EXHIBIT 10.05.1
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 22nd day of May, 1997, the
"Effective Date," by and between Falcon Building Products, Inc. (the "Company"),
and Xxx X. Xxxxxxx, an individual residing at 000 Xxxxx Xxxxxx Xxxxx, Xxxxxxxxx
0000, Xxxxxxx, Xxxxxxxx 00000 (the "Employee").
WHEREAS, as a condition to an Agreement and Plan of Merger between the
Company and FBP Acquisition Corp., Inc. (the "Merger Agreement"), the Employee
has agreed to be employed by the Company on and after the date as of which such
merger is effective (the "Merger Date"); and
WHEREAS, the Company wants to employ the Employee and the Employee wants to
be employed by the Company on and after the Effective Date in accordance with
the terms of this Employment Agreement, which Employment Agreement supersedes
and replaces any and all other employment agreements between Employee and the
Company;
NOW THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby agrees to employ the Employee
as an Executive Vice President and its Chief Financial Officer and the Employee
hereby agrees to serve the Company in such capacity, subject to the terms and
conditions hereof for the period commencing on the Merger Date and continuing
until terminated as provided in Section 5 (the "Termination Date"). The
Employee is being engaged on a full time basis to perform services consistent
with the titles of Executive Vice President and Chief Financial Officer. Prior
to the Merger Date, Employee will be compensated in accordance with the terms of
his employment as in effect immediately prior to the Effective Date.
2. COMPENSATION. The Employee shall be paid for the performance of his
duties under this Agreement during the term of his employment with the Company
in accordance with the following:
(a) BASE COMPENSATION. The Company shall pay the Employee base
compensation, which on and after the Merger Date shall be at the rate of
not less than $400,000 per year ("Base Compensation"). The Employee's Base
Compensation shall be payable semi-monthly, shall not be decreased and
shall be subject to annual or periodic review beginning June 1, 1998 in
accordance with the Company's customary practices for its other executives
and be increased in the sole discretion of the Company's Board of Directors
(the "Board"). In the event the Board increases the Employee's Base
Compensation, such compensation may not be decreased thereafter.
(b) BONUS. The Company shall pay the Employee a bonus for each
fiscal year based upon target performance goals (the "Target") to be
mutually agreed upon by the Board and the Employee and measured as a
percentage of the Employee's Base Compensation. Notwithstanding the
preceding sentence, if the Target is achieved, the Employee shall be
entitled to a bonus the amount of which is no less than 60% of Base
Compensation. The bonus shall be payable as soon after the end of each
fiscal year as it can be determined, but in any event within ninety (90)
days thereafter. If the employment of Employee is terminated at other
than year-end, the bonus will be pro rated to reflect the period during
the year Employee was employed.
(i) For the portion of the 1997 fiscal year which ends
immediately prior to the Merger Date, the Employee shall be entitled
to a pro rated bonus under the terms of the bonus plan as in effect on
the Effective Date.
(ii) For fiscal year 1997, the Target shall be based upon the
Company's earnings before interest, taxes, depreciation and
amortization from continuing operations and before corporate overhead
and Ultravent charges ("Subsidiary EBITDA"). For fiscal year 1997,
Subsidiary EBITDA is estimated to be $93.7 million and the bonus for
fiscal year 1997 will be paid pro rata based upon the Subsidiary
EBITDA earned after the Merger Date.
(iii) For the portion of the 1997 fiscal year which commences on
the Merger Date, the employee shall be entitled to a bonus provided
that at least 85% of the Target is achieved. The amount of the bonus
shall be pro rated for the portion of the fiscal year following the
Merger
Date from an amount determined by straight line interpolation
from 30% of Base Compensation if 85% of Target is achieved to 80% of
Base Compensation if 107.5% of the Target is achieved. The Board may,
in its sole and absolute discretion, increase the bonus by an amount
up to 20% of Base Compensation.
(c) TRANSACTION BONUS. The Company shall pay the Employee a bonus
equal to $300,000 (the "Transaction Bonus"); provided, however, that if the
Company reasonably determines that the payment of such Transaction Bonus,
together with the accelerated vesting of the Employee's stock options and
restricted stock previously granted by the Company, may result in an excise
tax under section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the amount of such Transaction Bonus shall be reduced to the
extent reasonably determined by the Company to be necessary or desirable to
avoid such excise tax, and the amount of such reduction shall be mutually
agreed to by the Company and the Employee prior to the Merger Date. The
Transaction Bonus shall be paid to the Employee in a lump sum on the Merger
Date. Notwithstanding the foregoing, the Company shall not be obligated to
pay the Transaction Bonus if the Employee is not employed by the Company on
the Merger Date.
