including the total market and the market share and sales information for
competitors of the Company, included herein are derived solely from data
reported by the MBMA, an industry trade association, in February 1998. The
Company believes that the 32 manufacturers of metal building systems who
are currently members of and report information to the MBMA represent
approximately 90% of the total industry sales. The sales data which the
Company reports to the MBMA, and on which the Company's metal buildings
industry market share information included herein is based, consist of
sales of the Company's Construction Products Group (which are referred to
herein collectively as "the Company's metal buildings industry sales"). In
1996 the Company created a Construction Products Group, which consists of
the Company's metal buildings systems, roofing, self storage, heavy
fabrication, components and international divisions.
-2-
<PAGE>
system. In addition, since most of the work is done in the factory, the
likelihood of construction delays resulting from bad weather is reduced.
Low Material Costs. Most metal building system manufacturers use
computer-aided analysis and design to fabricate structural members with high
strength-to-weight ratios, minimizing raw materials costs.
Low Construction Costs. Factory labor rates are generally lower than field
construction labor rates. Additionally, building system components produced in a
controlled factory environment generally tend to be of higher quality than
components built under the sometimes adverse weather conditions in the field.
Ease of Expansion and Flexibility. Metal building systems can be modified
quickly and economically before, during or after the building system is
completed to accommodate expansion. Typically, a building system can be expanded
by removing the end or side walls, erecting new framework, and adding matching
wall and roof panels.
Low Operating Costs. Metal will not deteriorate because of cracking, damp
rot and insect damage and metal buildings are easy to insulate. Furthermore,
factory applied roof and siding panel coatings resist cracking, peeling,
chipping, chalking and fading.
Improved Aesthetics. Metal building systems' aesthetic qualities have
dramatically improved with advances in design, materials and coatings. Metal
building systems can be combined with masonry, glass or wood facades in order to
meet customers' aesthetic requirements while maintaining many of the basic
advantages of metal buildings. The Company believes that an end-user's decision
between metal buildings and buildings constructed with more traditional
materials (e.g., wood, brick) is based on personal preferences for aesthetic
features and price.
The cost of metal building systems compares favorably to conventional
construction primarily because the secondary structural framing and covering
system are made from cold-formed steel products, thus reducing cost. The rigid
primary structural framing is also manufactured in a low labor-intensive
process, relying to a large extent on semi-automatic welding machinery to form
the various structural parts. Cost competitiveness can vary based on the type
and complexity of the building, including bay spacing, loads and cover system
requirements.
In addition to metal building systems, some metal building systems
companies have targeted the non-residential roofing business as an opportunity
to expand the applications of their base product. The development of the
standing seam roof as an alternative to the traditional through-fastened metal
roof and long life panel finishes have accelerated the growth of this market by
providing the industry with a product to market as a replacement for built-up
and single-ply roofs or as a retrofit over those roofs. Although the upfront
costs of a metal roof are 20-25% greater than those of roofs constructed with
more traditional materials, ABC believes that the cost savings over the 20-year
life of the metal roof exceed 10% per year due to energy efficiencies and lower
maintenance requirements. According to the National Roofing Contractors
Association, the market for non-residential roofing in 1996 was approximately
$13.9 billion, divided between retrofit roofing (approximately $10.7 billion)
and
-3-
<PAGE>
new roofing (approximately $3.2 billion).(2) Metal roofing in 1996 accounted for
approximately 3.1% of the total non-residential roofing market.
The non-residential construction industry is highly sensitive to overall
economic conditions, and from time to time has been negatively impacted in
numerous geographic regions by unfavorable economic conditions, relatively high
vacancy rates, changes in tax laws impacting the real estate industry and the
unavailability of financing. Demand for the Company's products may be adversely
affected by the weakness of demand within particular customer groups or a
recession in the construction industry or particular geographic regions, which
may adversely affect the Company's results of operations. The timing and
severity of future economic or industry downturns are not currently
determinable, and any such downturn could have a material adverse effect on the
Company's results of operations and business.
COMPANY STRATEGY
The Company's business strategy is focused on increasing long-term
profitability through enhancement of its strong builder/dealer network,
technological innovations, cost efficiencies, internal investment, capacity
expansion and expansion into related lines of business. The Company believes
that its recent growth and prospects for the future result from its
implementation of the following strategies:
Strong National Builder/Dealer Network. The Company has established, and
continues to enhance, its strong builder/dealer network. ABC focuses on
attracting design/build and negotiating contractors, which typically have higher
margins than bid-oriented general contractors. In 1996 and 1997, ABC added 184
and 152 builders, respectively, to its builder/dealer network and dropped 198
poorly performing builders in aggregate during these years. In 1996 and 1997,
the 184 new builders and 152 new builders accounted for approximately 9% and 7%,
respectively, of the Company's metal buildings industry sales. The Company
believes that its product mix, which includes roofing and architectural products
and its specialty engineering group responsible for the design of large, complex
buildings, as well as its national accounts program, which focuses on developing
business from large, frequent builders of metal building systems and
relationships with major engineering, architectural and construction firms, will
assist ABC in attracting and retaining the industry's highest caliber builders
as well as establishing relationships with large frequent purchasers of metal
building systems. The Company's relationship with its builder/dealers and
preferred roofing contractors is non-exclusive.
Technology Design Leadership. In 1991 the Company introduced Spectrum, a
personal computer-based proprietary design, estimating and ordering software
system which allows a builder to rapidly design projects and produce complete
cost data and computer generated drawings for most of the Company's metal
building systems. The Company believes that Spectrum's ease of use provides a
competitive edge to ABC's builders. Approximately 95% of
- ----------
(2) The sales information for the roofing industry is derived from data
published by the National Roofing Contractors Association ("NRCA"), an
industry trade association, in April 1997, which compiles information from
roofing contractors and makes certain extrapolations to determine the total
market. The NRCA has informed the Company that it does not expect to
publish 1997 data until mid-April 1998. The Company does not, and believes
other metal buildings systems manufacturers do not, report roofing sales to
the NRCA.
-4-
<PAGE>
the Company's builders are currently trained and licensed to use Spectrum. Based
upon the success of Spectrum, the Company introduced Summit, a personal
computer-based proprietary design, estimating and ordering software system
specifically designed for the metal roofing market, in April 1994. Approximately
80% of the Company's preferred roofing contractors are currently trained and
licensed to use Summit. The Company intends to continue to enhance its
technology to improve its ability to accurately and competitively price the
Company's products and use this competitive strength to recruit new builders.
Expansion of Non-Residential Metal Roofing Business. The Company has
focused on expanding its roofing and architectural products business to take
advantage of the rapid growth and acceptance of metal roofing in the $10.7
billion retrofit roofing and $3.2 billion new roofing markets. ABC devotes a
separate sales, engineering and customer service organization for the
distribution of non-residential roofing products. The Company believes that this
division also offers a new product line to its builder/dealer network, and that
this product line assists the Company in attracting and retaining the industry's
highest quality builders.
Internal Expansion. ABC opened the initial phase of its manufacturing
facility in Virginia in October 1994, and completed this facility in December
1995. Because of the significance of freight and delivery charges to the
delivered cost of metal building systems, the Company believes it is
advantageous to sell and deliver its products within a 500 mile radius of its
manufacturing facilities. The Company believes that locating a facility in
Virginia has allowed it to meet increasing demand in the East Coast market while
relieving capacity constraints at the Company's Alabama and Illinois facilities,
allowing continued growth in the markets supplied by these facilities. In
addition, in late 1996 and early 1997 the Company increased the capacity of its
Polymer Coil Coaters division by upgrading the line speed.
Improvement of Manufacturing Efficiency and Productivity. Following the
Company's recapitalization in January 1993 (see "--Company History"), the
Company implemented a capital expenditure program to improve manufacturing
efficiency and productivity. The Company spent $10.3 million in 1995 (including
$5.3 million for the expansion of its Virginia facility), $9.3 million during
1996 (including $3.6 million of capital expenditures for its Virginia facility,
$2.9 million to increase capacity at its Polymer Coil Coaters division and $2.1
million for office expansion) and $10.0 million during 1997 (including $3.6
million for new technical and business systems) and currently intends to spend
$11.6 million during 1998, including $2.0 million for new technical and business
systems, with the remainder for new equipment, production controls and other
capital expenditures which the Company believes will enhance its overall
profitability by improving manufacturing efficiency and productivity, reducing
costs and increasing capacity to meet increasing demand. ABC is committed to
ongoing reductions in its cost of producing metal building systems in order to
increase its sales and market share in the metal buildings industry.
International Opportunities. The Company intends to pursue international
opportunities through export of its products and formation of joint ventures.
The Company's joint venture, American Buildings Company Asia, L.P., was formed
to pursue the manufacture and sale of metal building systems in The People's
Republic of China and certain other countries in Southeast Asia. The Company is
also currently marketing its products in Brazil and certain other Latin American
countries. See "--International Opportunities."
Expansion into Related Lines of Business. The Company intends to expand the
construction products and services it offers, both through acquisition and
internal
-5-
<PAGE>
development. In November 1996, ABC acquired the Liberty, North Carolina
manufacturing facility of American Modular Technologies, L.L.C. for the
manufacture of modular buildings. In December 1996, the Company formed a new
division to pursue the manufacture and marketing of steel framing for the
residential market. In December 1997, the Company acquired the Windsor Door
division of United Dominion Industries, Inc., the industry's fourth largest
producer/marketer of steel sectional upward acting doors for residential and
commercial applications. The Windsor Door division also produces rolling steel
doors for industrial uses and has a contract manufacturing business specializing
in metal stampings.
CUSTOMERS AND DISTRIBUTION NETWORK
The Company distributes its metal building systems through a nationwide
network of approximately 1,120 authorized builder/dealers. ABC markets to
builders through a sales force of approximately 45 persons located throughout
the United States. The Company currently has an organization of approximately
375 preferred roofing contractors, including approximately 190 builders which
are part of the Company's metal building systems builder/dealer network. The
Roofing and Components Group primarily markets roofing products and secondary
components through a separate sales force of 27 persons to ABC's builder/dealer
network, preferred roofing contractors and components customers. In both cases,
the Company's engineering, manufacturing and marketing personnel work directly
with the builder and contractor to establish job specifications and
modifications, determine the appropriate pricing for the Company's products and
services, generate drawings and establish production and delivery schedules. The
Company's relationship with its builder/dealers and preferred roofing
contractors is non-exclusive.
The Company's authorized builder/dealer organization consists of
independent contractors who market ABC products to end-users. These builders
usually erect the metal building system on the customer's site, and provide
contracting and other ancillary services to the completion of the project. The
Company prices its products to the builder, which usually marks up the price to
its customer as part of the overall construction arrangement or bid with its
customer. The Company focuses on developing relationships with the strongest
builders in each market and recruiting design/build and negotiating contractors,
which typically have higher margins than bid-oriented general contractors.
Before a builder can become an authorized ABC builder, the Company performs a
market analysis of the builder's region to determine their market share and
position, as well as background and credit checks to ensure that the builder
meets ABC's standards. ABC believes the reputation of the builder/general
contractor, price and the ability to meet customer specifications and deliver on
time are key factors utilized by end-users in selecting among competing metal
building systems. Geographic location is also important to customer service,
helping ensure reliable delivery and minimizing freight expense. During 1996 and
1997, the Company's largest builder accounted for approximately 1.5% of the
Company's total metal building systems sales in both years, while the ten
largest builders accounted for approximately 11.3% and 8.0%, respectively, of
such sales.
The Company has written agreements with its authorized builder/dealers
which generally grant the builder the non-exclusive right to market the
Company's products and are generally cancelable by either party on 90 days'
notice (five days in the case of certain specified events). The agreements do
not prohibit the builder from marketing metal building systems of other
manufacturers, although as a matter of practice most of the Company's builders
work only with ABC because of ABC's commitment to its builders. The Company
provides its
-6-
<PAGE>
builders with sales and pricing information, design and engineering manuals,
drawings and assistance, Spectrum for estimating and quoting jobs, advertising
and promotional literature, a full-time customer service representative and
training for the builder's personnel. The Company often participates on a
limited basis with cooperative advertising arrangements, such as yellow pages
advertisements, with its builders. The Company also sponsors periodic builders
meetings at which it conducts seminars to assist builders in marketing the
Company's products. In 1993, the Company established the Golden Eagle program,
designed to recognize and reward the Company's highest caliber, highest volume
builders. For these builders, the Company provides special levels of support,
including free upgrades on Spectrum, free access to the Company's training
seminars, special customer service telephone lines and eligibility for incentive
awards. Approximately 215 builders are currently participants in the Golden
Eagle program.
The builder functions as the Company's direct link to the end-user. The
Company provides marketing support and engineering resources for its builders
and relies upon each builder's knowledge of the local market. The Company
believes that its builder relationships give it prompt and cost effective entry
into a local market. The metal buildings industry generally has gravitated
toward the builder-manufacturer relationship. However, two of the other three
largest national manufacturers each has its own construction company,
circumventing local builders in the marketplace. This direct approach allows
these manufacturers to compete for large projects without involving the services
of a local builder. The Company believes that by not forming a construction
subsidiary, it has strengthened its relationship with its builders, because it
does not compete with them to construct buildings, and has encouraged builders
to pursue a relationship with the Company.
The Company continually seeks to enhance its strong builder/dealer network.
The following table sets forth information relating to the total number of the
Company's authorized builder/dealers, and the number of builder/dealers added to
and terminated from its builder/dealer network, in each of the Company's last
three fiscal years:
Number of
Builder/Dealers 1995 1996 1997
--------------- ---- ---- ----
At January 1, ....................... 966 983 1,064
Added ............................... 152 184 152
Terminated .......................... 135 103 95
--- ----- -----
At December 31, ..................... 983 1,064 1,121
=== ===== =====
Although some builder/dealers chose not to continue to be part of the Company's
authorized builder/dealer network during this period, the substantial majority
of builder/dealers who ceased to be part of the Company's authorized
builder/dealer network were dropped by the Company for poor performance. In
order to enhance its builder/dealer network, the Company began focusing in 1993
on identifying and dropping from its builder/dealer network poorly performing
builders. The Company expects that it will continue to enhance its
builder/dealer network by actively recruiting strong builders and dropping
poorly performing builders. The Company anticipates that it will add
approximately as many new authorized builders/dealers to its builder/dealer
network as are terminated and, as a result, the Company expects the
-7-
<PAGE>
number of authorized builder/dealers will remain relatively constant over the
next two years, although there can be no assurance of this.
The Company's Heavy Fabrication division is a specialty engineering group
that combines the Company's metal buildings technology with conventional
construction techniques and applications to design and engineer large, complex
buildings. This division markets primarily to major architectural and
engineering firms, large general contractors and ABC builder/dealers. The
Company anticipates that its national accounts program will enhance the growth
of the Heavy Fabrication division by assisting it in closing orders and
developing relationships with prospective partners such as major engineering,
architectural and construction firms. The Company also believes that its Heavy
Fabrication division offers its builder/dealer network an additional service.
The Company's Roofing and Components Group's sales force markets metal
roofing products and secondary components to both the Company's authorized
builder/dealer network and to preferred roofing contractors. The Company
believes that roofing contractors are far more likely to be contacted by a
building owner when a new roof is needed, and, accordingly, the Company
established a network of preferred roofing contractors to market its metal
roofs. The Company devotes a separate sales, engineering and customer service
organization to the distribution of non-residential roofing products. By having
a separate organization whose compensation is tied directly to the sales of
roofing products, the Company believes it has created a more motivated work
force than if it used its established metal building systems sales organization.
As with its metal building systems builder/dealer network, the Company supports
its contractors with sales and pricing information, design and engineering
manuals, a full-time customer service representative and training for the
roofer's personnel.
In late 1992, the Company reinstated its national accounts program, which
focuses on developing business from large, frequent builders and users of metal
buildings and relationships with major engineering, architectural and
construction firms. The Company believes that a national accounts program allows
it to establish relationships with large industrial and retail companies on
their specific projects, which it can then refer to local builders who may not
have a relationship with such company at the corporate level. The Company
believes this will further strengthen ABC's relationships with its strongest
builders and assist in recruiting new builders. ABC believes this program
benefits its Heavy Fabrication, Roofing, Components and Metal Building Systems
divisions.
Windsor Door markets to the residential and non-residential commercial and
industrial door market through a network of approximately 300 independent
distributors and 29 Company-owned distribution centers. Products include
sectional garage doors and rolling steel doors. Windsor also has a contract
manufacturing business specializing in steel stampings. These products are sold
by an in-house sales force calling on targeted accounts.
AMT markets convenience stores and canopy systems to the petroleum industry
through a network of three sales people calling on the large oil companies and
the independents. It relies on long established relationships to be successful
in this market. Additionally, AMT sells to the commercial and institutional
market through a dedicated group of estimators which sell direct to the end user
or to intermediate leasing companies.
-8-
<PAGE>
DESIGN AND ENGINEERING
The manufacture and marketing of metal building systems depend
significantly upon engineering and design capability and capacity. Metal
building systems must be designed to meet end-users' requirements and to satisfy
applicable local building codes.
The Company's metal building systems are typically planned and designed by
the builder using Spectrum, which was introduced in 1991 to enhance the
productivity of the sales and estimating functions. The Spectrum database, which
is periodically updated, includes all local building codes, the Company's
products and prices therefor, delivery costs and design features. The Spectrum
software system allows a builder to produce complete cost data and computer
generated drawings for most of the Company's metal building systems. Spectrum
produces purchase order documentation, and supports builders by compiling
specification reports, proposals and other sales related documentation designed
to support the builder's selling efforts. Since the pricing of the building to
the builder is included in the Spectrum software, the calculation of project
costs is on-line, thereby eliminating the time consuming process of pricing a
building component by component from a catalogue. The system further enables the
Company's builder/dealer network to rapidly design projects and allows the
Company and its builders to price projects to achieve desired margins.
Furthermore, Spectrum provides builders with the flexibility to make
modifications to the design of the project and receive instant cost data and
project renderings reflecting such changes. Although several of the Company's
competitors have also introduced design, estimating and ordering software for
use by their builders, the Company believes Spectrum's ease of use provides a
competitive edge to ABC's builders. Approximately 95% of ABC's builders are
currently trained and licensed to use Spectrum.
Typically, a builder estimates a metal building system using Spectrum.
However, there may be projects, generally for large or complex buildings, which
require the builder to seek estimating and design assistance from the Company.
In these cases, the initial Spectrum designs are improved upon by the Company's
sales and engineering departments, working in close coordination with the
builder, in an attempt to determine the most cost-effective design within the
guidelines provided by the end-user or the architect or engineer working on the
project.
The Company has also developed a personal computer-based proprietary
design, estimating and ordering software system, Summit, to enhance the
productivity of the sales and estimating functions for the metal roofing market.
Summit, which the Company introduced in April 1994, operates similarly to
Spectrum. Approximately 80% of the Company's preferred roofing contractors are
currently trained and licensed to use Summit.
After receipt of an order that has been priced using the pre-design
features of Spectrum, the Company's engineering department develops actual
engineering design, construction and fabrication drawings to fulfill the order
requirements. The engineering department ensures that the order, the drawings
and the estimate agree. Change orders are developed to correct any discrepancies
and to address any changes after the order is received. The project is then
engineered to meet the local building code requirements, job specific
characteristics and customer specifications. This includes, but is not limited
to, addressing the member sizes needed to resist live loads, collateral loads,
snow loads and seismic forces. This design data is then utilized to develop the
construction drawings and fabrication drawings. The construction drawings are
furnished to the builder for construction and permit purposes. The fabrication
-9-
<PAGE>
drawings are furnished to the plants, either in hard copy or electronically, as
needed for fabrication.
As part of a strategy to bring engineering services closer to its dealers,
ABC operates eleven decentralized engineering services centers across the U.S.
to increase the Company's ability to provide value added engineering support and
increase flexibility in addressing dealers' and customers' needs.
MANUFACTURING
Once the specifications and designs of the customer's project have been
finalized, the manufacturing process begins. The fabrication of the primary
structural framing consists of a process in which pieces of rigid steel plates
and bar stock are sheared and punched, routed through a semi-automatic welding
machine and sent through further fitting and welding processes. This process is
the most labor intensive in the fabrication of metal building systems.
The secondary structural framing and the covering subsystem are roll-formed
steel products. In roll forming, coils of steel are decoiled and passed through
a series of progressive forming rolls which shape the steel into various
profiles of medium-gauge structural shapes and light-gauge sheets and panels.
The fabrication of the secondary framing and covering subsystems is more
automated than that of the primary structural framing.
Structural framing members and covering subsystems are shipped to the job
site for assembly by local builders or independent erectors. ABC generally is
not responsible for any on-site construction, although employees of the
Company's marketing and engineering departments may monitor the project until
completion. The time elapsed between the Company's receipt of an order and
shipment of a completed building system historically ranges from four to eight
weeks, depending upon the backlog at each manufacturing facility and the time
required for the builder to obtain all required governmental approvals as well
as approval of the builder's architect.
The Windsor Door manufacturing process involves custom built roll formers
for door sections and door track production, spring winders and plastic
extrusion equipment. Doors are assembled on automated assembly lines. The
manufacturing process for metal stampings involves custom dyes used on metal
press equipment.
AMT roll forms certain components of its modular buildings and purchases
some parts from outside suppliers. Modular structures, which include not only
the structure but most of the interior requirements such as HVAC, plumbing and
electrical, are then assembled at the plant site.
The Company operates 11 manufacturing facilities. Because of the
significance of freight and delivery charges to the delivered cost of metal
building systems, the Company believes it is advantageous to sell and deliver
its products within a 500 mile radius of its manufacturing facilities. Metal
building systems and roofing and architectural products are manufactured at the
Eufaula, Alabama; El Paso, Illinois; Carson City, Nevada; and La Crosse,
Virginia plants. The components division operates out of a leased facility in
Birmingham, Alabama. Residential and light commercial metal building systems are
manufactured at a leased facility in Atlanta, Georgia. ABC's coil painting plant
is located in Birmingham, Alabama. Modular systems are manufactured in Liberty,
North Carolina. Doors are
-10-
<PAGE>
manufactured in Little Rock, Arkansas and Olivehurst, California. Metal
stampings are manufactured at a leased facility in Little Rock, Arkansas. See
"Item 2. Properties."
PRODUCTS AND SERVICES
The Company conducts its business through 11 operating divisions,
Buildings, Roofing, Heavy Fabrication, Self Storage, Components, Polymer Coil
Coaters, International, Windsor Door, Modular Buildings, Residential/Light
Commercial and Transportation, which are organized by markets. These divisions
complement each other through a combination of common distribution channels,
common manufacturing facilities or vertical integration of products or services.
The Construction Products Group, which consists of the Buildings Group
(consisting of the Buildings, Heavy Fabrication, Self Storage and International
divisions) and the Roofing and Components Group (consisting of the Roofing and
Components divisions) all use as a distribution base the Company's nationwide
network of approximately 1,120 authorized builder/dealers, with the Roofing and
Components Group expanding from that base to other distribution networks.
Products for these Groups are manufactured in the Company's four metal building
systems manufacturing facilities. Because the primary structural framing is the
most labor intensive portion of the manufacturing process, capacity for roofing
and steel component parts exists even when the primary structural lines are
operating at full capacity. In addition, the Company has a manufacturing
facility devoted solely to the manufacture of components. The Polymer Coil
Coaters division paints coils for both the Buildings and the Roofing and
Components Groups, and is expected to paint coil for the Windsor Door division.
The Modular Buildings division, which was acquired in late November 1996,
manufactures and markets modular buildings for the non-residential market. ABC's
residential/light commercial division was formed in late 1996 to address the
market for residential steel framing. The Windsor Door division produces and
markets steel sectional upward acting doors for residential and commercial
applications and rolling steel doors for industrial uses and has a contract
manufacturing business specializing in metal stampings. The Company intends to
use its builder/dealer network to expand the market for the Windsor Door
division's door products. The Company also expects to produce roll up doors for
the Self Storage division and metal stampings for the Construction Products
Group at its Windsor Door facilities. The ABC Transportation division transports
raw materials to the Company's manufacturing facilities and delivers finished
products to customers throughout the United States.
BUILDINGS GROUP
The Buildings Group, which consists of the Buildings, Self Storage, Heavy
Fabrication and International divisions, designs, engineers, manufactures and
sells metal building systems for the low rise, non-residential construction
market. Typical structures include factories, warehouses, distribution
facilities, public buildings, schools, churches, healthcare facilities, aircraft
hangars, showrooms, office buildings, retailing establishments, self-storage
mini-warehouses and numerous other private sector and community purposes. The
Company's metal building systems are custom-designed and engineered to meet the
specific needs of the end-user and to allow for easy on-site assembly by
builders or independent erectors. Each building system is manufactured for a
specific customer order. The Company's average order size is $50,200,
representing a building of approximately 12,300 square feet in size, although
the Company frequently provides larger buildings of up to one million square
feet or more.
The metal building systems manufactured by the Company are comprised of (1)
primary structural framing, (2) secondary structural framing, and (3) the
covering system, which
-11-
<PAGE>
includes the roof, walls and trim. The building system is designed to support
externally applied loads.
Primary Structural Framing. The primary structural framing, fabricated from
steel plate and bar stock, supports the secondary structural framing, roof and
walls. Through the primary framing, the force of all applied loads is
structurally transferred to the foundation.
Secondary Structural Framing. The secondary structural framing consists of
medium-gauge, roll-formed steel components called purlins and girts. Purlins are
attached to the primary frame to support the roof. Girts are attached to the
primary frame to support the walls. The secondary structural framing is designed
to strengthen the primary structural framing and efficiently transfer applied
loads from the roof and walls to the primary structural framing.
Covering System. The covering system consists of roof and wall panels.
These panels not only lock out the weather but also contribute to the structural
integrity of the overall building system. Roof and siding panels are fabricated
from light-gauge, roll-formed steel. Accessory components, such as doors,
windows, gutters and interior partitions, complete the metal building system.
The Heavy Fabrication division is a specialty engineering group which is
responsible for the design of large, complex building structures such as heavy
industrial facilities, exhibition halls, athletic and event centers, airplane
maintenance facilities and cogeneration and waste-to-energy facilities. This
division's design/build approach combines conventional construction techniques
and applications with the advantages of the Company's metal building systems to
design and engineer large complex buildings. Typically, over one-half of the
fabrication for these projects is done by the Company's plants and the balance
by outside structural fabricators. Heavy Fabrication's larger projects included
two steel mills (one each in Indiana and Illinois) and a fiberboard plant in
Arkansas in 1996 and a second steel mill in Indiana, a large aircraft hanger in
Georgia and a mining facility in Chile in 1997.
See "--International Opportunities" for a discussion of the Company's
International division.
ROOFING AND COMPONENTS GROUP
The Roofing division manufactures and markets metal roofing systems that
can be installed on any type of building, metal systems construction or
conventional, new or existing. The Company's engineers work closely with
architects and contractors to design custom roofing systems according to exact
building specifications. The Company's roofing systems can be adapted to suit a
wide variety of architectural and design specifications. ABC's roofing systems
consist of secondary framing and roofing panels of coated cold-rolled steel. The
roofing panels are galvanized or galvalume coated for higher corrosion
resistance. Metal roofing systems can be painted in a number of colors, which is
becoming an increasingly important trend in commercial and pubic sector
construction. The majority of the Company's roofing systems are standing seam
roofs which ABC believes have considerable advantages over conventional roofing
materials. Standing seam roofs reduce the potential for leaks because there are
fewer through-the-roof fasteners and the seams stand up to three inches above
the roof drainage plane. By means of a substructure of light gauge steel
members, slope can be imposed on any roof. Panels are locked together as a seam
raised above the roof drainage plane. In addition,
-12-
<PAGE>
when required by design, the use of movable clips to attach the roof panels to
the structural support system allows the roof surface to "float" over its
structural supports, enabling the roof panels to expand and contract with
fluctuations in temperature without developing cracks, fissures and other common
causes of roof leakage. The increased longevity of standing seam metal roofing
systems has led to greater market acceptance. The Company believes that such
systems will continue to gain market share from conventional roofing materials.
