Builders FirstSource, Inc. appointed new CEO

Item 5.02. 
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers. 


Resignations and Appointment of Directors 

As contemplated by the Merger Agreement, at the Effective Time, the size of the Board of Directors of Builders FirstSource (the "Board") was increased to consist of twelve directors. Each of David A. Barr, M. Chad Crow, and Janice L. Davis resigned from the Board and from all committees of the Board of which such individual was a member, effective as of immediately prior to the Effective Time, but conditioned on, and subject to, consummation of the Merger. 

Effective as of the Effective Time, the Board consists of twelve directors: (i) seven directors designated by Builders FirstSource (the "BLDR Designees"), and (ii) five directors designated by BMC (the "BMC Designees"). The BLDR Designees are Paul S. Levy, who will serve as Chairman of the Board, Daniel Agroskin, Cleveland A. Christophe, W. Bradley Hayes, Brett N. Milgrim, Floyd F. Sherman, and Craig A. Steinke. The BMC Designees are David E. Flitman, Mark Alexander, Cory J. Boydston, David W. Bullock, and James O'Leary. 

The members of the Board have been appointed to the following classes, as of the Effective Time: Cleveland A. Christophe, David E. Flitman, W. Bradley Hayes, and Brett N. Milgrim serve in Class I of the Board; Daniel Agroskin, Mark Alexander, David W. Bullock, and Floyd F. Sherman serve in Class II of the Board; and Paul S. Levy, Cory J. Boydston, James O'Leary, and Craig A. Steinke serve in Class III of the Board. 


The composition of the standing committees of the Board, as of the Effective Time, are as follows: (i) the Audit Committee of the Board consists of Mark Alexander, Cory J. Boydston, W. Bradley Hayes, and Craig A. Steinke, with W. Bradley Hayes as the chairman of the committee; (ii) the Nominating and Corporate Governance Committee of the Board consists of David W. Bullock, Cleveland A. Christophe, and Craig A. Steinke, with Craig A. Steinke as the chairman of the committee; and (iii) the Compensation Committee of the Board consists of Daniel Agroskin, Cleveland A. Christophe, Brett N. Milgrim, and James O'Leary, with Cleveland A. Christophe as the chairman of the committee. 

Cory J. Boydston is the Chief Financial Officer of Ashton Woods Homes, a homebuilder headquartered in Atlanta, Georgia and a customer of Builders FirstSource. Ashton Woods Homes purchases building materials from Builders FirstSource from time to time in the ordinary course of business pursuant to pricing arrangements determined in local markets in connection with competitive bid processes involving other third parties. Activity associated with those transactions was not significant in 2020. Other than pursuant to the Merger Agreement and the previously disclosed Flitman Employment Agreement (as defined below), Builders FirstSource is not aware of any transactions involving the BMC Designees that would be required to be disclosed pursuant to Item 404(a) of Regulation S-K. Other than pursuant to the Merger Agreement and the Flitman Employment Agreement, there are no arrangements or understandings between any of the BMC Designees and any other persons pursuant to which a BMC Designee was selected as a director of Builders FirstSource. 

Under Builders FirstSource's Amended and Restated Director Compensation Policy (the "Policy") effective January 15, 2021, eligible directors will receive an annual cash retainer of $100,000 and an annual grant of restricted stock units with a value of $150,000. Committee members will also receive a fee of $5,000 per year. Eligible directors may elect to receive shares of BLDR Common Stock in lieu of any cash fees accrued under the Policy. As eligible directors, the BMC Designees (excluding David E. Flitman) will receive compensation under the Policy beginning on January 15, 2021. 

In connection with their appointment to the Board, the BMC Designees will enter into indemnification agreements with Builders FirstSource, the form of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference. 

Resignation & Appointment of Officers 

In connection with the Merger and effective at the Effective Time, Mr. M. Chad Crow, the current Chief Executive Officer of Builders FirstSource, ceased to serve as President of Builders FirstSource, and, pursuant to the previously disclosed Flitman Employment Agreement, Mr. David E. Flitman was appointed President of Builders FirstSource. Effective on the ninety-first (91st) day following the Effective Time and following the retirement of Mr. Crow as Chief Executive Officer of Builders FirstSource, Mr. Flitman will also be appointed to serve as the Chief Executive Officer of Builders FirstSource. 

