EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 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 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 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 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, 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 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 beginning 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 Xxx X. Xxxxx
Its:
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EXHIBIT A
The provisions of the Put/Call arrangements are as follows:
CALL PROVISION CALL PRICE
WITHIN 3 YEARS AFTER 3 YEARS
Lower of Cost or
Employee leaves without Good Reason FMV FMV
Employee leaves with Good Reason FMV FMV
Lower of Cost or Lower of Cost or
Employee is terminated for Cause FMV FMV
Any other reason FMV FMV
PUT PROVISION PUT PRICE
BEFORE 3 YEARS AFTER 3 YEARS
Employee is terminated without Lower of Cost or
Cause FMV FMV
Lower of Cost or
Resignation for Good Reason FMV FMV
Employee leaves without Good Reason
(provided employee does not go to a
competitor) None FMV
Death, Disability, Retirement FMV FMV
Cost to be grossed up by an appropriate interest rate.
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