The following are the advantages of metal roofing systems over conventional
roofing materials:
Lower Lifecycle Cost - The total cost over the life of metal roofing
systems is lower than that of conventional roofing systems for both new
construction and replacement roofing. For new construction, the cost of
installing metal roofing is equal to the cost of conventional roofing, and
the longer life and lower maintenance costs of metal roofing make the total
cost much more attractive. For replacement roofing, although installation
costs are 60 to 70 percent higher for metal roofing due to the need for a
sloping support system, the lower ongoing costs more than offset the
initial expenditure.
Longevity - Metal roofing systems last for twenty to thirty years without
requiring major maintenance or replacement, compared to five to ten years
for conventional roofs. The cost of leaks and roof failure can be very
high, including damage to building interiors and disruption of the
functional usefulness of the building. Metal roofing prolongs the intervals
between costly and time-consuming repair work.
Aesthetics - Metal roofing systems allow architects and builders to
integrate colors and geometric design into the roofing of new and existing
buildings, providing a new and increasingly fashionable means of enhancing
a building's aesthetics. Conventional roofing material is generally
unsightly tar paper or a gravel surface, and building designers tend to
conceal roofs made with such materials.
The Company's roofing systems meet all necessary and appropriate industry
codes and specifications. All orders received by ABC for roofing and
architectural products are fabricated in the Company's plants.
The Components division manufactures and markets secondary components,
which consist of wall and roofing panels, trim and other metal building
accessories. This division primarily serves the general construction industry,
frame fabricators who do not have production capability other than primary
frames, and the Company's builder/dealer network. These customers use the
components for repair and replacement jobs, or as parts for small buildings.
POLYMER COIL COATERS
The Polymer Coil Coaters division paints steel coils. This division's
facility is located in Birmingham, Alabama, adjacent to the U.S. Steel Division
of USX Corp.'s plant, providing the Company with substantial cost advantages
with respect to services performed for U.S. Steel. Approximately 30%, 25% and
20% of the division's gross sales for 1995, 1996 and 1997, respectively (before
intercompany eliminations), were to the U.S. Steel Division for that division's
customers who desired painted (as opposed to unpainted) coil. Approximately 43%,
51% and 55% of Polymer Coil Coaters' gross sales for 1995, 1996 and 1997,
respectively (before intercompany eliminations), were to the Company and the
balance to industrial customers.
-13-
<PAGE>
In October 1995, the Company began a $3.5 million capital expenditure program
for new coater heads and a 40% increase in line speed to increase capacity at
the facility, which was completed in January 1997. U.S. Steel recently added a
new galvanizing/galvalume line at its Birmingham, Alabama plant. The Company
believes its ability to add additional lines at its existing facility is limited
by local environmental regulations, particularly those relating to air
pollution. See "--Competition."
TRANSPORTATION
The ABC Transportation division transports raw materials to the Company's
manufacturing plants and delivers finished goods to customers around the United
States. This division operates approximately 134 leased truck cabs and
approximately 340 leased flatbed trailers. The Company believes that operating
its own transport service enhances the quality of services provided by it to its
builder/dealer network. This division also transports materials for third party
customers. The Company's ABC Transportation subsidiary is an ICC-licensed common
carrier, licensed to carry all types of materials other than explosives and
household goods.
MODULAR BUILDINGS
In November 1996 the Company acquired the Liberty, North Carolina
manufacturing facility of American Modular Technologies, L.L.C. for the
manufacture of modular buildings. This acquisition complements ABC's presence in
the low-rise non-residential construction market with a modular approach used by
major oil companies for convenience stores and canopy systems at their gas
stations. The Company intends to expand this division's activities into other
segments of the market where modular is an accepted form of construction, such
as classrooms and correctional facilities.
RESIDENTIAL/LIGHT COMMERCIAL
The Company formed this division in December 1996 to pursue the residential
steel framing market. Although currently fewer than 70,000 of the approximately
1.4 million annual new housing starts have steel framing, steel framing has
slowly been making inroads. Steel frames tend to have less price fluctuation
than wood and have the inherent characteristics of added strength, particularly
important in seismic and high wind areas. Steel frames are also superior to wood
frames in areas where there are termites and high humidity.
WINDSOR DOOR
In December 1997 the Company acquired substantially all the assets, and
assumed certain liabilities, of the Windsor Door division of United Dominion
Industries, Inc. The Windsor Door division, headquartered in Little Rock,
Arkansas, is the industry's fourth largest producer/marketer of steel sectional
upward acting doors for residential and commercial applications. The division
also produces rolling steel doors for industrial uses and has a contract
manufacturing business specializing in metal stampings. Door products are sold
through independent distributors and company-owned distribution centers. The
Division operates two plants in Little Rock and a plant in Olivehurst,
California, and has 29 Company-owned distribution centers.
-14-
<PAGE>
INTERNATIONAL OPPORTUNITIES
As part of its effort to increase the Company's presence in international
markets, in August 1995 ABC and China Renaissance Industries, L.P., a
partnership formed to invest in non-listed enterprises in The People's Republic
of China, formed a joint venture to pursue the manufacture of metal building
systems in the PRC and their sale throughout most of Southeast Asia (the
"Territory"). ABC has a 30% interest in the joint venture, and exclusively
licensed to the joint venture on a royalty-free basis the right to use certain
of ABC's technology to pursue the manufacture and sale of metal building systems
in the Territory. The joint venture completed its initial manufacturing facility
in the PRC in October 1996. ABC will receive a technology license fee of $1.5
million, of which $750,000 was paid in 1995 and the remainder of which is due in
late 1998. ABC invested approximately $4.4 million in the joint venture through
the end of 1997 and expects to invest up to an additional $0.1 million in 1998.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." The Company is
currently marketing its products in Asia, Brazil and certain other Latin
American countries, and is currently developing a dealer network in Latin
America to facilitate its sales there.
SUPPLIERS
The principal raw material used in the manufacture of the Company's metal
buildings, metal roofing, doors and components is steel. Components are
fabricated from commonly available steel products produced by mills including
bars, plates and cold rolled gauge and galvanized sheeting. In 1997, the Company
purchased approximately 47% of its steel requirements from two steel companies,
the largest of which accounted for approximately 30% of the Company's steel
purchases. Since the steel required for the Company's operations currently is
available from a number of domestic and foreign suppliers at competitive prices
and the Company has not to date experienced any significant quality or delivery
problems with its current suppliers, the Company has not traditionally
maintained an inventory of steel in excess of its current production
requirements. However, there can be no assurance that steel will remain
available or that prices will remain stable. If the available supply of steel
declines, or if one or more of the current sources for any reason is unable to
meet the Company's requirements, the Company could experience price increases, a
deterioration of service from its suppliers, or interruptions or delays that may
cause the Company to fail to meet delivery schedules to its customers. The
Company believes it obtains delivery and service benefits from its suppliers
because it concentrates its purchases among a small number of them; nonetheless,
there can be no assurance that these benefits will continue to be realized in
the future.
BACKLOG
At December 31, 1997, the total backlog for orders believed by the Company
to be firm was $96.6 million, all of which the Company expects to fill during
the current fiscal year. This compares with a total backlog of $82.1 million at
December 31, 1996, $56.3 million at December 31, 1995 and $76.0 million at
December 31, 1994. Job orders, including those believed by the Company to be
firm, generally are cancelable by customers at any time for any reason, although
the customer is obligated to pay any costs incurred by the Company prior to
cancellation of an order. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
-15-
<PAGE>
WARRANTIES
The Company provides three different warranties for its metal building
products. First, the fabricated steel portion of the product carries a one-year
warranty against defective material and workmanship. Second, an extended
material warranty is provided by the Company's suppliers and passed through to
the Company's customers. These material warranties relate to long-life paint (20
years), Premium 70, a prepainted galvanized steel (20-25 years), and galvalume
aluminized or zincalume steel (20 years). Third, a twenty-year weather-tightness
warranty against leaks under normal weather and atmospheric conditions is
available for standing seam roofs. Windsor Door has a one-year warranty for
defective material or workmanship. Additionally, certain model doors have a
limited 10-year or lifetime rust through warranty to the original owner. AMT
offers, for components manufactured by it, a one-year warranty against defective
materials and workmanship and a 90-day warranty on HVAC systems for its modular
structures. Refrigeration and roofing systems are warranted by their respective
suppliers. Historically, claims under these warranties have been immaterial.
COMPETITION
On the basis of data reported by the MBMA, the Company's 1997 sales of
metal building systems products constituted approximately 11.4% of reported
industry sales, placing it as the fourth largest domestic manufacturer behind
the Building Systems division of Butler Manufacturing Company, NCI Building
Systems, Inc. and the Varco-Pruden Buildings Division of LTV Steel Corporation,
which accounted for approximately 20.6%, 14.4% and 11.9%, respectively, of total
1997 industry sales reported by the MBMA. Other major competitors include the
Star and Ceco Divisions of Robertson-Ceco Corp. and Associated Buildings.
Several of the Company's competitors have greater financial resources than the
Company. The Company believes its American Buildings brand is the third largest
brand behind the Butler and Varco-Pruden brands. Competition in the metal
buildings industry is intense and is based primarily on price, service, quality
of the builder/dealer network and the ability to provide added value in the
design of a building. The Company's ability to expand its market share depends
in part on its ability to persuade builders to market the Company's products in
lieu of those of its competitors, attract conventional contractors to the metal
buildings industry and develop a separate network of preferred roofing
contractors to market its roofing products. In addition, the Company and others
in the metal building systems industry compete with alternative methods of
building construction. Although the Company maintains metal building
manufacturing facilities in Alabama, Illinois, Nevada and Virginia, the
Company's ability to quote competitive prices to customers located more than 500
miles from one of these facilities may be limited because of the significance of
freight and delivery charges to the cost of metal buildings. Foreign companies
are not presently a significant factor in the domestic marketplace, and the
Company does not expect them to be in the near future, mainly because of
transportation costs and the short lead times generally required by customers.
The Roofing and Components Group competes with numerous suppliers of
roofing and component parts as well as other metal buildings systems
manufacturers.
There are currently four other companies engaged in painting steel coil in
the southeastern United States. The Company believes that the recent addition of
two of these facilities has resulted in overcapacity for steel coil painting in
the southeastern United States and has created competitive pressure. However,
the Company believes that its location
-16-
<PAGE>
adjacent to a U.S. Steel plant provides it with substantial cost advantages with
respect to services performed for U.S. Steel.
In the upward acting, or garage door, manufacturing industry, there are
five "full-line" firms which serve a national base of customers. ABC estimates
that these companies have about 80% market share. The Windsor Door division's
current market share is estimated by ABC to be approximately 8%, ranking it
fourth. Wayne Dalton Corporation and Overhead Door Corporation are believed to
be the two largest manufacturers, with Clopay Corporation also being larger than
Windsor.
The Modular Buildings division has two primary competitors in the modular
petroleum business, both of which are privately owned. Several other
manufacturers compete in the canopy business and the commercial/institutional
modular business.
REGULATORY MATTERS
The Company's manufacturing facilities are subject to many federal, state
and local requirements relating to the protection of the environment. The
Company believes it is in compliance in all material respects with environmental
standards applicable to its operations. The Company does not anticipate material
capital expenditures to meet current environmental quality control standards,
but there can be no assurance that more stringent regulatory standards will not
be established which might require such expenditures. The metal building systems
manufactured by the Company must meet zoning and building code requirements
promulgated by local governmental agencies.
The Company's operations are also governed by laws and regulations relating
to workplace safety and worker health, principally the Occupational Safety and
Health Act and regulations thereunder which, among other requirements, establish
noise and dust standards. Management believes that it is in substantial
compliance with these laws and regulations and does not believe that future
compliance with such laws and regulations will have a material adverse effect on
its results of operations, liquidity or financial condition.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
The Company has a United States patent on its standing seam roof system.
The Company uses various trade names and trademarks in the conduct of its
business but has not registered such names or marks with any governmental
authorities.
EMPLOYEES
At December 31, 1997, the Company employed approximately 2,600 people, of
whom 135 were general and administrative personnel, approximately 125 were sales
personnel, approximately 420 were engineering personnel, and the remainder were
production workers (including drivers). The hourly production and maintenance
employees of the Company's Polymer Coil Coaters Division and Windsor Door
Division's Arkansas and California manufacturing facilities are represented by
labor unions; the remainder of the Company's employees are not represented by a
labor union or a collective bargaining agreement. The Company regards its
employee relations as excellent.
-17-
<PAGE>
COMPANY HISTORY
The Company and its predecessors have been engaged in the manufacture and
marketing of metal building systems since 1947. In July 1986, a management group
led by the Company's chief executive officer at that time, together with a
private investment firm, acquired the Company and Polymer Metals, Inc. from
Cronus Industries, Inc. in a $106.1 million leveraged buyout (the "1986 LBO").
Financing for the 1986 LBO consisted of $51.5 million of senior debt, $45.0
million of senior and subordinated notes, $4.2 million of cash on hand, and
approximately $5.4 million of equity. Following the 1986 LBO, the Company
operated under significant cash constraints and, in response thereto, the
Company sold certain of its non-core businesses, leased its Texas manufacturing
facility, which took the Company out of a significant market and resulted in
decreased sales and closed two manufacturing facilities in Iowa and Ohio in
order to cut costs. During the period following the 1986 LBO until the
Restructuring (defined below) was effected, the Company was able to retire $28.4
million of acquisition indebtedness through sales of assets and cash flow from
operations. By the end of 1990, the Company was experiencing significant
financial difficulties as a result of its negative net worth and substantial
interest payments, which severely limited the Company's capital spending and
working capital. As a result of the cash constraints and the general decline in
total metal buildings industry sales, the Company's net sales decreased from
$162.2 million in 1989 to $117.7 million in 1991, the Company incurred net
losses in each of 1989, 1990 and 1991, and the Company's metal buildings
industry market share decreased from 8.9% in 1989 to 8.4% in 1990 before
increasing to 8.6% in 1991.
In March 1991, the Company's debt and equity holders completed a financial
restructuring (the "Restructuring"), effective December 31, 1990, pursuant to
which the Company restructured its senior term and revolving credit loans and
$21.5 million of subordinated debt from the 1986 LBO was converted into
1,644,174 shares of Common Stock, representing 77.5% of the Company's then
outstanding Common Stock. In the Restructuring, the subordinated debt holders
gained control of the Company's Board of Directors. The Restructuring was
accounted for as a "quasi-reorganization," an elective accounting procedure that
permits a company emerging from financial difficulty to restate its accounts and
establish a fresh start in an accounting sense. The Restructuring permitted ABC
to meet all of its debt service obligations, although ABC remained highly
leveraged. Despite the Company's continued capital constraints during 1992, the
Company's revenues grew from $117.7 million in 1991 to $134.4 million in 1992,
and the Company's metal buildings industry market share increased from 8.6% to
9.7%.
In January 1993, ABC completed a recapitalization sponsored by Sterling
Ventures Limited in conjunction with New Street Capital Corporation (the
"Recapitalization"), which reduced interest expense, retired higher rate debt
and provided the Company with greater operating flexibility to pursue its growth
strategy and to invest in its businesses through its capital expenditures
program. In May 1994, the Company completed an initial public offering of an
aggregate of 1,825,000 shares of Common Stock at a purchase price of $10.00 per
share in an underwritten public offering managed by Dean Witter Reynolds Inc.
and Prudential Securities Inc. In addition, certain stockholders of the Company
sold an aggregate of 1,016,757 shares of Common Stock in such offering. The net
proceeds to the Company of the offering were used to repay long-term debt. The
Company incurred an extraordinary loss of $2.4 million (net of applicable income
tax benefit of $1.5 million) resulting from the write-off of the deferred
financing costs and unamortized discount related to the early extinguishment of
debt with the proceeds of the offering. In July 1995, certain stockholders of
the Company sold an
-18-
<PAGE>
aggregate of 1,466,250 shares of Common Stock at a price of $22.00 per share in
an underwritten public offering managed by Dean Witter Reynolds Inc. and Wheat
First Butcher Singer.
Beginning in 1992, following the 1991 Restructuring and the appointment of
Robert Ammerman as Chief Executive Officer and accelerating in 1993, 1994 and
1995 with the financial flexibility provided by the Recapitalization and the
Company's initial public offering, the Company began to pursue several strategic
initiatives to strengthen its core operations and to rebuild its metal buildings
industry market share. These strategic initiatives initially included aggressive
pricing of its products, but subsequently focused on enhancement of ABC's
builder/dealer network. The Recapitalization and the initial public offering
have enabled the Company to pursue a business strategy focused on increasing
long-term profitability through enhancement of its strong builder/dealer
network, technological innovations, cost efficiencies, internal investment and
capacity expansion. As a result, the Company's metal buildings industry sales
increased 14.8% in 1992, while metal buildings industry sales were flat, and the
Company's metal buildings industry sales increased 24.8%, 23.9% and 40.3% in
1993, 1994 and 1995, respectively, while metal buildings industry sales
increased 16.1%, 26.0% and 18.1%, respectively, as the U.S. economy emerged from
the economic recession that began in 1989. The Company's metal buildings
industry sales decreased 3.9% in 1996, while metal buildings industry sales were
flat, and increased 11.3% in 1997, while industry sales increased 12.2%.
Furthermore, ABC's domestic metal buildings industry market share (which is
measured in terms of sales dollars shipped as opposed to sales orders received)
increased from 8.6% in 1991 to 9.7% in 1992, and 10.4% in 1993, before
decreasing to 10.2% in 1994. ABC's domestic metal buildings industry market
share increased to 11.9% in 1995, but decreased to 11.6% in 1996 and to 11.5% in
1997. The decrease in market share in 1994 was primarily attributable to the
high product demand which exceeded the Company's manufacturing and engineering
capacity. The Company believes that the establishment of new engineering service
centers as well as the completion of the Company's new Virginia facility in
1995, have alleviated these capacity constraints. The decrease in sales and
market share in 1996 was primarily due to lower backlog at December 31, 1995
resulting from increased capacity in 1995 and lowering of sales prices in the
first half of 1996 to stimulate new business. In addition, the unusually severe
weather in the eastern half of the United States in early 1996 also adversely
affected 1996 sales. The slight decrease in metal buildings market share in 1997
was primarily due to the Company's focus on improving margins and optimizing
backlog. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
-19-
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and key employees of the Company are as follows:
Name Age Present Position with the Company
- ---- --- ---------------------------------
Robert T. Ammerman 58 Chief Executive Officer and Director
R. Charles Blackmon, Jr. 48 Executive Vice President--Chief
Financial Officer
Byron L. Brumfield 54 Vice President--Human Resources
William R. Buchholz 54 Vice President--Operations
R. Howard Burns 57 President--Windsor Door Division
Joseph M. Grigelevich, Jr. 55 President--American Modular
Technologies
Richard B. Haws 41 President--Residential/Light
Commercial Division
Barry L. Milling 54 Vice President--Technical Services
William W. Riley 65 President of ABC Transportation
Company
Anne M. Savage 42 Controller
Roy L. Smith 59 Vice President--Polymer Division
Joel R. Voelkert 49 President--Construction Products
Group
Mr. Ammerman has been Chief Executive Officer and a director since joining the
Company in July 1992, and served as President from July 1992 through August
1996. From 1973 until he joined the Company, Mr. Ammerman was employed by United
Dominion Industries, Inc. and its affiliates, including Varco-Pruden Buildings,
a manufacturer of metal buildings. Mr. Ammerman served in various capacities,
including Vice-President/General Manager Eastern Division of Varco-Pruden
Buildings and President of the Buildings segment of United Dominion Industries,
Inc., which included Varco-Pruden Buildings, Stran Buildings and AEP/Span. Mr.
Ammerman was Chairman and a member of the Executive Committee of the Metal
Building Manufacturers Association in 1995.
Mr. Blackmon has been Executive Vice President--Chief Financial Officer of the
Company since August 1996. Mr. Blackmon served as Vice President--Chief
Financial Officer of the Company from October 1994 to August 1996, as Vice
President--Finance and Administration of the Company from May 1992 to October
1994, as Controller of the Company from 1982 to May 1992 and as Assistant
Controller from 1981 to 1982. Mr. Blackmon is a CPA.
-20-
<PAGE>
Mr. Brumfield joined the Company as Vice President--Human Resources in August
1995. From July 1984 until he joined the Company, Mr. Brumfield served in
various human resources corporate positions with Hercules Inc., a major chemical
company. Prior to that he was employed in the aerospace, aluminum and hardboard
industries for 20 years.
Mr. Buchholz has been Vice President--Operations of the Company since January
1991. Mr. Buchholz is responsible for all manufacturing operations and
purchasing. From May 1979 to December 1990, Mr. Buchholz served the Company in
various capacities, including Manager of Industrial Engineering and plant
manager of the Company's former Houston facility.
Mr. Burns has been President of the Windsor Door division of the Company since
joining the Company in December 1997 in connection with the Company's
acquisition of the Windsor Door Division of United Dominion Industries, Inc. Mr.
Burns joined the predecessor of the Windsor Door division as President in 1986.
Prior to joining Windsor Door, Mr. Burns served in various positions for Ceco
Door Products Corporation, a division of The Ceco Corporation, including Vice
President--Manufacturing.
Mr. Grigelevich has been President of American Modular Technologies since
joining the Company in November 1996 in connection with the Company's
acquisition of the Liberty, North Carolina manufacturing operations of American
Modular Technologies, L.L.C. ("AMT"). Prior to joining the Company, Mr
Grigelevich served as a management consultant in 1995, and consulted for AMT.
From 1976 to 1995, Mr. Grigelevich served in various positions with Bird
Corporation, including Vice President--Finance & Administration from 1993 to
1995 and Treasurer from 1990 to 1993.
Mr. Haws joined the Company as President--Residential/Light Commercial Division
in December 1996. Prior to joining ABC, he was Manager-Light Construction of
American Iron and Steel Institute from October 1990 to November 1996 and Senior
Development Engineer for H.H. Robertson from March 1989 to September 1990.
Mr. Milling has served as Vice President--Technical Services since joining the
Company in October 1992, and is responsible for all functions of the Company's
Engineering Department. Prior to joining ABC, Mr. Milling served as Vice
President and General Manager of the Eastern Region of the Ceco-Building
Division of Robertson-Ceco Corp. since November 1990, and prior thereto held
various positions in operations, engineering, research and development, and
customer service at Robertson-Ceco Corporation since 1969. Mr. Milling is a
Registered Professional Engineer in a number of states.
Mr. Riley has been President of ABC Transportation Company since November 1992,
and served as Vice President/General Manager of ABC Transportation Company from
September 1979 until his election as President.
Ms. Savage has been Controller of the Company since January 1994. She joined the
Company in April 1993 as Manager of Customer Financial Services. From May 1983
until she joined the Company, Ms. Savage was employed by United Dominion
Industries, Inc. and held financial positions at its corporate office and two of
its metal building industry operating divisions, Varco-Pruden Buildings and
Stran Buildings. Prior to joining United Dominion Industries, Ms. Savage was an
audit manager at Ernst & Young. Ms. Savage is a CPA.
-21-
<PAGE>
Mr. Smith has been Vice President--Polymer Division since July 1986 and since
January 1981 has also served as President of Polymer Coil Coaters and its
predecessors. Prior to joining ABC, Mr. Smith was employed by United States
Steel Corporation (now known as USX Corp.) for 15 years in various capacities
including General Manager of Galvanizing Finishing.
Mr. Voelkert has been President--Construction Products Group of the Company
since August 1996. From April 1991 to August 1996 Mr. Voelkert served as Vice
President--Sales and Marketing of the Company. Prior thereto, Mr. Voelkert
served in various capacities with the Company since joining in 1976, including
as General Sales Manager, General Manager of Marketing Services, Director of
Marketing and District Sales Manager--Florida and the Caribbean. Mr. Voelkert
was responsible for starting the roofing and architectural division in 1987.
-22-
<PAGE>
ITEM 2. PROPERTIES
Because of the significance of freight and delivery charges to the
delivered cost of metal building systems, the Company believes it is
advantageous to sell and deliver its products within a 500 mile radius of its
manufacturing facilities. The following sets forth certain information with
respect to each of the Company's operating facilities:
<TABLE>
<CAPTION>
OWNED OR
LOCATION/PURPOSE AREA LEASED
---------------- ---- --------
<S> <C> <C>
Eufaula, Alabama/Executive Office and 295,000 square feet Owned
Manufacturing Facility.................................. 48.2 acres
Atlanta, Georgia/Manufacturing Facility.................. 30,000 square feet Leased
Birmingham, Alabama/Manufacturing 84,000 square feet Owned
Facility................................................ 6.0 acres
Birmingham, Alabama/Manufacturing Leased
Facility................................................ 56,000 square feet
Little Rock, Arkansas/Manufacturing 250,000 square feet Owned
Facility................................................ 18.3 acres
Maumelle, Arkansas/Manufacturing Leased
Facility................................................ 181,000 square feet
Olivehurst, California/Manufacturing 110,000 square feet Owned
Facility................................................ 20 acres
182,000 square feet Owned
El Paso, Illinois/Manufacturing Facility................. 10.3 acres
Carson City, Nevada/Manufacturing 142,000 square feet Owned
Facility................................................ 18.8 acres
Liberty, North Carolina/Manufacturing 160,000 square feet Owned
Facility................................................ 29.3 acres
La Crosse, Virginia/Manufacturing 197,000 square feet Owned
Facility................................................ 28 acres
</TABLE>
The Company also leases 29 distribution centers for its Windsor Door
Products and a 156,000 square foot facility in Jamestown, Ohio which is
currently not being utilized in the Company's operations. This facility ceased
operations in October 1990 as part of ABC's cost cutting efforts in response to
cash constraints resulting from its 1986 leveraged buyout. See "Item 1.
Business--Company History."
All of the Company facilities are in good operating condition.
-23-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that are incidental to
the conduct of its business. The Company is not involved in any pending or
threatened legal proceedings which the Company believes could reasonably be
expected to have a material adverse effect on the Company's financial condition,
liquidity or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
-24-
<PAGE>
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Common Stock is quoted on the Nasdaq National Market under the symbol
"ABCO". The Common Stock was initially offered to the public on April 28, 1994
at $10.00 per share. The following table sets forth for the periods indicated
the high and low reported sale prices per share for the Common Stock as reported
by the Nasdaq National Market.
High Low
---- ---
YEAR ENDED DECEMBER 31, 1996
----------------------------
First Quarter .......................... $24.375 $19.125
Second Quarter ......................... $34.375 $22.00
Third Quarter .......................... $29.75 $20.75
Fourth Quarter ......................... $26.75 $19.75
High Low
---- ---
YEAR ENDED DECEMBER 31, 1997
----------------------------
First Quarter .......................... $29.00 $23.375
Second Quarter ......................... $29.50 $24.75
Third Quarter .......................... $30.125 $26.00
Fourth Quarter ......................... $30.75 $25.00
The number of stockholders of record of Common Stock on March 16, 1998 was
approximately 95. On March 16, 1998, the last reported sale price of the Common
Stock as reported by the Nasdaq National Market was $30.00.
The Company has never paid cash dividends on the Common Stock.
