<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the year ended December 31, 1995 Commission file number: 0-5256
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 58-1351398
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
TWO NORTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(Address of Principal Executive Office)
(312) 648-5656
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates was
approximately $29.1 million based upon the average bid and asked prices of
$46.625 on February 16, 1996, using beneficial ownership of stock rules adopted
pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting
stock owned by Directors and Officers, some of whom may not be held to be
affiliates upon judicial determination.
9,194,251 SHARES OF THE REGISTRANT'S COMMON STOCK WERE OUTSTANDING
AT FEBRUARY 16, 1996
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates by reference the Registrant's Proxy Statement
relating to the Annual Meeting of Stockholders to be held June 5, 1996.
<PAGE> 2
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. PAGE
<S> <C> <C>
Item 1. Business..................................................................................... 3
Item 2. Properties................................................................................... 6
Item 3. Legal Proceedings............................................................................ 7
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 7
PART II.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters..................... 7
Item 6. Selected Financial Information............................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 9
Item 8. Financial Statements......................................................................... 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 39
PART III.
Item 10. Directors and Executive Officers of the Registrant........................................... 39
Item 11. Executive Compensation....................................................................... 39
Item 12. Security Ownership of Certain Beneficial Owners and Management............................... 39
Item 13. Certain Relationships and Related Transactions............................................... 39
PART IV.
Item 14. Exhibits, Financial Statements and Schedules, and Reports on Form 8-K........................ 40
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
Great American Management and Investment, Inc. ("GAMI" or "the
Company") has three major investments consisting of: a 70% interest in Falcon
Building Products, Inc. ("Falcon"); a 7% interest in IMC Global Inc. ("IMC");
and two operating businesses, Lapp Insulator Company ("Lapp") and Denman Tire
Corporation ("Denman"). This was accomplished through a number of dispositions,
substantially all of which were completed by or shortly after year end. In the
future, the Company's activities will relate to; managing the Lapp, Denman and
Falcon operations; monitoring its investment in IMC; completing certain
divestitures; and disposing of certain non-operating assets and liabilities
remaining from current or prior divestitures. In addition, the Company will
consider making new investments in operating companies and/or taking positions
in securities of other companies.
FALCON BUILDING PRODUCTS
In November 1994, Falcon completed an initial public offering of
6,000,000 shares of its Class A common stock. Eagle Industries, Inc. ("Eagle"),
a wholly owned subsidiary of GAMI, currently holds 14,000,000 shares of Class B
common stock or approximately 70% of the total common stock.
Falcon manufactures and distributes building products primarily for the
residential and commercial construction and home improvement markets. Products
manufactured by this group include air distribution and handling equipment,
bathroom plumbing fixtures, consumer and commercial air compressors and pressure
washers.
The building products industry relies primarily on the residential and
commercial construction markets. The residential construction market is largely
dependent on housing starts and remodeling/do-it-yourself ("DIY") projects.
Housing starts and remodeling/DIY projects are generally a function of new
household formation, mortgage rates, inflation, unemployment and gross national
product growth.
Air Distribution and Handling Equipment
Falcon is a manufacturer of residential and commercial air distribution
and air handling products in the North American market. Falcon manufactures more
than 8,000 items primarily for the residential and, to a lesser extent,
commercial heating ventilating and air conditioning ("HVAC") markets, including
metal grilles, registers and diffusers, metal and plastic chimney vent systems,
flexible ducts, terminal units and electric duct heaters. Products are generally
produced on a high volume, low cost basis, however, the standard product line is
supplemented with custom engineered products designed to meet specific size or
performance requirements.
Residential and commercial products are marketed to HVAC contractors
through a direct field sales staff, primarily to wholesale distributors. These
products are marketed under the Hart & Cooley(R), Metlvent(R), Reliable(TM),
Tuttle & Bailey(R) and Valley(TM) trade names. Commercial/industrial registers,
grilles, diffusers, terminal units, louvers and electric duct heaters are
marketed primarily to HVAC contractors through manufacturers' representatives.
Key competitive considerations in the HVAC market are delivery time, quality and
proximity to distributors.
Bathroom Plumbing Fixtures
Falcon manufactures ceramic, china and enameled steel bathroom plumbing
fixtures, including lavatories, toilet bowls and tanks, acrylic baths and
whirlpools and brass and plastic fittings. These products are sold primarily to
the residential construction markets under the Mansfield(R) and Swirl-way brand
names.
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Bathroom fixtures and brass and plastic fittings are marketed through
manufacturers' representatives to wholesaler distributors and to the retail
hardware and DIY markets through mass merchants. The market is divided into:
manufacturers that distribute nationally, service all market segments and have
broad product lines; and regional manufacturers that distribute regionally, tend
to emphasize marketing at the wholesale level and have narrower product lines.
Air Products
Falcon is a supplier of consumer and commercial air compressors for
home improvement applications. Falcon manufactures a broad line of air
compressors in the 3/4 to 6 horsepower range and also sells a variety of
accessories such as paint spray guns, air hoses, pneumatic tools and other
related items. Since 1979 Falcon has been the primary supplier of Craftsman(R)
air compressors to Sears Roebuck and Co. ("Sears"). Sales to Sears account for
approximately 13% of the Company's net sales.
Falcon also has a strong market position in the DIY and refurbishing
markets through home center and warehouse club outlets, selling its products
under such trade names as Charge Air Pro(R), Air America(R) and Pro Air II(R).
Falcon also manufactures air compressors under private-label programs,
which has further expanded its customer and distribution base. In January 1996,
Falcon completed the acquisition of Ex-Cell Manufacturing Company, Inc., a
manufacturer and supplier of pressure washer products, primarily to retailers,
including home centers and warehouse clubs.
INVESTMENT IN IMC
As of December 31, 1995, GAMI owned approximately 4.1 million shares or
20.4% of the outstanding common stock of The Vigoro Corporation ("Vigoro"),
which is engaged in the agricultural chemicals and fertilizer business. The
Company accounts for its investment in Vigoro under the equity method. The
common stock of Vigoro was listed on the New York Stock Exchange and closed at
$61.75 per share on December 29, 1995. Dividends received by the Company on its
ownership of Vigoro common stock have been less than income recorded under the
equity method.
Vigoro's results of operations have historically been influenced by a
number of factors beyond Vigoro's control, which have at times had a significant
effect on Vigoro's operating results. A significant factor affecting Vigoro's
operations is U.S. fertilizer demand which is itself affected by a variety of
factors, including planted acreage, U.S. agricultural policies (including
subsidy and acreage set-aside programs), projected grain stocks and weather.
Vigoro's export sales are influenced by world supply and demand conditions and
foreign governmental policies. Vigoro's business is highly seasonal with a
substantial portion of its sales and earnings occurring during the months of
April through June. Vigoro is focused on four areas of the agricultural
chemicals and fertilizer industry: potash; agribusiness; specialty/lawn and
garden; and industrial.
In November 1995, Vigoro entered into a merger agreement with IMC. Under
the terms of the agreement, each Vigoro shareholder received 1.6 shares of IMC
stock for each share of Vigoro stock. The merger was completed on March 1, 1996
and resulted in GAMI retaining an interest of approximately 7% in IMC. As a
result of this transaction, GAMI's method of accounting for this investment will
change from the equity method to the cost method. GAMI expects to record a
pretax gain of approximately $219 million in connection with the merger.
OTHER OPERATING COMPANIES
LAPP INSULATOR
Lapp manufactures porcelain electrical insulators and other products
used in electrical power transmission and distribution. Lapp's products are sold
principally to domestic electric utility companies and to manufacturers of
equipment used by utilities through a number of distribution channels, including
manufacturers' representatives, original equipment manufacturers and authorized
distributors, as well as through a direct sales staff.
Since the electrical power distribution products are used primarily in
the transmission and distribution of electricity, demand depends in part on the
level of residential and commercial construction. Although not heavily dependent
upon the construction of new power plants, business prospects are closely tied
to the electric utility industry.
4
<PAGE> 5
DENMAN TIRE
Denman manufactures and distributes over 1,000 different types of
specialty pneumatic tires, including tires for classic and racing automobiles,
all-terrain vehicles, motorcycles, light and medium duty trucks, farm, mining
and other industrial vehicles. Denman's products are marketed nationally under
both the Denman brand name and private labels. Denman distributes its tires
primarily through wholesale distributors, and services its customers through a
direct sales force. Substantially all of Denman's sales are to the replacement
tire market.
The tire industry is very large and is dominated by passenger radial
and truck and bus tire manufacturers. Specialty tires make up only a small
portion of the industry, and although the company has significant market share
within certain of its product lines, it has less than a one percent share of the
domestic tire industry.
COMPETITION
The Company faces competition in each of the various product lines from
numerous firms within the United States and internationally. GAMI's businesses
compete primarily with several domestic competitors in their various markets.
GAMI's businesses compete with other companies on the basis of price, service,
product quality, availability and delivery. The Company's competitors are larger
and have greater financial resources than GAMI.
SEASONALITY, WORKING CAPITAL AND CYCLICALITY
Sales of certain of the Company's products are subject to seasonal
variation. Seasonal factors historically have not had a significant effect on
working capital requirements as the Company has been able to adjust its
production to meet these seasonal demands. Sales of products manufactured within
Falcon are primarily dependent on residential and commercial construction
markets. The industries in which the Company competes are particularly sensitive
to changes in the economy.
RAW MATERIALS, SUPPLIERS AND CUSTOMERS
The Company purchases raw materials, principally steel, aluminum, alloy
metals, clay, rubber and other supplies from numerous domestic and foreign
suppliers. These raw materials and other supplies are generally available.
GAMI's businesses market their products to numerous domestic and foreign
customers. As previously discussed, Sears accounts for approximately 13% of the
Company's net sales.
RESEARCH AND DEVELOPMENT
The Company and its subsidiaries invest in research and development of
new products. See Note 1 to the Company's Consolidated Financial Statements for
information regarding research and development expenses.
PATENTS, TRADEMARKS, LICENSES AND FRANCHISES
There are several registered patents and trademarks used by businesses
within the Company, none of which are individually significant to its
consolidated operations. GAMI's businesses do not materially rely on any single
patent, license or franchise.
5
<PAGE> 6
BACKLOG
The following table indicates the approximate backlog as of the dates
indicated. All of the backlog at December 31, 1995 is expected to be shipped in
1996.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ -----------
(RESTATED)
(IN MILLIONS)
<S> <C> <C>
Building Products Group............. $ 10.6 $ 39.7
Other............................... 16.6 14.4
------ ------
Total.......................... $ 27.2 $ 54.1
====== ======
</TABLE>
ENVIRONMENTAL MATTERS
The Company's subsidiaries are subject to various environmental laws
concerning air emissions, discharges into water and the generation, handling,
storage, transportation, treatment and disposal of waste and other materials. In
addition to costs associated with regulatory compliance, companies such as those
within GAMI, which in prior years have disposed of hazardous material at various
sites may be liable under various federal and state laws for the costs of the
clean-up of such sites. It is impossible to predict accurately the Company's
future expenditures for environmental matters, however, the Company anticipates
that future environmental requirements will become more stringent, which may
result in increased expenditures. It is the Company's policy to take all
reasonable measures to control and eliminate pollution resulting from its
operations. The Company believes that as a general matter its policies,
practices and procedures in these areas are adequate to prevent unreasonable
risk of environmental and other damage, and the resulting financial liability.
The Company believes, based on consultations with legal counsel and
environmental consultants and its own reviews of the nature and extent of
potential liabilities, that compliance with existing environmental protection
laws, including those requiring clean-up of hazardous waste, will not have a
material adverse effect on the Company's financial position, results of
operations or competitive position. The Company believes that its reserves
related to environmental liabilities are adequate. The amounts spent by the
Company on environmental expenditures were not material to the Company's results
of operations or financial position in the years ended December 31, 1995, 1994
and 1993. It is impossible, however, to predict with certainty the level of
expenditures with respect to any such obligations, in part because a substantial
portion of any expenditure is a function of unsettled and evolving enforcement
and regulatory policies in states where the Company conducts its business.
EMPLOYEES
The Company's continuing operations employed approximately 4,600
employees as of December 31, 1995. Approximately 2,000 employees are represented
by 10 unions. Collective bargaining is conducted by each subsidiary with local
unions belonging to various national and international unions. Management
believes that labor relations are satisfactory at all subsidiaries.
ITEM 2. PROPERTIES
The Company's manufacturing, warehouse, distribution and office
facilities are located in 26 locations and total approximately 5.0 million
square feet. The Company believes these facilities, which are summarized below,
are adequate for its current and foreseeable requirements.
<TABLE>
<CAPTION>
THOUSANDS OF SQUARE FEET
----------------------------------------
LOCATIONS LEASED OWNED TOTAL
--------- ------ ----- -----
<S> <C> <C> <C> <C>
Building Products Group... 18 644 2,954 3,598
Other..................... 7 199 1,158 1,357
Corporate................. 1 10 -- 10
-- --- ----- -----
26 853 4,112 4,965
== === ===== =====
</TABLE>
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Certain properties owned by the Company and its subsidiaries are
subject to mortgages granted to financial institutions under its credit
facilities. See Note 6 to the Company's Consolidated Financial Statements for
additional information regarding indebtedness of the Company and its
subsidiaries.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to certain litigation related to the bankruptcy
of a non-consolidated affiliate, Madison Management Group, Inc. ("Madison"). See
Note 14 to the Company's Consolidated Financial Statements.
In addition to the above, the Company and its subsidiaries are
defendants in several lawsuits arising in the ordinary course of business.
Management does not believe, based on the advice of counsel, that any of these
lawsuits, individually or in the aggregate, will have a material adverse effect
on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The following table sets forth for the period indicated the high and
low bid prices for the Company's common stock ("Common Stock") in the national
over-the-counter securities market as reported by the National Association of
Securities Dealers, Inc. Automated Quotations Systems. The Company's stock is
traded under the symbol "GAMI". The over-the-counter quotations represent
inter-dealer quotations without adjustment for retail markup, markdown or
commissions, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
BID PRICES
-------------------
High Low
------ ------
<S> <C> <C>
1995
- -------------------------------------------
Quarter Ended December 31, 1995............ $45.00 $36.50
Quarter Ended September 30, 1995........... $36.50 $33.50
Quarter Ended June 30, 1995................ $33.50 $33.50
Quarter Ended March 31, 1995............... $34.50 $33.50
1994
- -------------------------------------------
Quarter Ended December 31, 1994............ $34.25 $33.00
Quarter Ended September 30, 1994........... $33.00 $32.00
Quarter Ended June 30, 1994................ $32.00 $30.00
Quarter Ended March 31, 1994............... $31.00 $29.00
</TABLE>
The number of holders of Common Stock of record at February 16, 1996 was
approximately 800. A dividend of $0.90 per share was paid on January 3, 1995.
7
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ITEM 6. SELECTED FINANCIAL INFORMATION
The selected financial information presented below has been derived
from the Company's audited Consolidated Financial Statements for the years ended
December 31, 1995, 1994 and 1993, the five months ended December 31, 1992 and
for the fiscal years ended July 31, 1992 and 1991, and should be read in
conjunction with such financial statements and the notes thereto. Historical
amounts have been restated for businesses being reflected as discontinued
operations.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, FIVE MONTHS ENDED JULY 31,
-------------------------------- DECEMBER 31, -------------------
1995 1994 1993 1992 1992 1991
-------- -------- -------- -------- -------- --------
INCOME STATEMENT DATA: (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 611.9 $ 592.7 $ 526.2 $ 211.6 $ 462.1 $ 410.9
Income (loss) from
continuing operations 34.0 92.4 (1.5) (2.7) (7.0) (9.5)
Net income (loss) to
common stockholders (38.5) 49.0 (100.2) (7.3) 29.6 37.7
Per common share:
Income (loss) from
continuing operations $ 3.08 $ 8.00 $ (0.39) $ (0.35) $ (0.86) $ (0.98)
Net income (loss) to
common shareholders (3.67) 4.38 (9.03) (0.66) 2.67 3.40
BALANCE SHEET DATA:
Total assets $ 744.5 $ 947.8 $1,021.9 $1,085.4 $1,111.3 $1,132.2
Long-term debt 114.0 376.0 514.0 537.2 540.7 554.2
Total liabilities 610.6 698.7 814.6 793.2 823.6 853.5
Stockholders' equity 133.9 249.1 207.3 292.2 287.7 278.7
Dividends declared per
common share $ -- $ 0.90 $ -- $ -- $ -- $ 0.84
</TABLE>
(A) The Company adopted the new accounting standards "Employers' Accounting
for Postemployment Benefits" ("SFAS No. 112") effective December 31,
1993 and "Accounting for Income Taxes" ("SFAS No. 109") effective
January 1, 1993. Refer to Notes 1 and 8 to the Company's
Consolidated Financial Statements for additional information regarding
the adoption of these accounting pronouncements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following should be read in conjunction with the Company's
Consolidated Financial Statements included herein.
GENERAL
As a result of the reclassification of a number of the Company's
businesses as discontinued operations in 1995, the Company has one reportable
segment. The operations of Lapp and Denman are combined into Other. Historical
amounts have been restated for businesses being reflected as discontinued
operations.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, INCREASE/(DECREASE)
----------------------- -------------------
1995 1994 AMOUNT PERCENTAGE
------ ------ ------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Building Products Group... $471.3 $440.7 $ 30.6 6.9%
Other..................... 140.6 152.0 (11.4) (7.5)%
------ ------ ------
Total................. $611.9 $592.7 $ 19.2 3.2%
====== ====== ====== ====
</TABLE>
Consolidated net sales of $611.9 million for the year ended December
31, 1995 were 3.2% higher than net sales for the year ended December 31, 1994.
Building Products Group net sales were $30.6 million or 6.9% higher than in the
1994 period. This increase was primarily due to new product introductions, the
effects of acquisitions, primarily the acrylic bath business of Swirl-way and
higher pricing. Other net sales declined $11.4 million or 7.5%. This decline was
the result of Lapp's sale of its polymer product line in 1994 and lower revenue
from the financial services business, partially offset by higher volume at
Denman.
Operating Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, INCREASE/(DECREASE)
----------------------- -------------------
1995 1994 AMOUNT PERCENTAGE
------ ------ ------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Building Products Group.............. $ 45.8 $ 51.7 $ (5.9) (11.4)%
Other................................ (15.5) (19.6) 4.1 20.9%
Corporate............................ (46.1) (26.0) (20.1) (77.3)%
Earnings accounted for by the equity
method........................... 19.7 19.8 (0.1) (0.5)%
------ ------- ------
Operating Income.............. $ 3.9 $ 25.9 $(22.0) (84.9)%
====== ======= ====== =====
</TABLE>
Consolidated operating income of $3.9 million for the year ended December
31, 1995 was $22.0 million or 84.9% lower than operating income for the year
ended December 31, 1994. This decline was primarily due to $28.7 million of
charges recorded in 1995 for the write-down of various assets and the write-off
of $28.2 million of goodwill at Denman. (See Note 9 to the Company's
Consolidated Financial Statements for a further discussion of these charges.)
Operating income for the Building Products Group was $45.8 million compared
to $51.7 million in the 1994 period. Raw material cost increases exceeded the
effects of the higher sales volume and pricing. In addition, higher operating
expenses, including securitization expense, contributed to the decline in the
Building Products Group operating income.
Operating losses for Lapp, Denman and financial services were $15.5 million
in 1995 compared to $19.6 million in 1994. Excluding the effects of a $28.2
million write-off of goodwill by Denman in 1995 and a $24.6 million
restructuring charge in 1994 related to Lapp's exit from the polymer product
line and restructuring of its
9
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porcelain product line, operating income was $12.7 million and $5.0 million in
1995 and 1994, respectively. The improvement was the result of the Lapp
restructuring and higher sales volume at Denman, partially offset by reduced
revenues in the financial services business. Corporate expense in 1994 included
a $4.1 million charge related to the Madison bankruptcy litigation. (See Note
14.)
Earnings accounted for by the equity method were $19.7 million and $19.8
million for the years ended December 31, 1995 and 1994, respectively. The
decrease in earnings from Vigoro was primarily a result of the decrease in
GAMI's ownership percentage from 29.5% in 1994 to 20.4% in 1995, due primarily
to the exchange of GAMI Common Stock held by Hellman & Friedman Capital Partners
and its affiliates for 1.76 million shares of Vigoro common stock. This decrease
in ownership was partially offset by improved earnings in 1995 compared to 1994.
