EXHIBIT 10.34
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Option Agreement"), dated as of
December 30, 1998, is by and among Falcon Building Products, Inc., a
Delaware corporation ("Falcon"), IFOH Limited, a corporation incorporated
in the Cayman Islands ("IFOH"), and those stockholders of Falcon listed on
Exhibit A hereto.
RECITALS
X. Xxxxxxxxx Plumbing Products, Inc., a Delaware corporation (the
"Company"), is a wholly owned subsidiary of Falcon.
B. The Board of Directors of Falcon has determined that it is in the
best interests of Falcon and all of its stockholders for Falcon
to sell to (i) the stockholders of record of Falcon on
December 29, 1998 listed on Exhibit A hereto (the "Exhibit A
Stockholders," and collectively with IFOH, the "Holders") and
(ii) IFOH an option (the "Option") to purchase up to all the
capital stock of the Company outstanding at the time the Option
is exercised (the "Shares").
C. IFOH has agreed to offer its interest in the Option to the
stockholders of record of Falcon on December 29, 1998 listed on
Exhibit B hereto (the "Exhibit B Stockholders").
D. Subject to the terms and conditions hereof, Falcon wishes to sell
and the Holders wish to purchase the Option.
AGREEMENT
THEREFORE, in consideration of the promises and the mutual
representations, warranties and covenants contained herein, the parties agree
as follows:
1. SALES OF OPTION. Subject to the other terms and conditions of this Option
Agreement, Falcon hereby grants, sells, transfers and delivers to each of
the Holders and their successors and assigns, free and clear of all
security interests, liens, and encumbrances, an undivided percentage
interest (a "Percentage Interest") in the Option equal to (i) in the case
of the Exhibit A Stockholders, the percentage interest each Exhibit A
Stockholder held on December 29, 1998 (the "Record Date") of the total of
all outstanding capital stock of Falcon, and (ii) in the case of IFOH, the
percentage interest of the total of all outstanding capital stock of
Falcon held on the Record Date by the Exhibit B Stockholders. Falcon
contemplates that the capital structure of the Company will be amended
between the date hereof and the date of the Closing (as hereinafter
defined) such that the Company will have authorized classes of capital
stock with rights, preferences
and privileges substantially similar to the classes of capital stock of
Falcon. If, on the date of the Closing, the capital structure of the
Company consists of substantially similar classes of capital stock as
were present in the capital structure of Falcon on the Record Date,
upon the exercise of the Option each Holder delivering to Falcon a
Notice of Exercise (as defined in Section 6 below) (an "Exercising
Holder") will be entitled to receive the same percentage of the same
class of capital stock of the Company that such Holder (or in the
case of IFOH, the Exhibit B Stockholders) held of Falcon's capital stock
on the Record Date. If the capital structure of the Company on the date of
the Closing does not consist of the same classes of capital stock as were
present in the capital structure of Falcon on the Record Date, upon the
exercise of the Option, each Exercising Holder will be entitled to receive
its Percentage Interest of the outstanding shares of the single class of
common stock of the Company then outstanding or of such other capital
stock of the Company as may then be outstanding.
2. PAYMENT OF THE PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Option to be paid by wire transfer to Falcon upon the execution of
this Option Agreement is set forth on Exhibit C hereto.
3. TERM. The ability of the Holders to exercise their Percentage Interests in
the Option shall expire on June 30, 1999 at 5:00 p.m. Chicago, Illinois
time (the "Expiration Date").
4. EXCLUSIVITY. During the period from the execution of this Option Agreement
(the "Execution Date") until the earlier of (i) the Closing or (ii) if the
Option is not exercised, the Expiration Date, Falcon shall not enter into
or continue any negotiations with respect to the sale or transfer of the
Shares or any other form of business combination transaction, license,
sale, liquidation, dissolution or recapitalization involving the Company
or its assets.