-25-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales .............................................. $323,387 $273,953 $ 281,450 $ 204,666 $ 166,805
-------- -------- --------- --------- ---------
Cost and expenses:
Cost of sales ........................................ 268,023 229,260 228,088 164,694 140,431
Selling, general and administrative .................. 28,528 24,311 26,567 21,830 18,282
-------- -------- --------- --------- ---------
296,551 253,571 254,655 186,524 158,713
-------- -------- --------- --------- ---------
Operating income ....................................... 26,836 20,382 26,795 18,142 8,092
Interest expense (income) .............................. 1,061 143 (175) 1,369 3,362
-------- -------- --------- --------- ---------
Income before provision for income
taxes, extraordinary item and
cumulative effect of change in
accounting principle ................................. 25,775 20,239 26,970 16,773 4,730
Provision for income taxes(1) .......................... 9,924 7,792 9,380 6,318 1,921
-------- -------- --------- --------- ---------
Income before extraordinary item
and cumulative effect of change in
accounting principle(1) .............................. 15,851 12,447 17,590 10,455 2,809
Extraordinary loss on early extinguishment
of long-term debt(2) ................................. -- -- -- (2,425) (413)
Cumulative effect of change in accounting
for income taxes ..................................... -- -- -- -- 1,022
-------- -------- --------- --------- ---------
Net income(1) .......................................... $ 15,851 $ 12,447 $ 17,590 $ 8,030 $ 3,418
======== ======== ========= ========= =========
Earnings per share-Diluted(3):
Income before extraordinary item
and cumulative effect of change in
accounting principle(1) ............................ $ 2.81 $ 2.06 $ 2.68 $ 1.81 $ 0.66
Extraordinary loss on early
extinguishment of long-term debt(2) ................ -- -- -- (0.42) (0.10)
Cumulative effect of change in accounting
for income taxes ................................... -- -- -- -- 0.24
-------- -------- --------- --------- ---------
Net income per common and
common equivalent share(1)(3) ........................ $ 2.81 $ 2.06 $ 2.68 $ 1.39 $ 0.80
======== ======== ========= ========= =========
Weighted average number of common and
common equivalent shares
outstanding(3) ....................................... 5,649 6,040 6,554 5,780 4,288
======== ======== ========= ========= =========
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ...................................... $ 37,108 $ 13,710 $ 27,116 $18,182 $14,093
Total assets ......................................... 210,051 101,970 101,343 85,149 60,744
Current maturities of long-term debt(4) .............. 13,866 1,051 970 1,863 6,636
Long-term debt, net of current
maturities(5) ...................................... 71,407 10,872 7,760 12,376 18,071
Stockholders' equity(6) .............................. 55,796 41,466 53,511 37,075 12,822
</TABLE>
- ----------
(1) In 1995, the Company eliminated a valuation allowance on net operating loss
carryforwards which resulted in a one-time reduction of its tax provision
and corresponding increase in net income of $1,005,000, or $0.15 per share.
(2) In 1994, the Company incurred an extraordinary loss of $2,425,000 (net of
applicable tax benefit of $1,436,000), resulting from the write-off of the
deferred financing costs and unamortized discount related to the early
extinguishment of its remaining senior notes with the proceeds from the
Company's initial public offering. In 1993, the Company extinguished
$4,415,000 principal amount of senior notes prior to scheduled maturity,
which resulted in an extraordinary loss of $413,000 (net of income tax
benefit of $259,000).
(3) The share and per share information for 1996, 1995, 1994 and 1993 has been
restated to reflect share and per share information in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
which was required to be adopted by the Company effective with its
financial statements for the year ended December 31, 1997.
(4) Includes $10,624,000 used to cash collateralize letters of credit issued by
its previous lenders until replacement letters of credit are issued. As
replacement letters of credit are issued, the cash is being used to pay
down the credit facility.
(5) Net of unamortized discount of $3,875,000 on the Company's New Class A
Notes and New Class B Notes at December 31, 1993, which notes were repaid
from the net proceeds to the Company from the Company's initial public
offering in 1994.
(6) Includes a reduction of $28,451,000, $26,531,000 and $1,071,000 in 1997,
1996 and 1995, respectively, which represents the Company's purchases of
Treasury Stock.
-27-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements in this Annual Report on Form 10-K concerning the Company's
business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; and product line growth, together
with other statements that are not historical facts, are "forward-looking
statements" as that term is defined under the Federal Securities Laws.
Forward-looking statements are subject to risks, uncertainties and other factors
which could cause actual results to differ materially from those stated in such
statements. Such risks, uncertainties and factors include, but are not limited
to, industry cyclicality, fluctuations in customer demand and order pattern, the
seasonal nature of the business, changes in pricing or other actions by
competitors, and general economic conditions, as well as other risks detailed in
the Company's filings with the Securities and Exchange Commission, including
this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Net sales increased 18.0% to $323.4 million in 1997 from $274.0 million in
1996. Backlog at December 31, 1997 of $96.6 million was 17.7% higher than
backlog at December 31, 1996. The Company's metal buildings industry domestic
market share, which is measured in terms of sales dollars shipped by the
Construction Products Group (consisting of the Company's Buildings Group and
Roofing and Components Group), decreased slightly to 11.5% compared to 11.6% in
1996. Net sales in the Buildings Group (consisting of the Company's Metal
Buildings, Heavy Fabrication, Self-Storage and International divisions) were
$237.8 million, up 10.4% from $215.5 million in 1996. This increase was
primarily the result of a higher backlog entering the year and good order intake
at somewhat higher prices throughout the year as well as the absence of the
severe weather conditions which adversely affected the first quarter of 1996.
Net sales in the Roofing and Components Group (consisting of the Company's
Roofing and Components divisions), increased 15.5% to $51.7 million from $44.8
million in 1996 due to continued increasing acceptance of metal in the roofing
market, continued expansion of the preferred roofing contractor network and
growth in the components business. Gross sales of the Polymer Group increased
18.8% to $21.8 million from $18.4 million in 1996. This increase was the result
of the line speed upgrade completed in early 1997 which significantly increased
the production capacity of this Group. Net sales after eliminations in the
Polymer Group increased to 10.1% to $9.9 million from $9.0 million in 1996 as
the capacity expansion allowed the Group to increase its production for third
party customers. Gross sales before eliminations in the Transportation Group
increased 12.6% to $23.1 million from $20.5 million in 1996. Net sales after
eliminations increased 25.7% to $4.8 million from $3.8 million in 1996 due to
increased revenues from hauling of third party loads.
On November 26, 1996, the Company purchased certain assets of the North
Carolina manufacturing facility of American Modular Technologies ("AMT"), which
manufactures modular structures. Net sales of AMT in 1997 were $11.4 million
compared to $1.0 million during the one-month period for which it was owned by
the Company in 1996. AMT's increase in sales accounted for approximately 4% of
the total 18% increase in net sales for the Company in 1997 compared to 1996.
-28-
<PAGE>
On December 4, 1997 the Company completed the acquisition of certain net
assets of Windsor Door, which manufactures and markets steel sectional upward
acting doors for residential and commercial applications, rolling steel doors
for industrial applications and has a metal stampings manufacturing business.
The acquisition of Windsor Door contributed $7.8 million to net sales for the
one-month period following the acquisition, which accounts for approximately 3%
of the total 18% increase in sales in 1997 compared to 1996.
Gross profit for 1997 increased 23.9% to $55.4 million from $44.7 million
in 1996. Gross margins increased 4.9% to 17.1% in 1997 compared to 16.3% in
1996. This increase was primarily caused by higher volume and somewhat higher
selling prices as well as effective cost containment. Gross margins in 1996 had
been adversely affected by lower selling prices during part of the year
resulting from the Company's strategy to be market and price aggressive in order
to build backlog and better utilize expanded production capabilities.
Selling, general and administrative expenses for 1997 increased 17.3% to
$28.5 million from $24.3 million in 1996. As a percentage of net sales, these
expenses decreased slightly to 8.8% in 1997 from 8.9% in 1996. The decrease
resulted from the Company's cost containment strategy to reduce costs as much as
possible without adversely affecting long-term growth objectives.
The Company had net interest expense of $1.1 million in 1997 compared to
$.1 million in 1996. The increase in interest expense resulted partially from
the Company's purchase of Windsor Door for $58.0 million in December 1997. The
transaction was financed by borrowings under its new credit facility which it
entered into concurrent with the acquisition. Prior to December, interest
expense was higher in 1997 due to higher Revolver borrowings during the year and
a lower restricted cash balance on which the Company earned interest income.
Net income for 1997 was $15.9 million, an increase of 27.3% compared to
$12.4 million in 1996.
1996 COMPARED TO 1995
Net sales decreased 2.7% to $274.0 million in 1996 from $281.5 million in
1995. Backlog at December 31, 1996 was 41.9% higher than backlog at December 31,
1995. The Company's metal buildings industry domestic market share, which is
measured in terms of sales dollars shipped by the Construction Products Group
(consisting of the Company's Buildings Group and Roofing and Components Group),
decreased slightly to 11.6% compared to 11.9% in 1995. Net sales in the
Buildings Group (consisting of the Company's Metal Buildings, Heavy Fabrication,
Mini-Warehouse (now Self Storage) and International divisions) were $215.5
million, down 4.7% from $226.1 million in 1995. This decrease was primarily the
result of lower volume in the first quarter of 1996, which was caused by a
combination of a low backlog coming into the year plus the effect of the severe
weather conditions across most U.S. markets, which caused customers to delay
shipment of their orders as construction sites were not yet prepared. Also
contributing to the decrease in net sales was lower per unit selling prices as a
result of the pass-through of cost decreases from suppliers, compounded further
by the aggressive pricing strategy implemented during the first half of 1996 to
rebuild backlog. Net sales in the Roofing and Components Group (consisting of
the Company's Roofing and Components divisions), increased 6.8% to $44.8 million
from $41.9 million in 1995 due to continued increasing acceptance of metal in
the roofing market and continued expansion of the
-29-
<PAGE>
preferred roofing contractor network. Gross sales of the Polymer Group increased
.7% to $18.4 million from $18.3 million in 1995. This Group has operated
essentially at capacity for the last two years; consequently, a capital project
was begun in late 1996 and completed in January 1997 which increased the
capacity of this Group by approximately 40%. Net sales after eliminations in the
Polymer Group decreased 14.0% to $9.0 million from $10.4 million in 1995 as
proportionately more of the Group's resources were directed toward production
for other divisions of the Company as opposed to third parties. Gross sales
before eliminations in the Transportation Group increased 6.3% to $20.5 million
from $19.3 million in 1995. Net sales after eliminations increased 27.6% to $3.8
million from $3.0 million in 1995 due to increased revenues from hauling of
third party loads.
Gross profit for 1996 decreased 16.3% to $44.7 million from $53.4 million
in 1995. Gross margins decreased 14.0% to 16.3% in 1996 compared to 19.0% in
1995. This decrease was primarily caused by lower volume plus lower selling
prices which were the result of the Company's strategy through the first half of
1996 to be market and price aggressive in order to build backlog and better
utilize expanded production capabilities.
Selling, general and administrative expenses for 1996 decreased 8.5% to
$24.3 million from $26.6 million in 1995. As a percentage of net sales, these
expenses decreased to 8.9% in 1996 from 9.4% in 1995. The decrease resulted from
the Company's strategy to mitigate the impact of reduced volume and selling
prices by reducing costs wherever possible without adversely affecting its
long-term growth objectives.
The Company had net interest expense of $.1 million in 1996 compared to net
interest income in 1995 of $.2 million. The increase in interest expense
resulted primarily from the Company's repurchase of its common stock and, to a
much lesser degree, the purchase of certain assets of AMT's Liberty, North
Carolina manufacturing operations which has caused it to incur borrowings under
its credit facility. Additionally, the Company was earning less interest income
on the unused proceeds from its Industrial Revenue Bond transaction which is
included on the accompanying Consolidated Balance Sheets in Other Assets, as
most of these proceeds have been invested in the Virginia manufacturing
facility.
Net income for 1996 was $12.4 million, which is comparable to $16.6 million
in 1995, which was net income before the $1.0 million one-time tax provision
credit for the reversal of a valuation allowance on net operating loss
carryforwards. Including this one-time credit, net income in 1995 was $17.6
million.
-30-
<PAGE>
The following table presents the Company's gross sales attributable to each
of its operating divisions for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Buildings Group .......................... $ 237,818 $ 215,456 $ 226,119 $ 157,661 $ 128,569
Roofing and Components
Group ................................... 51,737 44,790 41,943 33,313 25,608
Transportation Group(1) .................. 23,120 20,535 19,314 16,272 13,430
Polymer Group(2) ......................... 21,829 18,379 18,251 17,368 16,398
American Modular
Technologies(3) ......................... 11,420 962 -- -- --
Windsor Door(4) .......................... 7,783 -- -- -- --
--------- --------- --------- --------- ---------
Gross Sales .............................. 353,707 300,122 305,627 224,614 184,005
Eliminations ............................. (30,320) (26,169) (24,177) (19,948) (17,200)
--------- --------- --------- --------- ---------
Net sales ................................ $ 323,387 $ 273,953 $ 281,450 $ 204,666 $ 166,805
========= ========= ========= ========= =========
</TABLE>
- ----------
(1) Includes intercompany sales of $18.4 million, $16.7 million, $16.3 million,
$12.8 million and $10.9 million, respectively.
(2) Includes intercompany sales of $12.0 million, $9.4 million, $7.8 million,
$7.1 million and $6.3 million, respectively.
(3) American Modular Technologies was purchased on November 26, 1996. Data for
1996 represents net sales for the one-month period following the
acquisition.
(4) Windsor Door was purchased on December 4, 1997. Data for 1997 represents
net sales for the one-month period following the acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations from cash flows from
operations, bank borrowings and sales of its debt and equity securities.
Net cash provided by operations was $14.9 million, $14.0 million and $24.2
million in 1997, 1996 and 1995, respectively. Net income plus depreciation and
amortization was $21.1 million, $16.6 million and $20.9 million in the same
periods, respectively. For 1997, cash provided by continuing operations was
lower than net income plus depreciation and amortization due to an increased
investment in working capital which was required to support the Company's higher
sales volume throughout the year. For 1996, cash provided by continuing
operations was lower than net income plus depreciation and amortization due to
an increased investment in working capital which was required to support fourth
quarter volume. For 1995, cash provided by operating activities exceeded net
income plus depreciation and amortization primarily due to further improvement
in working capital management which was partially offset by an increase in net
noncurrent assets and liabilities.
Net cash used in investing activities was $68.7 million, $9.6 million and
$5.4 million in 1997, 1996 and 1995, respectively. For 1997, this was primarily
the result of the acquisition of the Windsor Door division for $58.7 million,
including transaction costs of $1.0 million and
-31-
<PAGE>
excluding $.2 million of cash acquired. Also in 1997, the Company made additions
to property, plant and equipment of $10.0 million, increased in investment in
its China Joint Venture by $.5 million and applied the remaining $.5 million of
Restricted Cash to capital expenditures related to the Virginia manufacturing
facility. The Restricted Cash resulted from the proceeds of the Industrial
Revenue Bond Financing, which was completed on December 7, 1994, for the
construction of the new Virginia manufacturing facility. The Restricted Cash was
drawn down as cash was expended and various phases of construction were
completed on that facility. For 1996, this was primarily the result of additions
to property, plant and equipment of $9.3 million, the purchase of certain assets
of AMT for $2.0 million, and the investment in the China Joint Venture of $2.9
million partially offset by the application of $3.6 million of Restricted Cash
to capital expenditures related to the Virginia manufacturing facility. For
1995, this was primarily the result of additions to property, plant and
equipment of $10.3 million partially offset by the application of $5.5 million
of Restricted Cash to capital expenditures related to the Virginia manufacturing
facility.
Net cash provided by (used for) financing activities was $70.3 million,
($21.5) million and ($6.7) million for 1997, 1996 and 1995, respectively. For
1997 this was largely the result of the incurrence of $59.9 million of debt
primarily in connection with the acquisition of Windsor Door. Additionally, the
Company drew down $13.2 million on its revolving credit facility, $10.6 million
of which was used to collateralize letters of credit which had been issued by
its previous lender until replacement letters of credit could be issued by its
new lender. As the replacement letters of credit are issued, the revolving
facility is being reduced accordingly. Other net proceeds from the revolving
facility of $2.6 million were used to finance normal operating activities of the
Company. Long term debt repayments of $1.3 million and purchases of treasury
stock of $1.9 million were funded by cash provided by operating activities and
by borrowings under the Company's revolving credit facility. For 1996, long-term
debt repayments of $1.0 million and purchases of treasury stock of $25.5 million
were funded by cash provided by operating activities and by borrowings under the
Company's revolving credit facility. For 1995, long-term debt repayments,
payment of stock registration costs and purchases of treasury stock were funded
by cash provided by operating activities.
The Company currently has budgeted an aggregate of $11.6 million for
capital expenditures in 1998, consisting of $2.0 million for new technical and
business systems, $.4 million to complete the Virginia manufacturing facility
and $9.2 million primarily for machinery and equipment at its other existing
facilities, including the Windsor Door facilities purchased in December 1997.
The Company expects to be able to fund these expenditures from cash provided by
operations and borrowings under its Credit Facility described below. There can
be no assurance that budgeted capital expenditures will be made as planned or
that additional capital expenditures will not be required.
In December 1997, the Company purchased certain net assets of Windsor Door
("Windsor") for $59.0 million, including transaction costs of $1.0 million.
Pursuant to the terms of the purchase agreement, the purchase price is subject
to further adjustment once a final determination is made for the amount of
working capital transferred as of the date of closing. The transaction was
accounted for as a purchase and the cost of the acquisition was allocated to the
assets and liabilities based on their estimated respective fair values. The
total cost of the acquisition, which was financed by proceeds from the Company's
Credit Facility, exceeded the fair value of net assets acquired by $29.7 million
which was assigned to goodwill and is being amortized over forty years.
-32-
<PAGE>
Concurrent with the purchase of Windsor in December 1997, the Company
replaced its previous revolving credit facility with a revolving credit and term
loan facility ("Credit Facility") with Canadian Imperial Bank of Commerce
("CIBC"), as administrative agent, and certain other lenders. The Credit
Facility includes a $40 million term loan facility and a revolving credit
facility ("Revolver") with maximum borrowings of $75 million, including a $30
million letter of credit sub-facility and a $5 million swingline sub-facility.
On December 4, 1997, the full amount of the term loan was borrowed to finance
part of the Windsor acquisition. The term loan requires semiannual principal
payments commencing July 1998 of $2 million to $9 million, with a final payment
due January 2003. Also on December 4, 1997 $19.0 million of the Revolver was
borrowed to finance the balance of the Windsor acquisition and $10.6 million of
the Revolver was borrowed to cash collateralize outstanding letters of credit
which had been issued by the Company's prior lender until replacement letters of
credit could be issued by CIBC. This $10.6 million of proceeds are carried as
restricted cash on the accompanying Consolidated Balance Sheets. This amount of
borrowing has been included in current portion of long-term debt as the Company
intends to repay the Credit Facility as soon as the replacement letters of
credit are issued and the underlying cash collateral is returned by the previous
lender. The Credit Facility expires on January 3, 2003 and bears interest at a
rate equal to, at the option of the Company, either (i) in the case of
Eurodollar loans, the sum of the interest rate in the London interbank market
for loans in an amount substantially equal to the amount of borrowing and for
the period of borrowing selected by the Company plus a margin of between
one-half percent and one and one-half percent (depending on the Company's
consolidated leverage ratio (as defined in the credit agreement) and
consolidated interest coverage ratio (as defined in the credit agreement)) or
(ii) the higher of (a) CIBC's prime or base rate or (b) one-half percent plus
the latest overnight federal funds rate. At December 31, 1997 the interest rate
on Eurodollar borrowings under the Credit Facility of $76.7 million was 6.97%
and the interest rate on $1.1 million of base rate borrowings was 8.5%. Interest
is payable quarterly in the case of base rate loans and on maturity dates or
every three months, whichever is shorter, in the case of Eurodollar loans. The
Company is required to pay a fee of .25% per year for the unused portion of the
Credit Facility and 1.125% per year on outstanding letters of credit. The Credit
Facility is guaranteed by all of the Company's domestic subsidiaries and
collateralized by substantially all of the Company's assets, and requires the
Company to maintain certain financial ratio covenants beginning the first
quarter of 1998. The Credit Facility limits the Company's ability to incur debt,
to sell or dispose of assets, to create or incur liens, to make additional
acquisitions, to pay dividends, to purchase or redeem the Company's stock and to
merge or consolidate with any other entity, and provides the banks with the
right to require the payment of all amounts outstanding under the Credit
Facility, if a change in control of the Company occurs.
In December 1994, the Company borrowed $9.7 million from the Industrial
Development Authority of Mecklenburg County, Virginia (the "IDA") to finance the
construction of the Company's new Virginia manufacturing facility. The IDA
financed the loan through the issuance of industrial development revenue bonds
("IDA Bonds"). The loan bears interest at a variable rate equal to the rate
necessary to allow the IDA bonds to be sold at 100% of the principal amount
thereof; the Company has the option to change the interest rate to a fixed rate
for a specified term (which may be the remaining term of the IDA Bonds). The IDA
Bonds mature December 1, 2004, are subject to mandatory sinking fund redemption
of $.97 million per year, and are subject to mandatory redemption under certain
circumstances. The Company has secured its obligations in respect of the IDA
Bonds through the issuance of a letter of credit, which reduces each year by the
amount of principal payments.
-33-
<PAGE>
At December 31, 1997, the Company's outstanding debt (including current
portion) was $85.3 million, which includes $40 million of the term loan, $37.8
million of the Revolver and $6.8 million of IDA Bonds used to finance the
Virginia manufacturing facility.
On November 26, 1996, the Company acquired certain assets of the Liberty,
North Carolina facility of American Modular Technologies ("AMT") for $2.0
million which approximated the fair value of the assets acquired. AMT produces
modular structures used for convenience stores which are sold to major oil
companies and its technology has also been used for correctional facilities,
schools and warehouses.
The Board of Directors authorized the Company to repurchase up to 1.3
million shares of its Common Stock to be purchased at any time in the open
market, subject to market conditions. At December 31, 1997 and 1996 the Company
had repurchased 1.1 million shares costing $28.5 million and 1.0 million shares
costing $26.5 million, respectively. These shares are reflected as Treasury
Stock on the accompanying Consolidated Balance Sheets and were purchased from a
combination of cash provided by operations and borrowings under the Company's
revolving credit facility.
In August 1995, the Company entered into a joint venture with China
Renaissance Industries, L.P. to pursue the manufacture of metal building systems
in the People's Republic of China ("PRC") for sale throughout most of Southeast
Asia. The Company has a 30% interest in the joint venture and exclusively
licensed to the joint venture on a royalty-free basis the right to use certain
elements of the Company's technology. The Company will receive a technology
license fee of $1.5 million, of which it received $.75 million during 1995. The
joint venture completed construction of its initial manufacturing facility in
the PRC in October 1996. At December 31, 1997 and 1996 the Company had $4.4
million and $3.8 million, respectively, invested in the joint venture, which was
funded by cash provided by operating activities, and may invest up to an
additional $.1 million in 1998.
The Company believes that the cash generated from operations and borrowings
under the Credit Facility will be sufficient to meet its working capital and
capital expenditure requirements, as well as the anticipated additional capital
to be invested in its joint venture in China, through at least 1998. There can
be no assurance that liquidity would not be impacted by a decline in general
economic conditions and higher interest rates which would affect the Company's
ability to obtain external financing.
The Company carries insurance on its activities in scope and amounts which
it believes are reasonable in light of the risks of the business. However, there
can be no assurance that it will not incur a liability which is not covered or
is in excess of coverage, which liability could have a material adverse effect
on the Company.
INFLATION
The Company has from time to time in the past experienced increases in
costs of sales and operating costs, including the costs of raw materials,
supplies and labor due to inflation. The Company has generally been able to
offset the effects of such inflation through periodic price increases. In recent
years, the rate of domestic inflation has abated significantly. No assurance can
be given, however, that the inflation rate will not increase in future years or
that the Company will be able to increase prices to match increases in costs.
-34-
<PAGE>
YEAR 2000 COMPLIANCE
The Company is currently in the process of identifying, evaluating and
implementing changes to computer programs necessary to address the year 2000
issue. This issue affects computer systems that have date sensitive programs
that may not properly recognize the year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail, resulting in business interruption. The Company does not believe the cost
of converting all internal systems to be year 2000 compliant will be material to
its financial condition or results of operations. Costs related to the year 2000
issue are being expensed as incurred.
The year 2000 issue is expected to affect the systems of various entities
with which the Company interacts, including the Company's builder/dealers,
suppliers and vendors. There can be no assurance that the systems of other
companies on which the Company's systems rely will be timely converted, or that
a failure by another company's systems to be year 2000 compliant would not have
a material adverse effect on the Company.
FLUCTUATIONS OF QUARTERLY OPERATING RESULTS
The Construction Products business is seasonal in nature in that shipments
are normally lower in the first half of each year compared to the second half
because of unfavorable weather conditions for construction, particularly in the
northern portion of the United States, and normal business planning cycles
affecting construction. This seasonality not only affects sales, but also
profitability for the quarter. See Note 10 of Notes to Consolidated Financial
Statements for selected unaudited quarterly financial data for the years ended
December 31, 1997 and 1996. The quarterly data reflect, in the opinion of the
Company, all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the results of operations for such periods.
Results of any one or more quarters are not necessarily indicative of annual
results or continuing trends.
-35-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
The following consolidated financial statements of American Buildings
Company and Subsidiaries are filed as part of this report.
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
-36-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
American Buildings Company:
We have audited the accompanying consolidated balance sheets of AMERICAN
BUILDINGS COMPANY (a Delaware corporation) AND SUBSIDIARIES as of December 31,
1997 and 1996 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Buildings Company and
subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 10, 1998
37
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash (including restricted cash of $10,624 in 1997) $ 16,560 $ 0
Accounts receivable, net of allowance for doubtful accounts of $4,375 and $3,345
in 1997 and 1996, respectively 61,574 36,332
Inventories 32,159 19,823
Deferred income taxes 4,059 3,333
Prepaid expenses 1,855 1,084
-------- --------
Total current assets 116,207 60,572
PROPERTY, PLANT, AND EQUIPMENT, NET 54,607 33,194
DEFERRED INCOME TAXES 892 1,313
GOODWILL, NET 29,669 0
OTHER ASSETS, NET 8,676 6,891
-------- --------
$210,051 $101,970
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 13,866 $ 1,051
Accounts payable 44,958 32,306
Accrued liabilities 19,109 12,137
Accrued income taxes 1,166 1,368
-------- --------
Total current liabilities 79,099 46,862
-------- --------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 71,407 10,872
-------- --------
OTHER NONCURRENT LIABILITIES 3,749 2,770
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 4,000 shares authorized, no shares issued and
outstanding at 1997 and 1996 0 0
Common stock, $.01 par value; 25,000 shares authorized, 6,339 and 6,312 shares
issued at 1997 and 1996, respectively 63 63
Additional paid-in capital 31,448 31,049
Retained earnings 52,736 36,885
-------- --------
84,247 67,997
Less treasury stock, at cost (1,069 and 1,001 shares in 1997 and 1996,
respectively) (28,451) (26,531)
-------- --------
Total stockholders' equity 55,796 41,466
-------- --------
$210,051 $101,970
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
38
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET SALES $323,387 $273,953 $281,450
-------- -------- --------
COSTS AND EXPENSES:
Cost of sales 268,023 229,260 228,088
Selling, general, and administrative 28,528 24,311 26,567
-------- -------- --------
296,551 253,571 254,655
-------- -------- --------
OPERATING INCOME 26,836 20,382 26,795
INTEREST EXPENSE (INCOME), NET 1,061 143 (175)
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 25,775 20,239 26,970
PROVISION FOR INCOME TAXES 9,924 7,792 9,380
-------- -------- --------
NET INCOME $ 15,851 $ 12,447 $ 17,590
======== ======== ========
EARNINGS PER SHARE:
Basic $3.00 $2.18 $2.82
======== ======== ========
Diluted $2.81 $2.06 $2.68
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 5,291 5,699 6,231
======== ======== ========
Diluted 5,649 6,040 6,554
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
39
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------ ------ ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 6,225 $62 $30,165 $ 6,848 $ 0 $37,075
Net income 0 0 0 17,590 0 17,590
Stock issued to employees 3 0 0 0 0 0
Exercise of stock options 9 0 124 0 0 124
Stock registration costs 0 0 (207) 0 0 (207)
Purchase of 46 shares of treasury stock 0 0 0 0 (1,071) (1,071)
----- --- ------- ------- -------- -------
BALANCE, DECEMBER 31, 1995 6,237 $62 $30,082 $24,438 $ (1,071) $53,511
Net income 0 0 0 12,447 0 12,447
Exercise of stock options 75 1 967 0 0 968
Purchase of 955 shares of treasury stock 0 0 0 0 (25,460) (25,460)
----- --- ------- ------- -------- -------
BALANCE, DECEMBER 31, 1996 6,312 $63 $31,049 $36,885 $(26,531) $41,466
Net income 0 0 0 15,851 0 15,851
Exercise of stock options 27 0 399 0 0 399
Purchase of 68 shares of treasury stock 0 0 0 0 (1,920) (1,920)
----- --- ------- ------- -------- -------
BALANCE, DECEMBER 31, 1997 6,339 $63 $31,448 $52,736 $(28,451) $55,796
===== === ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
40
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
------- ------- -------
Net income $15,851 $12,447 $17,590
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 5,219 4,128 3,353
Gain on sales of fixed assets (47) (64) (102)
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable, net (8,317) (6,859) (984)
Inventories (707) (4,119) 1,226
Accounts payable 1,431 8,549 (711)
Accrued liabilities and income taxes 3,205 452 5,726
Other working capital changes (1,288) (616) (1,176)
Other, net (415) 113 (695)
------- ------- -------
Total adjustments (919) 1,584 6,637
------- ------- -------
Net cash provided by operating activities 14,932 14,031 24,227
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (9,955) (9,335) (10,316)
Purchase of acquired businesses, net of cash acquired (58,734) (2,037) 0
Decrease in restricted cash 466 3,634 5,537
Investment in China Joint Venture (525) (2,940) (900)
Proceeds from sales of fixed assets 47 94 237
Proceeds from sales of nonoperating property, net 0 952 0
------- ------- -------
Net cash used in investing activities (68,701) (9,632) (5,442)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 399 968 124
Proceeds from issuance of debt, net 59,893 0 0
Long-term debt payments (1,264) (970) (5,509)
Changes in revolving credit facility, net 13,221 3,963 0
Payment of stock registration costs 0 0 (207)
Purchase of treasury stock (1,920) (25,460) (1,071)
------- ------- -------
Net cash provided by (used for) financing activities 70,329 (21,499) (6,663)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 16,560 (17,100) 12,122
CASH, BEGINNING OF YEAR 0 17,100 4,978
------- ------- -------
CASH, END OF YEAR $16,560 $ 0 $17,100
======= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 968 $ 559 $ 808
======= ======== =======
Cash paid for income taxes $10,328 $ 7,748 $10,562
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
41
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
American Buildings Company and its wholly owned subsidiaries (the
"Company"), after elimination of all material intercompany items.