In addition, the 1994 period included $2.5 million of earnings from The
Commodore Corporation ("Commodore") which was sold in early 1995.
Gain on Sale of Investments
The Company recorded gains on the sale of investments of $83.5 million
and $61.0 million in 1995 and 1994, respectively, in unrelated transactions. The
1995 gain consisted of a $53.4 million gain on the Company's repurchase of 2.0
million shares of its Common Stock held by Hellman & Friedman Capital Partners
and its affiliates, in exchange for 1.76 million shares of Vigoro common stock
held by GAMI and $18.7 million related to the sale of stock appreciation rights
in Robbins & Myers, Inc. common stock which were received as partial
consideration in connection with the Company's sale of The Pfaudler Companies,
Inc. ("Pfaudler") and Chemineer, Inc. ("Chemineer") in June 1994. (See Note 3).
In addition, in 1995 the Company sold its interest in Commodore, resulting in a
$6.4 million gain and certain other investments resulting in a $5.0 million
gain. The 1994 gain resulted from the sale of 6.0 million shares of Falcon Class
A common stock in an initial public offering in November 1994.
Interest Expense
Net interest expense related to continuing operations was $7.7 million
for the year ended December 31, 1995 compared to $12.2 million for the
comparable 1994 period. This decrease was primarily due to the overall decrease
in the level of debt.
Income Taxes
The Company's tax expense from continuing operations for the year ended
December 31, 1995 reflected the 80% income exclusion on Vigoro dividends,
non-deductible expenses including goodwill amortization and the write down of
goodwill. See Note 8 to the Company's Consolidated Financial Statements for a
further analysis of income taxes. The Company's tax benefit from continuing
operations for the year ended December 31, 1994 reflected the effects of the
tax-free gain on the sale of Falcon stock, the 80% income exclusion on Vigoro
dividends, the reversal of a valuation allowance and non deductible expenses,
including goodwill amortization.
A substantial portion of the Company's deferred tax assets relate to
its non-Falcon businesses. Management believes that future taxable income and
tax planning strategies are available to fully realize the recorded net deferred
tax assets and, accordingly, no valuation allowance has been recorded at
December 31, 1995.
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YEAR ENDED DECEMBER 31, 1994 AS COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net Sales
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, INCREASE/(DECREASE)
----------------------- --------------------
1994 1993 AMOUNT PERCENTAGE
------ ------ ------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Building Products Group ........ $440.7 $372.3 $68.4 18.4%
Other .......................... 152.0 153.9 (1.9) (1.2%)
------ ------ -----
Total ...................... $592.7 $526.2 $66.5 12.6%
====== ====== ===== ====
</TABLE>
Consolidated net sales of $592.7 million for the year ended December
31, 1994 were 12.6% higher than net sales for the year ended December 31, 1993.
Net sales of $440.7 million for the year ended December 31, 1994 for the
Building Products Group were $68.4 million or 18.4% higher than in the 1993
period. Sales to Sears increased due to higher volume of redesigned Craftsman(R)
air compressors. Price increases and continued market penetration of flexible
duct products, as well as geographic expansion into the Western United States,
generated higher net sales of air distribution and air handling products.
Changes in governmental regulations requiring the use of low water volume
toilets generated increased sales of ultra-low-flush toilets. Declines at Lapp
resulting from the sale of its polymer product line during 1994, as well as the
general soft market for its porcelain products, were largely offset by higher
volume at Denman.
Operating Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, INCREASE/(DECREASE)
----------------------- ---------------------
1994 1993 AMOUNT PERCENTAGE
----- ----- ------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Building Products Group ........... $51.7 $45.2 $ 6.5 14.4%
Other ............................. (19.6) (8.2) (11.4) (139.0)%
Corporate ......................... (26.0) (39.9) 13.9 34.8%
Earnings accounted for by the
equity method .................. 19.8 19.6 0.2 1.0%
----- ----- -----
Operating Income ............. $25.9 $16.7 $ 9.2 55.1%
===== ===== ===== =====
</TABLE>
Consolidated operating income for the year ended December 31, 1994 was
$25.9 million compared to $16.7 million in 1993. This increase was primarily due
to $28.6 million of charges related to the Madison bankruptcy and $9.6 million
of loan reserves recorded in 1993. In addition, $24.6 million of restructuring
charges were recorded at Lapp in 1994. Excluding these charges and $4.1 million
of Madison charges in 1994, operating income decreased $0.3 million. This
decrease was primarily due to $6.2 million of charges recorded in 1994 to
establish additional insurance reserves, partially offset by higher sales volume
for the Building Products Group.
Operating income for the year ended December 31, 1994 for the Building
Products Group was $6.5 million or 14.4% higher than in 1993. This increase was
primarily due to increased volume partially offset by $3.9 million of charges to
increase self-insurance reserves.
Operating losses for Lapp, Denman and financial services were $19.6
million and $8.2 million in 1994 and 1993, respectively. As noted above, in 1994
Lapp recorded $24.6 million of restructuring charges. In addition, financial
services recorded $9.6 million of loan valuation reserves in the 1993 period.
Corporate expense of $26.0 million and $39.9 million in 1994 and 1993,
respectively, included charges related to the Madison bankruptcy litigation (See
Note 14 to the Company's Consolidated Financial Statements).
Earnings accounted for by the equity method were $19.8 million and
$19.6 million for the years ended December 31, 1994 and 1993, respectively. The
decrease was due to the Company's decrease in ownership of Vigoro's outstanding
common stock from approximately 47% to 30% in such periods. Offsetting the
decrease in ownership, was Vigoro's improved earnings in 1994 as compared to
1993. An increase in the Company's share of earnings from Commodore of $0.7
million was primarily a result of favorable margins on increased volume.
11
<PAGE> 12
Gain on Sale of Investments
Gains on sale of investments were $61.0 million and $48.9 million in
1994 and 1993, respectively. The 1994 gain was a result of the sale of Falcon
Class A common stock previously described. The 1993 gain of $48.9 million
related to the public offering by GAMI of 3.0 million shares of Vigoro common
stock and the repurchase by Vigoro of 0.5 million shares of Vigoro common stock
held by GAMI.
Interest Expense
Net interest expense related to continuing operations was $12.2 million
for the year ended December 31, 1994 compared to $56.7 million for the
comparable 1993 period. This decrease was primarily due to the overall decrease
in the level of debt coupled with the decrease in interest rates associated with
the refinancing completed in January 1994.
Income Taxes
The Company's tax benefit from continuing operations for the year ended
December 31, 1994 reflected the tax-free gain on the sale of subsidiary stock,
the 80% income exclusion on Vigoro dividends, the reversal of a valuation
allowance and non-deductible expenses including goodwill amortization. See Note
8 to the Company's Consolidated Financial Statements for a further analysis of
income taxes.
During 1993, a valuation allowance was established against the deferred
tax assets due to uncertainties associated with the ultimate resolution of the
Madison bankruptcy. In the fourth quarter of 1994, the Company eliminated its
valuation allowance when it substantially reduced its exposure in the Madison
bankruptcy.
DISCONTINUED OPERATIONS
In 1995, the Company reflected Clevaflex, Inc. ("Clevaflex"), Amerace
Corporation ("Amerace"), Burns Aerospace Corporation ("Burns"), Mighty
Distributing of America, Inc. ("Mighty") and The Parts House, Inc. as
discontinued operations. The Company recorded pretax charges totaling $83.3
million and tax benefits of $3.1 million in 1995 related to the sale or future
sale of these businesses. The Company received total proceeds of $4.6 million
including a note receivable of $1.7 million in 1995 for the sale of Clevaflex
and proceeds of $243.2 million in 1996 for the sales of Amerace, Burns and
Mighty. The sale of The Parts House is expected to be completed in 1996.
In 1994, the Company sold certain assets of Caron International, Inc.
("Caron") and certain assets and liabilities of Hill Refrigeration, Inc.
("Hill") for total proceeds of $15.8 million including a $4.0 million note. In
addition, in 1994 the Company reflected as discontinued operations Gerry
Sportswear, Inc. ("Gerry") and Equality Specialties, Inc. ("Equality") which
were sold in 1995 for total proceeds of $21.5 million, including a $4.0 million
note. The Company recorded a pretax charge of $53.2 million and applicable tax
benefits of $12.9 million in 1994 for estimated losses from operations and the
ultimate disposition of Hill, Caron and Gerry. The Company recorded a pretax
charge of $0.6 million and a tax benefit of $0.3 million in 1995 related to the
sale of Equality. The Company also recorded pretax charges in 1994 of $5.8
million and applicable tax benefits of $2.3 million to establish additional
self-insurance reserves and $6.4 million of additional reserves and applicable
tax benefits of $2.2 million for costs associated with businesses previously
sold by the Company.
In June 1994, the Company sold the stock of Pfaudler and Chemineer to
Robbins & Myers, Inc. The Company received cash proceeds of $59.9 million and a
$50.0 million, 5.5% subordinated note. In addition, the Company received stock
appreciation rights with respect to 2.0 million shares of common stock of
Robbins & Myers, Inc. The Company recorded a pretax gain of $21.8 million and
applicable taxes of $6.7 million with respect to the sale of Pfaudler and
Chemineer. In 1995, the Company sold the note receivable and stock appreciation
rights for total proceeds of $57.4 million. No gain or loss was recorded with
respect to the sale of the note receivable. An $18.7 million pretax gain was
recorded on the sale of the stock appreciation rights.
12
<PAGE> 13
The Company sold Power Structures and certain assets of Underground
Technologies in the fourth quarter of 1993 for total proceeds of $3.5 million.
The Company recorded $13.4 million for estimated losses from operations and from
the ultimate disposition of these businesses.
In February, 1993, the Company sold a 60% interest in Signet Armorlite,
Inc. ("Signet") to Galileo Industrie Ottiche, S.p.A. ("Galileo"). Signet
manufactures and distributes ophthalmic lenses used for eyeglasses and also
distributes supplies used in ophthalmic lens processing. The Company received
cash proceeds of approximately $23.0 million from the sale, which were used to
reduce outstanding debt. The Company recorded a pretax loss of $5.0 million with
a corresponding tax benefit of $2.0 million in December 1992. See Note 3 to the
Company's Consolidated Financial Statements for a further discussion of the sale
agreement and resulting accounting treatment.
Interest expense allocated to these discontinued businesses primarily
represented debt related to the discontinued businesses that will no longer be
incurred by the Company or its subsidiaries and is allocated to discontinued
operations based on the percentage of net assets sold to total consolidated net
assets plus indebtedness. The Company believes the method used to allocate
interest expense to discontinued businesses is reasonable.
The provision for income taxes reflected for discontinued businesses
recognizes the tax effects related specifically to the discontinued businesses.
Income tax benefits of $3.4 million in 1995 and $6.5 million in 1994 were
recorded in connection with the ultimate disposition of companies reflected as
discontinued operations. For 1993, no income tax benefit from the disposition of
companies was recognized. The tax benefits recorded differ from that computed by
utilizing the U.S. federal tax rate due to certain non-deductible losses,
principally as a result of the write down of goodwill and the establishment of
an income tax valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Early in 1996, the Company redeemed substantially all of its non-Falcon
third-party debt, including debt of its subsidiaries, utilizing cash available
at December 31, 1995 supplemented by the collection of proceeds from the sale of
several businesses after year-end. (See Notes 3 and 6.)
In the future, it is anticipated that: a) remaining cash balances; b)
additional proceeds from the sale of businesses and/or non-operating assets; c)
operating cash flow of Lapp and Denman; and d) future credit capacity will be
adequate to fund the remaining third-party debt (nominal); working capital and
capital expenditures related to Lapp and Denman and; required payments for
non-operating liabilities. Management also believes that Falcon's cash flows and
availability under its credit facility will be sufficient to meet its debt
service, capital expenditure requirements and operating needs.
With respect to future credit capacity, the Company's assets include:
a) the operating assets of Lapp and Denman; b) certain non-operating assets; and
c) its investments in IMC and Falcon. As reflected in the following table, there
is significant unrealized appreciation in the Company's investments in IMC and
Falcon (dollars in millions):
<TABLE>
<CAPTION>
BOOK VALUE MARKET VALUE
12/31/95 3/1/96 *
---------- ------------
<S> <C> <C>
Investment in IMC........ $51.2 $272.6
Investment in Falcon .... (2.2) 133.0
----- ------
$49.0 $405.6
===== ======
</TABLE>
* Based on March 1, 1996 closing price per New York Stock Exchange
quotes.
13
<PAGE> 14
Capital Expenditures
The capital expenditures related to continuing operations in 1995, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Building Products Group... $16.4 $19.7 $10.1
Other..................... 6.5 4.0 5.1
----- ----- -----
$22.9 $23.7 $15.2
===== ===== =====
</TABLE>
Acquisitions and Divestitures
Although the Company has historically made a number of acquisitions, it
has not made any material acquisitions since fiscal 1990. While certain
preliminary discussions are at varying stages at this time, the Company
currently does not have any contract or arrangement with respect to a material
acquisition. The Company has considered, and in the future will consider,
proposals for the sale of some or all of its interests in its businesses and
investments.
IMPACT OF INFLATION
The Company believes that inflation, in general, has not had a
significant impact on operations during the period January 1, 1993 through
December 31, 1995. However, the Company has experienced price increases in
certain of its raw materials which adversely affected operating results in the
1995 period.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants................. 16
Consolidated Balance Sheets.............................. 17
Consolidated Statements of Income........................ 18
Consolidated Statements of Stockholders' Equity.......... 19
Consolidated Statements of Cash Flows.................... 20
Notes to Consolidated Financial Statements............... 22
</TABLE>
15
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Great American Management and Investment, Inc.:
We have audited the accompanying consolidated balance sheets of Great American
Management and Investment, Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Great
American Management and Investment, Inc. and Subsidiaries as of December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 15, 1996
16
<PAGE> 17
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
ASSETS (RESTATED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 61.9 $ 31.6
Accounts receivable, net ................................. 7.7 12.7
Inventories, net ......................................... 80.9 67.6
Other current assets ..................................... 68.4 73.0
Net current assets of discontinued operations ............ 265.5 333.4
------ ------
Total current assets ..................................... 484.4 518.3
Investments accounted for by the equity method ................ 51.2 70.9
Loans to affiliates (less valuation reserves of $22.8 and
$22.0, respectively) ..................................... 11.3 67.7
Property, plant and equipment, net ............................ 120.4 110.4
Goodwill ...................................................... 39.4 65.8
Other assets .................................................. 37.8 114.7
------ ------
Total assets ............................................. $744.5 $947.8
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities:
Current portion long-term debt ........................... $207.6 $ 23.5
Accounts payable ......................................... 37.5 33.3
Accrued liabilities ...................................... 120.4 96.8
------ ------
Total current liabilities ................................ 365.5 153.6
Long-term debt ................................................ 114.0 376.0
Accrued employee benefit obligations .......................... 49.0 48.7
Other long-term liabilities ................................... 82.1 73.7
------ ------
Total liabilities ........................................ 610.6 652.0
------ ------
Redeemable preferred stock of subsidiary ...................... -- 46.7
------ ------
Stockholders' Equity:
Common stock par value $.01 per share, 20,000,000 and
40,000,000 authorized, respectively, 12,059,067 issued,
9,223,251 and 11,178,586 outstanding, respectively ....... 0.1 0.1
Paid-in capital ............................................... 195.8 195.1
Retained earnings ............................................. 35.9 74.4
Cumulative translation adjustments and other .................. (1.8) (0.9)
Pension liability adjustment .................................. (8.4) (6.4)
Common stock in treasury, at cost (2,835,816 shares and
880,481 shares, respectively) ............................ (87.7) (13.2)
------ ------
Total stockholders' equity ............................... 133.9 249.1
------ ------
Total liabilities and stockholders' equity ............... $744.5 $947.8
====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
17
<PAGE> 18
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------
1995 1994 1993
------- ------- -------
(RESTATED)
<S> <C> <C> <C>
Net sales ......................................................... $ 611.9 $ 592.7 $ 526.2
Cost of goods and services sold ................................... 495.4 472.3 419.8
Selling and administrative ........................................ 73.1 83.4 78.3
Goodwill amortization ............................................. 2.3 2.2 2.4
Earnings accounted for by the equity method ....................... (19.7) (19.8) (19.6)
Restructuring and other charges ................................... 56.9 28.7 28.6
------- ------- -------
Operating income ............................................. 3.9 25.9 16.7
Gain on sale of investments ....................................... 83.5 61.0 48.9
Net interest expense .............................................. (7.7) (12.2) (56.7)
------- ------- -------
Income from continuing operations before income taxes ............. 79.7 74.7 8.9
Income tax expense (benefit) from continuing operations ........... 45.7 (17.7) 10.4
------- ------- -------
Income (loss) from continuing operations .......................... 34.0 92.4 (1.5)
Discontinued operations, net of taxes:
Income (loss) from operations ................................ 13.1 (7.2) (64.7)
Loss on disposal ............................................. (84.0) (21.1) (20.6)
------- ------- -------
Income (loss) before extraordinary item and cumulative effect of
change in accounting principles .............................. (36.9) 64.1 (86.8)
Extraordinary item:
Loss from early retirement of debt, net of income tax
benefit of $6.8 in 1994 ...................................... -- (12.0) (14.0)
------- ------- -------
Income (loss) before cumulative effect of change in accounting
principles ................................................... (36.9) 52.1 (100.8)
Cumulative effect of change in accounting principles .............. -- -- 3.4
------- ------- -------
Net income (loss) ................................................. (36.9) 52.1 (97.4)
Dividends on subsidiary preferred stock ........................... (1.6) (3.1) (2.8)
------- ------- -------
Net income (loss) to common stockholders .......................... $ (38.5) $ 49.0 $(100.2)
======= ======= =======
Weighted average shares outstanding ............................... 10.5 11.2 11.1
======= ======= =======
Earnings (loss) per common share:
Continuing operations ........................................ $ 3.08 $ 7.98 $ (0.39)
Discontinued operations ...................................... (6.75) (2.53) (8.51)
Extraordinary item ........................................... -- (1.07) (0.46)
Cumulative effect of change in accounting principles ......... -- -- 0.33
------- ------- -------
Net income (loss) ............................................ $ (3.67) $ 4.38 $ (9.03)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
18
<PAGE> 19
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
Cumulative
Translation Pension Common
Common Paid-in Retained Adjustments Liability Stock in
Stock Capital Earnings and Other Adjustment Treasury
------ ------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 ......... $ 0.1 $193.5 $135.7 $ (3.5) $ -- $(14.9)
Net loss .......................... -- -- (100.2) -- -- --
Exercise of stock options ......... -- 1.3 -- -- -- 1.4
Pension liability adjustment ...... -- -- -- -- (4.6) --
Translation adjustment and other .. -- -- -- (1.5) -- --
------ ------ ------ ------ ------ ------
Balance at December 31, 1993 ......... 0.1 194.8 35.5 (5.0) (4.6) (13.5)
Net income ........................ -- -- 49.0 -- -- --
Dividends ......................... -- -- (10.1) -- -- --
Exercise of stock options ......... -- 0.3 -- -- -- 0.3
Pension liability adjustment ...... -- -- -- -- (1.8) --
Translation adjustment and other .. -- -- -- 4.1 -- --
------ ------ ------ ------ ------ ------
Balance at December 31, 1994 ......... 0.1 195.1 74.4 (0.9) (6.4) (13.2)
Net loss ........................... -- -- (38.5) -- -- --
Purchase of treasury stock ......... -- -- -- -- -- (74.8)
Exercise of stock options .......... -- 0.7 -- -- -- 0.3
Pension liability adjustment ....... -- -- -- -- (2.0) --
Translation adjustment and other ... -- -- -- (0.9) -- --
------ ------ ------ ------ ------ ------
Balance at December 31, 1995 ......... $ 0.1 $195.8 $ 35.9 $ (1.8) $ (8.4) $(87.7)
====== ====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
19
<PAGE> 20
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1995 1994 1993
------ ------ -------
(RESTATED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations ................................ $ 34.0 $ 92.4 $ (1.5)
Adjustments to reconcile income (loss) from continuing
operations to net cash flow from operating activities:
Depreciation .......................................................... 17.6 16.4 16.1
Amortization .......................................................... 3.9 4.8 7.0
Deferred income tax (benefit) provision ............................... 12.2 (26.8) (3.2)
Accretion of discount on subordinated debt ............................ 15.0 20.3 9.3
Proceeds from sale of accounts receivable ............................. -- 110.3 --
Undistributed earnings of investments accounted for under the equity
method .............................................................. (15.2) (15.4) (13.9)
Valuation adjustments ................................................. -- -- 9.6
Gain on sale of investments ........................................... (83.5) (61.0) (48.9)
Restructuring and other charges ....................................... 56.9 28.7 28.6
Litigation claim payments ............................................. -- (24.6) --
Changes in current assets and current liabilities:
Trade receivables ..................................................... 7.4 (12.7) (7.1)
Inventories ........................................................... (11.8) (4.2) 1.6
Other current assets .................................................. 4.1 2.0 0.8
Accounts payable and accrued liabilities .............................. (1.6) 20.4 2.7
------ ------ ------
Net cash flow from continuing operating activities ................ 39.0 150.6 1.1
Net cash flow from (used in) discontinued operations .............. 0.9 (129.5) 14.1
------ ------ ------
Net cash flow from operations ..................................... 39.9 21.1 15.2
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses ................................................. (10.4) -- --
Proceeds from sale of notes receivable .................................. 39.8 -- --
Proceeds from sale of businesses ........................................ 20.4 71.7 25.9
Proceeds from sale of investments ....................................... 45.3 63.1 82.5
Loan principal repayments and proceeds from sales of real estate ........ 11.0 5.6 21.4
Capital expenditures .................................................... (22.9) (23.7) (15.2)
Other ................................................................... 0.9 (17.0) (5.4)
------ ------ ------
Net cash flow from investing activities ........................... 84.1 99.7 109.2
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on long term debt .......................................... (0.6) (82.7) (50.8)
Net repayments on revolving credit facilities ........................... (21.0) (42.0) (47.7)
Issuance/(retirement) of senior subordinated notes ...................... (70.2) (36.0) 184.0
Repayment of senior subordinated notes .................................. -- (155.0) (156.3)
Proceeds from bank credit facility, net ................................. -- 319.9 --
Repayment of senior credit facilities ................................... -- (167.0) --
Dividends paid .......................................................... (2.9) -- --
Other ................................................................... 1.0 0.5 2.8
------ ------ ------
Net cash flow used in financing activities ........................ (93.7) (162.3) (68.0)
------ ------ ------
CHANGE IN CASH AND CASH EQUIVALENTS ........................................ 30.3 (41.5) 56.4
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............................. 31.6 73.1 16.7
------ ------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................... $ 61.9 $ 31.6 $ 73.1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
20
<PAGE> 21
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(IN MILLIONS)
SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
CASH PAID DURING THE PERIOD FOR (RELATING TO CONTINUING AND YEAR ENDED
DISCONTINUED OPERATIONS): DECEMBER 31,
------------------------------
1995 1994 1993
----- ------ ------
<S> <C> <C> <C>
Interest .......................................................... $ 9.9 $ 27.3 $ 65.4
===== ====== ======
Income taxes....................................................... $23.7 $ 2.3 $ 0.9
===== ====== ======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
21
<PAGE> 22
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION:
Great American Management and Investment, Inc. ("GAMI" or the
"Company"), is a holding company with investments in agricultural fertilizers
through IMC (as hereinafter defined) and manufacturing companies through its
wholly owned subsidiary, Eagle Industries, Inc. ("Eagle"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES:
The Company's Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles and necessarily include
amounts based on estimates and assumptions by management. Actual results could
differ from those amounts.