5. RESTRICTIONS ON TRANSFER OF SHARES. During the period from the Execution
Date until the earlier of (i) the Closing or (ii) if the Option is not
exercised, the Expiration Date, Falcon shall not sell, transfer, pledge or
grant a security interest in, or otherwise dispose of or encumber, the
Shares; provided, it being understood that the Shares are currently
pledged to Chase Manhattan Bank ("Chase") as administrative agent under
the Credit Agreement, dated as of June 17, 1997, by and among Falcon, the
Company, certain of Falcon's other subsidiaries, Chase and the other
lenders party thereto.
6. NOTICE OF EXERCISE AND CLOSING. If a Holder elects to exercise its
Percentage Interest in the Option, such Holder shall deliver to Falcon a
"Notice of Exercise." The Notice of Exercise shall; (i) be written, (ii)
be executed by such Exercising Holder, (iii) state the Exercising Holder's
intention to exercise its rights under the Option, (iv) be delivered to
Falcon at its principal place of business no later than the Expiration
Date and (v) specify the time and date (not more than five business days
after the Expiration Date) on which such Exercising Holder will be
prepared
to close. Following receipt of a Notice of Exercise from Exercising
Holders of the Option holding more than fifty percent (50%) of the
Percentage Interests (the "Notice Date"), Falcon (i) shall schedule
the time, date and place of the closing of the Option Exercise (the
"Closing") with respect to such Percentage Interests, which shall not
be later than fifteen (15) business days after the Notice Date, and (ii)
shall provide written notice of the Closing to all Holders within two (2)
business days following the Notice Date. Any Holders who are not then
Exercising Holders shall have until the close of business of the third
business day preceding the Closing to file a Notice of Exercise and
exercise their Percentage Interests in the Option.
7. EXERCISE PRICE. The price at which the Option can be exercised (the
"Exercise Price") shall be equal to:
(i) $10,000,000 plus
(ii) to the extent that the total amount of indebtedness for borrowed
money ("Indebtedness") for which the Company will be liable
immediately before, on or after the Closing (the "Closing
Indebtedness") is less than $70,000,000, the difference between the
amount of such Indebtedness and $70,000,000 plus (minus)
(iii) the difference between (y) the sum of the fair market value of any
capital contributions to the Company (other than loans which
increase the amount of Indebtedness) ("Capital Contributions") and
the aggregate amount of after tax net income of the Company during
the Option Period ("Option Period Net Income") and (z) the fair
market value of any distributions (other than amounts paid by the
Company with respect to any Indebtedness, and other than an amount
of distributions equal to the difference between the amount of
Closing Indebtedness and the amount of Indebtedness of the Company
at December 31, 1998) made by the Company in the form of cash,
property or otherwise during the Option Period, minus
(iv) to the extent that the total amount of Closing Indebtedness is more
than $70,000,000 the difference between the amount of such
Indebtedness and $70,000,000 plus
(v) the amount of cash or cash equivalents on the books of the Company
at the Closing.
An amount equal to each Exercising Holder's Percentage Interest of the
exercise price shall be paid by wire transfer on the day of the
Closing.
8. INTERESTS IN THE OPTION. Each of the entities listed on Exhibit A hereto
shall hold an undivided Percentage Interest in the Option in the amount
set forth opposite its
name on such Exhibit A. Interests in the Option will not be transferable,
other than to holders of record of capital stock of Falcon on the Record
Date. If a majority of the Holders do not deliver a Notice of Exercise
prior to the Expiration Date, the Option shall expire unexercised. A
Holder can only exercise its Percentage Interest in the option in full
and not in part.
9. REPRESENTATIONS AND WARRANTIES. Falcon hereby makes the representations
and warranties with respect to the Company and other matters set forth on
Exhibit D hereto to the Holders on and as of the Execution Date and agrees
that all such representations and warranties shall be true on the day of
the Closing as if made on such day. All of the representations and
warranties set forth on Exhibit D shall expire at, and be terminated and
extinguished by, the Closing and thereafter be without force or effect,
except for those set forth in Sections 9.1.2 and 9.2.