The Company is a diversified manufacturer and marketer of construction
products and services for nonresidential and residential applications. The
Company designs, manufactures, and sells metal building systems for
industrial, commercial, institutional, and other nonresidential markets.
Metal building systems consist of structural framing and wall and roof
panels. The Company's metal building systems are generally custom-designed
to meet the specific needs of the end user and to allow for easy on-site
assembly. The Company markets its metal building systems nationwide
through authorized builder/dealers. The Company has a separate roofing
products' sales, engineering, and customer service organization, which
markets and sells the Company's roofing products to its builder/dealer
network and to preferred roofing contractors. In addition, the Company
paints steel coils, manufactures and markets building components and
self-storage systems, and provides specialty engineering services for
large, complex building structures. The Company markets and produces
modular structures and residential steel framing systems and also operates
an ICC-licensed trucking subsidiary.
In December 1997, the Company completed the acquisition of Windsor Door (a
division of United Dominion Industries, Inc.) ("Windsor"). Windsor
manufactures and markets steel sectional upward acting doors for
residential and commercial applications, which are sold nationwide through
independent distributors and company-owned distribution centers. Windsor
also produces rolling steel doors for industrial uses and has a metal
stampings manufacturing operation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recorded upon delivery of product to the customer.
42
<PAGE>
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," effective for fiscal years ending after December 15, 1997. The
Company has adopted the new guidelines for the calculation and
presentation of earnings per share, and all prior periods have been
restated. Basic earnings per share are based on the weighted average
number of shares outstanding. Diluted earnings per share are based on the
weighted average number of shares outstanding and the dilutive effect of
stock options outstanding (using the treasury stock method). For the years
ending December 31, 1997, 1996, and 1995, outstanding options of 142, 0,
and 100, respectively, have been excluded from diluted weighted average
shares outstanding, as the exercise price exceeded the average stock price
and, thus, their impact was antidilutive.
CASH
The Company considers all highly liquid investments with purchased
maturities of three months or less to be cash equivalents.
In December 1997, the Company canceled its previous credit facility and
entered into a new credit facility. As of December 31, 1997, the Company's
prior lender required the Company to deposit funds with it to support
outstanding letters of credit of $10,624. The Company expects to withdraw
the funds and pay down its revolving credit facility as the Company issues
replacement letters of credit under its new credit facility.
INVENTORIES
Inventories are stated at the lower of cost or market. The last-in,
first-out ("LIFO") method is used for determining the cost for
approximately 62% and 95% of the Company's inventories at December 31,
1997 and 1996, respectively. The first-in, first-out method is used for
determining the cost of all other inventories, including direct labor and
overhead incurred in the manufacturing process. Market is defined as
replacement cost for raw materials and net realizable value for work in
process and finished goods.
Inventories consist of the following:
1997 1996
------- -------
Raw materials $20,511 $17,151
Work in process 5,126 2,862
Finished goods 7,239 357
------- -------
32,876 20,370
Allowance to state inventories at LIFO costs (717) (547)
------- -------
$32,159 $19,823
======= =======
43
<PAGE>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is
provided for using the straight-line method over the estimated useful
lives of 20 to 40 years for buildings, approximately 7 to 15 years for
machinery and equipment, and 3 to 15 years for all other items. Leasehold
improvements are amortized over the shorter of the useful life of the
asset or the term of the lease.
Property, plant, and equipment, at cost, consist of the following:
1997 1996
------- -------
Land $ 1,923 $ 938
Buildings and leasehold improvements 26,594 20,710
Machinery and equipment 69,500 50,232
------- -------
98,017 71,880
Less accumulated depreciation 43,410 38,686
------- -------
$54,607 $33,194
GOODWILL
Goodwill is amortized on a straight-line basis over the lesser of its
estimated life or 40 years. Amortization expense was $78 in 1997.
LONG-LIVED ASSETS
The Company periodically reviews the values assigned to long-lived assets,
such as property and equipment and goodwill, and reviews the amortization
periods on an annual basis. Recoverability is measured based on the
anticipated undiscounted cash flows from operations. Management believes
that the long-lived assets in the accompanying balance sheets are
appropriately valued.
OTHER ASSETS
The Company is the beneficiary of life insurance policies covering certain
current and former management employees to fund the Company's obligations
to such employees under a noncontributory retirement and death benefit
plan (Note 7). The cash surrender value of these life insurance policies
is $2,179 and $1,899 at December 31, 1997 and 1996, respectively, and is
included in other assets in the accompanying balance sheets.
In December 1994, the Company obtained proceeds of $9,637, net of closing
costs of $63, related to the issuance of industrial revenue bonds (Note
4). The proceeds were restricted to purchases of property, equipment, and
buildings for the Company's Virginia manufacturing facility. At December
31, 1997 and 1996, $0 and $466, respectively, of the proceeds were
available for future purchases of property, equipment, and buildings and
have been included in other assets in the accompanying balance sheets.
44
<PAGE>
ACCRUED LIABILITIES
The Company accrues estimated insurance claims for the self-insured
portion of its workers' compensation, property, casualty and health
insurance plans. At December 31, 1997 and 1996, insurance claim reserves
of $5,592 and $4,711, respectively, were included in accrued liabilities.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are
limited due to the wide variety of customers and markets for which the
Company's services are provided, as well as their dispersion across many
different geographic areas. As a result, as of December 31, 1997, the
Company does not consider itself to have any significant concentrations of
credit risk.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
3. ACQUISITIONS
On December 4, 1997, the Company completed the acquisition of certain net
assets of Windsor for $57,950 in cash, including an estimated working
capital adjustment. Pursuant to the terms of the purchase agreement, the
purchase price is subject to further adjustment once a final determination
is made for the amount of working capital transferred as of the date of
close. The transaction was financed from proceeds from the Company's
credit facility (Note 4) and was accounted for as a purchase. The cost of
the acquisition has been allocated to assets and liabilities based on
their estimated respective fair values. Total consideration of $58,950,
including transaction expenses of $1,000, exceeded the fair value of net
assets purchased by $29,747, which has been assigned to goodwill.
The results of the operations of Windsor are included in the accompanying
financial statements since the date of acquisition. The following
unaudited pro forma information was prepared assuming that the transaction
was consummated on January 1, 1996:
45
<PAGE>
1997 1996
-------- --------
Revenue $412,004 $361,047
Net income 15,403 12,317
Earnings per share:
Basic $2.91 $2.16
Diluted 2.73 2.04
This pro forma information is not necessarily indicative of the results of
operations that would have been attained had the acquisition been
consummated on January 1, 1996 or that may be attained in the future.
During November 1996, the Company acquired certain assets of the Liberty,
North Carolina, facility of American Modular Technologies ("AMT") for
$2,037, which approximated the fair value of the assets acquired. The
transaction was accounted for as a purchase. The financial statements
include the operating results of AMT from the date of acquisition. AMT
provides specialty modular building structures for the retail petroleum
industry and for certain commercial applications.
4. LONG-TERM DEBT
Long-term debt consists of the following:
1997 1996
------- -------
Term loan $40,000 $ 0
Revolving credit facility 37,809 3,963
IDA of Mecklenburg County, Virginia;
Industrial Revenue Bonds 6,790 7,760
Other 674 200
------- -------
85,273 11,923
Less current maturities 13,866 1,051
------- -------
$71,407 $10,872
======= =======
The annual maturities of long-term debt are as follows:
1998 $13,866
1999 5,248
2000 5,094
2001 7,970
2002 14,970
Thereafter 38,125
-------
$85,273
=======
Concurrent with the Windsor acquisition in December 1997, the Company
canceled its previous revolving credit facility and entered into a
comprehensive credit facility ("Credit
46
<PAGE>
Facility") with a bank. The Credit Facility includes a $40,000 term loan
and a revolving credit facility with maximum borrowings of $75,000.
The term loan requires semiannual principal payments, commencing July
1998, of $2,000 to $9,000, with a final payment due January 2003. Interest
is payable monthly at the Eurodollar rate plus 1% (6.97% at December 31,
1997).
The revolving credit facility availability is based on borrowings
outstanding as well as amounts outstanding under letters of credit. At
December 31, 1997, borrowings outstanding on the revolving credit facility
were $37,809, outstanding letters of credit were $2,398, and $34,793 was
available under the revolving credit facility. As discussed in Note 2, the
Company intends to pay down the revolving credit facility upon the
withdrawal of restricted cash. Accordingly, $10,624 of the revolving
credit facility is reflected in the current portion of long-term debt. The
facility expires January 2003. Interest is payable at the Eurodollar rate
plus 1% (6.97% at December 31, 1997) for $36,700 of the outstanding
balance and 8.5% for the remaining $1,109 of the outstanding balance of
the revolver. The Company is required to pay a fee of .25% per year for
the unused portion of the facility and 1.125% per year on outstanding
letters of credit.
The Credit Facility is collateralized by substantially all of the
Company's assets and requires the Company to maintain certain financial
ratio covenants beginning the first quarter of fiscal year 1998.
In December 1994, the Company closed a $9,700 industrial revenue bond
transaction with the Industrial Development Authority ("IDA") of
Mecklenburg County, Virginia, for the purpose of financing its new
manufacturing facility located in Virginia. The bonds bear interest at a
variable rate (4.12% at December 31, 1997). Additionally, the Company pays
a .25% remarketing fee on the bond balance. The bonds mature on December
1, 2004 and are subject to a mandatory sinking fund redemption of $970 per
year and to a mandatory redemption under certain circumstances. The
Company has secured its obligation with respect to the IDA bonds through
the issuance of a letter of credit. The carrying amount of the bonds is
assumed to approximate fair value due to the bonds' variable rate
structure.
5. STOCKHOLDERS' EQUITY
STOCK OFFERING
In July 1995, the Company completed a secondary public offering of its
common stock that consisted of 1,275 shares (excluding the underwriters'
overallotment option from a certain stockholder) of common stock which
were sold by certain stockholders at a public offering price of $22 per
share. The Company incurred offering expenses of $207 and did not receive
any proceeds from the sale of the shares of common stock. Subsequently, a
certain stockholder sold 191 shares to the underwriters to cover
overallotments.
PREFERRED STOCK
In February 1994, the board of directors authorized 4,000 shares of
preferred stock with $.01 par value. The board of directors has the
authority to issue these preferred shares and
47
<PAGE>
to fix dividends, voting and conversion rights, redemption provisions,
liquidation preferences, and other rights and restrictions.
TREASURY STOCK
The board of directors has authorized the Company to repurchase up to
1,300 shares of its outstanding common stock, as deemed appropriate by
management. At December 31, 1997 and 1996, repurchases of 1,069 and 1,001
shares, respectively, had been effected at prevailing market prices from
time to time on the open market. These repurchased shares represent
additions to treasury stock and are carried at cost in the accompanying
balance sheets.
STOCK OPTION PLANS
In January 1993, the Company adopted the American Buildings Company
Management Incentive Plan. The Company reserved 223 shares for issuance
under the plan. Stock incentives granted pursuant to the plan may include
(a) nonqualified stock options, (b) incentive stock options, or (c)
restricted stock awards. All options were issued at an exercise price no
less than fair value as of the date of grant. Cancellation of options
granted under the plan are not available for future grants.
In February 1994, the board of directors approved the 1994 Employee Stock
Option Plan. The plan, as amended, provides for the issuance of incentive
and nonqualified stock options to acquire up to 580 shares of common
stock. Options become exercisable as determined at the date of grant by a
committee of the board of directors. Options expire ten years after the
date of grant unless an earlier expiration date is set at the time of
grant. To date, the exercise prices of all issuances of options have been
at fair market value at the date of grant.
In addition, the Company has a stock option plan for nonemployee directors
which authorizes options to purchase up to 160 shares of common stock. The
option price for future grants is to be determined by the board of
directors but shall not be less than the fair market value of the common
shares on the date the stock option is granted.
48
<PAGE>
Transactions under the Company's stock option plans during each of the
three years ended December 31, 1997 are summarized as follows:
WEIGHTED
NUMBER AVERAGE
OF PRICE
SHARES PER SHARE
------ ---------
Outstanding at December 31, 1994 617 $ 9.71
Granted 115 23.66
Exercised (9) 7.48
Canceled (1) 10.00
---
Outstanding at December 31, 1995 722 11.91
Granted 19 21.22
Exercised (75) 8.87
Canceled (14) 20.01
---
Outstanding at December 31, 1996 652 12.35
Granted 221 27.12
Exercised (27) 10.15
Canceled (2) 10.00
---
Outstanding at December 31, 1997 844 16.32
===
Exercisable at December 31, 1997 501 11.53
===
At December 31, 1997, options to purchase 42 shares were available for
future grant under the above option plans. Additionally, the Company has
granted 38 options subject to shareholder approval of an increase in the
authorized shares under the plans.
The following table sets forth the number of shares, weighted average
exercise price, and remaining contractual lives by groups of similar price
and grant date:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
RANGE OF OF EXERCISE CONTRACTUAL OF EXERCISE
EXERCISE PRICES SHARES PRICE LIFE SHARES PRICE
--------------- ------ -------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
$ 5.18--$ 6.89 186 $ 5.92 5.1 years 186 $ 5.92
$10.00--$16.38 321 $12.20 6.4 years 243 $12.19
$18.06--$28.25 337 $26.02 8.9 years 72 $23.97
--- ---
$ 5.18--$28.25 844 $16.32 7.1 years 501 $11.53
=== ===
</TABLE>
The Company accounts for the stock purchase and stock option plans under
Accounting Principles Board ("APB") Opinion No. 25, which requires
compensation costs to be recognized only when the option price differs
from the market price at the grant date. SFAS No. 123 allows a company to
follow APB Opinion No. 25 with additional disclosure
49
<PAGE>
that shows what the company's net income and earnings per share would have
been using the compensation model under SFAS No. 123.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants:
1997 1996 1995
------- ------- -------
Risk-free interest rate 5.98% 6.16% 6.16%
Expected dividend yield 0.00% 0.00% 0.00%
Expected lives 5 YEARS 5 years 5 years
Expected volatility 35% 35% 35%
The total values of the options granted during the year ended December 31,
1997, 1996, and 1995 were computed as approximately $2,407, $133, and
$962, respectively, which would be amortized over the vesting period of
the options. If the Company had accounted for these plans in accordance
with SFAS No. 123, the Company's reported pro forma net income and pro
forma net income per share for the years ended December 31, 1997, 1996,
and 1995 would have been as follows:
1997 1996 1995
------- ------- -------
Net income:
As reported $15,851 $12,447 $17,590
Pro forma 15,529 12,285 17,540
Basic earnings per share:
As reported $3.00 $2.18 $2.82
Pro forma 2.93 2.16 2.82
Diluted earnings per share:
As reported 2.81 2.06 2.68
Pro forma 2.75 2.03 2.68
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
50
<PAGE>
6. INCOME TAXES
The provision for income taxes for each of the three years ended December
31, 1997 consists of the following:
1997 1996 1995
------ ------ -------
Current:
Federal $9,180 $7,197 $10,194
State 1,049 823 1,020
Deferred benefit (305) (228) (829)
Change in valuation allowance 0 0 (1,005)
------ ------ -------
$9,924 $7,792 $ 9,380
====== ====== =======
The provision for income taxes differs from the amounts resulting from
multiplying the income before income taxes by the statutory federal income
tax rate. The reasons for these differences are as follows:
1997 1996 1995
---- ---- ----
Federal income tax provision at statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 4.0 4.0 4.0
Other (0.5) (0.5) (0.5)
Valuation allowance 0.0 0.0 (3.7)
---- ---- ----
38.5% 38.5% 34.8%
==== ==== ====
The sources of the difference between the financial accounting and tax
bases of the Company's assets and liabilities which give rise to the
deferred tax assets and liabilities and the tax effects of each are as
follows as of December 31, 1997 and 1996:
1997 1996
------ ------
Deferred tax assets:
Accrued liabilities $2,412 $1,706
Deferred compensation 1,209 1,138
Allowance for doubtful accounts 1,128 1,288
Reserves on nonoperating assets 422 417
Net operating loss carryforwards 257 497
Other 436 339
------ ------
5,864 5,385
------ ------
Deferred tax liabilities:
Property, plant, and equipment (881) (496)
Other (32) (243)
------ ------
(913) (739)
------ ------
Net deferred tax asset $4,951 $4,646
====== ======
51
<PAGE>
As of December 31, 1997, net operating losses of approximately $668 are
available for carryforward through 2007.
As of December 31, 1997, the Company has recorded a net deferred tax asset
of $4,951. Realization is dependent on generating sufficient taxable
income in future periods. Although realization is not assured, management
believes it is more likely than not that the deferred tax asset will be
realized.
7. EMPLOYEE BENEFIT PLANS
SAVINGS PLAN
The Company has a contributory 401(k) plan, the American Buildings Company
Savings Plan, under which all full-time employees are eligible to
participate. The Company matches at least $.25 per $1 of eligible employee
contributions and can make an additional contribution at the discretion of
the board of directors. The plan requires a minimum company contribution
of 1% of eligible gross payroll annually. Company contributions to this
plan were $1,913, $996, and $1,214 for 1997, 1996, and 1995, respectively.
RETIREMENT PLAN
The Company has a noncontributory retirement and death benefit plan which
covers certain management employees. The plan provides a death benefit
prior to obtaining retirement age, as defined by the plan, to be paid over
a minimum ten-year period and a mutually exclusive retirement benefit,
after obtaining the defined retirement age, to be paid over a ten-year
period. Benefits under this plan do not vest until retirement, and the
Company has the right to modify or terminate this plan at any time. The
Company's liability for benefits under this plan was $3,141 and $2,955 as
of December 31, 1997 and 1996, respectively. This liability is based on
the estimated present value of the retirement obligation accrued over the
estimated service period and is included in other noncurrent liabilities
in the accompanying balance sheets.
PENSION PLANS
In connection with the Windsor acquisition (Note 3), the Company became
the sponsor of three defined benefit plans covering hourly and salaried
employees. Benefits are based on years of service and/or compensation. The
Company's funding policy is to contribute annually an amount that can be
deducted for federal income tax purposes and meets minimum funding
standards, using an actuarial cost method and assumptions which are
different from those used for financial reporting. Plan assets are
invested primarily in equity and income securities. Net pension expense
from the date of acquisition through December 31, 1997 was $29.
52
<PAGE>
The following table sets forth the plans' funded status and amounts
recognized as other noncurrent liabilities in the accompanying balance
sheet at December 31, 1997:
<TABLE>
<CAPTION>
PLAN ASSETS ABO
EXCEED EXCEEDS
ABO PLAN ASSETS
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 718 $ 880
Nonvested benefit obligation 157 220
------ ------
Accumulated benefit obligation 875 1,100
Effect of future compensation levels 455 0
------ ------
Projected benefit obligation for service rendered to date 1,330 1,100
Plan assets at fair value 965 670
------ ------
Plan assets less than the projected benefit obligation/accrued
liability at December 31, 1997 $ (365) $ (430)
====== ======
</TABLE>
For the period presented, the discount rate used to determine the
projected benefit obligation was 7%, the assumed growth in compensation is
5%, and the expected long-term rate of return on plan assets is 8.5%.
The Company does not provide any other significant postretirement or
postemployment benefits.
8. COMMITMENTS AND CONTINGENCIES
RELATED-PARTY TRANSACTION
The Company has an agreement with an entity controlled by two of the
Company's directors to provide financial and management consulting
services. The Company paid $275 in 1997, 1996, and 1995 for annual
consulting services. In November 1997, the agreement was amended whereby
the annual fee was increased to $375 and the term was extended until March
2002. In addition to the annual fee, the entity is to receive $488 related
to services rendered in connection with the Windsor Door acquisition. This
amount is included in accrued liabilities in the accompanying balance
sheet as of December 31, 1997.
INSURANCE
The Company participates in self-insured workers' compensation, general
liability, and health insurance plans. Reserves are estimated for both
reported and unreported claims using industry loss development factors.
Revisions to estimated reserves are recorded in the period in which they
become known. Estimated self-insurance reserves as of December 31, 1997
and 1996 totaling $5,592 and $4,711, respectively, represent management's
best estimate. In the opinion of the Company's management, any future
adjustments to estimated reserves will not have a material impact on the
financial statements.
53
<PAGE>
LEASES
The Company leases certain property, plant, and equipment under operating
leases. Minimum future lease payments under operating leases with initial
or remaining noncancelable lease terms in excess of one year are as
follows:
1998 $ 2,829
1999 2,156
2000 1,589
2001 1,418
2002 1,418
Thereafter 5,310
-------
Total $14,720
=======
Total rent expense for all operating leases was $4,296, $3,811, and $3,249
in 1997, 1996, and 1995, respectively.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with six senior
executives for terms expiring December 31, 2000. The agreements provide
for severance, up to the longer of the remaining term of the agreement or
one year, for termination of employment for any reason other than good
cause.
LITIGATION
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, the ultimate resolution of such
claims and lawsuits will not have a material effect on the Company's
financial position, liquidity, or results of operations.
9. JOINT VENTURE
In August 1995, the Company entered into a joint venture with China
Renaissance Industries, L.P. to pursue the manufacture and sale of metal
building systems in the People's Republic of China ("PRC") and certain
countries in Southeast Asia (the "Joint Venture"). The Company has a 30%
interest in the Joint Venture and exclusively licensed to the Joint
Venture on a royalty-free basis the right to use certain elements of the
Company's technology. The Company will receive a technology license fee of
$1,500, of which it received $750 during 1995. The Company's portion of
the Joint Venture's cumulative loss is $587 as of December 31, 1997 and is
offset by deferred revenue from the technology license fee received during
1995. The Joint Venture completed construction of its initial
manufacturing facility in the PRC during October 1996. At December 31,
1997 and 1996, the Company had $4,365 and $3,840, respectively, invested
in the Joint Venture and has been included in other assets at December 31,
1997 and 1996, respectively.
54
<PAGE>
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
1997
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
Net sales $57,604 $78,509 $84,888 $102,386
Operating income 2,690 7,350 7,950 8,846
Interest expense 225 266 131 439
Net income 1,515 4,357 4,809 5,170
Earnings per share:
Basic $0.29 $0.82 $0.91 $0.98
Diluted 0.27 0.77 0.85 0.92
1996
-----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Net sales $48,180 $66,302 $78,171 $81,300
Operating income 1,849 5,690 5,917 6,926
Interest (income) expense (175) 2 164 152
Net income 1,245 3,499 3,537 4,166
Earnings per share:
Basic $0.20 $0.60 $0.65 $0.78
Diluted 0.19 0.56 0.61 0.74
55
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
Directors
The information set forth under the caption Proposal No. 1 - Election of
Directors in the Company's definitive Proxy Statement to be used in connection
with the 1998 Annual Meeting of Stockholders is incorporated herein by
reference.
Executive Officers
See "Part I - Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information set forth under the caption "Executive Compensation" in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
- --------------------------------------------------------------------------------
The information set forth under the caption "Principal Stockholders" in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The information set forth under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions" in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
-56-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
- --------------------------------------------------------------------------------
(a) DOCUMENT LIST
1. Financial Statements
The financial statements of the Company filed herewith are set forth in
Part II, Item 8 of this Report.
2. Financial Statement Schedules
The following financial statement schedule and opinion thereon are filed as
a part of this Report:
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
(a) The following exhibits are filed as part of this report or are
incorporated herein by reference (Exhibit Nos. 10.1, 10.3, 10.17, 10.18, 10.19,
10.20, 10.21, 10.22, 10.29, 10.30, 10.31, 10.32, 10.33 and 10.34 are management
contracts, compensatory plans or arrangements):
Exhibit No. Description
- ----------- -----------
2.1 Agreement of Purchase and Sale of Assets, dated as of
October 24, 1997, by and between Windsor Door, Inc.,
as Purchaser, and United Dominion Industries, Inc.
and WCGD, Inc., as Seller.(1)
2.2 Amendment to Agreement of Purchase and Sale of Assets, dated
November 19, 1997, between Windsor Door, Inc. and United Dominion
Industries, Inc. and WCGD, Inc.(2)
3.1 Restated Certificate of Incorporation, as amended.(3)
3.2 Amended and Restated By-laws.(3)
4. Form of Common Stock Certificate.(3)
10.1 Stock Option Agreement, dated November 9, 1992, between Robert T.
Ammerman and the Company, as amended.(3)
-57-
<PAGE>
10.2 Amended and Restated Registration Rights Agreement, dated as of
January 19, 1993, among the Company and certain of the Company's
stockholders.(3)
10.3 Amended and Restated Management Agreement, dated as
of November 25, 1997, between the Company and
Sterling Ventures Limited.
10.4 Loan and Security Agreement, dated as of January 19,
1993, among the Company, as Borrower, StanChart
Business Credit, Inc. and Continental Bank N.A., as
Lenders, and StanChart Business Credit, Inc., as
Agent for the Lenders.(3)
10.5 Amendment No. 1 to Loan and Security Agreement dated as of May 6,
1994, among the Company, LaSalle Business Credit, Inc.
(successor-in-interest to StanChart Business Credit, Inc.),
Continental Bank, N.A. and LaSalle Business Credit, Inc., as
Agent for the Lenders.(4)
10.6 Amendment No. 2 to Loan and Security Agreement dated as of
December 6, 1994, among LaSalle Business Credit, Inc.
(successor-in-interest to StanChart Business Credit, Inc.), Bank
of America Illinois (successor-in-interest to Continental Bank,
N.A.) and LaSalle Business Credit Inc., as Agent for the
Lenders.(5)
10.7 Net True Lease Agreement, dated September 22, 1986, between ABC
Transportation Company and PACCAR Leasing Corporation and related
Schedules.(3)
10.8 Master Maintenance Agreement between ABC Transportation Company
and Eufaula Trucking Company.(3)
10.9 Term Lease Master Agreement, dated June 11, 1984, between
American Buildings Company and IBM Credit Corporation and related
Lease Supplements and Schedules.(3)
10.10 Commercial Building Lease, dated February 1, 1992, between USX
Corporation and Polymer Coil Coaters, Inc. relating to Fairfield,
Alabama leased real property.(3)
10.11 Commercial Building Lease, dated April 1, 1992, between USX
Corporation and Polymer Coil Coaters, Inc., relating to
Fairfield, Alabama leased real property.(3)
10.12 Commercial Building Lease, dated April 17, 1985, between USX
Corporation and Polymer Coil Coaters, Inc., relating to
Fairfield, Alabama leased property.(3)
10.13 Form of Spectrum Software License Agreement.(3)
10.14 Form of Builder Agreement.(3)
10.15 Form of Roofing Contractor Agreement.(3)
10.16 Form of Indemnity Agreement.(3)
10.17 1994 Stock Option Plan, as amended.