SALE OF SUBSIDIARY STOCK:
In November 1994, Falcon Building Products, Inc. ("Falcon"), a wholly
owned subsidiary of Eagle, completed an initial public offering of 6,000,000
shares (30%) of its common stock (the "Offering"). The Company recorded a
tax-free gain of $61.0 million in conjunction with the Offering. Substantially
all of the cash proceeds were used to reduce outstanding indebtedness. Falcon is
a domestic manufacturer and distributor for the residential and commercial
construction and home improvement markets and comprises the Company's Building
Products Group.
CASH AND CASH EQUIVALENTS:
All highly liquid investment instruments with original maturities of
three months or less are considered to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost includes
raw materials, labor and manufacturing overhead. The last-in, first-out ("LIFO")
method of inventory valuation was used for 56.3% and 62.5% of inventory at
December 31, 1995 and 1994, respectively. The first-in, first-out ("FIFO")
method of inventory valuation was used for the remaining inventory.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost. The straight-line
method is generally used to provide for depreciation over the estimated useful
lives of the assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value because of the short-term
maturity of those instruments. The fair value of the Company's debt is discussed
in Note 6.
GOODWILL:
Goodwill represents the purchase price associated with acquired
businesses in excess of the fair value of the net assets acquired. Goodwill is
amortized on a straight-line basis primarily over forty years. Accumulated
amortization was $16.8 million and $14.5 million at December 31, 1995 and 1994,
respectively.
22
<PAGE> 23
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
The Company assesses the recoverability of unamortized goodwill
allocated to each of its individual acquired businesses as follows: A)
continuing operations - whenever current operating income is not sufficient to
recover current amortization of goodwill or when events and circumstances
indicate that future operating income and cash flow may be negatively affected,
the recoverability is evaluated based upon the estimated future operating income
and undiscounted cash flow of the related entity during the remaining period of
goodwill amortization, and; B) entities to be divested - the carrying value of
the net assets of each entity, including the amount of goodwill assigned
thereto, is compared to the expected divestiture proceeds. If a loss is
indicated, it is recorded when known; gains are recorded when the divestiture
occurs.
In 1995, the Company determined that the amount of goodwill recorded at
Denman was not recoverable through future cash flows during a likely holding
period, and accordingly, recorded a charge of $28.2 million to write off
Denman's goodwill. At December 31, 1995, all of the recorded goodwill relates to
Falcon.
REVENUE RECOGNITION:
Sales are recognized when products are shipped.
POSTEMPLOYMENT BENEFITS:
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS
No. 112") effective December 31, 1993. By adopting this standard, the Company
increased its accrued expenses by $3.0 million and recorded a corresponding
pretax charge of $3.0 million reflected as a "Cumulative effect of change in
accounting principles".
RESEARCH AND DEVELOPMENT:
Research, product development and engineering facilities are maintained
at various subsidiary locations. Research and development efforts center on
developing improved materials and designs for existing products and the creation
of new products and equipment. Research and development costs are expensed as
incurred. Research and development costs were $1.4 million, $1.3 million and
$0.9 million for the years ended December 31, 1995, 1994 and 1993, respectively.
INCOME TAXES:
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") effective
January 1, 1993. This new standard changed the Company's method of accounting
for income taxes from the deferred method required under APB No. 11 to the asset
and liability method. If it is more likely than not that some portion or all of
a deferred tax asset will not be realized, a valuation allowance is recognized.
(See Note 8)
INTEREST EXPENSE RELATED TO DISCONTINUED OPERATIONS:
Interest expense allocated to the discontinued businesses principally
represents interest expense related to the discontinued businesses that will no
longer be incurred by GAMI or its subsidiaries. Interest expense related to the
Company and its subsidiaries has been allocated to discontinued operations based
on the percentage of net assets sold or to be sold to total consolidated net
assets plus indebtedness of GAMI. The Company believes the method used to
allocate interest to discontinued businesses is reasonable.
23
<PAGE> 24
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
EARNINGS PER COMMON SHARE:
Earnings per common share are based on the weighted average number of
common shares outstanding during each year.
NEW ACCOUNTING STANDARDS:
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which the
Company will adopt effective January 1, 1996. The adoption of this new standard
is not expected to have a material effect on the financial statements.
Also in 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation". The Company will continue to account for its stock options under
APB 25, as such, the financial statement effect of this new standard will be
limited to additional required footnote disclosure in 1996.
(2) ACCOUNTS RECEIVABLE
In January 1994, Eagle entered into an asset securitization program
(the "Securitization Program") whereby it sold certain of its accounts
receivable for proceeds of $110.3 million and a residual interest in a trust to
which the receivables are transferred. In connection with the Securitization
Program, Eagle entered into a receivable sale agreement whereby it will sell,
with limited recourse, on a continuous basis, an undivided interest in
substantially all of its accounts receivable. Under the agreement, which expires
in 1999, the maximum amount of proceeds which may be accessed through this
agreement at any one time is $145.0 million and is subject to change based on
the level of eligible receivables and restrictions on concentration of
receivables. Uncollected receivables sold under the agreement were $116.5
million and $114.3 million at December 31, 1995 and 1994, respectively. The cost
related to the sale of receivables under this program was $6.0 million and $5.2
million in the years ended December 31, 1995 and 1994, respectively, and is
included in selling and administrative expenses. The residual interest in the
trust of $29.2 million at December 31, 1995 is reflected in other current
assets.
(3) DISCONTINUED OPERATIONS
In 1995, the Company has reflected Clevaflex, Inc. ("Clevaflex"),
Amerace Corporation ("Amerace"), Burns Aerospace Corporation ("Burns"), Mighty
Distributing of America, Inc. ("Mighty") and The Parts House, Inc. as
discontinued operations. The Company recorded pretax charges totaling $83.3
million and tax benefits of $3.1 million in 1995 related to the sale of these
businesses. The Company received total proceeds of $4.6 million including a note
receivable of $1.7 million in 1995 for the sale of Clevaflex and cash proceeds
of $243.2 million in 1996 for the sales of Amerace, Burns and Mighty. The sale
of The Parts House, Inc. is expected to be completed in 1996.
In September 1994, the Company sold certain assets of Caron
International, Inc. ("Caron") and certain assets and liabilities of Hill
Refrigeration, Inc. ("Hill") for total proceeds of $15.8 million, including a
$4.0 million note. In addition, in 1994 the Company reflected as discontinued
operations Gerry Sportswear, Inc. ("Gerry") and Equality Specialties, Inc.
("Equality") which were sold in 1995 for total proceeds of $21.5 million
including a $4.0 million note. The Company recorded a pretax provision of $53.2
million and applicable tax benefits of $12.9 million in 1994 for estimated
losses from operations and the ultimate disposition of Hill, Caron and Gerry.
The Company recorded a pretax charge of $0.6 million and a tax benefit of $0.3
million in 1995 related to the sale of Equality, which was sold to a director of
the Company. The Company also recorded pretax charges in 1994 of $5.8 million
and applicable tax benefits of $2.3 million to establish additional
self-insurance reserves and $6.4 million of additional reserves and applicable
tax benefits of $2.2 million for costs associated with businesses previously
sold by the Company.
24
<PAGE> 25
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
In June 1994, the Company sold the stock of The Pfaudler Companies,
Inc. ("Pfaudler") and Chemineer, Inc. ("Chemineer") to Robbins & Myers, Inc. The
Company received cash proceeds of $59.9 million and a $50.0 million, 5.5%
subordinated note. In addition, Eagle received stock appreciation rights with
respect to 2.0 million shares of common stock of Robbins & Myers, Inc. The
Company recorded a pretax gain of $21.8 million and applicable taxes of $6.7
million with respect to the sale of Pfaudler and Chemineer. In 1995, the Company
sold the note receivable and stock appreciation rights for total proceeds of
$57.4 million. No gain or loss was recorded with respect to the sale of the note
receivable. An $18.7 million gain was recorded on the sale of the stock
appreciation rights.
The Company sold Power Structures and certain assets of Underground
Technologies in the fourth quarter of 1993 for total proceeds of $3.5 million.
The Company recorded a provision of $13.4 million for estimated losses from
operations and from the ultimate disposition of these businesses.
In February 1993, the Company sold a 60% interest in Signet Armorlite,
Inc. ("Signet") to Galileo Industrie Ottiche, S.p.A. ("Galileo"). The Company
received cash proceeds of approximately $23.0 million and recorded a pretax loss
of $5.0 million with a corresponding tax benefit of $2.0 million in December
1992. Under the terms of the sale agreement, the Company has the right to put
(the "Put") its remaining 40% interest in Signet to Galileo on February 26,
1998. Galileo has the right to acquire the remaining 40% interest (the "Call")
held by Eagle any time prior to February 26, 1998. While the Company retains a
40% interest: it has no obligation to fund future losses or make additional
investments; it has a less than majority board representation; it has given up
substantially all of its rights to future earnings or appreciation related to
its 40% interest; and it intends to exercise its Put in the event that Galileo
does not exercise its Call. The price under either the Put or Call is $14.9
million. Under the terms of the sale agreement, Galileo also has the right to
put certain of Signet's plant and equipment to the Company from February 26,
1997 through February 26, 1998 for $10.0 million. In the fourth quarter of 1995,
the Company wrote down its investment by $9.2 million resulting in a remaining
investment of $6.0 million at December 31, 1995.
The following table summarizes key financial data related to the above
discontinued operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1995 1994 1993
------ ------ ------
(RESTATED)
(IN MILLIONS)
<S> <C> <C> <C>
Net sales ............................................................. $444.7 $602.1 $755.1
Operating income (loss) ............................................... 38.9 29.9 (47.8)
Allocated interest expense ............................................ 20.5 27.4 16.8
Income tax provision (benefit) applicable to discontinued businesses .. 5.3 5.5 (5.1)
Loss on disposal of discontinued operations ........................... -- -- (7.3)
Loss from early retirement of debt .................................... -- (4.2) --
Cumulative effect of change in accounting principles .................. -- -- 2.1
Income (loss) from operations of discontinued businesses net
of applicable income taxes ....................................... 13.1 (7.2) (64.7)
</TABLE>
The net current assets of discontinued operations included in the
Consolidated Balance Sheets at December 31, 1995 and 1994 amounted to $265.5
million and $333.4 million, respectively, and consisted primarily of
receivables, goodwill, inventories and property, plant and equipment, net of
accounts payable and accrued liabilities. These amounts have all been classified
as current based on the intent to dispose of them within one year.
25
<PAGE> 26
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
(4) INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
As of December 31, 1995, GAMI owned approximately 4.1 million shares or
20.4% of the outstanding common stock of The Vigoro Corporation ("Vigoro"),
which is engaged in the agricultural chemicals and fertilizer business. The
Company accounted for its investment in Vigoro under the equity method. The
common stock of Vigoro was listed on the New York Stock Exchange under the
symbol "VGR", and closed at $61.75 per share on December 29, 1995. Dividends
received by the Company on its ownership of Vigoro common stock have been less
than income recorded under the equity method.
In August 1995, in exchange for 1.76 million shares of Vigoro's common
stock, the Company repurchased 2.0 million shares of its common stock held by
Hellman & Friedman Capital Partners and its affiliates. The transaction resulted
in a reduction in GAMI's ownership of Vigoro to 20.5 percent from 29.5 percent.
A pretax gain of $53.4 million was recorded in connection with this transaction.
In 1993, the Company, through a Vigoro public offering sold, 3.0 million shares
of Vigoro common stock and sold an additional 0.5 million shares directly to
Vigoro. In September 1993, the offering was completed at a price of $24.625 per
share, with the Company realizing net proceeds of approximately $81.8 million.
The pretax gain realized on these sales was $48.9 million.
In November 1995, Vigoro entered into a merger agreement with IMC Global
Inc. ("IMC"). Under the terms of the agreement, each Vigoro shareholder received
1.6 shares of IMC stock for each share of Vigoro stock. The merger was completed
on March 1, 1996 and resulted in GAMI retaining an interest of approximately 7%
in IMC. As a result of this transaction, GAMI's method of accounting for this
investment will change from the equity method to the cost method. GAMI expects
to record a pretax gain in 1996 of approximately $219 million in connection with
the merger.
In March 1995, the Company sold its investment in The Commodore
Corporation for total proceeds of $20.4 million including a $3.0 million note
receivable. The Company realized a pretax gain of $6.4 million in connection
with the sale.
(5) LOANS TO AFFILIATES
In July 1995, GAI Partners Limited Partnership ("GAI Partners"), an
affiliate of the Company, defaulted on its secured promissory note held by GAMI.
The note was valued at $48.3 million, including accrued interest. GAI Partners
secured the note with Redeemable Preferred Stock ("Preferred Stock") of a GAMI
subsidiary valued at $48.3 million. Pursuant to a pledge agreement, GAMI
foreclosed on the collateral, thereby transferring title to the Preferred Stock
to GAMI. As a result of the default on the note and the foreclosure on the
Preferred Stock, GAMI reflected the redemption of the Preferred Stock and the
settlement of its note receivable. No gain or loss was recorded in connection
with this transaction.
In October 1995, an affiliate of GAI Partners repaid its $3.0 million
note. No gain or loss was recorded in connection with the repayment.
26
<PAGE> 27
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
(6) LONG-TERM DEBT
Components of long-term debt were as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------ ------
(RESTATED)
<S> <C> <C>
Senior Debt:
GAMI Credit Facility ............................... $ -- $ 10.1
Eagle Industrial Credit Facility ................... 70.2 89.5
Falcon Credit Facility ............................. 121.0 112.5
------ ------
191.2 212.1
Subordinated Debt ...................................... 124.1 180.4
Other Debt:
GAMI ............................................... 1.2 1.5
Eagle .............................................. 2.5 2.8
Falcon ............................................. 2.6 2.7
------ ------
Total Debt ............................................. 321.6 399.5
Less current portion ................................... (207.6) (23.5)
------ ------
Total long-term debt ................................... $114.0 $376.0
====== ======
</TABLE>
The aggregate long-term debt maturities, excluding the Eagle Industrial
Credit Facility and the Subordinated Debt, over the next five years are as
follows: 1996 - $13.4 million; 1997 - $15.5 million; 1998 - $16.3 million, 1999
- - $18.5 million and 2000 - $24.1 million. These amounts relate primarily to the
operations of Falcon.
SENIOR DEBT:
GAMI Credit Facility:
The GAMI Credit Facility is a $22.5 million credit facility which
matures on September 30, 1996. Amounts outstanding bear interest at alternative
floating rate structures, at management's option. The GAMI Credit Facility is
secured by a pledge of 2.6 million shares of IMC common stock. At December 31,
1995 there were no amounts outstanding against this facility.
The GAMI Credit Facility contains restrictive covenants including, but
not limited to, net worth maintenance, minimum liquidity requirements and
restrictions on the transfer of its holdings of IMC and Eagle common stock.
Eagle Industrial Credit Facility:
In January 1996, with use of the proceeds from the sale of Amerace and
available cash, Eagle repaid and terminated the agreement for the Eagle
Industrial Products Corporation credit facility. At December 31, 1995, the
revolving credit portion was unused and $70.2 million was outstanding under the
term loan portion of this credit facility. These amounts have been classified as
current in the Company's Consolidated Balance Sheet at December 31, 1995. No
gain or loss is expected to be recorded in connection with this transaction.
Falcon Credit Facility:
On June 30, 1995 Falcon amended and restated its existing senior credit
facility, increasing it to a $250 million credit facility with its existing
group of banks. The Falcon Credit Facility consists of a six year $100.0 million
term loan, maturing in June 2001, due in quarterly installments increasing in
amount from $2.5 million beginning September 30, 1995 to $6.25 million per
quarter beginning in September 2000, and a $150.0 million
27
<PAGE> 28
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
revolving credit facility (the "Revolver") that expires in 2001, which may be
extended through 2002. Borrowings under the Falcon Credit Facility bear
interest, at management's option, at rates equal to London Interbank Offered
Rates ("LIBOR") plus a margin (0.75 percent at December 31, 1995) or at the
prime rate. The Falcon Credit Facility is secured by substantially all of the
inventory, intangibles, property, plant, equipment and stock of Falcon's
subsidiaries. At December 31, 1995 the term loan and revolver loan portions
outstanding under the Falcon Credit Facility were $95.0 million and $26.0
million, respectively. The Falcon Credit Facility also allows for $25.0 million
to be used in the form of letters of credit. The use of letters of credit
reduces the availability of funds under the Revolver. At December 31, 1995,
$114.9 million was available to borrow under the revolving portion of this
facility.
The Falcon Credit Facility contains various covenants pertaining to the
maintenance of certain cash flow and expense coverage ratios, the incurrence of
additional indebtedness and restrictions on the payment of dividends.
In May 1995, the Company entered into a five year interest rate swap
agreement. This agreement, covering $100.0 million of the Company's floating
rate debt, fixed the interest rate at 6.5 percent per annum, plus an applicable
margin (0.75 percent at December 31, 1995). The effect of the swap agreement was
not material to the Company's Consolidated Financial Statements.
