EXHIBIT 10.04.1
EMPLOYMENT AGREEMENT
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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. Xxxxx, an individual residing at 0000 Xxxxxxxxx Xxxx, Xxxxxxx Xxxxx,
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 General Counsel and Secretary 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, General Counsel and
Secretary. 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 $330,000 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 prorated 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
prorated 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 75% 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 15% 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 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, 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 .60% 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 sections 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 the
Falcon Building Products, Inc. beginning of this Employment
0 Xxxxx Xxxxxxxxx Xxxxx Xxxxxxxxx
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 obligations 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
Xxx X. Xxxxx
By: /s/ Xxx Xxxxxxxx /s/ Xxx X. Xxxxx
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Its: Chairman Of the Board
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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
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Employee leaves without Good Reason Lower of Cost or FMV FMV
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Employee leaves with Good Reason FMV FMV
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Employee is terminated for Cause Lower of Cost or FMV Lower of Cost
or FMV
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Any other reason FMV FMV
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PUT PROVISION PUT PRICE
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BEFORE 3 YEARS AFTER 3 YEARS
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Employee is terminated without Cause Lower of Cost or FMV FMV
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Resignation for Good Reason Lower of Cost or FMV FMV
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Employee leaves without Good Reason
(provided employee does not go to
a competitor) None FMV
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Death, Disability, Retirement FMV FMV
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Cost to be grossed up by an appropriate interest rate.