-58-
<PAGE>
10.18 Form of Stock Option Agreement under 1994 Stock Option Plan.(3)
10.19 Stock Option Plan for Non-Employee Directors.(4)
10.20 Incentive Bonus Plan.(3)
10.21 Management Security Plan.(3)
10.22 Form of Non-Plan Stock Option Agreement.(3)
10.23 Industrial Development Authority of Mecklenburg County, Virginia
Purchase Contract dated November 22, 1994, with the Company and
Merchant Capital Corporation.(4)
10.24 Loan Agreement between Industrial Development Authority of
Mecklenburg County, Virginia and the Company dated December 1,
1994.(4)
10.25 Form of Note (included in Loan Agreement).(4)
10.26 Remarketing Agreement dated as of December 1, 1994, among the
Company, Merchant Capital Corporation, NationsBank of Virginia,
N.A. and the Industrial Development Authority of Mecklenburg
County, Virginia.(4)
10.27 Indenture of Trust between Industrial Development Authority of
Mecklenburg County, Virginia and NationsBank of Virginia, N.A.,
as Trustee.(4)
10.28 Pledge Agreement, dated as of December 1, 1994, between the
Company and LaSalle National Bank.(4)
10.29 Employment Agreement, dated as of January 1, 1998, between the
Company and Robert T. Ammerman.
10.30 Employment Agreement, dated as of January 1, 1998, between the
Company and Joel R. Voelkert.
10.31 Employment Agreement, dated as of January 1, 1998, between the
Company and Roy L. Smith.
10.32 Employment Agreement, dated as of January 1, 1998, between the
Company and Barry L. Milling.
10.33 Employment Agreement, dated as of January 1, 1998, between the
Company and William R. Buchholz.
10.34 Employment Agreement as of January 1, 1998, between the Company
and R. Charles Blackmon.
10.35 Amendment No. 3 to Loan and Security Agreement, dated May 10,
1995, between the Company and LaSalle Business Credit, Inc.(5)
10.36 Second Amended and Restated Loan Note, dated May 10, 1995, in
principal amount of $35 million.(5)
-59-
<PAGE>
10.37 Mortgage Modification Agreement, dated May 10, 1995,
between the Company and LaSalle Business Credit,
Inc.(5)
10.38 Limited Partnership Agreement of American Buildings Company Asia,
L.P., dated August 15, 1995.(6)
10.39 Technology License Agreement between American Buildings Company
Asia, L.P. and American Buildings Company International, Inc.,
dated August 15, 1995.(7)
10.40 Credit Agreement, dated as of December 4, 1997, among American
Buildings Company, as Borrower, the several lenders from time to
time party hereto, and Canadian Imperial Bank of Commerce, as
Administrative Agent.(1)
10.41 First Amendment, dated as of December 15, 1997, to the Credit
Agreement, dated as of December 4, 1997, among American Buildings
Company, as Borrower, the several lenders from time to time party
hereto, and Canadian Imperial Bank of Commerce, as Administrative
Agent.(1)
10.42 Guarantee and Collateral Agreement, dated as of December 4, 1997,
made by American Buildings Company and certain of its
subsidiaries in favor of Canadian Imperial Bank of Commerce, as
Administrative Agent.(1)
10.43 Mortgage from American Buildings Company, Mortgagor, to Canadian
Imperial Bank of Commerce, Mortgagee (Eufaula, Alabama).(1)
10.44 Mortgage from American Buildings Company, Mortgagor, to Canadian
Imperial Bank of Commerce, Mortgagee (Fairfield, Alabama).(1)
10.45 Mortgage from American Buildings Company, Mortgagor, to Canadian
Imperial Bank of Commerce, Mortgagee (El Paso, Illinois).(1)
10.46 Mortgage from American Buildings Company, Mortgagor, to Canadian
Imperial Bank of Commerce, Mortgagee (Carson City, Nevada).(1)
10.47 Mortgage from American Buildings Company, Mortgagor, to Canadian
Imperial Bank of Commerce, Mortgagee (La Crosse, Virginia).(1)
10.48 Mortgage from AMT/Beaman Corporation, Mortgagor, to Canadian
Imperial Bank of Commerce, Mortgagee (Liberty, North
Carolina).(1)
10.49 Mortgage from Windsor Door, Inc., Mortgagor, to Canadian Imperial
Bank of Commerce, Mortgagee (Little Rock, Arkansas).(1)
10.50 Mortgage from Windsor Door, Inc., Mortgagor, to Canadian Imperial
Bank of Commerce, Mortgagee (Oliverhurst, California).(1)
11 Computation of Earnings Per Share.
21 Subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
-60-
<PAGE>
(b) Reports on Form 8-K.
Current Report on Form 8-K, dated December
4, 1997, reporting the Company's acquisition
of the Windsor Door Division of United
Dominion Industries, Inc. and the Company's
new credit facility.
(c) Exhibits.
See (a)(3) above.
- ----------
(1) Incorporated by reference to Exhibits to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
(2) Incorporated by reference to Exhibits to the Current Report on Form 8-K
dated December 4, 1997.
(3) Incorporated by reference to Exhibits to the Registration Statement on Form
S-1 (Registration No. 33- 76054).
(4) Incorporated by reference to Exhibits to the Annual Report on Form 10-K for
the year ended December 31, 1994.
(5) Incorporated by reference to Exhibits to the Registration Statement on Form
S-3 (Registration No. 33- 94082).
(6) Incorporated by reference to Exhibits to the Quarterly Report on Form 10-Q
for the period ended September 30, 1995.
-61-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN BUILDINGS COMPANY
By: /s/ ROBERT T. AMMERMAN
---------------------------------------
Robert T. Ammerman,
President and Chief Executive Officer
March 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ ROBERT T. AMMERMAN
- ----------------------------
Robert T. Ammerman Chief Executive March 23, 1998
Officer and Director
/s/ R. CHARLES BLACKMON, JR.
- ----------------------------
R. Charles Blackmon, Jr. Executive Vice President - March 23, 1998
Chief Financial Officer
(principal financial
officer)
/s/ ANNE M. SAVAGE
- ----------------------------
Anne M. Savage Controller (principal March 23, 1998
accounting officer)
/s/ WILLIAM L. SELDEN
- ----------------------------
William L. Selden Chairman of the Board March 23, 1998
and Director
/s/ HAROLD LEVY
- ----------------------------
Harold Levy Director March 23, 1998
/s/ DOUGLAS L. NEWHOUSE
- ----------------------------
Douglas L. Newhouse Director March 23, 1998
- ----------------------------
Ralph Saul Director March __, 1998
-62-
<PAGE>
/s/ ROBERT F. SHAPIRO
- ----------------------------
Robert F. Shapiro Director March 23, 1998
/s/ KENDRICK R. WILSON, III
- ----------------------------
Kendrick Wilson, III Director March 23, 1998
-63-
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
American Buildings Company:
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheets of AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES as of
December 31, 1997 and 1996 and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997 and have issued our report thereon dated
February 10, 1998. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in Item
14(a)(2) hereof is the responsibility of management and is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects, the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
- --------------------------
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 10, 1998
<PAGE>
SCHEDULE II
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Additions
---------------------------------------
Charged
(Credited)
Balance at to Costs Charged Balance
Beginning and to Other at End
of Year Expenses Accounts Deduction(2) of Year
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts $3,345 $ (183) $1,405(1) $(192) $4,375
---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts $2,589 $1,067 $ 0 $(311) $3,345
---------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts $1,768 $1,577 $ 0 $(756) $2,589
---------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Represents the allowance recorded in conjunction with acquired companies.
(2) Charges to the allowance for purposes for which the allowance was created.
-64-
AMENDED AND RESTATED MANAGEMENT AGREEMENT
Amended and Restated Management Agreement, dated as of November 25, 1997
(the "MANAGEMENT AGREEMENT"), between Sterling Ventures Limited, a Delaware
corporation ("STERLING"), and American Buildings Company, a Delaware corporation
(the "COMPANY").
PREAMBLE
WHEREAS, the parties hereto are parties to a Management Agreement, dated as
of January 19, 1993 and amended as of March 11, 1994 (the "ORIGINAL MANAGEMENT
AGREEMENT"), pursuant to which STERLING is providing financial and management
consulting services to the Company;
WHEREAS, the Company is currently pursuing the acquisition of the Windsor
Door division of United Dominion Industries, Inc. (the "WINDSOR DOOR
ACQUISITION");
WHEREAS, the Company and STERLING desire to amend and restate the Original
Management Agreement to extend the term thereof and, if the Windsor Door
Acquisition is consummated, to increase the management fee in recognition of the
increased size and complexity of the Company following such acquisition; and
WHEREAS, the Company desires to compensate STERLING for its services
provided and to be provided to the Company in connection with the Windsor Door
Acquisition and the financing therefor if such acquisition is consummated.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, STERLING and the Company hereby agree as follows:
TERMS
1. Engagement. The Company hereby engages STERLING as a financial and
management consultant, and STERLING hereby agrees to provide financial and
management consulting services to the Company, all on the terms and subject to
the conditions set forth below.
2. Services of STERLING. STERLING hereby agrees during the term of this
engagement to consult with and assist the Company's Board of Directors (the
"BOARD") and management of the Company in such manner and on such business and
financial matters as may be reasonably requested from time to time by the Board
or management of the Company, including but not limited to consulting with and
assisting the Board and management in the following:
(i) developing and implementing corporate strategy;
<PAGE>
(ii) budgeting future corporate investments;
(iii) developing and implementing acquisition and divestiture
strategies;
(iv) subsequent debt and equity financings;
(v) developing relationships with real estate developers and other
prospective customers with whom Sterling and its partners and employees
have relationships; and
(vi) developing international joint ventures or licensing arrangements
with prospective partners or licensees with whom Sterling and its partners
and employees have relationships.
In addition to the business and financial consulting services set forth above,
officers and employees of STERLING will be available to serve on the Board,
without additional compensation, and will devote such time and attention to the
Company's affairs as STERLING determines reasonably necessary to accomplish the
purposes of this Agreement. Notwithstanding the foregoing, nothing herein shall
preclude the Company from compensating the non-employee directors for their
services as directors of the Company to the same extent as non-employee
directors were compensated prior to the date hereof.
3. Compensation. The Company agrees to pay to STERLING as compensation for
services to be rendered by STERLING hereunder a fee equal to $275,000 per year
through the date of closing of the Windsor Door Acquisition and thereafter a fee
equal to $375,000 per year. The management fee shall be payable quarterly in
four equal installments on each January 1, April 1, July 1 and October 1 of each
year commencing April 1, 1998; provided, however, that in the event there exists
any default by the Company in the payment of principal or interest on the
Company's outstanding revolving credit or term bank loans, the management fee
shall not be paid, but shall accrue, until such payment default is cured or
waived, at which time the accrued but unpaid management fee shall be paid to
STERLING. The Company shall reimburse STERLING for such reasonable travel
expenses and other direct out-of-pocket expenses as may be incurred by STERLING
and its employees in connection with the rendering of services hereunder. The
Company will, within 30 days after receipt of expense reports, reimburse
STERLING for such expenses. It is understood and agreed that nothing herein
shall preclude STERLING from receiving such additional compensation for
additional services rendered by it as may from time to time be mutually agreed
by STERLING and the Company.
The parties acknowledge that the Company paid to STERLING $68,750 as of
November 15, 1997, representing that portion of the management fee due for the
period November 15, 1997 through February 14, 1998 under the Original Management
Agreement. On January 1, 1998, the Company shall pay to STERLING an amount equal
to the sum of (i) the amount equal to the pro rata portion of the increase in
the
-2-
<PAGE>
management fee, if any, from the period beginning on the day of the closing of
the Windsor Door Acquisition through February 14, 1998 and (ii) the amount equal
to the pro rata portion of the management fee for the period from February 15,
1998 through March 31, 1998 ($46,875 in the event of closing of the Windsor Door
Acquisition).
The Company hereby agrees to pay STERLING as compensation for services
rendered and to be rendered by STERLING in connection with the Windsor Door
Acquisition and the financing therefor a transaction fee of $487,500 if and when
the Windsor Door Acquisition is consummated. Such fee shall be paid on the later
of January 1, 1998 or the closing of the Windsor Door Acquisition.
4. Term. This Agreement shall commence on the date hereof and shall
continue in effect until the first to occur of (a) March 31, 2002 or (b)
STERLING giving the Company 30 days' prior written notice of termination. No
termination of this Agreement, whether pursuant to this paragraph or otherwise,
shall affect the Company's obligations with respect to the fees, costs and
expenses incurred by STERLING in rendering services hereunder and not reimbursed
by the Company as of the effective date of such termination.
5. Indemnification. The Company agrees to indemnify and hold harmless
STERLING and its employees against and from any and all loss, liability, suits,
claims, costs, damages and expenses (including attorneys' fees) arising from
their performance hereunder, except as a result of their negligence or
intentional wrongdoing.
6. STERLING an Independent Contractor. STERLING and the Company agree that
STERLING shall perform services hereunder as an independent contractor,
retaining control over and responsibility for its own operations and personnel.
Neither STERLING nor its employees shall be considered employees or agents of
the Company nor shall any of them have authority to contract in the name of or
bind the Company, except as expressly agreed to in writing by the Company.
7. Confidential Information. STERLING acknowledges that the information,
observations and data obtained by it and its agents and employees during the
course of its performance under this Agreement concerning the business plans and
financial data of the Company (the "CONFIDENTIAL DATA") are the Company's
valuable, special and unique assets. Therefore, it agrees that it will not, nor
will it permit any of its agents or employees to, disclose to any unauthorized
person any of the Confidential Data obtained by it during the course of
STERLING's performance under this Agreement without the Company's prior written
consent, unless and to the extent that (i) the Confidential Data becomes
generally known to and available for use by the public otherwise than as a
result of its acts or omissions to act or (ii) such disclosure is required by
any statute, rule, regulation or law or any judicial or administrative body
having jurisdiction.
8. Notice. Any notice, report or payment required or permitted to be given
or made under this Agreement by one party to the other shall be deemed to have
been
-3-
<PAGE>
duly given or made when delivered, if personally delivered, when transmitted, if
sent by confirmed facsimile transmission, or, if mailed, when mailed by
registered or certified mail, return receipt requested, postage prepaid, to the
party at the following addresses (or at such other address as shall be given in
writing by one party to the other):
IF TO STERLING:
Sterling Ventures Limited
276 Post Road West
Westport, Connecticut 06880
Attention: Chairman
IF TO THE COMPANY:
American Buildings Company
1150 State Docks Road
Eufaula, Alabama 36027
Attention: President
9. Entire Agreement; Modification. This Agreement (a) contains the complete
and entire understanding and agreement of the Company and STERLING with respect
to the subject matter hereof; (b) supersedes all prior and contemporaneous
understandings, conditions and agreements, oral or written, express or implied,
respecting the engagement of STERLING in connection with the subject matter
hereof, including without limitation the Original Management Agreement; and (c)
may not be modified except by an instrument in writing executed by the Company
and STERLING.
10. Waiver and Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
11. Assignment. Neither the Company nor STERLING may assign its rights or
obligations under this Agreement without the express written consent of the
other.
12. Governing Law. This Agreement shall be deemed to be a contract made
under, and is to be governed and construed in accordance with, the laws of the
State of Delaware, without application of the conflicts of laws principles
thereof.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company and STERLING have caused this Agreement to
be duly executed and delivered on the date and year first above written.
AMERICAN BUILDINGS COMPANY
By: /s/ R. CHARLES BLACKMON, JR.
--------------------------------
Its: Executive Vice President
STERLING VENTURES LIMITED
By: Douglas L. Newhouse
--------------------------------
Its: Chairman
-5-
AMERICAN BUILDINGS COMPANY
1994 STOCK OPTION PLAN
1. Purpose. The purpose of the American Buildings Company 1994 Stock Option
Plan (the "Plan") is to enable American Buildings Company (the "Company") and
its stockholders to secure the benefits of common stock ownership by employees
of the Company and its subsidiaries. The Board of Directors of the Company (the
"Board") believes that the granting of options under the Plan will foster the
Company's ability to attract, retain and motivate those individuals who will be
largely responsible for the profitability and long-term future growth of the
Company.
2. Stock Subject to the Plan. The Company may issue and sell a total of
580,000 shares of its common stock, $.01 par value (the "Common Stock"),
pursuant to the Plan. Such shares may be either authorized and unissued or held
by the Company in its treasury. New options may be granted under the Plan with
respect to shares of Common Stock which are covered by the unexercised portion
of an option which has terminated or expired by its terms, by cancellation or
otherwise.
3. Administration. The Plan will be administered by a committee (the
"Committee") consisting of the Board or, at the option of the Board, at least
two directors appointed by and serving at the pleasure of the Board. If the
Board does not act as the Committee, the members of the Committee shall be
"non-employee directors" within the meaning and for the purposes of Rule 16(b)-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Subject to the provisions of the Plan, the Committee, acting in its sole and
absolute discretion, will have full power and authority to grant options under
the Plan, to interpret the provisions of the Plan, to fix and interpret the
provisions of option agreements made under the Plan, to supervise the
administration of the Plan, and to take such other action as may be necessary or
desirable in order to carry out the provisions of the Plan. A majority of the
members of the Committee will constitute a quorum. The Committee may act by the
vote of a majority of its members present at a meeting at which there is a
quorum or by unanimous written consent. The decision of the Committee as to any
disputed question, including questions of construction, interpretation and
administration, will be final and conclusive on all persons. The Committee will
keep a record of its proceedings and acts and will keep or cause to be kept such
books and records as may be necessary in connection with the proper
administration of the Plan.
4. Eligibility. Options may be granted under the Plan to present or future
officers and employees of the Company or a subsidiary of the Company (a
"Subsidiary") within the meaning of Section 424(f) of the Internal Revenue Code
of 1986 (the "Code"), and to consultants to the Company or a Subsidiary who are
not employees. Options may not be granted to directors of the Company or a
Subsidiary who are not also employees of or consultants to the Company and/or a
Subsidiary. Subject to the provisions of the Plan, the Committee may from time
to time select the persons to whom options will be granted, and will fix the
number of shares covered by each such option and establish the terms and
conditions thereof, including, without limitation, the
-1-
<PAGE>
exercise price, restrictions on exercisability of the option and/or on the
disposition of the shares of Common Stock issued upon exercise thereof and
whether or not the option is to be treated as an incentive stock option within
the meaning of Section 422 of the Code (an "Incentive Stock Option").
5. Terms and Conditions of Options. Each option granted under the Plan will
be evidenced by a written agreement in a form approved by the Committee. Each
such option will be subject to the terms and conditions set forth in this
paragraph and such additional terms and conditions not inconsistent with the
Plan (and, in the case of an Incentive Stock Option, not inconsistent with the
provisions of the Code applicable thereto) as the Committee deems appropriate.
(a) Option Exercise Price. In the case of an option which is not
treated as an Incentive Stock Option, the exercise price per share may not be
less than the par value of a share of Common Stock on the date the option is
granted; and, in the case of an Incentive Stock Option, the exercise price per
share may not be less than 100% of the fair market value of a share of Common
Stock on the date the option is granted (110% in the case of an optionee who, at
the time the option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or a Subsidiary (a
"ten percent shareholder")). For purposes hereof, the fair market value of a
share of Common Stock on any date will be equal to the closing sale price per
share as published by a national securities exchange on which shares of the
Common Stock are traded on such date or, if there is no sale of Common Stock on
such date, the average of the bid and asked prices on such exchange at the
closing of trading on such date or, if shares of the Common Stock are not listed
on a national securities exchange on such date, the closing price or, if none,
the average of the bid and asked prices in the over the counter market at the
close of trading on such date, or if the Common Stock is not traded on a
national securities exchange or the over the counter market, the fair market
value of a share of the Common Stock on such date as determined in good faith by
the Committee.
(b) Option Period. The period during which an option may be exercised
will be fixed by the Committee and will not exceed 10 years from the date the
option is granted (5 years in the case of an Incentive Stock Option granted to a
"ten percent shareholder").
(c) Exercise of Options.
(1) General. No option will become exercisable unless the person
to whom the option was granted remains in the continuous employ or service of
the Company or a Subsidiary for at least six months (or for such longer period
as the Committee may designate) from the date the option is granted. The
Committee may determine and set forth in the option agreement any additional
vesting or other restrictions on the exercisability of an option, subject to
earlier termination of the option as provided herein. All or part of the
exercisable portion of an option may be exercised at any time during the option
period. An option may be exercised by
-2-
<PAGE>
transmitting to the Company (a) a written notice specifying the number of shares
to be purchased, and (b) payment of the exercise price (or, if applicable,
delivery of a secured obligation therefor), together with the amount, if any,
deemed necessary by the Committee to enable the Company to satisfy its income
tax withholding obligations with respect to such exercise (unless other
arrangements acceptable to the Company are made with respect to the satisfaction
of such withholding obligations).
(2) Securities Laws Compliance Required. Notwithstanding anything
in the Plan to the contrary, if the shares of Common Stock issuable upon
exercise of options granted under the Plan have not been registered under the
Securities Act of 1993, as amended, the Committee may condition the
exercisability of options upon compliance with applicable federal and state
securities laws.
(d) Payment of Exercise Price. The purchase price of shares of Common
Stock acquired pursuant to the exercise of an option granted under the Plan may
be paid in cash and/or such other form of payment as may be permitted under the
option agreement, including, without limitation, previously-owned shares of
Common Stock. The Committee may permit the payment of all or a portion of the
purchase price in installments (together with interest) over a period of not
more than five years.
(e) Rights as a Stockholder. No shares of Common Stock will be issued
in respect of the exercise of an option granted under the Plan until full
payment therefor has been made (and/or provided for where all or a portion of
the purchase price is being paid in installments). The holder of an option will
have no rights as a stockholder with respect to any shares covered by an option
until the date a stock certificate for such shares is issued to him or her.
Except as otherwise provided herein, no adjustments shall be made for dividends
or distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
(f) Nontransferability of Options. No option shall be assignable or
transferrable except upon the optionee's death to a beneficiary designated by
the optionee in accordance with procedures established by the Committee or, if
no designated beneficiary shall survive the optionee, pursuant to the optionee's
will or by the laws of descent and distribution. During an optionee's lifetime,
options may be exercised only by the optionee or the optionee's guardian or
legal representative.
(g) Termination of Employment or Other Service. If an optionee ceases
to be employed by or to perform services for the Company and any Subsidiary for
any reason other than death or disability (defined below), then, unless extended
by the Committee acting in its sole discretion, each outstanding option granted
to him or her under the Plan will terminate on the date three months after the
date of such termination of employment or service, or, if earlier, the date
specified in the option agreement. If an optionee's employment or service is
terminated by reason of the optionee's death or disability (or if the optionee's
employment or service is terminated by reason of his or her disability and the
optionee dies within one year after such
-3-
<PAGE>
termination of employment or service), then, unless extended by the Committee,
acting in its sole discretion each outstanding option granted to the optionee
under the Plan will terminate on the date one year after the date of such
termination of employment or service (or one year after the later death of a
disabled optionee) or, if earlier, the date specified in the option agreement.
For purposes hereof, the term "disability" means the inability of an optionee to
perform the customary duties of his or her employment or other service for the
Company or a Subsidiary by reason of a physical or mental incapacity which is
expected to result in death or be of indefinite duration.
(h) Incentive Stock Options. In the case of an Incentive Stock Option
granted under the Plan, at the time the option is granted, the aggregate fair
market value (determined at the time of grant) of the shares of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by the optionee during any calendar year may not exceed $100,000.
(i) Maximum Option Grant. The maximum option grant which may be made
to an executive officer of the Company in any calendar year shall not cover more
than 50,000 shares.
(j) Other Provisions. The Committee may impose such other conditions
with respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws, as
it may deem necessary or advisable.
6. Change in Control; Capital Changes.
(a) If any event constituting a "Change in Control of the Company"
shall occur, all Options granted under the Plan which are outstanding at the
time a Change of Control of the Company shall occur shall immediately become
exercisable. A "Change in Control of the Company" shall be deemed to occur if
(i) there shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (y) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (ii) the stockholders of the
Company shall approve any plan or proposal for liquidation or dissolution of the
Company, or (iii) any person (as such term is used in Section 13(d) and 14(d)(2)
of the Exchange Act), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 40% or more of the Company's outstanding
Common Stock other than pursuant to a plan or arrangement entered into by such
person and the Company, or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute a majority thereof unless the
election, or the
-4-
<PAGE>
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(b) In the event of any stock split, stock dividend or similar
transaction which increases or decreases the number of outstanding shares of
Common Stock, appropriate adjustment shall be made by the Board of Directors to
the number and option exercise price per share of Common Stock which may be
purchased under any outstanding Options. In the case of a merger, consolidation
or similar transaction which results in a replacement of the Company's Common
Stock and stock of another corporation but does not constitute Change in Control
of the Company, the Company will make a reasonable effort, but shall not be
required, to replace any outstanding Options granted under the Plan with
comparable options to purchase the stock of such other corporation, or will
provide for immediate maturity of all outstanding Options, with all Options not
being exercised within the time period specified by the Board of Directors being
terminated.
(c) In the event of any adjustment in the number of shares covered by
any option pursuant to the provisions hereof, any fractional shares resulting
from such adjustment will be disregarded and each such option will cover only
the number of full shares resulting from the adjustment.
(d) All adjustments under this paragraph 6 shall be made by the Board,
and its determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive.
7. Amendment and Termination of the Plan. The Board may amend or terminate
the Plan. Except as otherwise provided in the Plan with respect to equity
changes, any amendment which would increase the aggregate number of shares of
Common Stock as to which options may be granted under the Plan, materially
increase the benefits under the Plan, or modify the class of persons eligible to
receive options under the Plan shall be subject to the approval of the Company's
stockholders. No amendment or termination may affect adversely any outstanding
option without the written consent of the optionee.
No Rights Conferred. Nothing contained herein will be deemed to give
any individual any right to receive an option under the Plan or to be retained
in the employ or service of the Company or any Subsidiary.
8. Governing Law. The Plan and each option agreement shall be governed by
the laws of the State of Delaware.
9. Decisions and Determinations of Committee to be Final. Except to the
extent rights or powers under this Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee are
final and binding.
-5-
<PAGE>
10. Number of Shares of Common Stock; Reverse Stock Split Required. It is
expressly understood and agreed that the number of shares of Common Stock set
forth in paragraphs 2 and 5 of the Plan reflects and gives effect to the reverse
stock split of the Company's Common Stock approved by the Company's Board on
February 25, 1994 (the "Reverse Split"). Notwithstanding anything herein to the
contrary, the options granted hereunder may not be exercised unless and until
the amendment to the Company's Restated Certificate of Incorporation reflecting
the Reverse Split has been filed with the Secretary of State of Delaware.
11. Term of the Plan. The Plan shall be effective as of February 25, 1994,
the date on which it was adopted by the Board, subject to the approval of the
stockholders of the Company within one year from the date of adoption by the
Board. The Plan will terminate on the date ten years after the date of adoption
by the Board, unless sooner terminated by the Board. The rights of optionees
under options outstanding at the time of the termination of the Plan shall not
be affected solely by reason of the termination and shall continue in accordance
with the terms of the option (as then in effect or thereafter amended).