SUBORDINATED DEBT:
Senior Deferred Coupon Notes:
Eagle's $315.0 million original principal amount of Senior Deferred
Coupon Notes (the "Notes") were issued pursuant to an indenture (the
"Indenture"), dated July 1, 1993, and were scheduled to mature on July 15, 2003.
The issue price of each Note was $598.97 per $1,000 principal amount at
maturity, which represents a yield to July 15, 1998 of 10.5% per annum. In
January 1996, Eagle consummated a tender offer at a price of $845 per $1,000
principal amount for substantially all of the Notes outstanding. The Company
recorded a pretax loss of $12.5 million and a tax benefit of $4.4 million in
connection with the tender offer in 1996. The Notes are classified as current in
the Company's Consolidated Balance Sheet at December 31, 1995.
(7) EMPLOYEE RETIREMENT AND BENEFIT PLANS
PENSION:
Substantially all employees are covered by Company or union sponsored
defined benefit pension plans. Plans covering salaried and management employees
provide pension benefits that are based on the employee's years of service with
the Company and average compensation during the five years before retirement.
For other employees, pension benefits are provided based on a stated amount for
each year of service. The Company's funding policy for all plans is to make no
less than the minimum annual contributions required by applicable governmental
regulations. Plan assets generally consist of common stocks and fixed income
instruments.
28
<PAGE> 29
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
The following table sets forth the funded status for all U.S. defined
benefit pension plans and related amounts recognized in the Company's
Consolidated Financial Statements:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------- ----------------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(IN MILLIONS) (RESTATED)
<S> <C> <C> <C> <C>
Actuarial present value of:
Accumulated benefit obligation ......... $31.4 $ 65.3 $46.0 $ 55.3
===== ====== ===== ======
Vested benefits ........................ $29.5 $ 63.8 $44.0 $ 53.0
===== ====== ===== ======
Plan assets at fair value ................. $35.3 $ 53.9 $49.0 $ 40.3
Projected benefit obligation .............. 31.4 65.3 46.0 55.3
----- ------ ----- ------
Plan assets in excess of (less than)
projected benefit obligation ........... 3.9 (11.4) 3.0 (15.0)
Net unrecognized (gain) loss .............. (3.2) 13.8 -- 9.7
Net unrecognized prior service costs ...... (0.5) 1.5 (0.6) 1.6
Unrecognized liability at August 1, 1987 .. -- (0.2) (0.9) 0.7
Additional minimum liability .............. -- (15.1) -- (12.0)
----- ------ ----- ------
Pension asset (liability) recognized in
Consolidated Financial Statements ...... $ 0.2 $(11.4) $ 1.5 $(15.0)
===== ====== ===== ======
</TABLE>
In accordance with SFAS No. 87, "Employer's Accounting for Pensions,"
the Company has recorded an additional minimum pension liability for underfunded
plans of $15.1 million and $12.0 million at December 31, 1995 and 1994,
respectively, representing the excess of unfunded accumulated benefit
obligations over previously recorded pension cost liabilities. A corresponding
amount is recognized as an intangible asset except to the extent that these
additional liabilities exceed related unrecognized prior service costs and net
transition obligations, in which case the increase in liabilities is charged
directly to stockholders' equity. At December 1995 and 1994, the excess minimum
pension liability resulted in a net reduction of equity of $8.4 million and $6.4
million, respectively.
Net periodic pension cost for defined benefit pension plans included in
the above table was:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1995 1994 1993
---- ---- ----
(RESTATED)
(IN MILLIONS)
<S> <C> <C> <C>
Service cost ..................................... $3.2 $3.3 $3.3
Interest cost .................................... 5.5 6.7 3.3
Actual return on assets .......................... (6.7) (1.9) (4.2)
Net amortization and deferral .................... 0.5 (6.2) 1.3
---- ---- ----
Net periodic pension cost ................... $2.5 $1.9 $3.7
==== ==== ====
</TABLE>
The following assumptions were used in determining the actuarial
present value of the projected benefit obligation for the Company's U.S. defined
benefit plans for all periods presented: weighted-average discount rate of 7.5%;
rate of increase in future compensation levels of 4.0%; and expected long-term
rate of return on assets of 9.0%.
The Company and its subsidiaries also have several defined contribution
plans for certain U.S. employees. The Company contributions to these plans were
$1.9 million and $2.1 million in the years ended December 31, 1995 and 1994,
respectively. Contributions to these plans by the Company are determined under a
variety of methods including those based on years employed or a percentage of
the contribution made by the employee.
29
<PAGE> 30
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
OTHER POSTRETIREMENT BENEFITS:
The Company provides certain postretirement life and health-care
benefits to certain of its employees. For most business units providing these
benefits, employees retiring from the Company on or after attaining age 55 who
have rendered at least 15 years of active service to the Company are entitled to
postretirement benefits coverage. Most of these plans are non-contributory,
while there are a few in which employees and retirees contribute towards their
coverage. The Company has not funded any of this postretirement benefits
liability. Contributions to the postretirement plans are made by the Company as
claims are incurred.
The accumulated postretirement benefit obligation was determined using
an assumed discount rate of 7.5% for the years ended December 31, 1995 and 1994,
and a health care cost trend rate of 13% for the year ended December 31, 1994
and 12% for the year ended December 31, 1995, with the assumption that the
health care cost trend rate would decrease ratably to 6.0% by the year 1999. The
effect of a one percent increase in the health care cost trend rate assumption
would be to increase the accumulated postretirement benefit obligation, the
aggregate annual service cost and interest expense components by approximately
$4.6 million and $0.4 million, respectively.
In the fourth quarter of 1993, the Company curtailed certain of its
postretirement benefits for its non-bargaining employees. In general, the
curtailment affects employees who retire after December 1994 with exception for
employees who meet certain age plus years of service requirements. The
curtailment resulted in a reduction of the postretirement benefit liability of
$4.2 million. The effect of the curtailment was offset by a charge in the fourth
quarter of 1993 of $4.2 million related to the Company's self-insurance costs.
The following table sets forth postretirement benefits recognized in
the Company's Consolidated Financial Statements:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
----- ----------
(RESTATED)
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees .............................................. $26.6 $26.0
Other fully eligible participants ..................... 4.5 4.8
Other active participants ............................. 10.4 8.7
----- -----
41.5 39.5
Unrecognized actuarial loss ........................... (2.7) (2.7)
Unrecognized prior service cost ....................... 0.1 0.5
----- -----
Postretirement benefit liability recognized in
Consolidated Financial Statements ..................... $38.9 $37.3
===== =====
</TABLE>
Net post retirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
(RESTATED)
(IN MILLIONS)
<S> <C> <C> <C>
Service cost ....................................... $0.8 $0.6 $0.8
Interest cost ...................................... 2.9 2.8 3.3
---- ---- ----
Net postretirement benefit cost ........... 3.7 3.4 4.1
Effect of curtailment .............................. -- (0.2) (1.8)
---- ---- ----
Adjusted net postretirement benefit cost .. $3.7 $3.2 $2.3
==== ==== ====
</TABLE>
30
<PAGE> 31
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
(8) INCOME TAXES
The Company adopted the provisions of SFAS No. 109 effective January 1,
1993. The December 31, 1993 Consolidated Financial Statements reflect an
increase in the net deferred tax assets of $6.4 million and corresponding income
of $6.4 million, reflected as a "Cumulative effect of change in accounting
principles".
The Company's Consolidated Financial Statements reflect the following
deferred tax assets and liabilities (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
----------- ------------
Deferred tax assets: (RESTATED)
<S> <C> <C>
Inventory and bad debt reserves ............................... $ 7.8 $ 9.8
Accrued employee benefit obligations .......................... 17.1 19.6
Net operating loss carryforwards and alternative minimum tax
credit carryforwards ....................................... 4.7 26.4
Divestiture and restructure reserves .......................... 18.9 15.6
Insurance reserves ............................................ 11.7 13.8
Legal and environmental reserves .............................. 8.1 3.7
Other ......................................................... 27.0 11.1
------ ------
$ 95.3 $100.0
====== ======
Deferred tax liabilities:
Property, plant and equipment basis difference ................ $ 9.8 $ 11.2
Investments accounted for by the equity method ................ 14.0 17.0
Other ......................................................... 5.8 3.4
------ ------
$ 29.6 $ 31.6
====== ======
</TABLE>
A significant portion of the Company's deferred tax assets relate to
its non-Falcon businesses. Management believes that future taxable income and
tax planning strategies are available, principally related to the sale of
certain assets, if necessary, to fully realize the recorded net deferred tax
assets and accordingly, no valuation allowance has been recorded at December 31,
1995.
The U.S. federal and state components of the provision for income taxes
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1995 1994 1993
----- ----- -----
(RESTATED)
(IN MILLIONS)
<S> <C> <C> <C>
Provision (benefit) for income taxes:
Current:
U.S. federal ............................ $29.7 $ 4.5 $11.3
U.S. state .............................. 3.8 4.6 2.3
----- ------ -----
33.5 9.1 13.6
----- ------ -----
Deferred:
U.S. federal ............................ 10.4 (24.9) (4.7)
U.S. state .............................. 1.8 (1.9) 1.5
----- ------ -----
12.2 (26.8) (3.2)
----- ------ -----
Total ................................. $45.7 $(17.7) $10.4
===== ====== =====
</TABLE>
31
<PAGE> 32
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Reconciliation of income taxes computed at the U.S. federal statutory
rate to the consolidated provision (benefit) for income taxes from continuing
operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1995 1994 1993
----- ----- -----
(RESTATED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
U.S. federal statutory rate ................................... 35.0% 35.0% 35.0%
Income taxes at U.S. federal statutory rate ................... $27.9 $26.2 $ 3.1
U.S. state income taxes, net of U.S. federal tax benefit ...... 3.7 2.0 1.6
Foreign dividend .............................................. -- -- 3.5
Nondeductible book depreciation and amortization .............. 10.7 2.3 0.8
Differences in basis between book and tax ..................... 3.0 (3.6) (3.2)
Tax-exempt return on investments accounted for by the equity
method ..................................................... (0.5) (1.2) (1.2)
Gain on sale of subsidiary stock .............................. -- (22.1) --
Valuation allowance ........................................... -- (20.1) 4.2
Other ......................................................... 0.9 (1.2) 1.6
----- ----- -----
Provision (benefit) for income taxes ....................... $45.7 $(17.7) $10.4
===== ===== =====
</TABLE>
During 1993, a valuation allowance was established against the deferred
tax assets due to uncertainties associated with the ultimate resolution of the
Madison Management Group, Inc. bankruptcy case (see Note 14). In the fourth
quarter of 1994, the Company eliminated its valuation allowance when it
substantially reduced its exposure in the Madison bankruptcy.
(9) RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1995, the Company recorded restructuring and
other charges of $56.9 million. Included in the 1995 charges were $28.2 million
related to the write-down of goodwill associated with the Company's investment
in Denman, $22.1 million related to the write-down of the carrying value of the
Company's investments and other assets, (including $9.2 million related to its
investment in Signet) and $6.6 million of other items. The write downs were
based on the Company's reassessment of each non-operating assets' estimated net
realizable value and its likely holding period. All of the charges were non-cash
in nature.
In the fourth quarter of 1994, Lapp Insulator Company ("Lapp") recorded
a pretax restructuring charge of $24.6 million. The restructuring charge
included costs related to Lapp's exit from its polymer business and the
restructuring of its porcelain operations. At December 31, 1995 there was
approximately $4.2 million in reserve remaining from this restructuring charge.
Other charges consisted primarily of expenses related to the Company's
reserves pertaining to the Madison Management Group, Inc. bankruptcy (See Note
14).
The cash and non-cash components of these charges are as follows (in
millions):
<TABLE>
<CAPTION>
CASH NON-CASH
CHARGES CHARGES TOTAL
------- -------- -----
<S> <C> <C> <C>
Year ended December 31, 1994:
Lapp:
Property, plant and equipment write down ...... $-- $ 4.6 $ 4.6
Inventory write down .......................... -- 4.9 4.9
Goodwill write-off ............................ -- 4.2 4.2
Shut down expenses ............................ 10.9 -- 10.9
Other:
Provision for litigation costs (See Note 14) .. 4.1 -- 4.1
----- ----- -----
$15.0 $13.7 $28.7
===== ===== =====
Year ended December 31, 1993:
Other:
Provision for litigation cost (See Note 14) ... $28.3 $-- $28.3
Other ......................................... 0.3 -- 0.3
----- ----- -----
$28.6 $-- $28.6
===== ===== =====
</TABLE>
32
<PAGE> 33
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
(10) BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
------ ---------
(RESTATED)
(IN MILLIONS)
<S> <C> <C>
Inventories:
Raw materials and supplies ............................. $ 28.8 $ 25.5
Work in process ........................................ 14.5 14.0
Finished goods ......................................... 37.6 28.1
------ ------
Total ................................................ $ 80.9 $ 67.6
====== ======
Excess of replacement cost over LIFO inventory cost .... $ 3.3 $ 3.2
====== ======
Other current assets:
Deferred taxes ......................................... $ 24.5 $ 28.8
Residual interest in accounts receivable ............... 29.2 29.1
Other .................................................. 14.7 15.1
------ ------
Total ................................................ $ 68.4 $ 73.0
====== ======
Property, plant and equipment:
Land ................................................... $ 10.1 $ 10.0
Buildings .............................................. 55.4 50.4
Machinery and equipment ................................ 144.5 125.7
Construction in progress ............................... 17.4 15.3
Less accumulated depreciation .......................... (107.0) (91.0)
------ ------
Total ................................................ $120.4 $110.4
====== ======
Accrued liabilities:
Dividends payable ...................................... $ -- $ 10.1
Madison reserve ........................................ 8.1 10.4
Divestiture reserves ................................... 37.2 13.4
Wages and benefits ..................................... 30.6 25.2
Other .................................................. 44.5 37.7
------ ------
Total ................................................ $120.4 $ 96.8
====== ======
</TABLE>
(11) REDEEMABLE PREFERRED STOCK
The Company's Preferred Stock was owned by GAI Partners, had a 7%
dividend per annum, was cumulative, nonparticipating and nonvoting. The stated
value of the Preferred Stock was $1,000 per share. Dividends for the period from
issuance were paid in like Preferred Stock. As discussed in Note 5, the
Preferred Stock was redeemed in July 1995 at a value of $48.3 million.
(12) STOCKHOLDERS' EQUITY
AUTHORIZED CAPITAL:
In 1995, the Company amended and restated its Certificate of
Incorporation to reduce the maximum number of shares of Common Stock the Company
is authorized to issue from 40 million shares to 20 million and to reduce the
maximum number of shares of Preferred Stock the Company is authorized to issue
from five million shares to none.
33
<PAGE> 34
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
STOCK OPTIONS:
The Company's Amended and Restated 1991 Stock Option Plan (the "Stock
Option Plan") provides for the issuance of incentive stock options, nonqualified
stock options or stock appreciation rights for certain key employees, officers,
directors and consultants of the Company. Most options have been granted for
five-year terms at their fair market value at the date of the grant. Shares
which remain available for future grants totaled 1,426,500 at December 31, 1995.
<TABLE>
<CAPTION>
SHARES SUBJECT AVERAGE OPTION
TO OPTION PRICE PER SHARE
-------------- ---------------
<S> <C> <C>
Balance at December 31, 1992..... 392,500 $ 26.41
Options granted.............. 74,000 33.32
Options exercised............ (106,327) 26.47
Options cancelled............ (22,500) 26.39
-------
Balance of December 31, 1993..... 337,673 27.90
Options granted.............. 75,000 33.00
Options exercised............ (19,998) 26.46
-------
Balance at December 31, 1994..... 392,675 28.95
Options granted.............. 79,000 35.38
Options exercised............ (57,665) 27.01
Options cancelled............ (24,504) 32.69
-------
Balance at December 31, 1995..... 389,506 30.31
=======
</TABLE>
(13) RELATED PARTY TRANSACTIONS
Equity Holdings Limited Partnership, an Illinois limited partnership
("EHL"), an entity affiliated with Mr. Zell, Chairman of the Board, along with
certain other officers and directors of the Company, owned approximately 88% of
the Company's outstanding common stock at December 31, 1995, as a result of
purchases and sales made from 1980 through 1995.
On January 3, 1995, the Company assigned all of its right, title and
interest in the Equity Pool No. 1 loan receivable to EHL as part of a dividend
to the Company's stockholders.
Individuals and companies affiliated with Mr. Zell perform or provide
services to the Company and its subsidiaries relating to acquisition and
divestiture consulting, corporate planning, legal and tax advice, property
management, as well as providing certain computer equipment, operations and
maintenance services, and lease office space to the Company and certain of its
subsidiaries. Related party agreements or fee arrangements are approved by
independent members of the Board of Directors and are generally for a term of
one year. Fees paid relating to the above described services were $4.9 million,
$5.4 million and $3.5 million for the years ended December 31, 1995, 1994 and
1993, respectively.
Also see Notes 3, 5, 11 and 12 for other information regarding related
party transactions.
34
<PAGE> 35
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
(14) COMMITMENTS AND CONTINGENCIES
The Company conducts manufacturing operations at various leased
facilities and also leases warehouses, office space, computers and office
equipment. Most of the realty leases contain renewal options and escalation
clauses. Total rent expense, including related real estate taxes, amounted to
$5.9 million in the year ended December 31, 1995, $6.5 million in the year ended
December 31, 1994 and $5.7 million in the year ended December 31, 1993.
Litigation- Madison Management Group, Inc.:
In November 1991, Madison Management Group, Inc. ("Madison"), an
unconsolidated affiliate, the stock of which is owned by Great American
Financial Group, Inc. ("GAFG"), filed a petition with the United States
Bankruptcy Court for the Northern District of Illinois (the "Bankruptcy Court")
under Chapter 11 of the United States Bankruptcy Code ("Bankruptcy Code"). In
July 1992, the Chapter 11 case of Madison was converted to a case under Chapter
7 of the Bankruptcy Code. A Chapter 7 trustee (the "Trustee") was appointed for
Madison. Total proofs of claim filed by creditors through the bar date with the
Bankruptcy Court amounted to approximately $943.0 million. After the elimination
of what the Company believed to be duplicate filings of proofs of claim, the
total outstanding claims amounted to approximately $485.0 million. The automatic
stay of the Bankruptcy Code prohibited the creditors of Madison from pursuing
their claims outside of the Madison bankruptcy case.
The Company believed that approximately $454.0 million of these claims
(the "Pipe Claims") were successor liability claims, all of which are
unadjudicated, for breach of contract, tort and breach of warranty asserted by
former customers of a division whose business was sold in 1981 by a predecessor
company of Madison. In addition to the Pipe Claims, various of the claims that
had been filed against Madison in the bankruptcy proceeding (and included in the
$485.0 million above) alleged environmental (including Superfund) liabilities
and certain obligations for health and welfare ("Health and Welfare Claims"), as
well as pension benefits (the "Pension Obligations") to former employees of
predecessor companies.
On December 31, 1992, a complaint (the "Complaint") was filed by the
Trustee with the Bankruptcy Court. The Complaint, which was filed against the
Company, GAFG and certain present and former officers and directors of the
Company and Madison, seeks monetary and equitable relief from the named
defendants. The Trustee alleged in the Complaint that: (i) in connection with
the initial acquisition by a subsidiary of the Company of the predecessor
business (the "Predecessor Business") of Madison, the issuance of approximately
$113.0 million in notes by the Predecessor Business to the Company was a
fraudulent conveyance; (ii) two dividends totaling approximately $8.3 million
made by the Predecessor Business of Madison were fraudulent conveyances and
improper dividends under state law; (iii) the sale by Madison to GAFG of 67.5%
of Eagle's outstanding common stock owned by Madison for cash consideration of
$28.7 million was a fraudulent conveyance; (iv) the approval of such sale of
Eagle stock by Madison to GAFG by former directors of Madison constituted a
breach of their fiduciary duty and duty of loyalty to Madison; (v) the payment
by Madison to GAFG of $45.2 million to cause GAFG to assume $40.5 million of
subordinated notes of Madison was a fraudulent conveyance; and (vi) Madison was
a mere instrumentality and alter ego of the Company. The Company and the other
defendants deny that the Trustee is entitled to any of the monetary or equitable
relief requested in the Complaint.