In connection with the Merger and effective prior to the Effective Time, as previously announced, Mr. Donald F. McAleenan resigned as Senior Vice President, General Counsel, and Secretary of Builders FirstSource. Mr. McAleenan remains an employee of Builders FirstSource. 

In connection with the Merger and effective at the Effective Time, Mr. David E. Rush, the current Senior Vice President & Chief Operating Officer - East of Builders FirstSource, was elected by the Board to serve as the Executive Vice President - Integration of Builder FirstSource and will cease to serve as Senior Vice President & Chief Operating Officer - East. 

In connection with the Merger and effective at the Effective Time, Mr. Scott Robins, the current Senior Vice President & Chief Operating Officer - West of Builders FirstSource, was elected by the Board to serve as the President - West Division of Builder FirstSource and will cease to serve as Senior Vice President & Chief Operating Officer - West. 

In connection with the Merger and effective at the Effective Time, Mr. Peter Jackson, the current Senior Vice President and Chief Financial Officer of Builders FirstSource, was elected by the Board to serve as the Executive Vice President and Chief Financial Officer of Builder FirstSource. 


Employment Agreements 

David E. Flitman 

As previously disclosed, on August 26, 2020, in connection with the parties' entrance into the Merger Agreement, Builders FirstSource entered into an amended and restated employment agreement with Mr. Flitman (the "Flitman Employment Agreement"). The Flitman Employment Agreement became effective at the Effective Time on January 1, 2021. 

The foregoing description of the Flitman Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Flitman Employment Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference. 

David E. Rush 

In connection with Mr. Rush's appointment as Executive Vice President - Integration, Builders FirstSource entered into an Amended and Restated Employment Agreement with Mr. Rush, effective at the Effective Time (the "Rush Employment Agreement"). The material terms of the Rush Employment Agreement are as follows: 


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The term of the Rush Employment Agreement shall commence as of the Effective Time and end on the second anniversary of the Effective Time, and thereafter shall automatically renew on a month-to-month basis for up to one year as necessary to complete the integration of the Merger. After the second anniversary of the Effective Time, either party may give thirty days' notice of his or its intent to end the term at the next monthly renewal date. 


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Mr. Rush's initial base salary shall be $525,000, subject to annual review (but may not be decreased). 


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Mr. Rush will be eligible to earn a target cash bonus of $1,500,000 during the term of the Rush Employment Agreement based on realized run rate achievements agreed to by the parties. Mr. Rush's maximum cash bonus potential is $1,800,000. 


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Mr. Rush will be eligible to earn a target restricted stock unit award of $3,000,000 (the "Integration RSUs") during the term of the Rush Employment Agreement based on realized run rate achievements agreed to by the parties. One-half of the restricted stock units are time-based, vesting in two equal installments on the first and second anniversaries of the Effective Time. One-half of the restricted stock units are performance-based, based on the run rate achievements agreed to by the parties, as determined on the second anniversary of the Effective Time. Mr. Rush's maximum time-based restricted stock unit award is $1,500,000 and maximum performance-based restricted stock unit award is $1,800,000. 


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Subject to his execution of a release, Mr. Rush will be entitled to certain post-termination payments and benefits in the event his employment is terminated without cause (as defined in the Rush Employment Agreement) or he resigns because of a material diminution of job title or responsibilities or a relocation of his principal place of employment more than 100 miles from its current location without his consent or in other qualifying circumstances set forth in the Rush Employment Agreement. Depending on the circumstances, these payments include payments and benefits of up to a maximum of (i) one year of base salary, (ii) one year of health and welfare benefits, (iii) an amount equal the average of his two most recent full-year annual bonus amounts, (iv) accelerated vesting of any time-based Integration RSUs, and (v) accelerated vesting of any Integration RSUs at target performance. 


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The Rush Employment Agreement includes confidentiality, 12-month post-termination non-competition, and 24-month post-termination non-solicitation covenants.