-6-
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between AMERICAN BUILDINGS COMPANY, a
Delaware corporation with an office at 1150 State Docks Road, Eufaula, Alabama
36027 (the "Company"), and Robert T. Ammerman, residing at Apt. 8B, Oak Hill
Apartments, Oak Hill Drive, Eufaula, Alabama 36027 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Chief Executive Officer of the Company reporting to the
Board of Directors of the Company (the "Board of Directors"). The Company shall
nominate Executive for election as a director of the Company for all periods
when Executive holds the office of Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the
date hereof (the "Employment Date") and shall continue until December 31, 2000,
subject to prior termination in accordance with the terms hereof. Thereafter,
this Agreement shall automatically be renewed for successive one year terms
unless either party shall give the other ninety (90) days prior written notice
of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company
<PAGE>
practice, an initial annual salary of $400,000. Executive's annual salary
hereunder for the remaining years of employment shall be determined by the Board
of Directors in its sole discretion; provided, however, that Executive's salary
shall be increased each year, effective January 1 of such year, commencing
January 1, 1999, by at least the percentage increase, if any, in the cost of
living shown on the Consumer Price Index for all items in a Size D South Urban
Area (published by the Bureau of Labor Statistics of the United States
Department of Labor) between January, 1998 or the month in which the most recent
salary increase occurred, as the case may be, and the last calendar month
immediately preceding the date of such annual meeting of the Board of Directors
of the Company. In addition, Executive shall be entitled to participate in the
Company's SVA Management Incentive Plan (or replacement plan approved by the
Compensation Committee of the Board of Directors) at a target bonus level equal
to up to 100% of Executive's salary, as may be determined by the Board of
Directors in its sole discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of
suitable vouchers, for all reasonable business and travel expenses which may be
incurred or paid by Executive in connection with his employment hereunder.
Executive shall comply with such restrictions and shall keep such records as the
Company may deem necessary to meet the requirements of the Internal Revenue Code
of 1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
(a) Executive shall be entitled to four (4) weeks' vacation per year and
to participate in and receive any other benefits customarily provided by the
Company to its senior management personnel (including any profit sharing,
pension, short and long-term disability insurance, hospital, major medical
insurance and group life insurance plans in accordance with the terms of such
plans) and including stock option and/or stock purchase plans, all as determined
from time to time by the Board of Directors of the Company.
(b) The Company shall, during the term of Executive's employment
hereunder, pay the basic yearly membership fees actually incurred by Executive
in connection with Executive's maintaining his current country club membership;
provided, however, that such yearly membership fees shall not in any case exceed
$2,500 per year.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Board of
Directors of the Company shall from time to time determine and Executive shall
comply in the performance of his duties with the policies of, and be subject to
the direction of, the Board of Directors. Executive shall serve as a director of
the Company without
-2-
<PAGE>
further compensation. At the request of the Board of Directors, Executive shall
serve as an executive officer and director of any subsidiary of the Company and,
in the performance of such duties, Executive shall comply with the policies of
the Board of Directors of each such subsidiary.
(b) During the term of this Agreement, Executive shall devote
substantially all of his time and attention, reasonable vacation time and
absences for sickness excepted, to the business of the Company, as necessary to
fulfill his duties. Executive shall perform the duties assigned to him with
fidelity and to the best of his ability. Notwithstanding anything herein to the
contrary, Executive may engage in other activities so long as such activities do
not unreasonably interfere with Executive's performance of his duties hereunder
and do not violate Section 9 hereof.
(c) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
(d) The principal location at which the Executive shall perform his
duties hereunder shall be at the Company's offices in Eufaula, Alabama or at
such other location as may be designated from time to time by the Board of
Directors of the Company; provided that if the principal location of Executive's
duties is transferred from Eufaula, Alabama, the new principal location of
Executive's duties shall not be transferred beyond a 25-mile radius of Eufaula,
Alabama without Executive's consent. Notwithstanding the foregoing, Executive
shall perform such services at such other locations as may be required for the
proper performance of his duties hereunder, and Executive recognizes that such
duties may involve significant travel.
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors that Executive's
performance of his duties has not been fully satisfactory for any reason
which would not constitute justifiable cause (as hereinafter defined) upon
thirty (30) days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten
(10) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
-3-
<PAGE>
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company after examination of
Executive by an independent physician reasonably acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and
be limited to: any repeated wilful failure or refusal to perform any of his
duties pursuant to this Agreement where such conduct shall not have ceased
within 30 days following written warning from the Company; Executive's
conviction (which, through lapse of time or otherwise, is not subject to appeal)
of, pleading guilty to, or confession of any crime or offense involving money or
other property of the Company or its subsidiaries or which constitutes a felony
in the jurisdiction involved; Executive's performance of any act or his failure
to act, for which if Executive were prosecuted and convicted, a crime or offense
involving money or property of the Company or its subsidiaries, or which would
constitute a felony in the jurisdiction involved, would have occurred; any
unauthorized disclosure by Executive to any person, firm or corporation other
than the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or any
of its subsidiaries; any attempt by Executive to secure any personal profit in
connection with the business of the Company or any of its subsidiaries;
Executive's engagement in a fraudulent act to the material damage or prejudice
of Company or its subsidiaries or in conduct or activities materially damaging
to the property, business or reputation of Company or its subsidiaries, all as
determined by the Board of Directors in good faith; Executive's illegal use of
controlled substances; any material act or omission by Executive involving
malfeasance or negligence in the performance of Executive's duties to the
material detriment of the Company or its subsidiaries, as determined by the
Board of Directors in good faith, which has not been corrected by Executive
within thirty (30) days after written notice from the Company of any such act or
omission; the entry of an order of a court that remains in effect and is not
discharged for a period of at least sixty (60) days, which enjoins or otherwise
limits or restricts the performance by Executive under this Agreement, relating
to any contract, agreement or commitment made by or applicable to Executive in
favor of any former employer or any other person; or the engaging by Executive
in any business other than the business of the Company and its subsidiaries
which unreasonably interferes with the performance of his duties hereunder. Upon
termination of Executive's employment for justifiable cause, this Agreement
shall terminate immediately and Executive shall not be entitled to any amounts
or benefits hereunder other than such portion of Executive's annual salary and
reimbursement of expenses pursuant to Section 4 hereof as has been accrued
through the date of his termination of employment.
-4-
<PAGE>
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 as has been
accrued through the date of his death. If Executive's death shall occur while he
is on Company business, the estate of Executive shall be entitled to receive, in
addition to the other amounts set forth in this subsection (e), an amount equal
to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) and reimbursement of expenses pursuant to Section 4 as provided
herein until he begins to receive long-term disability insurance benefits under
the policy provided by the Company pursuant to Section 5 hereof. Any termination
pursuant to this subsection (f) shall be effective on the later of (i) the date
30 days after which Executive shall have received written notice of the
Company's election to terminate or (ii) the date he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof.
(g) Notwithstanding any provision to the contrary contained herein, in
the event that Executive's employment is terminated by the Company at any time
for any reason other than justifiable cause, disability or death, the Company
shall (i) pay Executive, for a period equal to the longer of (1) the remaining
term of this Agreement or (2) two years (such period being hereinafter referred
to as the "Severance Period"), a monthly payment equal to one-twelfth of his
then annual salary, which amount shall be in lieu of any and all other payments
due and owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof),
and (ii) continue to allow Executive to participate, at the Company's expense,
in the Company's health insurance and disability insurance programs, to the
extent permitted under such programs, during the Severance Period (collectively,
the "Severance Payments"); provided, however, that if such termination occurs
within one (1) year following the effective date of a Change in Control of the
Company (as hereinafter defined), the Company shall pay to Executive, in lieu of
the amounts set forth in clause (i) above, in one lump sum, a severance payment
equal to (i) two years' annual salary plus (ii) an amount equal to twice
Executive's most recently declared bonus, if any.
(h) For purposes of this Agreement, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially
-5-
<PAGE>
all, of the assets of the Company, or (ii) the stockholders of the Company shall
approve any plan or proposal for liquidation or dissolution of the Company, or
(iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of 40% or more of the Company's outstanding Common Stock other than pursuant to
a plan or arrangement entered into by such person and the Company, or (iv)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the entire Board of Directors of the Company shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(i) Notwithstanding any provision to the contrary contained herein, in
the event the Company elects not to renew this Agreement (other than within one
year following a Change in Control of the Company, which is covered in Section
7(g) above) the Company will pay Executive a severance payment equal to one
year's annual salary.
(j) Executive may terminate his employment at any time upon 30 days'
prior written notice to the Company. Upon Executive's termination of his
employment hereunder or his election not to renew this Agreement, this Agreement
(other than Sections 4, 7, 9, 10, 11 and 12, which shall survive, if at all, in
accordance with their terms) shall terminate; provided, however, that Section 9
shall not survive such termination unless the Company pays to Executive during
the Severance Period the Severance Payments. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary and bonus, if any,
as has been accrued to date. Executive shall be entitled to reimbursement of
expenses pursuant to Section 4 hereof and to participate in the Company's
benefit plans to the extent participation by former employees is required by law
or permitted by such plans, with the expense of such participation to be as
specified in such plans for former employees.
(k) If, in connection with a change of ownership or control of the
Company or a change in ownership of a substantial portion of the assets of the
Company (all within the meaning of Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code")), an excise tax is payable by Executive
under Section 4999 of the Code, then the Company will pay to the Executive
additional compensation which will be sufficient to enable Executive to pay such
excise tax as well as the income tax and excise tax on such additional
compensation, such that, after the payment of income and excise taxes, Executive
is in the same economic position in which he would have been if the provisions
of Section 4999 of the Code had not been applicable. The additional compensation
required by this Section 7(k) will be paid to Executive promptly after the date
or dates on which the amount of such additional compensation is determinable, in
whole or in part.
-6-
<PAGE>
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company and
during the Severance Period following the termination of Executive's employment
hereunder (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, (i) any business which is competitive with products or services
of the Company or any of its subsidiaries in any geographic area in the United
States of America, Central and South America, Canada, The People's Republic of
China and Southeast Asia where, at the time of the termination of his employment
hereunder, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever or (ii) any
business conducted under any corporate or trade name utilized by the Company or
any name similar thereto without the prior written consent of the Company;
provided, however, that Executive may own any securities of any corporation
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause any suppliers or
customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
(b) If any portion of the restrictions set forth in this Section 9
should, for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business throughout
the United States, that its sales and marketing prospects are for continued
-7-
<PAGE>
expansion throughout the United States, Central and South America and Canada and
that, therefore, the territorial and time limitations set forth in this Section
9 are reasonable and properly required for the adequate protection of the
business of the Company and its subsidiaries. In the event any such territorial
or time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of the territorial or time
limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action by Executive against
the Company or any subsidiary shall not constitute a defense to the enforcement
by the Company or any subsidiary of the foregoing restrictive covenants, but
such claim or cause of action shall be litigated separately.
(e) In the event Executive's employment with the Company terminates for
any reason other than termination by the Company within one year following a
Change in Control of the Company, the Company and Executive agree that in
consideration of the payments being made to Executive during the Severance
Period, Executive shall be available during the Severance Period to advise and
consult with the Board of Directors, the President and other officers of the
Company and its subsidiaries with respect to the affairs of the Company and its
subsidiaries on a part-time basis, in response to requests for such advisory and
consulting services by the Board of Directors, or other officers of the Company
or its subsidiaries, subject to the conditions that (i) such services shall be
performed within the United States of America, (ii) Executive shall not be
required to devote a major portion of his time to such services, (iii) such
services shall not unreasonably interfere with the performance of other
employment or consulting duties Executive may have, (iv) Executive shall not be
required to perform such services during usual vacation periods and reasonable
periods of illness or other incapacitation, (v) such services shall be performed
at times and places as shall be chosen by Executive, and which will result in
the least inconvenience to Executive, and (vi) all other provisions of this
Section 9 shall apply. The Company shall reimburse Executive for actual
out-of-pocket expenses incurred in rendering the services performed by Executive
upon the request of the Board of Directors, or other officers of the Company or
its subsidiaries, payable at the end of each month during such period.
Notwithstanding the foregoing, in the event that Executive seeks full-time
employment with a third party and such third party will not accept Executive's
services for as long as he is committed under this subsection (e) to provide
consulting services to the Company, then if the Board of Directors of the
Company determines in its reasonable discretion that Executive's employment with
the third party will not cause him to breach the provisions of Section 9 of this
Agreement (other than this subsection (e)) and Executive provides the Board of
Directors with a letter signed by the third party stating that such third party
will not accept Executive's services as described above, the provisions of this
subsection (e) shall immediately terminate and be of no further force or effect.
(f) Notwithstanding anything herein to the contrary, this Section 9
shall automatically terminate if the Company terminates Executive's employment
-8-
<PAGE>
within one year following the effective date of a Change in Control of the
Company, or if the Company fails to make any payments due to Executive under
Sections 7(g), 7(i), 7(j) or 9(e).
10. INVENTIONS AND DISCOVERIES.
(a) Executive shall promptly and fully disclose to the Company, and with
all necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Executive (whether or not at the request or upon the suggestion of
the Company) during the period of his employment with, or rendering of advisory
or consulting services to, the Company or any of its subsidiaries, solely or
jointly with others in or relating to any activities of the Company or its
subsidiaries known to him as a consequence of his employment or the rendering of
advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $1,500.00 per day (or portion thereof), plus out-of-pocket expenses
incurred in rendering such assistance or giving or preparing to give such
testimony if it is required after the Severance Period.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than as is required in the regular course of his
duties (including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or
-9-
<PAGE>
controlled, directly or indirectly, by any of the foregoing, or in which any of
the foregoing has a beneficial interest, including, but not limited to, the
business affairs of each of the foregoing. Such confidential information shall
include, but shall not be limited to, proprietary technology, trade secrets,
patented processes, research and development data, know-how, market studies and
forecasts, competitive analyses, pricing policies, employee lists, personnel
policies, the substance of agreements with customers, suppliers and others,
marketing or dealership arrangements, servicing and training programs and
arrangements, customer lists and any other documents embodying such confidential
information. This confidentiality obligation shall not apply to any confidential
information which thereafter becomes publicly available other than pursuant to a
breach of this Section 11(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use commercially
reasonable best efforts to prevent any publication or disclosure thereof. Upon
termination of Executive's employment with the Company, all documents, records,
reports, writings and other similar documents containing confidential
information, including copies thereof, then in Executive's possession or control
shall be returned and left with the Company.
12. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach
of, any of the provisions of Sections 9, 10 or 11 (the "Restrictive Covenants"),
the Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to
injunctive relief and/or to have the Restrictive Covenants specifically enforced
by an court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company. Notwithstanding the foregoing, nothing herein shall constitute a waiver
by Executive of his right to contest whether a breach or threatened breach of
any Restrictive Covenant has occurred.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be
valid unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Alabama applicable to agreements made and to be
performed therein.
-10-
<PAGE>
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or courier, or sent by
certified mail, return receipt requested, to the addresses set forth above or
such other address as either party may from time to time designate in writing to
the other, and shall be deemed given as of the date of the delivery or at the
expiration of three days in the event of a mailing.
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof, supersedes all prior agreements, both
written and oral, between the parties with respect to the subject matter hereof,
including without limitation that certain employment agreement dated October 21,
1994, between the Company and Executive, and may be modified only by a written
instrument signed by each of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributors, successors and assigns, provided, however,
that Executive shall not be entitled to assign or delegate any of his or her
rights or obligations hereunder without the prior written consent of the
Company.
19. SURVIVAL.
Except as otherwise expressly provided herein, the termination of
Executive's employment hereunder or the expiration of this Agreement shall not
affect the enforceability of Sections 4, 7, 9, 10, 11 and 12 hereof.
20. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
-11-
<PAGE>
21. CONSTRUCTION OF AGREEMENT.
No provision of this Agreement or any related document shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or drafted such provision.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes
of easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
AMERICAN BUILDINGS COMPANY
[CORPORATE SEAL]
By: /s/___________________________
ATTEST:
By: /s/_______________________________
Name:
Title:
/s/_______________________________
Robert T. Ammerman
-12-
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between AMERICAN BUILDINGS COMPANY, a
Delaware corporation with an office at 1150 State Docks Road, Eufaula, Alabama
36027 (the "Company"), and Joel R. Voelkert, residing at 404 St. Francis Point,
Eufaula, Alabama 36027 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of President--Construction Products Group of the Company
reporting to the Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue until December 31, 2000,
subject to prior termination in accordance with the terms hereof. Thereafter,
this Agreement shall automatically be renewed for successive one year terms
unless either party shall give the other ninety (90) days prior written notice
of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $210,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion, but shall not in
any year be reduced below the rate for the previous
<PAGE>
year. In addition, Executive shall be entitled to bonuses from time to time in
such amounts as may be determined by the Board of Directors in its sole
discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to such vacations and to participate in and
receive any other benefits customarily provided by the Company to its senior
management personnel (including any profit sharing, pension, short and long-term
disability insurance, hospital, major medical insurance and group life insurance
plans in accordance with the terms of such plans) and including stock option
and/or stock purchase plans, all as determined from time to time by the Board of
Directors of the Company.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Chief
Executive Officer of the Company shall from time to time determine and Executive
shall comply in the performance of his duties with the policies of the Board of
Directors, and be subject to the direction of the Chief Executive Officer. At
the request of the Board of Directors, Executive shall serve as an executive
officer and director of any subsidiary of the Company and, in the performance of
such duties, Executive shall comply with the policies of the Board of Directors
of each such subsidiary.
(b) During the term of this Agreement, Executive shall devote substantially
all of his time and attention, reasonable vacation time and absences for
sickness excepted, to the business of the Company, as necessary to fulfill his
duties. Executive shall perform the duties assigned to him with fidelity and to
the best of his ability. Notwithstanding anything herein to the contrary,
Executive may engage in other activities so long as such activities do not
unreasonably interfere with Executive's performance of his duties hereunder and
do not violate Section 9 hereof.
(c) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
-2-
<PAGE>
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors that Executive's
performance of his duties has not been fully satisfactory for any reason
which would not constitute justifiable cause (as hereinafter defined) upon
thirty (30) days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten
(10) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company after examination of
Executive by an independent physician reasonably acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and be
limited to: any repeated wilful failure or refusal to perform any of his duties
pursuant to this Agreement where such conduct shall not have ceased within 30
days following written warning from the Company; Executive's conviction (which,
through lapse of time or otherwise, is not subject to appeal) of, pleading
guilty to, or confession of any crime or offense involving money or other
property of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; Executive's performance of any act or his failure to act,
for which if Executive were prosecuted and convicted, a crime or offense
involving money or property of the Company or its subsidiaries, or which would
constitute a felony in the jurisdiction involved, would have occurred; any
unauthorized disclosure by Executive to any person, firm or corporation other
than the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or any
of its subsidiaries; any attempt by Executive to secure any personal profit in
connection with the business of the Company or any of its subsidiaries;
Executive's engagement in a fraudulent act to the material damage or prejudice
of Company or its subsidiaries or in conduct or activities materially damaging
to the property, business or reputation of
-3-
<PAGE>
Company or its subsidiaries, all as determined by the Board of Directors in good
faith; Executive's illegal use of controlled substances; any material act or
omission by Executive involving malfeasance or negligence in the performance of
Executive's duties to the material detriment of the Company or its subsidiaries,
as determined by the Board of Directors in good faith, which has not been
corrected by Executive within thirty (30) days after written notice from the
Company of any such act or omission; the entry of an order of a court that
remains in effect and is not discharged for a period of at least sixty (60)
days, which enjoins or otherwise limits or restricts the performance by
Executive under this Agreement, relating to any contract, agreement or
commitment made by or applicable to Executive in favor of any former employer or
any other person; or the engaging by Executive in any business other than the
business of the Company and its subsidiaries which unreasonably interferes with
the performance of his duties hereunder. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary and reimbursement of expenses pursuant
to Section 4 hereof as has been accrued through the date of his termination of
employment.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 as has been
accrued through the date of his death. If Executive's death shall occur while he
is on Company business, the estate of Executive shall be entitled to receive, in
addition to the other amounts set forth in this subsection (e), an amount equal
to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) and reimbursement of expenses pursuant to Section 4 as provided
herein until he begins to receive long-term disability insurance benefits under
the policy provided by the Company pursuant to Section 5 hereof. Any termination
pursuant to this subsection (f) shall be effective on the later of (i) the date
30 days after which Executive shall have received written notice of the
Company's election to terminate or (ii) the date he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof.
(g) Notwithstanding any provision to the contrary contained herein, in the
event that Executive's employment is terminated by the Company at any time for
any reason other than justifiable cause, disability or death, the Company shall
(i) pay Executive, for a period equal to the longer of (1) the remaining term of
this Agreement or (2) one year (such period being hereinafter referred to as the
"Severance Period"), a monthly payment equal to one-twelfth of his then annual
salary, which amount shall be in lieu of any and all other payments due and
owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof),
and (ii) continue to allow Executive to
-4-
<PAGE>
participate, at the Company's expense, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
during the Severance Period (collectively, the "Severance Payments"); provided,
however, that if such termination occurs within one (1) year following the
effective date of a Change in Control of the Company (as hereinafter defined),
the Company shall pay to Executive, in lieu of the amounts set forth in clause
(i) above, in one lump sum, a severance payment equal to (i) two years' annual
salary plus (ii) an amount equal to twice Executive's most recently declared
bonus, if any.
(h) For purposes of this Agreement, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(i) Notwithstanding any provision to the contrary contained herein, in the
event the Company elects not to renew this Agreement (other than within one year
following a Change in Control of the Company, which is covered in Section 7(g)
above) the Company will pay Executive a severance payment equal to one year's
annual salary.
(j) Executive may terminate his employment at any time upon 30 days' prior
written notice to the Company. Upon Executive's termination of his employment
hereunder or his election not to renew this Agreement, this Agreement (other
than Sections 4, 7, 9, 10, 11 and 12, which shall survive, if at all, in
accordance with their terms) shall terminate; provided, however, that Section 9
shall not survive such termination unless the Company pays to Executive during
the Severance Period the Severance Payments. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary and bonus, if any,
as has been accrued to date. Executive shall be entitled to reimbursement of
expenses pursuant to Section 4 hereof and to participate in the Company's
benefit plans to the extent participation by former
-5-
<PAGE>
employees is required by law or permitted by such plans, with the expense of
such participation to be as specified in such plans for former employees.
(k) If, in connection with a change of ownership or control of the Company
or a change in ownership of a substantial portion of the assets of the Company
(all within the meaning of Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code")), an excise tax is payable by Executive under
Section 4999 of the Code, then the Company will pay to the Executive additional
compensation which will be sufficient to enable Executive to pay such excise tax
as well as the income tax and excise tax on such additional compensation, such
that, after the payment of income and excise taxes, Executive is in the same
economic position in which he would have been if the provisions of Section 4999
of the Code had not been applicable. The additional compensation required by
this Section 7(k) will be paid to Executive promptly after the date or dates on
which the amount of such additional compensation is determinable, in whole or in
part.
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company and during
the Severance Period following the termination of Executive's employment
hereunder (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, (i) any business which is competitive with products or services
of the Company or any of its subsidiaries in any geographic area in the United
States of America, Central and South America, Canada, The People's Republic of
China and Southeast Asia where, at the time of the termination of his employment
hereunder, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever or (ii) any
business conducted under any corporate or trade name utilized by the Company or
any name similar thereto without the prior written consent of the Company;
provided, however, that Executive may own any securities of any corporation
-6-
<PAGE>
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause any suppliers or
customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
(b) If any portion of the restrictions set forth in this Section 9 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business throughout
the United States, that its sales and marketing prospects are for continued
expansion throughout the United States, Central and South America and Canada and
that, therefore, the territorial and time limitations set forth in this Section
9 are reasonable and properly required for the adequate protection of the
business of the Company and its subsidiaries. In the event any such territorial
or time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of the territorial or time
limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action by Executive against the
Company or any subsidiary shall not constitute a defense to the enforcement by
the Company or any subsidiary of the foregoing restrictive covenants, but such
claim or cause of action shall be litigated separately.
(e) In the event Executive's employment with the Company terminates for any
reason other than termination by the Company within one year following a Change
in Control of the Company, the Company and Executive agree that in consideration
of the payments being made to Executive during the Severance Period, Executive
shall be available during the Severance Period to advise and consult with the
Board of Directors, the President and other officers of the Company and its
subsidiaries with respect to the affairs of the Company and its subsidiaries on
a part-time basis, in response to requests for such advisory and consulting
services by the Board of Directors, or other officers of the Company or its
subsidiaries, subject to the conditions that (i) such services shall be
performed within the United States of America, (ii) Executive shall not be
required to devote a major portion of his time to such services, (iii) such
services shall not unreasonably interfere with the performance of other
employment or consulting duties Executive may have, (iv) Executive shall not be
required to perform such services during usual vacation periods and reasonable
periods of illness or other incapacitation, (v) such services shall be performed
at times and places as shall be chosen by Executive, and which will result in
the least inconvenience to Executive, and (vi) all other provisions of this
Section 9 shall apply. The Company
-7-
<PAGE>
shall reimburse Executive for actual out-of-pocket expenses incurred in
rendering the services performed by Executive upon the request of the Board of
Directors, or other officers of the Company or its subsidiaries, payable at the
end of each month during such period. Notwithstanding the foregoing, in the
event that Executive seeks full-time employment with a third party and such
third party will not accept Executive's services for as long as he is committed
under this subsection (e) to provide consulting services to the Company, then if
the Board of Directors of the Company determines in its reasonable discretion
that Executive's employment with the third party will not cause him to breach
the provisions of Section 9 of this Agreement (other than this subsection (e))
and Executive provides the Board of Directors with a letter signed by the third
party stating that such third party will not accept Executive's services as
described above, the provisions of this subsection (e) shall immediately
terminate and be of no further force or effect.
(f) Notwithstanding anything herein to the contrary, this Section 9 shall
automatically terminate if the Company terminates Executive's employment within
one year following the effective date of a Change in Control of the Company, or
if the Company fails to make any payments due to Executive under Sections 7(g),
7(i), 7(j) or 9(e).
10. INVENTIONS AND DISCOVERIES.
(a) Executive shall promptly and fully disclose to the Company, and with
all necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Executive (whether or not at the request or upon the suggestion of
the Company) during the period of his employment with, or rendering of advisory
or consulting services to, the Company or any of its subsidiaries, solely or
jointly with others in or relating to any activities of the Company or its
subsidiaries known to him as a consequence of his employment or the rendering of
advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $500.00 per day (or portion thereof), plus out-of-pocket expenses
incurred in rendering such
-8-
<PAGE>
assistance or giving or preparing to give such testimony if it is required after
the Severance Period.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any time
following termination of this Agreement, directly or indirectly, disclose or
permit to be known (other than as is required in the regular course of his
duties (including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers, suppliers
and others, marketing or dealership arrangements, servicing and training
programs and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 11(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use commercially
reasonable best efforts to prevent any publication or disclosure thereof. Upon
termination of Executive's employment with the Company, all documents, records,
reports, writings and other similar documents containing confidential
information, including copies thereof, then in Executive's possession or control
shall be returned and left with the Company.
12. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach of,
any of the provisions of Sections 9, 10 or 11 (the "Restrictive Covenants"), the
Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to
injunctive relief and/or to have the Restrictive Covenants specifically enforced
by an court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company. Notwithstanding the foregoing, nothing
-9-
<PAGE>
herein shall constitute a waiver by Executive of his right to contest whether a
breach or threatened breach of any Restrictive Covenant has occurred.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Alabama applicable to agreements made and to be performed
therein.
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand or courier, or sent by certified mail,
return receipt requested, to the addresses set forth above or such other address
as either party may from time to time designate in writing to the other, and
shall be deemed given as of the date of the delivery or at the expiration of
three days in the event of a mailing.
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior agreements, both written and
oral, between the parties with respect to the subject matter hereof, including
without limitation the employment agreement, dated as of October 21, 1994,
between the Company and Executive, and may be modified only by a written
instrument signed by each of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributors, successors and assigns, provided, however,
that Executive shall not be entitled to assign or delegate any of his or her
rights or obligations hereunder without the prior written consent of the
Company.
-10-
<PAGE>
19. SURVIVAL.
Except as otherwise expressly provided herein, the termination of
Executive's employment hereunder or the expiration of this Agreement shall not
affect the enforceability of Sections 4, 7, 9, 10, 11 and 12 hereof.
20. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
21. CONSTRUCTION OF AGREEMENT.
No provision of this Agreement or any related document shall be construed
against or interpreted to the disadvantage of any party hereto by any court or
other governmental or judicial authority by reason of such party having or being
deemed to have structured or drafted such provision.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
AMERICAN BUILDINGS COMPANY
[CORPORATE SEAL]
By: /s/_____________________________
ATTEST:
By: /s/_____________________
Name:
Title:
/s/________________________________
Joel R. Voelkert
-11-
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between AMERICAN BUILDINGS COMPANY, a
Delaware corporation with an office at 1150 State Docks Road, Eufaula, Alabama
36027 (the "Company"), and Roy L. Smith, residing at 510 Poinciana Drive,
Homewood, Alabama 35209 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of President-Polymer Division of the Company reporting to
the Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue until December 31, 2000,
subject to prior termination in accordance with the terms hereof. Thereafter,
this Agreement shall automatically be renewed for successive one year terms
unless either party shall give the other ninety (90) days prior written notice
of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $125,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion, but shall not in
any year be reduced below the rate for the previous
<PAGE>
year. In addition, Executive shall be entitled to bonuses from time to time in
such amounts as may be determined by the Board of Directors in its sole
discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to such vacations and to participate in and
receive any other benefits customarily provided by the Company to its senior
management personnel (including any profit sharing, pension, short and long-term
disability insurance, hospital, major medical insurance and group life insurance
plans in accordance with the terms of such plans) and including stock option
and/or stock purchase plans, all as determined from time to time by the Board of
Directors of the Company.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Chief
Executive Officer of the Company shall from time to time determine and Executive
shall comply in the performance of his duties with the policies of the Board of
Directors, and be subject to the direction of the Chief Executive Officer. At
the request of the Board of Directors, Executive shall serve as an executive
officer and director of any subsidiary of the Company and, in the performance of
such duties, Executive shall comply with the policies of the Board of Directors
of each such subsidiary.
(b) During the term of this Agreement, Executive shall devote substantially
all of his time and attention, reasonable vacation time and absences for
sickness excepted, to the business of the Company, as necessary to fulfill his
duties. Executive shall perform the duties assigned to him with fidelity and to
the best of his ability. Notwithstanding anything herein to the contrary,
Executive may engage in other activities so long as such activities do not
unreasonably interfere with Executive's performance of his duties hereunder and
do not violate Section 9 hereof.
(c) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
-2-
<PAGE>
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors that Executive's
performance of his duties has not been fully satisfactory for any reason
which would not constitute justifiable cause (as hereinafter defined) upon
thirty (30) days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten
(10) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company after examination of
Executive by an independent physician reasonably acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and be
limited to: any repeated wilful failure or refusal to perform any of his duties
pursuant to this Agreement where such conduct shall not have ceased within 30
days following written warning from the Company; Executive's conviction (which,
through lapse of time or otherwise, is not subject to appeal) of, pleading
guilty to, or confession of any crime or offense involving money or other
property of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; Executive's performance of any act or his failure to act,
for which if Executive were prosecuted and convicted, a crime or offense
involving money or property of the Company or its subsidiaries, or which would
constitute a felony in the jurisdiction involved, would have occurred; any
unauthorized disclosure by Executive to any person, firm or corporation other
than the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or any
of its subsidiaries; any attempt by Executive to secure any personal profit in
connection with the business of the Company or any of its subsidiaries;
Executive's engagement in a fraudulent act to the material damage or prejudice
of Company or its subsidiaries or in conduct or activities materially damaging
to the property, business or reputation of
-3-
<PAGE>
Company or its subsidiaries, all as determined by the Board of Directors in good
faith; Executive's illegal use of controlled substances; any material act or
omission by Executive involving malfeasance or negligence in the performance of
Executive's duties to the material detriment of the Company or its subsidiaries,
as determined by the Board of Directors in good faith, which has not been
corrected by Executive within thirty (30) days after written notice from the
Company of any such act or omission; the entry of an order of a court that
remains in effect and is not discharged for a period of at least sixty (60)
days, which enjoins or otherwise limits or restricts the performance by
Executive under this Agreement, relating to any contract, agreement or
commitment made by or applicable to Executive in favor of any former employer or
any other person; or the engaging by Executive in any business other than the
business of the Company and its subsidiaries which unreasonably interferes with
the performance of his duties hereunder. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary and reimbursement of expenses pursuant
to Section 4 hereof as has been accrued through the date of his termination of
employment.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 as has been
accrued through the date of his death. If Executive's death shall occur while he
is on Company business, the estate of Executive shall be entitled to receive, in
addition to the other amounts set forth in this subsection (e), an amount equal
to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) and reimbursement of expenses pursuant to Section 4 as provided
herein until he begins to receive long-term disability insurance benefits under
the policy provided by the Company pursuant to Section 5 hereof. Any termination
pursuant to this subsection (f) shall be effective on the later of (i) the date
30 days after which Executive shall have received written notice of the
Company's election to terminate or (ii) the date he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof.
(g) Notwithstanding any provision to the contrary contained herein, in the
event that Executive's employment is terminated by the Company at any time for
any reason other than justifiable cause, disability or death, the Company shall
(i) pay Executive, for a period equal to the longer of (1) the remaining term of
this Agreement or (2) one year (such period being hereinafter referred to as the
"Severance Period"), a monthly payment equal to one-twelfth of his then annual
salary, which amount shall be in lieu of any and all other payments due and
owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof),
and (ii) continue to allow Executive to
-4-
<PAGE>
participate, at the Company's expense, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
during the Severance Period (collectively, the "Severance Payments"); provided,
however, that if such termination occurs within one (1) year following the
effective date of a Change in Control of the Company (as hereinafter defined),
the Company shall pay to Executive, in lieu of the amounts set forth in clause
(i) above, in one lump sum, a severance payment equal to (i) two years' annual
salary plus (ii) an amount equal to twice Executive's most recently declared
bonus, if any.
(h) For purposes of this Agreement, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(i) Notwithstanding any provision to the contrary contained herein, in the
event the Company elects not to renew this Agreement (other than within one year
following a Change in Control of the Company, which is covered in Section 7(g)
above) the Company will pay Executive a severance payment equal to one year's
annual salary.
(j) Executive may terminate his employment at any time upon 30 days' prior
written notice to the Company. Upon Executive's termination of his employment
hereunder or his election not to renew this Agreement, this Agreement (other
than Sections 4, 7, 9, 10, 11 and 12, which shall survive, if at all, in
accordance with their terms) shall terminate; provided, however, that Section 9
shall not survive such termination unless the Company pays to Executive during
the Severance Period the Severance Payments. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary and bonus, if any,
as has been accrued to date. Executive shall be entitled to reimbursement of
expenses pursuant to Section 4 hereof and to participate in the Company's
benefit plans to the extent participation by former
-5-
<PAGE>
employees is required by law or permitted by such plans, with the expense of
such participation to be as specified in such plans for former employees.
(k) If, in connection with a change of ownership or control of the Company
or a change in ownership of a substantial portion of the assets of the Company
(all within the meaning of Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code")), an excise tax is payable by Executive under
Section 4999 of the Code, then the Company will pay to the Executive additional
compensation which will be sufficient to enable Executive to pay such excise tax
as well as the income tax and excise tax on such additional compensation, such
that, after the payment of income and excise taxes, Executive is in the same
economic position in which he would have been if the provisions of Section 4999
of the Code had not been applicable. The additional compensation required by
this Section 7(k) will be paid to Executive promptly after the date or dates on
which the amount of such additional compensation is determinable, in whole or in
part.
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company and during
the Severance Period following the termination of Executive's employment
hereunder (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, (i) any business which is competitive with products or services
of the Company or any of its subsidiaries in any geographic area in the United
States of America, Central and South America, Canada, The People's Republic of
China and Southeast Asia where, at the time of the termination of his employment
hereunder, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever or (ii) any
business conducted under any corporate or trade name utilized by the Company or
any name similar thereto without the prior written consent of the Company;
provided, however, that Executive may own any securities of any corporation
-6-
<PAGE>
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause any suppliers or
customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
(b) If any portion of the restrictions set forth in this Section 9 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business throughout
the United States, that its sales and marketing prospects are for continued
expansion throughout the United States, Central and South America and Canada and
that, therefore, the territorial and time limitations set forth in this Section
9 are reasonable and properly required for the adequate protection of the
business of the Company and its subsidiaries. In the event any such territorial
or time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of the territorial or time
limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action by Executive against the
Company or any subsidiary shall not constitute a defense to the enforcement by
the Company or any subsidiary of the foregoing restrictive covenants, but such
claim or cause of action shall be litigated separately.
(e) In the event Executive's employment with the Company terminates for any
reason other than termination by the Company within one year following a Change
in Control of the Company, the Company and Executive agree that in consideration
of the payments being made to Executive during the Severance Period, Executive
shall be available during the Severance Period to advise and consult with the
Board of Directors, the President and other officers of the Company and its
subsidiaries with respect to the affairs of the Company and its subsidiaries on
a part-time basis, in response to requests for such advisory and consulting
services by the Board of Directors, or other officers of the Company or its
subsidiaries, subject to the conditions that (i) such services shall be
performed within the United States of America, (ii) Executive shall not be
required to devote a major portion of his time to such services, (iii) such
services shall not unreasonably interfere with the performance of other
employment or consulting duties Executive may have, (iv) Executive shall not be
required to perform such services during usual vacation periods and reasonable
periods of illness or other incapacitation, (v) such services shall be performed
at times and places as shall be chosen by Executive, and which will result in
the least inconvenience to Executive, and (vi) all other provisions of this
Section 9 shall apply. The Company
-7-
<PAGE>
shall reimburse Executive for actual out-of-pocket expenses incurred in
rendering the services performed by Executive upon the request of the Board of
Directors, or other officers of the Company or its subsidiaries, payable at the
end of each month during such period. Notwithstanding the foregoing, in the
event that Executive seeks full-time employment with a third party and such
third party will not accept Executive's services for as long as he is committed
under this subsection (e) to provide consulting services to the Company, then if
the Board of Directors of the Company determines in its reasonable discretion
that Executive's employment with the third party will not cause him to breach
the provisions of Section 9 of this Agreement (other than this subsection (e))
and Executive provides the Board of Directors with a letter signed by the third
party stating that such third party will not accept Executive's services as
described above, the provisions of this subsection (e) shall immediately
terminate and be of no further force or effect.
(f) Notwithstanding anything herein to the contrary, this Section 9 shall
automatically terminate if the Company terminates Executive's employment within
one year following the effective date of a Change in Control of the Company, or
if the Company fails to make any payments due to Executive under Sections 7(g),
7(i), 7(j) or 9(e).
10. INVENTIONS AND DISCOVERIES.
(a) Executive shall promptly and fully disclose to the Company, and with
all necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Executive (whether or not at the request or upon the suggestion of
the Company) during the period of his employment with, or rendering of advisory
or consulting services to, the Company or any of its subsidiaries, solely or
jointly with others in or relating to any activities of the Company or its
subsidiaries known to him as a consequence of his employment or the rendering of
advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $500.00 per day (or portion thereof), plus out-of-pocket expenses
incurred in rendering such
-8-
<PAGE>
assistance or giving or preparing to give such testimony if it is required after
the Severance Period.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any time
following termination of this Agreement, directly or indirectly, disclose or
permit to be known (other than as is required in the regular course of his
duties (including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers, suppliers
and others, marketing or dealership arrangements, servicing and training
programs and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 11(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use commercially
reasonable best efforts to prevent any publication or disclosure thereof. Upon
termination of Executive's employment with the Company, all documents, records,
reports, writings and other similar documents containing confidential
information, including copies thereof, then in Executive's possession or control
shall be returned and left with the Company.
12. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach of,
any of the provisions of Sections 9, 10 or 11 (the "Restrictive Covenants"), the
Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to
injunctive relief and/or to have the Restrictive Covenants specifically enforced
by an court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company. Notwithstanding the foregoing, nothing
-9-
<PAGE>
herein shall constitute a waiver by Executive of his right to contest whether a
breach or threatened breach of any Restrictive Covenant has occurred.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Alabama applicable to agreements made and to be performed
therein.
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand or courier, or sent by certified mail,
return receipt requested, to the addresses set forth above or such other address
as either party may from time to time designate in writing to the other, and
shall be deemed given as of the date of the delivery or at the expiration of
three days in the event of a mailing.
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior agreements, both written and
oral, between the parties with respect to the subject matter hereof, including
without limitation the employment agreement, dated as of October 21, 1994,
between the Company and Executive, and may be modified only by a written
instrument signed by each of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributors, successors and assigns, provided, however,
that Executive shall not be entitled to assign or delegate any of his or her
rights or obligations hereunder without the prior written consent of the
Company.
-10-
<PAGE>
19. SURVIVAL.
Except as otherwise expressly provided herein, the termination of
Executive's employment hereunder or the expiration of this Agreement shall not
affect the enforceability of Sections 4, 7, 9, 10, 11 and 12 hereof.
20. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
21. CONSTRUCTION OF AGREEMENT.
No provision of this Agreement or any related document shall be construed
against or interpreted to the disadvantage of any party hereto by any court or
other governmental or judicial authority by reason of such party having or being
deemed to have structured or drafted such provision.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
AMERICAN BUILDINGS COMPANY
[CORPORATE SEAL]
By: /s/_______________________________
ATTEST:
By: /s/____________________________
Name:
Title:
/s/___________________________________
Roy L. Smith
-11-
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between AMERICAN BUILDINGS COMPANY, a
Delaware corporation with an office at 1150 State Docks Road, Eufaula, Alabama
36027 (the "Company"), and Barry Milling, residing at 1816 Fox Ridge Road,
Eufaula, Alabama 36027 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Vice President-Technical Services of the Company
reporting to the Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue until December 31, 2000,
subject to prior termination in accordance with the terms hereof. Thereafter,
this Agreement shall automatically be renewed for successive one year terms
unless either party shall give the other ninety (90) days prior written notice
of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $152,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion, but shall not in
any year be reduced below the rate for the previous
<PAGE>
year. In addition, Executive shall be entitled to bonuses from time to time in
such amounts as may be determined by the Board of Directors in its sole
discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to such vacations and to participate in and
receive any other benefits customarily provided by the Company to its senior
management personnel (including any profit sharing, pension, short and long-term
disability insurance, hospital, major medical insurance and group life insurance
plans in accordance with the terms of such plans) and including stock option
and/or stock purchase plans, all as determined from time to time by the Board of
Directors of the Company.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Chief
Executive Officer of the Company shall from time to time determine and Executive
shall comply in the performance of his duties with the policies of the Board of
Directors, and be subject to the direction of the Chief Executive Officer. At
the request of the Board of Directors, Executive shall serve as an executive
officer and director of any subsidiary of the Company and, in the performance of
such duties, Executive shall comply with the policies of the Board of Directors
of each such subsidiary.
(b) During the term of this Agreement, Executive shall devote
substantially all of his time and attention, reasonable vacation time and
absences for sickness excepted, to the business of the Company, as necessary to
fulfill his duties. Executive shall perform the duties assigned to him with
fidelity and to the best of his ability. Notwithstanding anything herein to the
contrary, Executive may engage in other activities so long as such activities do
not unreasonably interfere with Executive's performance of his duties hereunder
and do not violate Section 9 hereof.
(c) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
-2-
<PAGE>
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors that Executive's
performance of his duties has not been fully satisfactory for any reason
which would not constitute justifiable cause (as hereinafter defined) upon
thirty (30) days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten
(10) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company after examination of
Executive by an independent physician reasonably acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and
be limited to: any repeated wilful failure or refusal to perform any of his
duties pursuant to this Agreement where such conduct shall not have ceased
within 30 days following written warning from the Company; Executive's
conviction (which, through lapse of time or otherwise, is not subject to appeal)
of, pleading guilty to, or confession of any crime or offense involving money or
other property of the Company or its subsidiaries or which constitutes a felony
in the jurisdiction involved; Executive's performance of any act or his failure
to act, for which if Executive were prosecuted and convicted, a crime or offense
involving money or property of the Company or its subsidiaries, or which would
constitute a felony in the jurisdiction involved, would have occurred; any
unauthorized disclosure by Executive to any person, firm or corporation other
than the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or any
of its subsidiaries; any attempt by Executive to secure any personal profit in
connection with the business of the Company or any of its subsidiaries;
Executive's engagement in a fraudulent act to the material damage or prejudice
of Company or its subsidiaries or in conduct or activities materially damaging
to the property, business or reputation of
-3-
<PAGE>
Company or its subsidiaries, all as determined by the Board of Directors in good
faith; Executive's illegal use of controlled substances; any material act or
omission by Executive involving malfeasance or negligence in the performance of
Executive's duties to the material detriment of the Company or its subsidiaries,
as determined by the Board of Directors in good faith, which has not been
corrected by Executive within thirty (30) days after written notice from the
Company of any such act or omission; the entry of an order of a court that
remains in effect and is not discharged for a period of at least sixty (60)
days, which enjoins or otherwise limits or restricts the performance by
Executive under this Agreement, relating to any contract, agreement or
commitment made by or applicable to Executive in favor of any former employer or
any other person; or the engaging by Executive in any business other than the
business of the Company and its subsidiaries which unreasonably interferes with
the performance of his duties hereunder. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary and reimbursement of expenses pursuant
to Section 4 hereof as has been accrued through the date of his termination of
employment.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 as has been
accrued through the date of his death. If Executive's death shall occur while he
is on Company business, the estate of Executive shall be entitled to receive, in
addition to the other amounts set forth in this subsection (e), an amount equal
to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) and reimbursement of expenses pursuant to Section 4 as provided
herein until he begins to receive long-term disability insurance benefits under
the policy provided by the Company pursuant to Section 5 hereof. Any termination
pursuant to this subsection (f) shall be effective on the later of (i) the date
30 days after which Executive shall have received written notice of the
Company's election to terminate or (ii) the date he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof.
(g) Notwithstanding any provision to the contrary contained herein, in
the event that Executive's employment is terminated by the Company at any time
for any reason other than justifiable cause, disability or death, the Company
shall (i) pay Executive, for a period equal to the longer of (1) the remaining
term of this Agreement or (2) one year (such period being hereinafter referred
to as the "Severance Period"), a monthly payment equal to one-twelfth of his
then annual salary, which amount shall be in lieu of any and all other payments
due and owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof),
and (ii) continue to allow Executive to
-4-
<PAGE>
participate, at the Company's expense, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
during the Severance Period (collectively, the "Severance Payments"); provided,
however, that if such termination occurs within one (1) year following the
effective date of a Change in Control of the Company (as hereinafter defined),
the Company shall pay to Executive, in lieu of the amounts set forth in clause
(i) above, in one lump sum, a severance payment equal to (i) two years' annual
salary plus (ii) an amount equal to twice Executive's most recently declared
bonus, if any.
(h) For purposes of this Agreement, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(i) Notwithstanding any provision to the contrary contained herein, in
the event the Company elects not to renew this Agreement (other than within one
year following a Change in Control of the Company, which is covered in Section
7(g) above) the Company will pay Executive a severance payment equal to one
year's annual salary.
(j) Executive may terminate his employment at any time upon 30 days'
prior written notice to the Company. Upon Executive's termination of his
employment hereunder or his election not to renew this Agreement, this Agreement
(other than Sections 4, 7, 9, 10, 11 and 12, which shall survive, if at all, in
accordance with their terms) shall terminate; provided, however, that Section 9
shall not survive such termination unless the Company pays to Executive during
the Severance Period the Severance Payments. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary and bonus, if any,
as has been accrued to date. Executive shall be entitled to reimbursement of
expenses pursuant to Section 4 hereof and to participate in the Company's
benefit plans to the extent participation by former
-5-
<PAGE>
employees is required by law or permitted by such plans, with the expense of
such participation to be as specified in such plans for former employees.
(k) If, in connection with a change of ownership or control of the
Company or a change in ownership of a substantial portion of the assets of the
Company (all within the meaning of Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code")), an excise tax is payable by Executive
under Section 4999 of the Code, then the Company will pay to the Executive
additional compensation which will be sufficient to enable Executive to pay such
excise tax as well as the income tax and excise tax on such additional
compensation, such that, after the payment of income and excise taxes, Executive
is in the same economic position in which he would have been if the provisions
of Section 4999 of the Code had not been applicable. The additional compensation
required by this Section 7(k) will be paid to Executive promptly after the date
or dates on which the amount of such additional compensation is determinable, in
whole or in part.
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company and
during the Severance Period following the termination of Executive's employment
hereunder (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, (i) any business which is competitive with products or services
of the Company or any of its subsidiaries in any geographic area in the United
States of America, Central and South America, Canada, The People's Republic of
China and Southeast Asia where, at the time of the termination of his employment
hereunder, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever or (ii) any
business conducted under any corporate or trade name utilized by the Company or
any name similar thereto without the prior written consent of the Company;
provided, however, that Executive may own any securities of any corporation
-6-
<PAGE>
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause any suppliers or
customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
(b) If any portion of the restrictions set forth in this Section 9
should, for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business throughout
the United States, that its sales and marketing prospects are for continued
expansion throughout the United States, Central and South America and Canada and
that, therefore, the territorial and time limitations set forth in this Section
9 are reasonable and properly required for the adequate protection of the
business of the Company and its subsidiaries. In the event any such territorial
or time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of the territorial or time
limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action by Executive against
the Company or any subsidiary shall not constitute a defense to the enforcement
by the Company or any subsidiary of the foregoing restrictive covenants, but
such claim or cause of action shall be litigated separately.
(e) In the event Executive's employment with the Company terminates for
any reason other than termination by the Company within one year following a
Change in Control of the Company, the Company and Executive agree that in
consideration of the payments being made to Executive during the Severance
Period, Executive shall be available during the Severance Period to advise and
consult with the Board of Directors, the President and other officers of the
Company and its subsidiaries with respect to the affairs of the Company and its
subsidiaries on a part-time basis, in response to requests for such advisory and
consulting services by the Board of Directors, or other officers of the Company
or its subsidiaries, subject to the conditions that (i) such services shall be
performed within the United States of America, (ii) Executive shall not be
required to devote a major portion of his time to such services, (iii) such
services shall not unreasonably interfere with the performance of other
employment or consulting duties Executive may have, (iv) Executive shall not be
required to perform such services during usual vacation periods and reasonable
periods of illness or other incapacitation, (v) such services shall be performed
at times and places as shall be chosen by Executive, and which will result in
the least inconvenience to Executive, and (vi) all other provisions of this
Section 9 shall apply. The Company
-7-
<PAGE>
shall reimburse Executive for actual out-of-pocket expenses incurred in
rendering the services performed by Executive upon the request of the Board of
Directors, or other officers of the Company or its subsidiaries, payable at the
end of each month during such period. Notwithstanding the foregoing, in the
event that Executive seeks full-time employment with a third party and such
third party will not accept Executive's services for as long as he is committed
under this subsection (e) to provide consulting services to the Company, then if
the Board of Directors of the Company determines in its reasonable discretion
that Executive's employment with the third party will not cause him to breach
the provisions of Section 9 of this Agreement (other than this subsection (e))
and Executive provides the Board of Directors with a letter signed by the third
party stating that such third party will not accept Executive's services as
described above, the provisions of this subsection (e) shall immediately
terminate and be of no further force or effect.
(f) Notwithstanding anything herein to the contrary, this Section 9
shall automatically terminate if the Company terminates Executive's employment
within one year following the effective date of a Change in Control of the
Company, or if the Company fails to make any payments due to Executive under
Sections 7(g), 7(i), 7(j) or 9(e).
10. INVENTIONS AND DISCOVERIES.
(a) Executive shall promptly and fully disclose to the Company, and with
all necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Executive (whether or not at the request or upon the suggestion of
the Company) during the period of his employment with, or rendering of advisory
or consulting services to, the Company or any of its subsidiaries, solely or
jointly with others in or relating to any activities of the Company or its
subsidiaries known to him as a consequence of his employment or the rendering of
advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $500.00 per day (or portion thereof), plus out-of-pocket expenses
incurred in rendering such
-8-
<PAGE>
assistance or giving or preparing to give such testimony if it is required after
the Severance Period.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than as is required in the regular course of his
duties (including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers, suppliers
and others, marketing or dealership arrangements, servicing and training
programs and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 11(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use commercially
reasonable best efforts to prevent any publication or disclosure thereof. Upon
termination of Executive's employment with the Company, all documents, records,
reports, writings and other similar documents containing confidential
information, including copies thereof, then in Executive's possession or control
shall be returned and left with the Company.
12. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach
of, any of the provisions of Sections 9, 10 or 11 (the "Restrictive Covenants"),
the Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to
injunctive relief and/or to have the Restrictive Covenants specifically enforced
by an court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company. Notwithstanding the foregoing, nothing
-9-
<PAGE>
herein shall constitute a waiver by Executive of his right to contest whether a
breach or threatened breach of any Restrictive Covenant has occurred.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Alabama applicable to agreements made and to be performed
therein.
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or courier, or sent by
certified mail, return receipt requested, to the addresses set forth above or
such other address as either party may from time to time designate in writing to
the other, and shall be deemed given as of the date of the delivery or at the
expiration of three days in the event of a mailing.
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect
to the subject matter hereof, supersedes all prior agreements, both written and
oral, between the parties with respect to the subject matter hereof, including
without limitation the employment agreement, dated as of October 21, 1994,
between the Company and Executive, and may be modified only by a written
instrument signed by each of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributors, successors and assigns, provided, however,
that Executive shall not be entitled to assign or delegate any of his or her
rights or obligations hereunder without the prior written consent of the
Company.
-10-
<PAGE>
19. SURVIVAL.
Except as otherwise expressly provided herein, the termination of
Executive's employment hereunder or the expiration of this Agreement shall not
affect the enforceability of Sections 4, 7, 9, 10, 11 and 12 hereof.
20. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
21. CONSTRUCTION OF AGREEMENT.
No provision of this Agreement or any related document shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or drafted such provision.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
AMERICAN BUILDINGS COMPANY
[CORPORATE SEAL]
By:/s/___________________________
ATTEST:
By:/s/________________________
Name:
Title:
/s/______________________________
Barry Milling
-11-
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between AMERICAN BUILDINGS COMPANY, a
Delaware corporation with an office at 1150 State Docks Road, Eufaula, Alabama
36027 (the "Company"), and W. Ronald Buchholz, residing at 5151 Yosemite Drive,
Columbus, GA 31907 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Vice President-Operations of the Company reporting to
the Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue until December 31, 2000,
subject to prior termination in accordance with the terms hereof. Thereafter,
this Agreement shall automatically be renewed for successive one year terms
unless either party shall give the other ninety (90) days prior written notice
of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $145,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion, but shall not in
any year be reduced below the rate for the previous
<PAGE>
year. In addition, Executive shall be entitled to bonuses from time to time in
such amounts as may be determined by the Board of Directors in its sole
discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to such vacations and to participate in and
receive any other benefits customarily provided by the Company to its senior
management personnel (including any profit sharing, pension, short and long-term
disability insurance, hospital, major medical insurance and group life insurance
plans in accordance with the terms of such plans) and including stock option
and/or stock purchase plans, all as determined from time to time by the Board of
Directors of the Company.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Chief
Executive Officer of the Company shall from time to time determine and Executive
shall comply in the performance of his duties with the policies of the Board of
Directors, and be subject to the direction of the Chief Executive Officer. At
the request of the Board of Directors, Executive shall serve as an executive
officer and director of any subsidiary of the Company and, in the performance of
such duties, Executive shall comply with the policies of the Board of Directors
of each such subsidiary.
(b) During the term of this Agreement, Executive shall devote
substantially all of his time and attention, reasonable vacation time and
absences for sickness excepted, to the business of the Company, as necessary to
fulfill his duties. Executive shall perform the duties assigned to him with
fidelity and to the best of his ability. Notwithstanding anything herein to the
contrary, Executive may engage in other activities so long as such activities do
not unreasonably interfere with Executive's performance of his duties hereunder
and do not violate Section 9 hereof.