In May 1994, pursuant to an agreement with the Trustee and the Pension
Benefit Guaranty Corporation, the Company assumed sponsorship of the Pension
Obligations. In August 1994, the Company purchased all but five of the Pipe
Claims for $24.6 million. Subsequently, one of the remaining Pipe Claims
claimants withdrew its claim in Bankruptcy Court. The remaining Pipe Claims
claimants (the "Unsettled Pipe Claimants") are codefendants in litigation
related to legal actions brought by one of the other Pipe Claims claimants whose
claim against Madison was purchased by the Company.
35
<PAGE> 36
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
In February 1995, the Company entered into an Agreement (the
"Settlement Agreement") with the Trustee. The consummation of the transactions
contemplated by the Settlement Agreement involved a release by the Trustee in
favor of the Company and other named defendants of all claims asserted in the
Complaint. Under the terms of the Settlement Agreement, the Company agreed to:
(a) make payments to the Trustee totaling $7.2 million and (b) make an
additional payment to the Trustee on account of the Health and Welfare Claims
pursuant to a formula in the Settlement Agreement based on the number and amount
of Health and Welfare Claims. The consummation of the Settlement Agreement was
contingent upon, among other things, (i) Bankruptcy Court approval, (ii) the
entry of an order by the Bankruptcy Court disallowing the claims of the
Unsettled Pipe Claimants, (iii) the resolution of the Other Claims (as described
below), and (iv) the order of the Bankruptcy Court becoming final and
nonappealable.
The Settlement Agreement was opposed by the Unsettled Pipe Claimants,
and accordingly, in September 1995, the Trustee abandoned the Settlement
Agreement and withdrew from the Bankruptcy Court the motion seeking approval of
the Settlement Agreement. As a result, the Trustee has reinstated discovery
procedures in the Complaint.
The claims of two claimants (the "Other Claims") filed against Madison
were subject to resolution outside of the auspices of the Trustee. The Company
reached settlements with the claimants representing the Other Claims for total
payments of $1.2 million.
At December 31, 1995, the face amount of proofs of claim filed in the
Madison case that have not either been withdrawn or purchased by the Company is
approximately $53.4 million, excluding those claims of an unspecified amount.
The Company continues to believe that it has adequate reserves for this matter
and that the outcome will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Litigation - Other:
The Company and its subsidiaries have, from time to time, become a
party to claims, lawsuits and environmental matters in the ordinary course of
business. It is the opinion of the Company's management, based upon the advice
of counsel, that the claims, lawsuits and environmental matters are without
merit, covered by insurance, or are adequately reserved for in the Consolidated
Financial Statements, and that the ultimate disposition of pending litigation
will not be material in relation to the Company's consolidated financial
position or results of operations.
(15) SEGMENT AND GEOGRAPHIC DATA
The Company is organized into two business segments: the Building
Products Group and Other.
The Building Products Group consists of Falcon which manufactures and
distributes building products for the residential and commercial construction
and home improvement markets. Products manufactured include air distribution and
handling equipment, bathroom plumbing fixtures and air compressors.
36
<PAGE> 37
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Other businesses consist principally of Lapp and Denman Tire
Corporation ("Denman"). Lapp manufactures porcelain insulators and other
products used in electrical power transmission and distribution. Denman
manufactures specialty pneumatic tires.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(RESTATED)
(IN MILLIONS)
<S> <C> <C> <C>
Net sales:
Building Products Group ....................... $ 471.3 $ 440.7 $ 372.3
Other ......................................... 140.6 152.0 153.9
======== ======== ========
Total ...................................... $ 611.9 $ 592.7 $ 526.2
======== ======== ========
Operating income (loss):
Building Products Group ....................... $ 45.8 $ 51.7 $ 45.2
Other ......................................... (15.5) (19.6) (8.2)
Corporate ..................................... (46.1) (26.0) (39.9)
Earnings accounted for by the equity method ... 19.7 19.8 19.6
======== ======== ========
Total ...................................... $ 3.9 $ 25.9 $ 16.7
======== ======== ========
Depreciation and amortization:
Building Products Group ....................... $ 15.0 $ 12.9 $ 12.1
Other ......................................... 4.9 5.6 5.6
Corporate ..................................... 1.6 2.7 5.4
======== ======== ========
Total ...................................... $ 21.5 $ 21.2 $ 23.1
======== ======== ========
Capital expenditures:
Building Products Group ....................... $ 16.4 $ 19.7 $ 10.1
Other ......................................... 6.5 3.8 4.5
Corporate ..................................... -- 0.2 0.6
======== ======== ========
Total ...................................... $ 22.9 $ 23.7 $ 15.2
======== ======== ========
Identifiable assets:
Building Products Group ....................... $ 202.4 $ 187.5 $ 218.9
Other ......................................... 78.4 158.0 191.8
Net assets of discontinued operations ......... 265.5 333.4 418.0
-------- -------- --------
Total ...................................... 546.3 678.9 828.7
Corporate ..................................... 198.2 268.9 193.2
======== ======== ========
Total ...................................... $ 744.5 $ 947.8 $1,021.9
======== ======== ========
</TABLE>
Corporate depreciation and amortization includes amortization of debt
issuance costs and depreciation expense. Corporate assets are principally cash
and cash equivalents, debt issuance costs and investments accounted for by the
equity method.
37
<PAGE> 38
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
The Company's revenues and identifiable assets related to its
continuing operations are predominately related to its U.S. operations and no
one other geographic area accounts for more than 10% of total revenue or 10% of
total assets. Export sales from the United States to other geographic areas were
$20.6 million, $20.9 million and $26.7 million in the years ended December 31,
1995, 1994 and 1993, respectively. Sales to Sears Roebuck and Co. accounted for
approximately 13%, 14% and 12% of the Company's net sales in the years ended
December 31, 1995, 1994 and 1993, respectively.
(16) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited interim results of operations
for the years ended December 31, 1995 and 1994 (in millions except per share
amounts). Quarterly data has been restated to reflect discontinued operations.
Refer to Note 3 in the Company's Consolidated Financial Statements.
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
March 31, June 30, September 30, December 31,
------------------- ------------------- ------------------- --------------------
1995 1994 1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............... $ 146.4 $ 138.3 $ 152.8 $ 149.7 $ 155.4 $ 157.1 $ 157.3 $ 147.6
Income (loss) from
continuing
operations ........... 11.1 2.7 14.7 6.6 34.4 6.7 (26.2) 76.4
Income (loss) before
extraordinary
item and
cumulative
effect of change
in accounting
principle ............ 16.1 (1.8) 16.2 (20.8) 41.0 12.4 (110.2) 74.3
Net income (loss) ....... 15.3 (21.6) 15.4 (21.6) 41.0 18.8 (110.2) 73.4
Weighted average
shares outstanding ... 11.2 11.2 11.2 11.2 10.4 11.2 9.2 11.2
Per Common Share:
Net income (loss) ....... $ 1.36 $ (1.93) $ 1.38 $ (1.94) $ 3.94 $ 1.68 $(11.97) $ 6.57
</TABLE>
The sum of the quarterly earnings per share amounts does not agree to the annual
earnings per share amount due to differences in the weighted average shares
outstanding.
38
<PAGE> 39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 10, Item 11, Item 12 and Item 13 will be
contained in a definitive proxy statement which the Registrant anticipates will
be filed no later than April 29, 1996 and thus this part has been omitted in
accordance with General Instruction G(3) to Form 10-K.
39
<PAGE> 40
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K
(A) Financial Statements and Schedules
Description
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................... 16
Consolidated Balance Sheets................................................. 17
Consolidated Statements of Income........................................... 18
Consolidated Statements of Stockholders' Equity............................. 19
Consolidated Statements of Cash Flows....................................... 20
Notes to Consolidated Financial Statements.................................. 22
</TABLE>
Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, or are not applicable, or the information called for
therein is included elsewhere in the financial statements or the notes thereto.
Accordingly, such schedules have been omitted.
(B) Reports on Form 8-K
Current Report on Form 8-K dated November 13, 1995 pursuant to Item 5
regarding the signing of a Merger Agreement between The Vigoro Corporation and
IMC Global Inc.
Current Report on Form 8-K dated December 19, 1995 pursuant to Item 5
regarding Eagle Industries, Inc. fourth quarter 1995 charges and commencement of
a tender and consent offer for Senior Deferred Coupon Notes.
(C) Exhibits
Exhibits are required by Item 601 of Regulation S-K are listed in the
Index to Exhibits, which is incorporated herein by reference.
40
<PAGE> 41
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
By: /s/ Rod F. Dammeyer
----------------------------------------------
Rod F. Dammeyer
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Sam A. Cottone
----------------------------------------------
Sam A. Cottone
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
TITLE
<S> <C> <C>
March 15, 1996 Chairman of the Board /s/ Samuel Zell
- --------------------------- ----------------------
Samuel Zell
March 15, 1996 Director, President and /s/ Rod F. Dammeyer
- --------------------------- Chief Executive Officer ----------------------
Rod F. Dammeyer
March 15, 1996 Director *Bradbury Dyer III
- --------------------------- ----------------------
*Bradbury Dyer III
March 15, 1996 Director *David A. Gardner
- --------------------------- ----------------------
*David A. Gardner
March 15, 1996 Director *F. Philip Handy
- --------------------------- ----------------------
*F. Philip Handy
March 15, 1996 Director /s/ Sheli Z. Rosenberg
- --------------------------- ----------------------
Sheli Z. Rosenberg
March 15, 1996 Director /s/ Joseph P. Sullivan
- --------------------------- ----------------------
Joseph P. Sullivan
March 15, 1996 Director /s/ William K. Hall
- --------------------------- ----------------------
William K Hall
* By: /s/ Gus J. Athas as attorney-in-fact for each person indicated
-------------------
Gus J. Athas
</TABLE>
41
<PAGE> 42
INDEX TO EXHIBITS
DOCUMENT DESCRIPTION
Exhibit
Number Description
3.1. Certificate of Incorporation.
3.2. Bylaws of Great American Management and Investment, Inc., as amended
through July 18, 1990. (Incorporated by reference to Exhibit 3.4 to
Form 10-K dated July 31, 1990).
4.1. Eagle Trade Receivables Master Trust Pooling and Servicing Agreement
dated as of January 1, 1994, among Centrally Held Eagle Receivables
Program, Inc., Eagle Industrial Products Corporation and Continental
Bank, National Association as trustee. (Incorporated by reference to
Exhibit 4.3 of Eagle Industries, Inc.'s (Commission file number:
0-20416) Annual Report on Form 10-K for the year ended December 31,
1993).
4.2. Series 1994-1 Supplement, dated as of January 1, 1994 to Eagle Trade
Receivable Master Trust Pooling and Servicing Agreement. (Incorporated
by reference to Exhibit 4.4 of Eagle Industries, Inc.'s (Commission
file number: 0-20416) Annual Report on Form 10-K for the year ended
December 31, 1993).
4.3. Amended and Restated Credit Agreement, dated as of October 28, 1994,
among Eagle Industrial Products Corporation and Chemical Bank as
Administrative Agent, Citicorp North America, Inc. As Collateral Agent,
and the other banks named therein. (Incorporated by reference to
Exhibit 4.4 of Eagle Industries, Inc.'s (Commission file number:
0-20416) Annual Report on Form 10-K for the year ended December 31,
1994).
4.4. Credit Agreement, dated as of June 30, 1995, among Falcon Building
Products, Inc. and Chemical Bank as Administrative Agent, Citicorp
North America, Inc. as Collateral Agent, and the other financial
institutions named therein. (Incorporated by reference to Exhibit 4.1
of Eagle Industries, Inc.'s (Commission file number: 0-20416) Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1995.)
4.5 Indenture dated as of July 1, 1993, including herein the form of Note,
between Eagle Industries, Inc. and Harris Trust and Savings Bank, as
Trustee, providing for the 10.5% Senior Deferred Coupon Notes due 2003.
(Incorporated by reference Exhibit 4.2 of Eagle Industries, Inc.
(Commission file number: 0-20416) quarterly report on Form 10-Q for the
quarterly period ended June 30, 1993.)
10.1. Great American Management and Investment, Inc. Amended and Restated
1991 Stock Option Plan. (Incorporated by reference to Exhibit A to
Proxy Statement dated November 23, 1990 for the Annual Meeting held
December 13, 1990).
10.2. First Amendment to the Great American Management and Investment, Inc.
Amended and Restated 1991 Stock Option Plan. (Incorporated by reference
to Exhibit 28 to Form 10-Q for the quarterly period ended January 31,
1992).
42
<PAGE> 43
10.3. Eagle Industries, Inc. Cash Balance Pension Plan. (Incorporated by
reference to Exhibit 10.9 of Eagle Industries, Inc.'s (Commission file
number: 0-20416) Registration Statement on Form S-1, File No.
33-23585).
10.4. Advantage Retirement Savings Plan. (Incorporated by reference to
Exhibit 10.10 of Eagle Industries, Inc.'s (Commission file number:
0-20416) Registration Statement on Form S-1, File No. 33-23585).
10.5. Eagle Industries, Inc. Employee Savings Plan, as amended and restated
as of January 1, 1991. (Incorporated by reference to Exhibit 10.6 of
Eagle Industries, Inc.'s (Commission file number: 0-20416) Annual
Report on Form 10-K for the fiscal year ended July 31, 1991).
10.6. Eagle Industries, Inc. 1991 Long Term Incentive Plan. (Incorporated by
reference to Exhibit 10.5 of Eagle Industries, Inc.'s (Commission file
number: 0-20416) Annual Report on Form 10-K for the fiscal year ended
July 31, 1992).
10.7. Eagle Industries, Inc.'s Employee Stock Incentive Plan (Incorporated by
reference to Exhibit 10.6 of Eagle Industries, Inc.'s (Commission file
number: 0-20416) Annual Report on Form 10-K for the year ended December
31, 1994).
10.8 Eagle Industrial Products Corporation Supplemental Retirement Plan.
10.9 Falcon Building Products, Inc. 1994 Stock Option and Restricted Share
Plan.
10.10 Falcon Building Products, Inc. Senior Executive Stock Purchase Plan.
10.11. Purchase and Sale Agreement between Industrie Ottiche Europee, S.p.A.
and Falcon Manufacturing, Inc. (Incorporated by reference to Exhibit
2.1 of Eagle Industries, Inc.'s (Commission file number: 0-20416)
Current Report on Form 8-K, dated March 10, 1993).
10.12. First Amendment to Purchase and Sale Agreement between Industrie
Ottiche Europee, S.p.A. and Falcon Manufacturing Inc. (Incorporated by
reference to Exhibit 2.2 of Eagle Industries, Inc.'s (Commission file
number: 0-20416) Current Report on Form 8-K, dated March 10, 1993).
10.13. Amended and Restated Stock Purchase Agreement among Eagle Industrial
Products Corporation and O.D.E. Manufacturing, Inc. and Robbins and
Myers, Inc. (Incorporated by reference to Exhibit 2.1 of Eagle
Industries, Inc.'s (Commission file number: 0-20416) Current Report on
Form 8-K dated June 30, 1994).
10.14. Robbins and Myers, Inc. Senior Subordinated Extendible Reset Note
(Incorporated by reference to Exhibit 2.3 of Eagle Industries, Inc.'s
(Commission file number: 0-20416) Current Report on Form 8-K dated June
30, 1994).
10.15. Asset Purchase Agreement among Hill Phoenix, Inc., Refrigeration
Systems, Inc., Phoenix Refrigeration Systems, Inc., Dover Diversified,
Inc., Hill Refrigeration, Inc., and Eagle Industries, Inc.
(Incorporated by reference to Exhibit 2.1 of Eagle Industries, Inc.'s
(Commission file number: 0-20416) quarterly report on Form 10-Q for the
quarterly period ended June 30, 1994).
10.16. Purchase Agreement among Caron International, Inc., Eagle Industrial
Products Corporation and Eagle Industries, Inc. and NSC Buyer, Inc. and
National Spinning Co., Inc. (Incorporated by reference to Exhibit 2.1
of Eagle Industries, Inc.'s (Commission file number: 0-20416) Current
Report on Form 8-K dated September 2, 1994).
10.17. Stock Purchase Agreement between Eagle Industrial Products Corporation
and Thomas & Betts Corporation dated November 1, 1995. (Incorporated by
reference to Exhibit 2.1 of Eagle Industries, Inc. (Commission file
number: 0-20416) Current Report on Form 8-K dated January 2, 1996).
43
<PAGE> 44
10.18. Amendment No. 1 to Stock Purchase Agreement between Eagle Industrial
Products Corporation and Thomas & Betts Corporation dated December 15,
1995. (Incorporated by reference to Exhibit 2.2 of Eagle Industries,
Inc. (Commission file number: 0-20416) Current Report on Form 8-K dated
January 2, 1996).
10.19. Acquisition Agreement dated December 14, 1995 among BE Aerospace, Inc.,
Burns Aerospace Corporation, Eagle Industrial Products Corporation,
Eagle Industries, Inc. and Great American Management and Investment,
Inc. (Incorporated by reference to Exhibit 1 of BE Aerospace, Inc.'s
(Commission file number: 0-18348) Current Report on Form 8-K dated
December 14, 1995).
10.20. Voting Agreement dated November 13, 1995 between IMC Global and the
Registrant. (Incorporated by reference to Exhibit 99.2 of the
Registrant's Current Report on Form 8-K dated November 13, 1995).
21.0. Subsidiaries of Registrant.
23.1. Consent of Arthur Andersen LLP
24.1. Power of Attorney for Bradbury Dyer III dated February 20, 1996.
24.2. Power of Attorney for David A. Gardner dated February 20, 1996.
24.3. Power of Attorney for F. Philip Handy dated February 19, 1996.
27.1. Financial Data Schedule
44
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
FIRST: The name of the corporation (hereinafter called the
"corporation") is:
Great American Management and Investment, Inc.
SECOND: The address of its registered office in the State of
Delaware is 229 South State Street, in the City of Dover, 19901 County of Kent.
The name of its registered agent at such address is the Prentice-Hall
Corporation System, Inc., the business office of which is identical with the
registered office of the corporation.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of capital stock which the
corporation is authorized to issue or to have outstanding at any time shall be
20,000,000 shares of which 20,000,000 shall be Common Stock of $.01 (one cent)
par value.
FIFTH: The name and mailing address of each incorporator is as
follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
W. J. Reif 100 West Tenth Street
Wilmington, Delaware 19801
M.A. Ferrucci 100 West Tenth Street
Wilmington, Delaware 19801
F.J. Obara, Jr. 100 West Tenth Street
Wilmington, Delaware 19801
</TABLE>
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Elections of directors need not be written by ballot
unless the bylaws of the corporation shall so provide.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the bylaws of the corporation.
NINTH: Meetings of stockholders and directors may be held within
or without the State of Delaware, as the bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the bylaws of the corporation.
Elections of directors need not be by written ballot unless the bylaws of the
corporation shall so provide.
TENTH: The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute or by this Certificate or
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ELEVENTH: No holder of any of the shares of the stock of this
corporation shall have the preemptive right to subscribe to or acquire any of
the shares of stock of this corporation or any securities of the corporation
convertible into such stock.
<PAGE> 2
TWELFTH: At all elections of directors of the corporation each
holder of stock shall be entitled to as many votes as shall equal the number of
votes which (except for such provision as to cumulative voting) he would be
entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected and that he may cast
all such votes for a single director or may distribute them among the number to
be voted for, or for any two or more of them as he may see fit.