3. BENEFITS.
(a) The Employee shall be entitled to participate in and receive
benefits under any retirement plan, savings plan, related override benefit
plan, nonqualified deferred compensation plan, health plan, disability
plan, life insurance plan and any other employee benefit plan or
arrangement (collectively, "Benefit Plans") made available from time to
time to executives of the Company. The Employee shall be entitled to such
other benefits, including vacation, executive perquisites, fringe benefits
and expense reimbursements as currently in effect for executives of the
Company and as the same may be from time to time be amended.
(b) The Company shall establish a funded supplemental executive
retirement plan in which the Employee participates as of the Merger Date.
This funded supplemental executive retirement plan, based on seven (7)
credited years service with the Company, commencing on the Merger Date
shall provide for ten (10) annual payments of $200,000 each year, net-after
applicable income taxes, commencing on the date the Employee retires from
the Company, with the vesting schedule, funding mechanism and payment
schedule to be mutually agreed to prior to the Merger Date. If the
Employee dies during the period he is collecting supplemental retirement
benefits, the payments provided pursuant to this section 3(b) will
thereafter be payable to his spouse or estate.
4. STOCK OWNERSHIP.
(a) STOCK OPTIONS. On the Merger Date, the Company shall grant the
Employee seven-year stock options on shares equal to no less than .75% of
the Company's then-outstanding shares of common stock. To the extent
permitted by law, such options shall constitute incentive stock options
under the Internal Revenue Code. Such options will be exercisable at a
price equal to the Cash Election Price (as defined in the Merger
Agreement), subject to adjustment for changes in capital, and will provide
for seven (7) year cliff vesting with four (4) year accelerated vesting
based on meeting agreed-upon financial performance and acquisition targets
and/or cumulative performance vesting goals, with further accelerated
vesting in the event of an IPO or other exit scenarios provided in the
latter event that agreed upon IRR target levels are achieved.
Additionally, these options shall include put provisions in the event of
the Employee's death, disability or retirement, and call provisions in the
event of termination of employment - both put and call provisions to be
exercised at fair market value. Said provisions and such other additional
reasonable terms and conditions will be set forth in a stock option plan to
be adopted by the Company before the Merger Date.
(b) OWNERSHIP. ON the Merger Date, the Employee shall purchase or
retain ownership of no less than .17% of the Company's outstanding shares
of common stock on the Merger Date.
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(c) SENIOR EXECUTIVE STOCK PURCHASE PLAN. On and after the Merger
Date, the Company shall continue the loan program under the Company's
Senior Executive Stock Purchase Plan as in effect immediately prior to the
Effective Date and the change in control provision of such plan shall not
take effect by reason of the merger contemplated by the Merger Agreement.
(d) PUT/CALL RIGHTS. The Employee will have rights to put to the
Company and the Company shall have rights to call from the Employee shares
of capital stock of the Company owned or acquired by the Employee on the
Merger Date without restriction, as set forth on attached Exhibit A. The
parties will agree on a fair and reasonable valuation process no later than
the Merger Date.
5. TERMINATION.
(a) This Agreement may be terminated by the Company by written notice
to the Employee only by action of a majority of the Board. The termination
will not be effective until the later of three years after the Merger Date
or two years after written notice of termination is given to the Employee
unless the termination is for "Good Cause." "Good Cause" shall mean (i)
the Employee's conviction of any embezzlement or any felony involving fraud
or breach of trust relating to the performance of the Employee's duties,
(ii) the Employee's willful engagement in gross misconduct in the
performance of his duties, (iii) the Employee's death, or (iv) permanent
disability which materially impairs the Employee's performance of his
duties. Termination for "Good Cause" shall be effective immediately.
(b) The Employee may terminate this Agreement by giving the Company
written notice of termination. The termination will be effective sixty
(60) days after written notice of termination is given to the Company.
The Employee may terminate this Agreement for "Good Reason." "Good
Reason" shall exist if (i) the Company continues a reduction in
compensation or expenditures for Benefit Plans, relocates outside the
Chicago area or commits another material breach of this Agreement for
more than 30 days after being notified in writing by the Employee of such
breach PROVIDED the Employee has given such notice to the Company within
30 days of first becoming aware of the facts constituting such breach,
(ii) the Company gives the Employee a notice of termination without Good
Cause (as defined above) PROVIDED the Employee terminates this Agreement
within 30 days of receiving such notice, (iii) a "Change of Control"
occurs, and the Employee's employment hereunder is terminated by either
party for any reason other than "Good Cause," or (iv) the Employee
retires from the Company on a date that is mutually agreed upon by the
Company and the Employee. A "Change of Control" shall occur when any
person (as such term is used in section 13(d) and 14(d) of the Securities
Exchange Act, of 1934 as amended, the "Exchange Act") other than a
majority shareholder on the Merger Date is or becomes the "beneficial
owner" (as defined in Rule 13(d)-3 under the Exchange Act), of securities
of the Company representing more than 35% of the combined voting power of
the Company's then outstanding voting securities; provided, however, that
no Change of Control shall be deemed to have occurred if beneficial
ownership by such person is less than 50% of the combined voting power of
the Company's then outstanding voting securities and the original
investors in FBP Acquisition Corp., Inc. who at the Merger Date received
voting securities of the Company beneficially own at least 20% of the
combined voting power of the Company's then outstanding voting securities.