(c) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
-2-
<PAGE>
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors that Executive's
performance of his duties has not been fully satisfactory for any reason which
would not constitute justifiable cause (as hereinafter defined) upon thirty (30)
days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten (10)
days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company after examination of
Executive by an independent physician reasonably acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and
be limited to: any repeated wilful failure or refusal to perform any of his
duties pursuant to this Agreement where such conduct shall not have ceased
within 30 days following written warning from the Company; Executive's
conviction (which, through lapse of time or otherwise, is not subject to appeal)
of, pleading guilty to, or confession of any crime or offense involving money or
other property of the Company or its subsidiaries or which constitutes a felony
in the jurisdiction involved; Executive's performance of any act or his failure
to act, for which if Executive were prosecuted and convicted, a crime or offense
involving money or property of the Company or its subsidiaries, or which would
constitute a felony in the jurisdiction involved, would have occurred; any
unauthorized disclosure by Executive to any person, firm or corporation other
than the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or any
of its subsidiaries; any attempt by Executive to secure any personal profit in
connection with the business of the Company or any of its subsidiaries;
Executive's engagement in a fraudulent act to the material damage or prejudice
of Company or its subsidiaries or in conduct or activities materially damaging
to the property, business or reputation of
-3-
<PAGE>
Company or its subsidiaries, all as determined by the Board of Directors in good
faith; Executive's illegal use of controlled substances; any material act or
omission by Executive involving malfeasance or negligence in the performance of
Executive's duties to the material detriment of the Company or its subsidiaries,
as determined by the Board of Directors in good faith, which has not been
corrected by Executive within thirty (30) days after written notice from the
Company of any such act or omission; the entry of an order of a court that
remains in effect and is not discharged for a period of at least sixty (60)
days, which enjoins or otherwise limits or restricts the performance by
Executive under this Agreement, relating to any contract, agreement or
commitment made by or applicable to Executive in favor of any former employer or
any other person; or the engaging by Executive in any business other than the
business of the Company and its subsidiaries which unreasonably interferes with
the performance of his duties hereunder. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary and reimbursement of expenses pursuant
to Section 4 hereof as has been accrued through the date of his termination of
employment.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 as has been
accrued through the date of his death. If Executive's death shall occur while he
is on Company business, the estate of Executive shall be entitled to receive, in
addition to the other amounts set forth in this subsection (e), an amount equal
to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) and reimbursement of expenses pursuant to Section 4 as provided
herein until he begins to receive long-term disability insurance benefits under
the policy provided by the Company pursuant to Section 5 hereof. Any termination
pursuant to this subsection (f) shall be effective on the later of (i) the date
30 days after which Executive shall have received written notice of the
Company's election to terminate or (ii) the date he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof.
(g) Notwithstanding any provision to the contrary contained herein, in
the event that Executive's employment is terminated by the Company at any time
for any reason other than justifiable cause, disability or death, the Company
shall (i) pay Executive, for a period equal to the longer of (1) the remaining
term of this Agreement or (2) one year (such period being hereinafter referred
to as the "Severance Period"), a monthly payment equal to one-twelfth of his
then annual salary, which amount shall be in lieu of any and all other payments
due and owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof),
and (ii) continue to allow Executive to
-4-
<PAGE>
participate, at the Company's expense, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
during the Severance Period (collectively, the "Severance Payments"); provided,
however, that if such termination occurs within one (1) year following the
effective date of a Change in Control of the Company (as hereinafter defined),
the Company shall pay to Executive, in lieu of the amounts set forth in clause
(i) above, in one lump sum, a severance payment equal to (i) two years' annual
salary plus (ii) an amount equal to twice Executive's most recently declared
bonus, if any.
(h) For purposes of this Agreement, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(i) Notwithstanding any provision to the contrary contained herein, in
the event the Company elects not to renew this Agreement (other than within one
year following a Change in Control of the Company, which is covered in Section
7(g) above) the Company will pay Executive a severance payment equal to one
year's annual salary.
(j) Executive may terminate his employment at any time upon 30 days'
prior written notice to the Company. Upon Executive's termination of his
employment hereunder or his election not to renew this Agreement, this Agreement
(other than Sections 4, 7, 9, 10, 11 and 12, which shall survive, if at all, in
accordance with their terms) shall terminate; provided, however, that Section 9
shall not survive such termination unless the Company pays to Executive during
the Severance Period the Severance Payments. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary and bonus, if any,
as has been accrued to date. Executive shall be entitled to reimbursement of
expenses pursuant to Section 4 hereof and to participate in the Company's
benefit plans to the extent participation by former
-5-
<PAGE>
employees is required by law or permitted by such plans, with the expense of
such participation to be as specified in such plans for former employees.
(k) If, in connection with a change of ownership or control of the
Company or a change in ownership of a substantial portion of the assets of the
Company (all within the meaning of Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code")), an excise tax is payable by Executive
under Section 4999 of the Code, then the Company will pay to the Executive
additional compensation which will be sufficient to enable Executive to pay such
excise tax as well as the income tax and excise tax on such additional
compensation, such that, after the payment of income and excise taxes, Executive
is in the same economic position in which he would have been if the provisions
of Section 4999 of the Code had not been applicable. The additional compensation
required by this Section 7(k) will be paid to Executive promptly after the date
or dates on which the amount of such additional compensation is determinable, in
whole or in part.
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company and
during the Severance Period following the termination of Executive's employment
hereunder (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, (i) any business which is competitive with products or services
of the Company or any of its subsidiaries in any geographic area in the United
States of America, Central and South America, Canada, The People's Republic of
China and Southeast Asia where, at the time of the termination of his employment
hereunder, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever or (ii) any
business conducted under any corporate or trade name utilized by the Company or
any name similar thereto without the prior written consent of the Company;
provided, however, that Executive may own any securities of any corporation
-6-
<PAGE>
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause any suppliers or
customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
(b) If any portion of the restrictions set forth in this Section 9
should, for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business throughout
the United States, that its sales and marketing prospects are for continued
expansion throughout the United States, Central and South America and Canada and
that, therefore, the territorial and time limitations set forth in this Section
9 are reasonable and properly required for the adequate protection of the
business of the Company and its subsidiaries. In the event any such territorial
or time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of the territorial or time
limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action by Executive against
the Company or any subsidiary shall not constitute a defense to the enforcement
by the Company or any subsidiary of the foregoing restrictive covenants, but
such claim or cause of action shall be litigated separately.
(e) In the event Executive's employment with the Company terminates for
any reason other than termination by the Company within one year following a
Change in Control of the Company, the Company and Executive agree that in
consideration of the payments being made to Executive during the Severance
Period, Executive shall be available during the Severance Period to advise and
consult with the Board of Directors, the President and other officers of the
Company and its subsidiaries with respect to the affairs of the Company and its
subsidiaries on a part-time basis, in response to requests for such advisory and
consulting services by the Board of Directors, or other officers of the Company
or its subsidiaries, subject to the conditions that (i) such services shall be
performed within the United States of America, (ii) Executive shall not be
required to devote a major portion of his time to such services, (iii) such
services shall not unreasonably interfere with the performance of other
employment or consulting duties Executive may have, (iv) Executive shall not be
required to perform such services during usual vacation periods and reasonable
periods of illness or other incapacitation, (v) such services shall be performed
at times and places as shall be chosen by Executive, and which will result in
the least inconvenience to Executive, and (vi) all other provisions of this
Section 9 shall apply. The Company
-7-
<PAGE>
shall reimburse Executive for actual out-of-pocket expenses incurred in
rendering the services performed by Executive upon the request of the Board of
Directors, or other officers of the Company or its subsidiaries, payable at the
end of each month during such period. Notwithstanding the foregoing, in the
event that Executive seeks full-time employment with a third party and such
third party will not accept Executive's services for as long as he is committed
under this subsection (e) to provide consulting services to the Company, then if
the Board of Directors of the Company determines in its reasonable discretion
that Executive's employment with the third party will not cause him to breach
the provisions of Section 9 of this Agreement (other than this subsection (e))
and Executive provides the Board of Directors with a letter signed by the third
party stating that such third party will not accept Executive's services as
described above, the provisions of this subsection (e) shall immediately
terminate and be of no further force or effect.
(f) Notwithstanding anything herein to the contrary, this Section 9
shall automatically terminate if the Company terminates Executive's employment
within one year following the effective date of a Change in Control of the
Company, or if the Company fails to make any payments due to Executive under
Sections 7(g), 7(i), 7(j) or 9(e).
10. INVENTIONS AND DISCOVERIES.
(a) Executive shall promptly and fully disclose to the Company, and with
all necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Executive (whether or not at the request or upon the suggestion of
the Company) during the period of his employment with, or rendering of advisory
or consulting services to, the Company or any of its subsidiaries, solely or
jointly with others in or relating to any activities of the Company or its
subsidiaries known to him as a consequence of his employment or the rendering of
advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $500.00 per day (or portion thereof), plus out-of-pocket expenses
incurred in rendering such
-8-
<PAGE>
assistance or giving or preparing to give such testimony if it is required after
the Severance Period.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any
time following termination of this Agreement, directly or indirectly, disclose
or permit to be known (other than as is required in the regular course of his
duties (including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers, suppliers
and others, marketing or dealership arrangements, servicing and training
programs and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 11(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use commercially
reasonable best efforts to prevent any publication or disclosure thereof. Upon
termination of Executive's employment with the Company, all documents, records,
reports, writings and other similar documents containing confidential
information, including copies thereof, then in Executive's possession or control
shall be returned and left with the Company.
12. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach
of, any of the provisions of Sections 9, 10 or 11 (the "Restrictive Covenants"),
the Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to
injunctive relief and/or to have the Restrictive Covenants specifically enforced
by an court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company. Notwithstanding the foregoing, nothing
-9-
<PAGE>
herein shall constitute a waiver by Executive of his right to contest whether a
breach or threatened breach of any Restrictive Covenant has occurred.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Alabama applicable to agreements made and to be performed
therein.
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand or courier, or sent by
certified mail, return receipt requested, to the addresses set forth above or
such other address as either party may from time to time designate in writing to
the other, and shall be deemed given as of the date of the delivery or at the
expiration of three days in the event of a mailing.
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect
to the subject matter hereof, supersedes all prior agreements, both written and
oral, between the parties with respect to the subject matter hereof, including
without limitation the employment agreement, dated as of October 21, 1994,
between the Company and Executive, and may be modified only by a written
instrument signed by each of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributors, successors and assigns, provided, however,
that Executive shall not be entitled to assign or delegate any of his or her
rights or obligations hereunder without the prior written consent of the
Company.
-10-
<PAGE>
19. SURVIVAL.
Except as otherwise expressly provided herein, the termination of
Executive's employment hereunder or the expiration of this Agreement shall not
affect the enforceability of Sections 4, 7, 9, 10, 11 and 12 hereof.
20. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
21. CONSTRUCTION OF AGREEMENT.
No provision of this Agreement or any related document shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or drafted such provision.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
AMERICAN BUILDINGS COMPANY
[CORPORATE SEAL]
By:/s/___________________________
ATTEST:
By:/s/________________________
Name:
Title:
/s/______________________________
W. Ronald Buchholz
-11-
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between AMERICAN BUILDINGS COMPANY, a
Delaware corporation with an office at 1150 State Docks Road, Eufaula, Alabama
36027 (the "Company"), and Charles Blackmon, residing at 105 Sunrise Drive,
Eufaula, Alabama 36027 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises, representations and covenants herein contained, the parties
hereto agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Executive Vice President-Chief Financial Officer of the
Company reporting to the Chief Executive Officer of the Company.
2. TERM.
The initial term of employment under this Agreement shall begin on the date
hereof (the "Employment Date") and shall continue until December 31, 2000,
subject to prior termination in accordance with the terms hereof. Thereafter,
this Agreement shall automatically be renewed for successive one year terms
unless either party shall give the other ninety (90) days prior written notice
of its intent not to renew this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $165,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion, but shall not in
any year be reduced below the rate for the previous
<PAGE>
year. In addition, Executive shall be entitled to bonuses from time to time in
such amounts as may be determined by the Board of Directors in its sole
discretion.
4. EXPENSES.
The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS.
Executive shall be entitled to such vacations and to participate in and
receive any other benefits customarily provided by the Company to its senior
management personnel (including any profit sharing, pension, short and long-term
disability insurance, hospital, major medical insurance and group life insurance
plans in accordance with the terms of such plans) and including stock option
and/or stock purchase plans, all as determined from time to time by the Board of
Directors of the Company.
6. DUTIES.
(a) Executive shall perform such duties and functions as the Chief
Executive Officer of the Company shall from time to time determine and Executive
shall comply in the performance of his duties with the policies of the Board of
Directors, and be subject to the direction of the Chief Executive Officer. At
the request of the Board of Directors, Executive shall serve as an executive
officer and director of any subsidiary of the Company and, in the performance of
such duties, Executive shall comply with the policies of the Board of Directors
of each such subsidiary.
(b) During the term of this Agreement, Executive shall devote substantially
all of his time and attention, reasonable vacation time and absences for
sickness excepted, to the business of the Company, as necessary to fulfill his
duties. Executive shall perform the duties assigned to him with fidelity and to
the best of his ability. Notwithstanding anything herein to the contrary,
Executive may engage in other activities so long as such activities do not
unreasonably interfere with Executive's performance of his duties hereunder and
do not violate Section 9 hereof.
(c) Nothing in this Section 6 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.
-2-
<PAGE>
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:
(i) upon the determination by the Board of Directors that Executive's
performance of his duties has not been fully satisfactory for any reason
which would not constitute justifiable cause (as hereinafter defined) upon
thirty (30) days' prior written notice to Executive; or
(ii) upon the determination by the Board of Directors that there is
justifiable cause (as hereinafter defined) for such termination upon ten
(10) days' prior written notice to Executive.
(b) Executive's employment shall terminate upon:
(i) the death of Executive; or
(ii) the "disability" of Executive (as hereinafter defined pursuant to
subsection (c) herein) pursuant to subsection (f) hereof.
(c) For the purposes of this Agreement, the term "disability" shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company after examination of
Executive by an independent physician reasonably acceptable to Executive.
(d) For the purposes hereof, the term "justifiable cause" shall mean and be
limited to: any repeated wilful failure or refusal to perform any of his duties
pursuant to this Agreement where such conduct shall not have ceased within 30
days following written warning from the Company; Executive's conviction (which,
through lapse of time or otherwise, is not subject to appeal) of, pleading
guilty to, or confession of any crime or offense involving money or other
property of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; Executive's performance of any act or his failure to act,
for which if Executive were prosecuted and convicted, a crime or offense
involving money or property of the Company or its subsidiaries, or which would
constitute a felony in the jurisdiction involved, would have occurred; any
unauthorized disclosure by Executive to any person, firm or corporation other
than the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or any
of its subsidiaries; any attempt by Executive to secure any personal profit in
connection with the business of the Company or any of its subsidiaries;
Executive's engagement in a fraudulent act to the material damage or prejudice
of Company or its subsidiaries or in conduct or activities materially damaging
to the property, business or reputation of
-3-
<PAGE>
Company or its subsidiaries, all as determined by the Board of Directors in good
faith; Executive's illegal use of controlled substances; any material act or
omission by Executive involving malfeasance or negligence in the performance of
Executive's duties to the material detriment of the Company or its subsidiaries,
as determined by the Board of Directors in good faith, which has not been
corrected by Executive within thirty (30) days after written notice from the
Company of any such act or omission; the entry of an order of a court that
remains in effect and is not discharged for a period of at least sixty (60)
days, which enjoins or otherwise limits or restricts the performance by
Executive under this Agreement, relating to any contract, agreement or
commitment made by or applicable to Executive in favor of any former employer or
any other person; or the engaging by Executive in any business other than the
business of the Company and its subsidiaries which unreasonably interferes with
the performance of his duties hereunder. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary and reimbursement of expenses pursuant
to Section 4 hereof as has been accrued through the date of his termination of
employment.
(e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary and reimbursement of expenses pursuant to Section 4 as has been
accrued through the date of his death. If Executive's death shall occur while he
is on Company business, the estate of Executive shall be entitled to receive, in
addition to the other amounts set forth in this subsection (e), an amount equal
to one-half his then annual salary.
(f) Upon Executive's "disability", the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) and reimbursement of expenses pursuant to Section 4 as provided
herein until he begins to receive long-term disability insurance benefits under
the policy provided by the Company pursuant to Section 5 hereof. Any termination
pursuant to this subsection (f) shall be effective on the later of (i) the date
30 days after which Executive shall have received written notice of the
Company's election to terminate or (ii) the date he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof.
(g) Notwithstanding any provision to the contrary contained herein, in the
event that Executive's employment is terminated by the Company at any time for
any reason other than justifiable cause, disability or death, the Company shall
(i) pay Executive, for a period equal to the longer of (1) the remaining term of
this Agreement or (2) one year (such period being hereinafter referred to as the
"Severance Period"), a monthly payment equal to one-twelfth of his then annual
salary, which amount shall be in lieu of any and all other payments due and
owing to the Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof),
and (ii) continue to allow Executive to
-4-
<PAGE>
participate, at the Company's expense, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
during the Severance Period (collectively, the "Severance Payments"); provided,
however, that if such termination occurs within one (1) year following the
effective date of a Change in Control of the Company (as hereinafter defined),
the Company shall pay to Executive, in lieu of the amounts set forth in clause
(i) above, in one lump sum, a severance payment equal to (i) two years' annual
salary plus (ii) an amount equal to twice Executive's most recently declared
bonus, if any.
(h) For purposes of this Agreement, a "Change in Control of the Company"
shall be deemed to occur if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company shall approve any plan or proposal for
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and the Company, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(i) Notwithstanding any provision to the contrary contained herein, in the
event the Company elects not to renew this Agreement (other than within one year
following a Change in Control of the Company, which is covered in Section 7(g)
above) the Company will pay Executive a severance payment equal to one year's
annual salary.
(j) Executive may terminate his employment at any time upon 30 days' prior
written notice to the Company. Upon Executive's termination of his employment
hereunder or his election not to renew this Agreement, this Agreement (other
than Sections 4, 7, 9, 10, 11 and 12, which shall survive, if at all, in
accordance with their terms) shall terminate; provided, however, that Section 9
shall not survive such termination unless the Company pays to Executive during
the Severance Period the Severance Payments. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary and bonus, if any,
as has been accrued to date. Executive shall be entitled to reimbursement of
expenses pursuant to Section 4 hereof and to participate in the Company's
benefit plans to the extent participation by former
-5-
<PAGE>
employees is required by law or permitted by such plans, with the expense of
such participation to be as specified in such plans for former employees.
(k) If, in connection with a change of ownership or control of the Company
or a change in ownership of a substantial portion of the assets of the Company
(all within the meaning of Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code")), an excise tax is payable by Executive under
Section 4999 of the Code, then the Company will pay to the Executive additional
compensation which will be sufficient to enable Executive to pay such excise tax
as well as the income tax and excise tax on such additional compensation, such
that, after the payment of income and excise taxes, Executive is in the same
economic position in which he would have been if the provisions of Section 4999
of the Code had not been applicable. The additional compensation required by
this Section 7(k) will be paid to Executive promptly after the date or dates on
which the amount of such additional compensation is determinable, in whole or in
part.
8. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.
(a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.
9. NON-COMPETITION.
(a) Executive agrees that during his employment by the Company and during
the Severance Period following the termination of Executive's employment
hereunder (the "Non-Competitive Period"), Executive shall not, directly or
indirectly, as owner, partner, joint venturer, stockholder, employee, broker,
agent, principal, trustee, corporate officer, director, licensor, or in any
capacity whatsoever engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, (i) any business which is competitive with products or services
of the Company or any of its subsidiaries in any geographic area in the United
States of America, Central and South America, Canada, The People's Republic of
China and Southeast Asia where, at the time of the termination of his employment
hereunder, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever or (ii) any
business conducted under any corporate or trade name utilized by the Company or
any name similar thereto without the prior written consent of the Company;
provided, however, that Executive may own any securities of any corporation
-6-
<PAGE>
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time one percent (1%) of any class of stock or
securities of such corporation. In addition, Executive shall not, directly or
indirectly, during the Non-Competitive Period, request or cause any suppliers or
customers with whom the Company or any of its subsidiaries has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its subsidiaries or solicit, interfere with or entice from the
Company any employee (or former employee) of the Company.
(b) If any portion of the restrictions set forth in this Section 9 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Executive acknowledges that the Company conducts business throughout
the United States, that its sales and marketing prospects are for continued
expansion throughout the United States, Central and South America and Canada and
that, therefore, the territorial and time limitations set forth in this Section
9 are reasonable and properly required for the adequate protection of the
business of the Company and its subsidiaries. In the event any such territorial
or time limitation is deemed to be unreasonable by a court of competent
jurisdiction, Executive agrees to the reduction of the territorial or time
limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action by Executive against the
Company or any subsidiary shall not constitute a defense to the enforcement by
the Company or any subsidiary of the foregoing restrictive covenants, but such
claim or cause of action shall be litigated separately.
(e) In the event Executive's employment with the Company terminates for any
reason other than termination by the Company within one year following a Change
in Control of the Company, the Company and Executive agree that in consideration
of the payments being made to Executive during the Severance Period, Executive
shall be available during the Severance Period to advise and consult with the
Board of Directors, the President and other officers of the Company and its
subsidiaries with respect to the affairs of the Company and its subsidiaries on
a part-time basis, in response to requests for such advisory and consulting
services by the Board of Directors, or other officers of the Company or its
subsidiaries, subject to the conditions that (i) such services shall be
performed within the United States of America, (ii) Executive shall not be
required to devote a major portion of his time to such services, (iii) such
services shall not unreasonably interfere with the performance of other
employment or consulting duties Executive may have, (iv) Executive shall not be
required to perform such services during usual vacation periods and reasonable
periods of illness or other incapacitation, (v) such services shall be performed
at times and places as shall be chosen by Executive, and which will result in
the least inconvenience to Executive, and (vi) all other provisions of this
Section 9 shall apply. The Company
-7-
<PAGE>
shall reimburse Executive for actual out-of-pocket expenses incurred in
rendering the services performed by Executive upon the request of the Board of
Directors, or other officers of the Company or its subsidiaries, payable at the
end of each month during such period. Notwithstanding the foregoing, in the
event that Executive seeks full-time employment with a third party and such
third party will not accept Executive's services for as long as he is committed
under this subsection (e) to provide consulting services to the Company, then if
the Board of Directors of the Company determines in its reasonable discretion
that Executive's employment with the third party will not cause him to breach
the provisions of Section 9 of this Agreement (other than this subsection (e))
and Executive provides the Board of Directors with a letter signed by the third
party stating that such third party will not accept Executive's services as
described above, the provisions of this subsection (e) shall immediately
terminate and be of no further force or effect.
(f) Notwithstanding anything herein to the contrary, this Section 9 shall
automatically terminate if the Company terminates Executive's employment within
one year following the effective date of a Change in Control of the Company, or
if the Company fails to make any payments due to Executive under Sections 7(g),
7(i), 7(j) or 9(e).
10. INVENTIONS AND DISCOVERIES.
(a) Executive shall promptly and fully disclose to the Company, and with
all necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Executive (whether or not at the request or upon the suggestion of
the Company) during the period of his employment with, or rendering of advisory
or consulting services to, the Company or any of its subsidiaries, solely or
jointly with others in or relating to any activities of the Company or its
subsidiaries known to him as a consequence of his employment or the rendering of
advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $500.00 per day (or portion thereof), plus out-of-pocket expenses
incurred in rendering such
-8-
<PAGE>
assistance or giving or preparing to give such testimony if it is required after
the Severance Period.
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Executive shall not, during the term of this Agreement, or at any time
following termination of this Agreement, directly or indirectly, disclose or
permit to be known (other than as is required in the regular course of his
duties (including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers, suppliers
and others, marketing or dealership arrangements, servicing and training
programs and arrangements, customer lists and any other documents embodying such
confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 11(a) by Executive.
(b) All information and documents relating to the Company and its
affiliates as hereinabove described (or other business affairs) shall be the
exclusive property of the Company, and Executive shall use commercially
reasonable best efforts to prevent any publication or disclosure thereof. Upon
termination of Executive's employment with the Company, all documents, records,
reports, writings and other similar documents containing confidential
information, including copies thereof, then in Executive's possession or control
shall be returned and left with the Company.
12. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach of,
any of the provisions of Sections 9, 10 or 11 (the "Restrictive Covenants"), the
Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to
injunctive relief and/or to have the Restrictive Covenants specifically enforced
by an court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
the Company and that money damages would not provide an adequate remedy to the
Company. Notwithstanding the foregoing, nothing
-9-
<PAGE>
herein shall constitute a waiver by Executive of his right to contest whether a
breach or threatened breach of any Restrictive Covenant has occurred.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Alabama applicable to agreements made and to be performed
therein.
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand or courier, or sent by certified mail,
return receipt requested, to the addresses set forth above or such other address
as either party may from time to time designate in writing to the other, and
shall be deemed given as of the date of the delivery or at the expiration of
three days in the event of a mailing.
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior agreements, both written and
oral, between the parties with respect to the subject matter hereof, including
without limitation the employment agreement, dated as of October 21, 1994,
between the Company and Executive, and may be modified only by a written
instrument signed by each of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, distributors, successors and assigns, provided, however,
that Executive shall not be entitled to assign or delegate any of his or her
rights or obligations hereunder without the prior written consent of the
Company.
-10-
<PAGE>
19. SURVIVAL.
Except as otherwise expressly provided herein, the termination of
Executive's employment hereunder or the expiration of this Agreement shall not
affect the enforceability of Sections 4, 7, 9, 10, 11 and 12 hereof.
20. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
21. CONSTRUCTION OF AGREEMENT.
No provision of this Agreement or any related document shall be construed
against or interpreted to the disadvantage of any party hereto by any court or
other governmental or judicial authority by reason of such party having or being
deemed to have structured or drafted such provision.
22. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
AMERICAN BUILDINGS COMPANY
[CORPORATE SEAL]
By: /s/___________________________
ATTEST:
By: /s/________________________
Name:
Title:
/s/___________________________
Charles Blackmon
-11-
<TABLE>
EXHIBIT 11
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
Net income $ 15,851 $ 12,447 $17,590
======== ======== =======
Weighted Average Shares Outstanding - Basic 5,291 5,699 6,231
Add - Dilutive effect of outstanding options (as determined
by the application of the treasury stock method) 358 341 323
-------- -------- -------
Weighted Average Shares Outstanding - Diluted 5,649 6,040 6,554
======= ======= =======
Earnings per share:
Basic $ 3.00 $ 2.18 $ 2.82
======== ======= =======
Diluted $ 2.81 $ 2.06 $ 2.68
======== ======= =======
</TABLE>
EXHIBIT 21
SUBSIDIARIES
ABC Transportation Company
ABC Brokerage Co.
American Buildings Cayman Incorporated
American Buildings Company International, Inc.
ABC Residential Company
American Buildings Offshore, Inc.
AMT/Beaman Corporation
Global Modular, Inc.
Windsor Door, Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included (or incorporated by reference) in this Form 10-K into the
Company's previously filed Registration Statements on Form S-8, File No.
33-86556, File No. 33-86558, and File No. 33-86560.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 23, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY RERERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 16,560
<SECURITIES> 0
<RECEIVABLES> 65,949
<ALLOWANCES> 4,375
<INVENTORY> 32,159
<CURRENT-ASSETS> 116,207
<PP&E> 98,017
<DEPRECIATION> 43,410
<TOTAL-ASSETS> 210,051
<CURRENT-LIABILITIES> 79,099
<BONDS> 71,407
0
0
<COMMON> 63
[OTHER] 55,733
<TOTAL-LIABILITY-AND-EQUITY> 210,051
<SALES> 323,387
<TOTAL-REVENUES> 323,387
<CGS> 268,023
<TOTAL-COSTS> 296,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (183)
<INTEREST-EXPENSE> 1,061
<INCOME-PRETAX> 25,775
<INCOME-TAX> 9,924
<INCOME-CONTINUING> 15,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,851
<EPS-BASIC> 3.00
<EPS-DILUTED> 2.81
</TABLE>