<PAGE> 1
EXHIBIT 10.8
EAGLE INDUSTRIAL PRODUCTS CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(EFFECTIVE JANUARY 1, 1995)
<PAGE> 2
TABLE OF CONTENT
<TABLE>
<S> <C>
I. PURPOSE............................................................... 1
II. DEFINITIONS........................................................... 1
2.1. "Account".................................................... 1
2.3. "Beneficiary"................................................ 1
2.4. "Board"...................................................... 1
2.5. "Code"....................................................... 1
2.6. "Committee".................................................. 1
2.7. "Company".................................................... 1
2.8. "Compensation"............................................... 1
2.9. "Deferral Account"........................................... 2
2.10. "Deferral Credit"............................................ 2
2.11. "Effective Date"............................................. 2
2.12. "Eligible Employee".......................................... 2
2.13. "Employer"................................................... 2
2.14. "Matching Account"........................................... 2
2.15. "Matching Credit"............................................ 2
2.16. "Participant"................................................ 2
2.17. "Participation Agreement".................................... 2
2.18. "Pension Account"............................................ 2
2.19. "Pension Credit"............................................. 2
2.20. "Plan"....................................................... 2
2.21. "Plan Year".................................................. 2
2.22 "Pre-1994 Compensation Limitation"........................... 2
2.23. "Qualified Pension Plan"..................................... 3
2.24 "Qualified Pension Plan Contributions"....................... 3
2.25 "Qualified Plans"............................................ 3
2.26. "Qualified Savings Plan Matching Contributions".............. 3
2.27. "Qualified Savings Plan Salary Reduction Contributions"...... 3
2.28. "Qualified Savings Plan"..................................... 3
2.29. "Termination"................................................ 3
III. ENROLLMENT AND DEFERRAL OF COMPENSATION .............................. 3
3.1 Enrollment................................................... 3
3.2 Deferral of Compensation..................................... 4
IV. ACCOUNTS ............................................................. 4
4.1 Maintenance of Accounts...................................... 4
4.2. Deferral Credits............................................. 5
4.3. Matching Credits............................................. 5
4.4. Pension Credits.............................................. 5
</TABLE>
<PAGE> 3
- ii -
<TABLE>
<S> <C>
4.5. Interest Credits............................................. 6
4.6. Annual Statements............................................ 6
V. VESTING ............................................................. 6
5 1. Determination of Vested Percentage........................... 6
5 2 Acceleration of Vesting...................................... 6
VI. PAYMENTS ............................................................. 6
6.1. Termination.................................................. 6
6.2. Payments on Taxability....................................... 7
6.3. Right of Offset.............................................. 7
6.4. Withholding.................................................. 7
VII. BENEFICIARIES......................................................... 7
7.1. Designation of Beneficiaries................................. 7
7.2. Designation Forms............................................ 7
VIII. ADMINISTRATION AND CLAIMS............................................. 7
8.1. Membership; Procedures; Authority and Responsibilities....... 7
8.2. Claims....................................................... 8
8.3. Incorporation by Reference................................... 8
8.4. Suspension of Payments in Event of Dispute................... 8
IX. MISCELLANEOUS......................................................... 8
9.1. Amendment and Termination.................................... 8
9.2. No Contract of Employment.................................... 8
9.3. Tax Effects.................................................. 8
9.4. Nonalienation of Benefits.................................... 8
9.5. Corporate Successors......................................... 9
9.6. Participants' Rights Unsecured............................... 9
9.7. Limitation of Liability...................................... 9
9.8. Payments to Minors, etc...................................... 9
9.9. Notices...................................................... 9
9.10. Captions..................................................... 10
9.11. Entire Agreement; Successors................................. 10
9.12. Partial Invalidity........................................... 10
9.13. Governing Law................................................ 10
9.14. Third Parties................................................ 10
</TABLE>
<PAGE> 4
EAGLE INDUSTRIAL PRODUCTS CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(Effective January 1, 1995)
I. PURPOSE
The Eagle Industrial Products Corporation Supplemental Retirement Plan
has been adopted by Eagle Industrial Products Corporation (the "Company"),
effective January 1, 1995, for the purpose of providing certain highly
compensated employees of the Company and its Affiliates with the opportunity to
receive retirement benefits in excess of those which they are entitled to
receive under the Eagle Industrial Products Corporation Employee Savings Plan
and the Eagle Industrial Products Corporation Cash Balance Pension Plan.
II. DEFINITIONS
Where the following terms appear in this Plan, they shall have the
respective meanings set forth in this Section II unless the context clearly
indicates to the contrary:
2.1. "Account" means the account maintained by the Committee and
the Employer to reflect the accrued benefit of a Participant under the Plan.
2.2. "Affiliate" means any entity which is a member of a controlled
group of corporations or a group of trades or business under common control (as
such terms are defined in Sections 414(b) and (c) of the Code), of which the
Company is a member.
2.3. "Beneficiary" means the person or persons entitled to receive
benefits under the Plan after the death of a Participant, pursuant to Section
7.1 hereof.
2.4. "Board" means the Board of Directors of the Company.
2.5. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any regulations issued thereunder.
2 6. "Committee" means the committee of the Board appointed by the
Board to administer the Plan.
2.7. "Company" means Eagle Industrial Products Corporation, a
Delaware corporation, and its successors and assigns.
2 8. "Compensation" means the amount of compensation which would be
subject to deferral under the Qualified Savings Plan if the limitations of Code
Sections 401(a)(17) and 402(g) were not taken into account; provided, however,
that in no event shall the Compensation of a Participant exceed the Pre-1994
Compensation Limitation.
<PAGE> 5
- 2-
2.9. "Deferral Account" means the portion of a Participant's
Account derived from Deferral Credits.
2.10. "Deferral Credit" means a credit to a Participant's Account
under Section
2.11 "Effective Date" means January 1, 1995.
2.12. "Eligible Employee" means any employee of an Employer who (i)
is eligible to participate in the Qualified Plans and whose Compensation for the
Plan Year is greater than the maximum amount of compensation which may he taken
into account under the Qualified Plans for the Plan Year because of the
limitations set forth in Section 401(a)(17) of the Code and (ii) has been
selected by the Committee to participate in the Plan.
2.13. "Employer" means the Company and each Affiliate which is a
participating employer under the Qualified Plans.
2.14. "Matching Account" means the portion of a Participant's
Account derived from Matching Credits.
2.15. "Matching Credit" means a credit to a Participant's Account
under Section 4.3.
2.16. "Participant" means an Eligible Employee who has enrolled in
the Plan in accordance with Section 3.1.
2.17. "Participation Agreement" means an agreement between an
Eligible Employee and his or her Employer whereby the Eligible Employee agrees
to become a Participant in the Plan and, if the Participant so elects, to defer
a portion of his or her Compensation for the Plan Year pursuant to the
provisions of the Plan.
2.18. "Pension Account" means the portion of a Participant's Account
derived from Pension Credits.
2.19. "Pension Credit" means a credit to a Participant's Account
under Section 4.4.
2.20. "Plan" means the Eagle Industrial Products Corporation
Supplemental Retirement Plan set forth herein, as amended From time to time.
2.21. "Plan Year" means each calendar year beginning January 1,
1995.
2.22 "Pre-1994 Compensation Limitation" means $235,840, as
increased each calendar year after 1993 by the cost of living adjustment. The
cost of living adjustment for each calendar year after 1993 shall be the
percentage adjustment made under Section 415(d) of the Code for such calendar
year or such other percentage adjustment as shall be determined by the
Committee.
<PAGE> 6
- 3-
2.23. "Qualified Pension Plan" means a tax-qualified defined benefit
plan or money purchase pension plan sponsored by the Company or an Affiliate in
which the Participant participates during a Plan Year.
2.24 "Qualified Pension Plan Contributions" means the amount of
employer contributions made on behalf of a Participant under the Qualified
Pension Plan.
2.25 "Qualified Plans" means the Qualified Pension Plan and the
Qualified Savings Plan.
2.26. "Qualified Savings Plan Matching Contributions" means the
amount of Employer matching contributions made on behalf of a Participant under
the Qualified Savings Plan.
2.27. "Qualified Savings Plan Salary Reduction Contributions" means
the pre-tax salary reduction contributions made to the Qualified Savings Plan by
an Employer on behalf of a Participant pursuant to a salary reduction agreement
between the Participant and the Employer.
2.28. "Qualified Savings Plan" means a retirement plan qualified
under Section 401(k) of the Code which is sponsored by the Company or an
Affiliate and in which the Participant participates during a Plan Year.
2.29. "Termination" means the termination of the Participant's
employment with his or her Employer for any reason.
III. ENROLLMENT AND DEFERRAL OF COMPENSATION
3.l Enrollment. Each Eligible Employee may become a Participant in
the Plan by filing with his or her Employer a fully completed and executed
Participation Agreement on which the Eligible Employee elects to participate in
the Plan and, if he or she so desires, to defer a portion of his or her
Compensation. A Participation Agreement must be filed with the Employer before
the first day of the Plan Year to which it relates. With respect to the initial
Plan Year of the Plan, the Participation Agreement may be filed with the
Employer within thirty (30) day after the effective date of the Plan. If an
Eligible Employee first becomes an Eligible Employee after the first day of a
Plan Year, his or her Participation Agreement must be filed with the Employer
within thirty (30) days after the date on which he or she first becomes an
Eligible Employee in order to participate in the Plan during such Plan Year.
A Participation Agreement shall remain in full force and
effect for subsequent Plan Years unless modified or terminated by the filing
with the Employer of a new Participation Agreement. A new Participation
Agreement shall only apply to Compensation earned by the Participant after the
end of the Plan Year in which such Participation Agreement is filed with the
Employer. If a Participant receives a distribution on account of hardship from
the Qualified
<PAGE> 7
- 4 -
Savings Plan under circumstances requiring that deferrals under this Plan be
suspended, deferrals under this Plan shall cease for such period as may be
required in connection with such distribution.
3.2 Deferral of Compensation. A Participant shall have the right
to elect on his or her Participation Agreement to deter each Plan Year that
portion of his or her Compensation which is equal to (A) minus (B) below:
(A) The Qualified Savings Plan Salary Reduction Contributions
which would have been made on behalf of the Participant for the Plan Year if the
limitations imposed by Code Sections 401(a)(17) and 402(g) were not taken into
account; minus
(B) The Qualified Savings Plan Salary Reduction Contributions
actually made on behalf of the Participant for the Plan Year.
A Participant who elects to defer his or her Compensation
under this Section 3.2 shall have his or her Compensation reduced as of the
first payroll period in which the Participant's Compensation for the Plan Year
reaches the amount at which the Participant is no longer able to defer
Compensation as a Qualified Plan Salary Reduction Contribution under the
Qualified Savings Plan because of the limitations imposed by either Section
401(a)(17) or Section 402(g) of the Code.
The amount in (A) above shall be based on the rate of
Qualified Savings Plan Salary Reduction Contributions in effect for the
Participant under the Qualified Savings Plan as of the first day of a Plan Year.
At the discretion of the Committee, the amount in (A) above may be modified to
include Qualified Salary Reduction Contributions which would have been made to
the Qualified Savings Plan on behalf of the Participant for the Plan Year if any
or all of the limitations imposed by Sections 401(k)(3), 401(m)(2) and 415 of
the Code were not taken into account, in addition to the limitations imposed by
Code Section 401(a)(17) and 402(g). Participants shall be advised of any such
modification during the Plan Year preceding the Plan Year in which such
modification is to become effective.
IV. ACCOUNTS
4.1. Maintenance of Accounts. The Employer and the Committee shall
maintain on the Employer's books and records an Account for each Participant
which shall be credited with any credits and earnings and charged with payments,
and forfeitures. Each Participant's Account shall consist of a Deferral Account,
a Matching Account and a Pension Account. The amount available for payments
shall be limited to the portion of the Account which is vested. The Employer or
the Committee may from time to time assess reasonable service charges against
all or any portion of the Accounts to defray costs associated with the
implementation and administration of the Plan. Payments under the Plan shall be
charged against Accounts at the date on which the payments are made and
forfeitures shall be charged at the date of Termination.
<PAGE> 8
- 5 -
4.2. Deferral Credits. The Deferral Account of each Participant
shall be credited at the end of each calendar month with Deferral Credits equal
to the amounts of Compensation deferred by the Participant under this Plan
during such month.
4.3. Matching Credits. The Matching Account of each Participant
will be credited at the end of each Plan Year with a Matching Credit, provided
that the Participant has elected to defer compensation pursuant to Section 3.2
for such Plan Year. In addition, the Matching Account of each Participant who
has elected to defer Compensation during the 1995 Plan Year pursuant to Section
3.2 shall be credited as of the Effective Date with a Matching Credit (an
"Initial Matching Credit"). The amount of each such Matching Credit shall be
equal to:
(A) The Qualified Savings Plan Matching Contributions which would have
been made on behalf of the Participant for the Plan Year (or for the 1994
calendar year, with respect to an Initial Matching Credit) if the Participant's
Qualified Savings Plan Salary Reduction Contributions for the Plan Year had not
been restricted by the limitations imposed by Sections 401(a)(17) and 402(g) of
the Code (or such other Code limitations as the Committee elects to take into
account pursuant to Section 3.2); minus
(B) The Qualified Savings Plan Matching Contributions actually made on
behalf of the Participant for the Plan Year (or for the 1994 calendar year, with
respect to an Initial Matching Credit).
For purposes of determining the amount in (A) above, a Participant's
Compensation in excess of the Pre-1994 Compensation Limitation shall not be
taken into account. A Participant shall be entitled to a Matching Credit for a
Plan Year only if he or she has elected to defer Compensation pursuant to
Section 3.2 of the Plan during such Plan Year.
4.4. Pension Credits. The Pension Account of each Participant will
be credited at the end of each Plan Year with a Pension Credit. In addition, the
Pension Account of each Participant whose participation in the Plan began on or
before February 1, 1995 shall be credited as of such date with a Pension Credit
(an "Initial Pension Credit"). The amount of each such Pension Credit shall be
equal to:
(A) The Qualified Pension Plan Contributions which would have been made
on behalf of the Participant for the Plan Year (or for the 1994 calendar year,
with respect to an Initial Pension Credit) if the Qualified Pension Plan
Contributions had not been restricted by the limitations imposed by Section
401(a)(17) of the Code; minus
(B) The Qualified Pension Plan Contributions actually made on behalf of
the Participant for the Plan Year (or for the 1994 calendar year, with respect
to an Initial Pension Credit).
At the discretion of the Committee, the amount in (A) above may be
modified to include Qualified Pension Plan Contributions which would have been
made to the Qualified Pension Plan on behalf of the Participant for the Plan
Year (or for the 1994 calendar year, with respect to
<PAGE> 9
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an initial Pension Credit) if the limitation imposed by Section 415 of the Code
were not taken into account, in addition to the limitation imposed by Code
Section 401(a)(17). For purposes of determining the amount in (A) above, a
Participant's compensation in excess of the Pre-1994 Compensation Limitation
shall not be taken into account.
4.5. Interest Credits. As of the last day of each Plan Year, each
Participant's Deferral Account, Pension Account and Matching Account shall be
credited with interest at a rate equal to the greater of (i) five (5) percent or
(ii) the of average Three Year Constant Maturities during the month of December
of the preceding Plan Year, as published in the Federal Reserve Statistical
Release H. 15(519) of the Board of Governors of the Federal Reserve System.
4.6. Annual Statements. Statements indicating the total amount
credited to a Participant's Account as of the last day of each Plan Year shall
be furnished by the Committee to the Participant not more than ninety (90) days
after the end of each Plan Year and at such other time or times as the Committee
may determine.
V. VESTING
5.1. Determination of Vested Percentage. A Participant's vested
percentage in his or her Deferral Account and Matching Account shall at all
times be 100%. A Participant's vested percentage in his or her Pension Account
shall be equal to the percentage that the Participant is vested in his or her
accrued benefit under the Qualified Pension Plan. A Participant's vested
percentage in his or her Pension Account shall be determined as of the date any
payment is to be made. The portion of a Participant's Pension Account which is
not vested shall be forfeited on Termination.
5.2 Acceleration of Vesting. The Committee shall have the power to
accelerate vesting of all or any portion of a Participant's Pension Account to
such extent and at such times as may be in the best interests of the Employer.
VI. PAYMENTS
6.1. Termination. The vested portion of the Account of a
Participant shall be paid by the Employer to the Participant in a lump sum cash
distribution at the time the Participant is first eligible to request and
receive payment of benefits under either the Qualified Savings Plan or the
Qualified Pension Plan because of a Termination. Alternatively, the Participant
may elect to have his or her Account paid in a single lump sum payment on a
later date or in a specified number of approximately equal annual installments
over a period not exceeding ten (10) years. Payment of the lump sum or first
installment shall be made on a date specified by the Participant which is not
later than one (1) year after the Participant's Termination. The Participant's
election shall be made on his or her initial Participation Agreement or on any
subsequent Participation Agreement filed with the Participant's Employer at
least one (1) year prior to date on which payment of the Participant's Account
is to be made or commenced.
<PAGE> 10
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6.2. Payments on Taxability. If any amount credited to a
Participant's Account under this Plan becomes taxable to the Participant, such
taxable amounts or any portions thereof may, at the discretion of the Committee,
be paid to the Participant upon his or her written request.
6.3. Right of Offset. If the Committee determines that a person
entitled to payment under this Plan or the Participant of whom such person is
the Beneficiary is, for any reason, indebted to the Company, any Employer or any
Affiliate, the Committee and the Employer may offset such indebtedness,
including any interest accruing thereon, against payments otherwise due under
the Plan.
6.4. Withholding. The Employer may withhold from payments due under
the Plan any and all taxes of any nature required by any government to be
withheld.
VII. BENEFICIARIES
7.1. Designation of Beneficiaries. A Participant may designate one
or more Beneficiaries to receive payments under the Plan after the Participant's
death. If a Participant dies without having completed and filed a proper
Beneficiary designation or to the extent all designated Beneficiaries are not
living, the amount credited to the Participant's Deferral Account and Matching
Account shall be paid to the Participant's Beneficiaries under the Qualified
Savings Plan and the amounts then credited to the Participant's Pension Account
shall be paid to his Beneficiaries under the Qualified Pension Plan.
7.2. Designation Forms. All Beneficiary designations must be on
forms provided by the Committee and will be effective on the date filed with the
Committee. A Participant may change any Beneficiary at any time by filing with
the Committee a written change of Beneficiary form.
VII. ADMINISTRATION AND CLAIMS
8.1. Membership: Procedures; Authority and Responsibilities. The
Committee shall operate under the same rules and procedures as the
administrative committee under the Qualified Pension Plan. The Committee may
assign all or some of its duties hereunder to an officer or other employee of
the Company. The Committee shall have, in addition to the powers and
responsibilities specifically provided for in this Plan, all of the powers and
responsibilities provided under the Qualified Pension Plan which are applicable
to the administration and operation of this Plan, including the authority to
interpret the Plan, to adopt and revise rules and regulations relating to the
Plan, and to make any other determinations which it believes to be necessary or
advisable for the administration of the Plan. Determinations and decisions by
the Committee shall be final and binding on Employees, Participants and all
other persons except that denied claims for benefits may be subject to review
pursuant to Section 8.2. Any determination under the Qualified Pension Plan
which is relevant to the administration of this Plan shall be effective under
this Plan as well as under the Qualified Pension Plan.
<PAGE> 11
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8.2. Claims. All claims for benefits must be made under the rules
and procedures then in effect under the Qualified Pension Plan, including the
Qualified Pension Plan's procedures with respect to review of denied claims.
8.3. Incorporation by Reference. The provisions of the Qualified
Pension Plan related to its administrative committee and claims procedures are
hereby incorporated by reference in this Plan.
8.4. Suspension of Payments in Event of Dispute. If the Committee
is in doubt concerning the entitlement of any person to any payment claimed to
be due under the Plan, the Committee may direct the Employer to suspend any such
payment until satisfied as to the entitlement of such person to such payment.
The Committee or the Employer may file or cause to be filed in any court of
competent jurisdiction an appropriate legal action or process in such form as
the Committee or the Employer deems appropriate, including an interpleader
action or an action for declaratory judgment, for a legal determination of the
entitlement of any person to any payment claimed to be due under the Plan. The
Employer and the Committee shall comply with any final order of the court in any
such suit, subject to appellate review, and the Participant and Beneficiaries
will be similarly bound thereby.
IX. MISCELLANEOUS
9.1. Amendment and Termination. The Company may at any time and
from time to time alter, amend, suspend, or terminate this Plan with or without
the consent of any Participant or Beneficiary. No amendment shall reduce the
amount then credited to any Participant's Account. Any amendment or termination
of the Plan shall become effective as to a Participant on the date established
by the Company. If the Plan is curtailed or terminated, or the deferral of
additional Compensation is suspended permanently, the Employer shall continue to
be responsible for making payments attributable to existing Accounts. Upon
curtailment, suspension, or termination, the Committee may, if it deems it to be
in the best interests of the Employer, direct early payment of the vested
portions of any or all Accounts.
9.2. No Contract of Employment. The establishment of the Plan, any
modification thereof, the creation of one or more Accounts, and/or the making of
any payments under the Plan, shall not give any employee or other person the
right to remain in the service of any Employer, and all Participants and other
employees shall remain subject to discharge to the same extent as if the Plan
had never been adopted.
9.3. Tax Effects. None of the Company, any other Employer or the
Committee, represents or guarantees that any particular federal, state or local
tax consequences will occur as a result of any Participant's participation in
this Plan. Each Participant should consult with his or her own advisors
regarding the tax consequences of participation in this Plan.