(c) If the Company by written notice to the Employee elects to
terminate his employment with the Company prior to the Termination Date
provided by Section 5(a) for other than "Good Cause," or, if the Employee
terminates this Agreement and simultaneously therewith his employment by
the Company and its parent and subsidiary corporations for Good Reason,
then the following shall occur:
(i) All of the Employee's outstanding and unexercised options to
purchase stock of the Company shall, to the extent vested at the date
of notice of termination, continue to be exercisable for a period
ending on the earlier of the date 18 months from the date of such
notice and the specific expiration date stated in the option.
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(ii) The Company for a period of two years from the date of
notice of such termination or through three years after the Merger
Date whichever is later (the "Severance Period") shall continue to
provide to the Employee (1) his Base Compensation, at the rate most
recently determined, (2) a bonus for each fiscal year (and a pro rata
amount for each partial year) in an amount equal to the latest Target
bonus, (3) health coverage, life insurance and disability insurance
(subject in the case of long-term disability to the availability of
such coverage under the Company's insurance policy), (4) suitable
office space and secretarial services, and (5) reimbursement for
outplacement services. If the Employee dies during the Severance
Period, the payments provided by (1) and (2) above shall be made to
the Employee's spouse at the time of his death as long as she is alive
and if she should not survive him or shall subsequently die, to the
estate of the Employee, and the health coverage shall be made
available to his spouse and eligible dependents. The period of health
coverage provided by this Agreement shall reduce the period of COBRA
coverage which would otherwise be required.
(iii) The Employee will be fully vested in his supplemental
retirement benefits specified in section 3(b) above and all other
retirement and savings plans.
(d) The parties agree that the payments and benefits provided for
in subsection (c) of this Section shall be deemed to constitute
liquidated damages for the Company's breach or constructive breach of
this Agreement and payment for the non-competition provisions of this
Agreement, and the Company agrees that (i) the Employee shall not be
required to mitigate his damages by seeking other employment or
otherwise, and (ii) the Company's payments and other obligations under
this Agreement shall not be reduced in any way by reason of any
compensation received by the Employee from sources other than the Company
and its affiliates, except as otherwise expressly provided herein.
6. ENTIRE AGREEMENT. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. NOTICE. Any Notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
If to the Company: If to the Employee:
President To the address shown at
Falcon Building Products, Inc. the begriming of this
2 North Riverside Plaza Employment Agreement
Xxxxxxx, Xxxxxxxx 00000
or such other address as shall be furnished in writing by one party to the
other.
8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision had been omitted.
9. SUCCESSORS. The Company's obligation hereunder shall be binding legal
obligations of any successor to all or substantially all of the Company's
business by purchase, merger, consolidation or otherwise. The Company may not
sell or otherwise dispose of all or substantially all of its assets or merge or
consolidate with any other entity without making adequate provision for its
obligations hereunder. The Employee may not assign this Agreement during his
life, and upon his death, this Agreement shall be binding upon and inure to the
benefit of his heirs, legatees and the legal representative of each.
10. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
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11. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
Falcon Building Products, Inc. Employee
By /s/ Xxx Xxxxxxxx
------------------------- Xxx X. Xxxxxxx
Its: Chairman of the Board
------------------------- /s/ Xxx Xxxxxxx
-------------------------
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Exhibit A
The provisions of the Put/Call arrangements are as follows:
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CALL PROVISION CALL PRICE
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WITHIN 3 YEARS AFTER 3 YEARS
Employee leaves without Good Reason Lower of Cost or FMV FMV
Employee leaves with Good Reason FMV FMV
Employee is terminated for Cause Lower of Cost or FMV Lower of Cost or FMV
Any other reason FMV FMV
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PUT PROVISION PUT PRICE
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BEFORE 3 YEARS AFTER 3 YEARS
Employee is terminated without Cause Lower of Cost or FMV FMV
Resignation for Good Reason Lower of Cost or FMV FMV
Employee leaves without Good Reason
(provided employee does not go to a
competitor) None FMV
Death, Disability, Retirement FMV FMV
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Cost to be grossed up by an appropriate interest rate.
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