10. COVENANTS AND AGREEMENTS. Falcon hereby makes the covenants and agreements
with respect to its actions and the actions of the Company during the
Option Period set forth on Exhibit E hereto.
11. CONDITIONS TO CLOSING. The conditions set forth on Exhibit F hereto shall
constitute the conditions to the obligation of each of the Exercising
Holders to pay an amount equal to their Percentage Interest of the
Exercise Price to Falcon at the Closing and, in the case of the condition
set forth in Section 11.2 of Exhibit F relating to the waiting period
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 ("HSR"),
shall also constitute a condition to the obligation of Falcon to sell the
Shares at the Closing. If any of the conditions to closing set forth on
Exhibit F have not been satisfied prior to the Closing, the Holders shall
be entitled to the return of the Purchase Price by Falcon, plus interest
at the rate of 8% per annum, and any damages that may be imposed under
Section 13(c) of this Option Agreement as a result of a willful violation
of a provision of this Option Agreement; provided, that in no event shall
Falcon be liable in an amount in excess of the Purchase Price. Falcon
hereby agrees to pay all such amounts to the Holders in accordance with
their Percentage Interests.
12. LIMITED RIGHTS OF OPTION HOLDER. The Holders of the Option shall not have
any of the rights of a holder of voting securities of the Company, either
at law or in equity, until the Option shall have been duly exercised and
the Closing shall have occurred.
13. MISCELLANEOUS.
a) APPLICABLE LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, BUT NOT THE CHOICE OF
LAW PROVISIONS, OF THE STATE OF DELAWARE.
b) HEADINGS. The headings herein are for convenience only and are not
part of this Option Agreement and shall not affect the interpretation
thereof.
c) ARBITRATION. Any controversy, dispute, or claim arising out of, in
connection with, or in relation to, the interpretation, performance
or breach of this Option Agreement, including, without limitation, the
validity, scope, and enforceability of this Section 13(c), may at the
election of any party be solely and finally settled by arbitration
conducted in Illinois, by and in accordance with the then-existing
rules for commercial arbitration of the American Arbitration
Association, or any successor organization. Judgment upon any
award rendered by the arbitrator(s) may be entered by the State
or Federal Court having jurisdiction thereof. Any of the parties may
demand arbitration by written notice to the other and to the American
Arbitration Association ("Demand for Arbitration"). Any Demand for
Arbitration pursuant to this Section 13(c) shall be made within one
(1) year from the date that the dispute upon which the demand is
based arose. The parties intend that this agreement to arbitrate be
valid, enforceable and irrevocable.
d) ATTORNEY'S FEES. If any suit, action or arbitration arising out of or
related to this Option Agreement is brought by any party, the
prevailing party or parties shall be entitled to recover the costs
and fees (including without limitation reasonable attorneys' fees,
the fees and costs of experts and consultants, copying, courier and
telecommunication costs, and deposition costs and all other costs of
discovery) incurred by such party of parties in such suit or action,
including without limitation any post-trial or appellate proceeding,
or in the collection of enforcement of any judgment or award entered
or made in such suit or action.
e) BINDING EFFECT. This Option Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, permitted assigns, heirs and legal representatives, as the
case may be.
f) AUTHORITY. Each of the signatories to the Option Agreement personally
warrants that he has been duly authorized and has full authority
(i) to sign this Option Agreement on behalf of the entity on whose
behalf he is signing and (ii) to bind such party and its successors
and assigns to the terms hereof.
g) COUNTERPART EXECUTION. This Option Agreement may be executed in
counterparts, and when each party has signed and delivered to the
other party at least one such counterpart, each counterpart shall be
deemed an original, and when taken together with the other signed
counterpart, shall constitute one agreement.
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