9.4. Nonalienation of Benefits. None of the payments, benefits, or
rights of any Participant or Beneficiary shall be subject to any claim of any
creditor of such Participant or
<PAGE> 12
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Beneficiary, and, to the fullest extent permitted by law, all such payments,
benefits, and rightsshall be free from attachment, garnishment, or any other
legal or equitable process available to any creditor of such Participant or
Beneficiary. No Participant or Beneficiary shall have the right to alienate,
anticipate, commute, pledge, encumber, or assign any of the benefits or payments
which the Participant or Beneficiary may expect to receive, contingently or
otherwise, under the Plan, except the right of a Participant to designate a
Beneficiary.
9.5. Corporate Successors. The Plan shall not be automatically
terminated by a transfer or sale of the assets of the Company or any Employer or
by the merger or consolidation of the Company or any Employer into or with any
other corporation or other entity, but the Plan shall be continued after such
sale, merger or consolidation only if and to the extent that the transferee,
purchaser or successor entity agrees to continue the Plan. In the event that the
Plan is not continued by the transferee, purchaser or successor entity, then the
Plan shall terminate subject to the provisions of Section 9.1.
9.6. Participants' Rights Unsecured. The Plan shall at all times be
entirely unfunded and, except as provided in the following paragraph, no
provision shall at any time be made with respect to segregating any assets of
the Company or any other Employer for payment of any benefits hereunder. The
right of a Participant or Beneficiary to receive a distribution hereunder shall
be an unsecured claim against the general assets of the Employers, and neither
the Participant nor any Beneficiary shall have any rights in or against any
specific assets of the Employers.
The Company may establish a reserve of assets to provide funds for the
payment of benefits under the Plan. Such reserve may be through a trust account
and such reserve shall, at all times, be subject to the claims of unsatisfied
judgment creditors of the Employers and shall otherwise be on such terms and
conditions as shall prevent taxation to Participants and Beneficiaries of any
amounts held in the reserve or credited to an account prior to the time payments
are made. No Participant or Beneficiary shall have any ownership rights in or to
any reserve.
9.7. Limitation of Liability. The liability of the Employers under
this Plan is limited to the obligations expressly set forth in the Plan, and no
term or provision of this Plan may be construed to impose any further or
additional duties, obligations or costs on the Employers or the Committee not
expressly set forth in the Plan.
9.8. Payments to Minors, etc. Any amount payable to or for the
benefit of a minor, an incompetent person or any other person incapable of
receipting therefor may be paid to such person's guardian, to any trustee or
custodian holding assets for the benefit of such person, or to any person
providing, or reasonably appearing to provide, for the care of such person, and
such payment will fully discharge the Committee and the Employer with respect
thereto.
9.9. Notices. Notices under the Plan will be sufficiently made if
sent by first class, registered or certified mail addressed (a) to a Participant
or Beneficiary at such person's address as set forth in the books and records of
the Employer, or (b) to the Employer or the Committee at the principal office of
the Company.
<PAGE> 13
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9.10. Captions. The headings and captions appearing herein are
inserted only as a matter of convenience. They do not define, limit, construe or
describe the scope or intent of the provisions of the Plan.
9.11. Entire Agreement: Successors. This Plan and any Participation
Agreements shall be the entire agreement or contract between the Employer and
the Participants and Beneficiaries regarding the Plan. No oral statement
regarding the Plan may be relied upon by any Participant or Beneficiary. This
Plan will be binding on the Company, all other Employers, Participants and
Beneficiaries and their respective heirs, administrators, trustees, successors
and assigns.
9.12. Partial Invalidity. If any term or provision hereof or the
application thereof to any person or circumstance is invalid or unenforceable,
the remainder of this Plan, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid, will
both be unaffected and each term or provision hereof will be valid and be
enforced to the fullest extent permitted by law.
9.13. Governing Law. The laws of the State of Illinois applicable to
agreements to be performed in the State of Illinois will apply in determining
the construction and validity of the Plan and all rights and obligations under
the Plan.
9.14. Third Parties. Nothing expressed or implied in this Plan is
intended or may be construed to give any person other than Participants and
Beneficiaries any rights or remedies under this Plan.
EXECUTED and DATED this 31st day of December, 1994.
EAGLE INDUSTRIAL PRODUCTS
CORPORATION
By: /s/ Gus J. Athas
-------------------------
Gus J. Athas
Senior Vice-President
ATTEST:
/s/ Kari L. Yunker
- -------------------------
Kari L. Yunker
Assistant Secretary
<PAGE> 1
EXHIBIT 10.9
FALCON BUILDING PRODUCTS, INC.
1994 STOCK OPTION AND RESTRICTED SHARE PLAN
<PAGE> 2
FALCON BUILDING PRODUCTS, INC.
1994 STOCK OPTION AND RESTRICTED SHARE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 - ESTABLISHMENT AND PURPOSE................................................. 1
1.1 Establishment and Effective Date.................................... 1
1.2 Purpose............................................................. 1
ARTICLE 2 - AWARDS................................................................... 1
2.1 Form of Awards...................................................... 1
2.2 Maximum Shares Available............................................ 2
2.3 Return of Prior Awards.............................................. 2
ARTICLE 3 - ADMINISTRATION............................................................ 2
3.1 Committee........................................................... 2
3.2 Powers of Committee................................................. 2
3.3 Delegation.......................................................... 3
3.4 Interpretations..................................................... 3
3.5 Liability; Indemnification.......................................... 3
ARTICLE 4 - ELIGIBILITY............................................................... 3
ARTICLE 5 - STOCK OPTIONS............................................................. 3
5.1 Grant of Options.................................................... 3
5.2 Grants to Non-Employee Directors.................................... 4
5.3 Option Price........................................................ 4
5.4 Term of Options..................................................... 4
5.5 Exercise of Options................................................. 4
5.6 Cancellation of Tandem Stock Appreciation Rights.................... 5
ARTICLE 6. - SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS...................... 5
6.1 Ten Percent Stockholder............................................. 5
6.2 Limitation on Grants................................................ 5
6.3 Limitations on Time of Grant........................................ 5
ARTICLE 7 - STOCK APPRECIATION RIGHTS................................................. 5
7.1 Grants of Stock Appreciation Rights................................. 5
7.2 Exercise of Tandem Stock Appreciation Rights........................ 6
7.3 Exercise of Nontandem Stock Appreciation Rights..................... 6
7.4 Settlement of Stock Appreciation Rights............................. 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.5 Cash Settlement..................................................... 6
ARTICLE 8 - NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS............... 7
ARTICLE 9 - EFFECT OF TERMINATION OF EMPLOYMENT ON OPTIONS AND STOCK APPRECIATION.... 7
9.1. Termination of Employment........................................... 7
9.2. Disability.......................................................... 7
9.3 Death............................................................... 7
ARTICLE 10 - RESTRICTED SHARES........................................................ 8
10.1 Grant of Restricted Shares.......................................... 8
10.2 Vesting in Restricted Shares........................................ 8
10.3 Restrictions........................................................ 8
10.4 Restricted Stock Certificates....................................... 8
10.5 Rights of Grantees of Restricted Shares............................. 8
10.6 Termination of Employment........................................... 9
10.7 Delivery of Restricted Shares....................................... 9
10.8 Deferral of Vesting of Restricted Shares............................ 9
ARTICLE 11 - CHANGE IN CONTROL........................................................ 9
11.1 Effect of Change in Control......................................... 9
11.2 Definition of "Change in Control"................................... 10
ARTICLE 12 - ADJUSTMENT UPON CHANGES IN CAPITALIZATION................................ 10
ARTICLE 13 - AMENDMENT AND TERMINATION................................................ 10
ARTICLE 14 - WRITTEN AGREEMENT........................................................ 11
ARTICLE 15 - MISCELLANEOUS PROVISIONS................................................. 11
15.1 Grantee; Date of Grant.............................................. 11
15.2 Fair Market Value................................................... 11
15.3 Tax Withholding..................................................... 12
15.4 Compliance With Section 16(b)....................................... 12
15.5 Successors.......................................................... 12
15.6 General Creditor Status............................................. 12
15.7 No Right to Employment.............................................. 12
15.8 Notices............................................................. 13
15.9 Severability........................................................ 13
15.10 Governing Law....................................................... 13
</TABLE>
<PAGE> 4
- i -
FALCON BUILDING PRODUCTS, INC.
1994 STOCK OPTION AND RESTRICTED SHARE PLAN
ARTICLE 1.
ESTABLISHMENT AND PURPOSE
1.1 Establishment and Effective Date. Falcon Building Products,
Inc., a Delaware corporation (the "Corporation"), hereby establishes a stock
incentive plan to be known as the "Falcon Building Products, Inc. 1994 Stock
Option and Restricted Share Plan" (the "Plan"). The Plan shall become effective
on the date on which the initial public offering ("IPO") of the Corporation's
Class A Common Stock ("Common Stock") is completed, subject to the approval of
the Corporation's stockholders. Upon approval by the Board of Directors of the
Corporation (the "Board"), awards may be made as provided herein, subject to
subsequent stockholder approval. In the event that such stockholder approval is
not obtained, any such awards shall be canceled and all rights of individuals
with respect to such awards shall thereupon cease.
1.2 Purpose. The Corporation desires to attract and retain the
best available executive and key management employees, officers and directors
for itself and its Subsidiaries and to encourage the highest level of
performance by such individuals in order to serve the best interests of the
Corporation and its stockholders. The Plan is expected to contribute to the
attainment of these objectives by offering eligible individuals the opportunity
to acquire stock ownership interests in the Corporation, and to thereby provide
them with incentives to put forth maximum efforts for the success of the
Corporation and its Subsidiaries. The term "Subsidiary" as used herein means
each corporation which meets the definition of "subsidiary corporation"
contained in Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code").
ARTICLE 2.
AWARDS
2.1 Form of Awards. Awards under the Plan may be granted in any
one or all of the following forms: (i) options to purchase shares of Common
Stock, which options may be either incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Code or nonstatutory
stock options ("Nonstatutory Stock Options") (unless otherwise indicated,
references in the Plan to Options shall include both Incentive Stock Options and
Nonstatutory Stock Options); (ii) stock appreciation rights ("Stock Appreciation
<PAGE> 5
- ii -
Rights"), as described in Article 7, which may be awarded either in tandem with
Options ("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); and (iii) shares of Common Stock which
are restricted as provided in Article 10 ("Restricted Shares").
2.2 Maximum Shares Available. The maximum aggregate number of
shares of Common Stock available for award under the Plan is 1,700,000, subject
to adjustment pursuant to Article 12. Shares of Common Stock issued pursuant to
the Plan may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that any Option or any Stock
Appreciation Right under the Plan expires unexercised or is terminated,
surrendered or canceled (other than in connection with the exercise of a Stock
Appreciation Right) without being exercised in whole or in part for any reason,
or if such awards are settled in cash in lieu of Common Stock, or if any
Restricted Shares are forfeited, then the shares of Common Stock covered by such
Option or Stock Appreciation Right, or such Restricted Shares, may, at the
discretion of the Committee, be made available for subsequent awards under the
Plan, upon such terms as the Committee may determine; provided, however, that
Restricted Shares which are forfeited may not be made available for subsequent
award if the Grantees of such Restricted Shares have received dividends with
respect to such shares prior to the date of forfeiture.
2.3 Return of Prior Awards. As a condition to any subsequent
award, the Committee shall have the right, at its discretion, to require
Grantees (as defined in Section 15.1 below) to return to the Corporation awards
previously granted under this Plan. Subject to the provisions of this Plan, such
new award shall be upon such terms and conditions as are specified by the
Committee at the time the new award is granted.
ARTICLE 3.
ADMINISTRATION
3.1 Committee. The Plan shall be administered by a committee (the
"Committee") appointed by the Board and consisting of not less than two (2)
non-employee directors of the Corporation each of whom is a "disinterested
person" as such term is defined in Rule 16b-3(c)(2)(i) under the Securities
Exchange Act of 1934 (the "Act").
3.2 Powers of Committee. Subject to the express provisions of the
Plan, the Committee shall have the power and authority (i) to grant Options and
(except as otherwise provided in Article 5 with respect to Options granted to
non-employee directors) to determine the purchase price of the Common Stock
covered by each such Option, the term of each such Option, the number of shares
of Common Stock to be covered by each such Option and any vesting standards
applicable to each such Option; (ii) to designate Options (other than Options
described in Section 5.2) as Incentive Stock Options or Nonstatutory Stock
Options and to
<PAGE> 6
- iii -
determine which of such Options, if any, shall be accompanied by Tandem Stock
Appreciation Rights; (iii) to grant Tandem Stock Appreciation Rights and
Nontandem Stock Appreciation Rights to employees and officers and to determine
the terms and conditions of such rights; (iv) to grant Restricted Shares to
employees and officers and to determine the vesting standards and other
restrictions applicable to such shares; and (v) to determine the employees and
officers to whom, and the time or times at which, Options, Stock Appreciation
Rights and Restricted Shares shall be granted. The Committee shall have no
authority, power or discretion to determine the number or timing of Options
granted to non-employee directors pursuant to Section 5.2 or to alter the terms
and conditions applicable to such Options.
3.3 Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may deem
advisable; provided, however, that the Committee may not delegate any of its
responsibilities hereunder if such delegation will cause the Plan to fail to
comply with the "disinterested administration" rules under Section 16 of the
Act. The Committee may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled to rely upon the advice, opinions or
valuations of any such advisors.
3.4 Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all Grantees who have received awards under the Plan and
all other interested persons.
3.5 Liability; Indemnification. No member of the Committee, nor
any individual to whom ministerial duties have been delegated, shall be
personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified and protected by the Corporation with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Certificate of Incorporation and Bylaws, as
amended from time to time.
ARTICLE 4.
ELIGIBILITY
Except as otherwise provided in Section 5.2, awards shall be limited to
employees and officers of the Corporation and its present and future
Subsidiaries. In determining the individuals to whom awards shall be granted and
the number of shares to be covered by each award, the Committee shall take into
account the nature of the services rendered by such
<PAGE> 7
- iv -
individuals, their present and potential contribution to the success of the
Corporation and its Subsidiaries and such other factors as the Committee in its
sole discretion shall deem relevant.
ARTICLE 5.
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under this Plan for
the purchase of shares of Common Stock. Except as otherwise provided in this
Article V with respect to Options granted to non-employee directors pursuant to
Section 5.2, Options shall be granted in such form and upon such terms and
conditions as the Committee shall from time to time determine.
5.2 Grants to Non-Employee Directors. An Option to purchase 2,000
shares of Common Stock shall be awarded to each non-employee director of the
Corporation on the later of the date on which the IPO is completed or the date
the director is first elected to the Board, and thereafter on the date of the
first meeting of the Board held after each annual meeting of the Corporation's
stockholders to each individual who is a non-employee director of the
Corporation on such date.
5.3 Option Price. The price at which a share of Common Stock may
be purchased pursuant to the exercise of an Option shall be determined by the
Committee at the Date of Grant, but shall not be less than one hundred (100)
percent of the Fair Market Value (as defined in Section 15.2) of the Common
Stock subject to such Option on the Date of Grant (as defined in Section 15.1);
provided, however, that the option price for shares which may be purchased upon
the exercise of an Option granted pursuant to Section 5.2 shall be the IPO
price, if the Option was granted on the date of the IPO or the Fair Market Value
if the Option was granted subsequent to the date of the IPO. The option price so
determined shall also be applicable in connection with the exercise of any
Tandem Stock Appreciation Right granted with respect to such Option.
5.4 Term of Options. The term of each Option granted under the
Plan (other than an Option granted pursuant to Section 5.2) shall be established
by the Committee. Except as otherwise provided in Section 6.1 with respect to
ten (10) percent stockholders of the Corporation, the term of each such Option
shall not exceed ten (10) years from the Date of Grant. The term of each such
Option granted pursuant to Section 5.2 shall be ten (10 ) years from the Date of
Grant.
5.5 Exercise of Options. Unless otherwise provided in an award
agreement with a Grantee other than a non-employee director, each Option shall
become exercisable to the extent of twenty-five (25) percent of the number of
shares originally covered thereby on the first anniversary of the Date of Grant
of such Option and to the extent of an additional twenty-
<PAGE> 8
- v -
five (25) percent on the second, third and fourth anniversaries of the Date of
Grant. The Committee may, in its discretion, accelerate the exercisability of
any Option (other than an Option granted pursuant to Section 5.2) at any time.
Options may be exercised by a Grantee by giving written notice to the Committee
stating the number of shares of Common Stock with respect to which the Option is
being exercised and tendering payment therefor. Payment for the Common Stock
issuable upon exercise of the Option shall be made in full in cash or, if
theCommittee, in its sole discretion, permits (with respect to Options other
than Options granted to non-employee directors pursuant to Section 5.2), in
shares of Common Stock (valued at Fair Market Value on the date of exercise). As
soon as reasonably practicable following such exercise, a certificate
representing the shares of Common Stock purchased, registered in the name of the
Grantee, shall be delivered to the Grantee. Notwithstanding the foregoing, a
Grantee may not exercise an Option prior to the approval of the Plan by the
Corporation's stockholders.
5.6 Cancellation of Tandem Stock Appreciation Rights. Upon
exercise of all or a portion of an Option, the related Tandem Stock Appreciation
Rights, if any, shall be canceled with respect to an equal number of shares of
Common Stock.
ARTICLE 6.
SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS
6.1 Ten Percent Stockholder. Notwithstanding any other provisions
of this Plan to the contrary, an individual may not receive an Incentive Stock
Option under the Plan if such individual, on the Date of Grant, owns (after
application of the rules contained in Section 424(d) of the Code) stock
possessing more than ten (10) percent of the total combined voting power of all
classes of stock of the Corporation or its Subsidiaries, unless (i) the option
price for such Incentive Stock Option is at least one hundred and ten (110)
percent of the Fair Market Value of the Common Stock subject to such Incentive
Stock Option on the Date of Grant and (ii) such Incentive Stock Option is not
exercisable after the date five (5) years from its Date of Grant.
6.2 Limitation on Grants. The aggregate Fair Market Value
(determined with respect to each Incentive Stock Option at the time such
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by a Grantee
during any calendar year (under this Plan or any other plan of the Corporation
or a Subsidiary) shall not exceed one hundred thousand dollars ($100,000).
6.3 Limitations on Time of Grant. No grant of an Incentive Stock
Option shall be made under this Plan more than ten (10) years after the earlier
of the date of adoption of the Plan by the Board or the date the Plan is
approved by the Corporation's stockholders.
<PAGE> 9
- vi -
ARTICLE 7.
STOCK APPRECIATION RIGHTS
7.1 Grants of Stock Appreciation Rights. Tandem Stock Appreciation
Rights may be awarded by the Committee in connection with any Option granted
under the Plan (other than an Option granted to a non-employee director pursuant
to Section 5.2), either on the Date of Grant of the Option or thereafter at any
time prior to the exercise, termination or expirationof the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. On
the Date of Grant of a Nontandem Stock Appreciation Right, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 7.3 below. The base price of a Nontandem Stock Appreciation
Right shall be not less than one hundred (100) percent of the Fair Market Value
of a share of Common Stock on the Date of Grant. Stock Appreciation Rights shall
be subject to such terms and conditions not inconsistent with the other
provisions of this Plan as the Committee shall determine.
7.2 Exercise of Tandem Stock Appreciation Rights. A Tandem Stock
Appreciation Right shall be exercisable only to the extent that the related
Option is exercisable and shall be exercisable only for such period as the
Committee may determine (which period may expire prior to the expiration date of
the related Option). Upon the exercise of all or a portion of a Tandem Stock
Appreciation Right, the related Option shall be canceled with respect to an
equal number of shares of Common Stock. A Tandem Stock Appreciation Right shall
entitle the Grantee to surrender to the Corporation unexercised the related
Option, or any portion thereof, and to receive from the Corporation in exchange
therefor that number of shares of Common Stock having an aggregate Fair Market
Value equal to (A) the excess of (i) the Fair Market Value of one (1) share of
Common Stock as of the date the Tandem Stock Appreciation Right is exercised
over (ii) the Option price per share specified in such Option, multiplied by (B)
the number of shares of Common Stock subject to the Option, or portion thereof,
which is surrendered. Cash shall be delivered in lieu of any fractional shares.
7.3 Exercise of Nontandem Stock Appreciation Rights. A Nontandem
Stock Appreciation Right shall be exercisable during such period as the
Committee shall determine prior to the Date of Grant. The exercise of a
Nontandem Stock Appreciation Right shall entitle the Grantee to receive from the
Corporation that number of shares of Common Stock having an aggregate Fair
Market Value equal to (A) the excess of (i) the Fair Market Value of one (1)
share of Common Stock as of the date on which the Nontandem Stock Appreciation
Right is exercised over (ii) the base price of the shares covered by the
Nontandem Stock Appreciation Right, multiplied by (B) the number of shares of
Common Stock covered by the Nontandem Stock Appreciation Right, or the portion
thereof being exercised. Cash shall be delivered in lieu of any fractional
shares.
<PAGE> 10
- vii -
7.4 Settlement of Stock Appreciation Rights. As soon as is
reasonably practicable after the exercise of a Stock Appreciation Right, the
Corporation shall (i) issue, in the name of the Grantee, stock certificates
representing the total number of full shares of Common Stock to which the
Grantee is entitled pursuant to Section 7.2 or 7.3 hereof and cash in an amount
equal to the Fair Market Value, as of the date of exercise, of any resulting
fractional shares, and (ii) if the Committee causes the Corporation to elect to
settle all or part of its obligations arising out of the exercise of the Stock
Appreciation Right in cash pursuant to Section 7.5, deliver to the Grantee an
amount in cash equal to the Fair Market Value, as of the date of exercise, of
the shares of Common Stock it would otherwise be obligated to deliver.
7.5 Cash Settlement. The Committee, in its discretion, may cause
the Corporation to settle all or any part of its obligation arising out of the
exercise of a Stock Appreciation Right by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver in
an amount equal to the Fair Market Value of such shares on the date of exercise.
ARTICLE 8.
NONTRANSFERABILITY OF OPTIONS
AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Right may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will, the applicable laws of descent and distribution or pursuant to
a qualified domestic relations order (as defined in Section 414(p) of the Code),
and no Option or Stock Appreciation Right shall be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of an Option or Stock Appreciation Right not
specifically permitted herein shall be null and void and without effect. An
Option or Stock Appreciation Right may be exercised only by the Grantee during
his or her lifetime and, following the Grantee's death, may be exercised only as
provided in Section 9.3.
ARTICLE 9.
EFFECT OF TERMINATION OF EMPLOYMENT
ON OPTIONS AND STOCK APPRECIATION RIGHTS
9.1. Termination of Employment. In the event that the employment of
a Grantee to whom an Option or Stock Appreciation Right has been granted under
the Plan shall be terminated, or the term of a non-employee director of the
Corporation or one of its Subsidiaries who has been granted an Option pursuant
to Section 5.2 shall cease (for reasons
<PAGE> 11
- viii -
other than death or disability), such Option or Stock Appreciation Right may be
exercised (to the extent that the Grantee was entitled to do so at the time he
or she terminated employment or ceased serving as a non-employee director) at
any time within three (3) months after such Grantee terminated employment or
ceased serving as a non-employee director, but in no event later than the date
on which the right to exercise the Option or Stock Appreciation Right
terminates.
9.2. Disability. In the event that the employment of a Grantee to
whom an Option or Stock Appreciation Right has been granted under the Plan shall
be terminated, or the term of a non-employee director of the Corporation or one
of its Subsidiaries who has been granted an Option pursuant to Section 5.2 shall
cease, as a result of becoming disabled (within the meaning of Section 22(e)(3)
of the Code), such Option or Stock Appreciation Right may be exercised (to the
extent that the Grantee was entitled to do so on the date he or she terminated
employment or ceased serving as a non-employee director) at any time during the
first twelve (12) months after such Grantee terminated employment or ceased
serving as a non-employee director, but in no event later than the date on which
the right to exercise the Option or Stock Appreciation Right terminates.
9.3 Death. If a Grantee to whom an Option or Stock Appreciation
Right has been granted under the Plan shall die while employed by or serving as
a non-employee director of the Corporation or one of its Subsidiaries or within
three (3) months after the termination of such employment or cessation of such
director's term, such Option or Stock Appreciation Right may be exercised to the
extent that the Grantee was entitled to do so at the time of his or her death,
by the Grantee's estate or by the person who acquires the right to exercise such
Option or Stock Appreciation Right on his or her death by bequest or
inheritance. Such exercise may occur at any time within one (1) year after the
date of the Grantee's death, but in no event later than the date on which the
right to exercise such Option or Stock Appreciation Right terminates.
ARTICLE 10.
RESTRICTED SHARES
10.1 Grant of Restricted Shares. The Committee may from time to
time cause the Corporation to issue Restricted Shares under the Plan, subject to
such restrictions, conditions and other terms as the Committee may determine in
addition to those set forth herein.
10.2 Vesting in Restricted Shares. Unless a different vesting
schedule is set forth in the Grantee's award agreement and except as otherwise
provided in Section 10.8, a Grantee shall become vested in 25% of the Restricted
Shares which have been awarded to him or her on the first anniversary of the
Date of Grant of such Restricted Shares and shall become vested in an additional
25% of such Restricted Shares on the second, third and fourth anniversaries of
<PAGE> 12
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such Date of Grant. The Committee may, in its discretion, accelerate the vesting
of any Restricted Shares granted hereunder.
10.3 Restrictions. None of the Restricted Shares may be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of prior to
the date on which such Restricted Shares vest in accordance with Section 10.2.
10.4 Restricted Stock Certificates. The Corporation shall issue, in
the name of each Grantee, stock certificates representing the total number of
Restricted Shares granted to the Grantee, as soon as reasonably practicable
after the Date of Grant. The Secretary of the Corporation shall hold such
certificates, properly endorsed for transfer, for the Grantee's benefit until
such time as the Restricted Shares are forfeited to the Corporation pursuant to
Section 10.4 or until the Restricted Shares vest. In lieu of the foregoing,
Restricted Shares awarded to a Grantee may be held under the Grantee's name in a
book entry account maintained by or on behalf of the Corporation.
10.5 Rights of Grantees of Restricted Shares. Grantees of
Restricted Shares shall have the right to vote such shares and the right to
receive any dividends with respect to such shares; provided, however, that the
Committee, in its discretion, may direct the Corporation to accumulate dividends
payable on Restricted Shares awarded to a Grantee and to pay such dividends to
such Grantee when and if the Restricted Shares are delivered to the Grantee
pursuant to Section 10.7. All distributions, if any, received by a Grantee with
respect to Restricted Shares as a result of any stock split-up, stock
distribution, combination of shares, or other similar transaction shall be
subject to the restrictions of this Article 10.
10.6 Termination of Employment. Any Restricted Shares granted to a
Grantee pursuant to the Plan shall be forfeited if the Grantee terminates
employment with the Corporation or its Subsidiaries for reasons other than death
or disability prior to becoming vested in such Restricted Shares pursuant to
Section 10.2. Upon such forfeiture, the Secretary of the Corporation shall
either cancel or retain in its treasury the Restricted Shares that are forfeited
to the Corporation. Upon the death of a Grantee prior to his termination of
employment, or upon a Grantee's termination of employment as a result of
disability, all Restricted Shares previously awarded to such Grantee which have
not previously vested shall immediately become fully vested and such Restricted
Shares shall be delivered to the Grantee or to the person or persons to whom the
right to such Restricted Shares passes by will or by the laws of descent and
distribution in accordance with Section 10.7 hereof.
10.7 Delivery of Restricted Shares. Subject to the provisions of
Section 10.8, at such time as the Grantee shall become vested in his Restricted
Shares, the restrictions applicable to the Restricted Shares shall lapse and a
stock certificate for the number of Restricted Shares with respect to which the
restrictions have lapsed shall be delivered, free of all such restrictions, to
the Grantee or the Grantee's beneficiary or estate, as the case may be.
<PAGE> 13
- x -
10.8 Deferral of Vesting of Restricted Shares. The Committee, in
its sole discretion, may defer the date on which all or a portion of the
Restricted Shares awarded to a Grantee shall vest to the last day of the taxable
year of the Grantee in which he or she would otherwise vest pursuant to Section
10.2, or to the last day of a subsequent taxable year; provided, however, that
the Committee may defer vesting to a subsequent taxable year only if and to the
extent that the total remuneration paid to the Grantee for the taxable year in
which the Restricted Shares would otherwise vest exceeds the amount which the
Corporation may deduct under Section 162(m) of the Code.
ARTICLE 11.
CHANGE IN CONTROL
11.1 Effect of Change in Control. Upon a Change in Control, as
defined in Section 11.2 below, the following shall occur:
(a) all Options and Stock Appreciation Rights which have been
granted under the Plan and which the Grantees shall not then
have been entitled to exercise shall be immediately
accelerated and the Grantees shall be entitled to exercise
such Options and Stock Appreciation Rights; and
(b) all Restricted Shares granted under the Plan in which the
Grantees are not then one hundred (100) percent vested shall
immediately become one hundred (100) percent vested and shall
be delivered to the Grantees free from all restrictions as
soon as practicable following such Change in Control.
11.2 Definition of "Change in Control". A "Change in Control" means
that any of the following events has occurred:
(a) any person, entity or group (other than the Corporation or a
Subsidiary) has acquired fifty (50) percent or more of the
outstanding Common Stock from the holders thereof;
(b) there has been a merger or combination of the Corporation with
one or more other entities after which fifty (50) percent or
more of the voting stock of the surviving corporation is held
by persons other than former stockholders of the Corporation;
or
(c) twenty (20) percent or more of the directors elected by
stockholders to the Board are persons who were not nominated
by management in the most recent proxy statement of the
Corporation.
<PAGE> 14
- xi -
ARTICLE 12.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may at
any time make or provide for such adjustments to the Plan, to the number and
class of shares available thereunder or to any outstanding Options, Stock
Appreciation Rights or Restricted Shares as it shall deem appropriate to prevent
dilution or enlargement of rights, including adjustments in the event of changes
in the number of shares of outstanding Common Stock by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations
or exchanges of shares, separations, reorganizations, liquidations and the like.
ARTICLE 13.
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan; (ii) materially increase the benefits
accruing to Grantees under the Plan; or (iii) materially modify the requirements
as to eligibility for participation in the Plan, shall be subject to the
approval of the Corporation's stockholders, except that any such increase or
modification that may result from adjustments authorized by Article 12 does not
require such approval. No amendment requiring stockholder approval under Rule
16b-3 of the Act or Section 422 of the Code shall be valid unless such
stockholder approval is secured as provided therein. If the Plan is terminated,
the terms of the Plan shall, notwithstanding such termination, continue to apply
to awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the Grantee to
whom an award shall theretofore have been granted, adversely affect the rights
of such Grantee under such award. No provisions of this Plan related to the
award of Options to non-employee directors of the Corporation may be amended
more than once every six months, other than to comport with changes in the Code
or the rules thereunder.
ARTICLE 14.
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights and Restricted Shares
shall be evidenced by a written agreement, executed by the Grantee and the
Corporation, and
<PAGE> 15
- xii -
containing such restrictions, terms and conditions, if any, as the Committee may
require. In the event of any conflict between a written agreement and the Plan,
the terms of the Plan shall govern.
ARTICLE 15.
MISCELLANEOUS PROVISIONS
15.1 Grantee; Date of Grant. The term "Grantee" shall refer to any
employee, officer or non-employee director of the Corporation or its
subsidiaries who has been granted an award of Options, Stock appreciations
Rights or Restricted Shares pursuant to Sections 5.1, 5.2, 7.1 and 10.1. The
term "Date of Grant" shall refer to the date on which any award is made to a
Grantee.
15.2 Fair Market Value. "Fair Market Value" of a share of Common
Stock as of any date shall mean the average of the high "bid" and low "asked"
prices of the shares during the three (3) most recent days on which the shares
were traded, as reported on the principal exchange on which the shares are
listed.
15.3 Tax Withholding. The Corporation shall have the right to
require Grantees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under this Plan amounts
sufficient to satisfy all withholding tax requirements. Whenever payments under
the Plan are to be made to a Grantee in cash, such payments shall be net of any
amounts sufficient to satisfy all Federal, state and local withholding tax
requirements. The Committee may, in its discretion, permit a Grantee to satisfy
his or her tax withholding obligation either by (i) surrendering shares owned by
the Grantee or (ii) having the Corporation withhold from shares otherwise
deliverable to the Grantee. Shares surrendered or withheld shall be valued at
their Fair Market Value as of the date on which income is required to be
recognized for income tax purposes. In the case of an award of Incentive Stock
Options, the foregoing right shall be deemed to be provided to the Grantee at
the time of such award.
15.4 Compliance With Section 16(b). In the case of a Grantee who is
or may be subject to Section 16 of the Act, it is the intent of the Corporation
that the Plan and any award granted hereunder satisfy and be interpreted in a
manner that satisfies the applicable requirements of Rule 16b-3, so that such
person will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Act and will not be subjected to liability thereunder.
If any provision of the Plan or any award would otherwise conflict with the
intent expressed herein, that provision, to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to a Grantee who is or may be subject to Section 16 of
the Act.
<PAGE> 16
- xiii -
15.5 Successors. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to substantially all of the
assets and business of the Corporation. The Corporation shall make appropriate
provision for the preservation of Grantees' rights under the Plan in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
15.6 General Creditor Status. Grantees shall have no right, title,
or interest whatsoever in or to any investments which the Corporation may make
to aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Corporation and any Grantee or beneficiary or legal representative of such
Grantee. To the extent that any person acquires a right to receive payments from
the Corporation under the Plan, such right shall be no greater than the right of
an unsecured general creditor of the Corporation. All payments to be made
hereunder shall be paid from the general funds of the Corporation and no special
or separate fund shall be established and no segregation of assets shall be made
to assure payment of such amounts except as expressly set forth in the Plan.
15.7 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 14, nor the grant of any award, shall
confer upon any individual any right to continue in the employ of the
Corporation or a Subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such written agreement or interfere with or limit
the right of the Corporation or a Subsidiary to modify the terms of or terminate
such individual's employment at any time.
15.8 Notices. Notices required or permitted to be made under the
Plan shall be sufficiently made if sent by registered or certified mail
addressed (a) to the Grantee at the Grantee's address as set forth in the books
and records of the Corporation or its Subsidiaries, or (b) to the Corporation or
the Committee at the principal office of the Corporation.
15.9 Severability. In the event that any provision of the Plan
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
15.10 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.
<PAGE> 1
EXHIBIT 10.10
FALCON BUILDING PRODUCTS, INC.
SENIOR EXECUTIVE STOCK PURCHASE PLAN
1. Purpose. The Falcon Building Products, Inc. Senior Executive
Stock Purchase Plan (the "Plan") has been established by Falcon Building
Products, Inc. (the "Company") to secure for the Company and its shareholders
the benefits arising from capital ownership, and thereby entrepreneurial risk,
by those senior executive officers of the Company and its subsidiaries who are
and will be responsible for the future growth and continued success of the
Company and its subsidiaries. The Plan will provide a means whereby such
individuals, pursuant to purchases under the Plan, will acquire shares of Class
A common stock, par value $0.01 per share, of the Company ("Class A Stock")
coincident with the initial public offering of Class A Stock (the "IPO").
2. Administration. The authority to manage and control the
operation and administration of the Plan shall be vested in a Committee (the
"Committee") consisting of two or more non-employee members of the Board of
Directors of the Company (the "Board") who are appointed by, and may be removed
by, the Board and who are disinterested persons within the meaning of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Any interpretation of the Plan by the Committee and any
decision made by the Committee on any matter within its discretion is final and
binding on all persons. No member of the Committee shall be liable for any
action or determination made with respect to the Plan.
3. Participation. Prior to the effective date of the registration
statement to be filed by the Company with the Securities and Exchange Commission
in September 1994 in connection with the IPO (the "IPO Date"), the Committee
shall determine and designate from among the senior executive officers of the
Company and its subsidiaries (including employees who are also directors) the
officers who will participate in the Plan and purchase shares of Class A Stock
on the IPO Date ("Participants").
4. Shares Subject to the Plan. The number of shares of Class A
Stock available for purchase under the Plan shall not exceed, in the aggregate,
196,500 shares, which may be either authorized and unissued shares, treasury
shares or a combination thereof, as the Committee shall determine.
5. Stock Purchase. Subject to the terms and conditions of the
Plan, each Participant shall (i) be required to purchase from the Company the
number of shares of Class A Stock that can be purchased based on the multiple of
his salary set forth in the first column below and the IPO Price (as defined in
subsection 5.1) (the "Required Purchased Shares) and (ii) upon the purchase of
the Required Purchased Shares, have the opportunity to purchase from the Company
all or any of the number of additional shares of Class A Stock that can be
purchased based on the multiple of his salary set forth in the second column
below and the IPO Price (the "Optional
<PAGE> 2
Purchased Shares) (the Required Purchased Shares and the Optional Purchased
Shares are referred to collectively as the "Purchased Shares"):
<TABLE>
<CAPTION>
Required Purchased Optional Purchased
Shares Salary Multiple Shares Salary Multiple
---------------------- ----------------------
<S> <C> <C>
President/CEO 2.5 2.5
Senior Vice President 1 1
President/Subsidiary 1 1
</TABLE>
Notwithstanding the foregoing, the Company shall have no obligation to sell any
Purchased Shares to any Participant unless the IPO is successfully completed on
or prior to December 31, 1994.
5.1. Purchase Price. The purchase price per share for the
Purchased Shares shall be equal to the price of Class A Stock that is sold to
the public in the IPO (the "IPO Price"). The amount of a Participant's "Purchase
Price" shall be equal to the number of his Required Purchased Shares and the
number of Optional Purchased Shares he elects to purchase multiplied by the IPO
Price.
5.2. Purchase. Each Participant shall purchase the Required
Purchased Shares and the number of Optional Purchased Shares he elects to
purchase by giving written notice to the Secretary of the Company at the
principal executive offices of the Company prior to the IPO Date; provided, that
the Participant may purchase only whole shares of Class A Stock. Such notice
shall specify the number of shares of Class A Stock to be purchased and shall be
accompanied by payment of the Purchase Price for such shares. The portion of the
Purchase Price not being financed by a loan pursuant to subsection 5.3 shall be
paid by the Participant to the Company in cash.
5.3. Purchase Loan. The Company shall make a loan (a "Loan")
to each Participant in an amount up to 90% of the Purchase Price for his
Required Purchased Shares and up to 95% of the Purchase Price for his Optional
Purchased Shares, as selected by the Participant, which may be used only for the
purpose of financing the purchase, subject to the following:
(a) Each Loan shall be evidenced by a promissory note in such
form as the Committee shall approve; provided, that the note shall (i)
provide full recourse to the Participant, (ii) provide for interest at
the rate of six and one-half percent (6-1/2%) per annum or, if higher,
the applicable Federal rate per annum determined under section 1274(d)
of the Internal Revenue Code in effect during the month in which the
IPO Date occurs, compounded semi-annually, (iii) be secured by a Pledge
Agreement (described in subsection 5.4), and (iv) comply with all
applicable laws, regulations and rules of the Board of Governors of the
Federal Reserve System and any other governmental agency having
jurisdiction.
2
<PAGE> 3
(b) Subject to the prepayment provisions of subsection 5.5 and
the acceleration provisions set forth in paragraphs (c) and (d) below,
each Loan shall mature on December 1, 2001 (the "Maturity Date"), at
which time interest shall be payable.
(c) Subject to the repurchase provisions of section 8, the
principal and interest outstanding under a Loan of a Participant who
retires on or after age 65 or whose employment with the Company and its
affiliates terminates by reason of his death or Disability (as defined
below) or is terminated for a reason other than Cause (as defined
below) will not become due and payable until the Maturity Date of the
Loan. All principal and interest outstanding under a Loan with respect
to any other Participant will automatically become due and payable on
the date the Participant's employment with the Company and its
affiliates terminates. "Disability" means a determination by the
Committee in its sole discretion that a Participant has become
"disabled" within the meaning of the Company's long-term disability
plan as in effect at the time. "Cause" means a Participant has been
convicted of a felony (without regard to whether the conviction is
subject to appeal), the Board or the Committee has determined that the
Participant has willfully engaged in gross misconduct materially and
demonstrably injurious to the Company, or the Participant has willfully
failed to substantially perform his duties (other than any such failure
resulting from the Participant's Disability) and has failed to remedy
the situation within ten (10) business days after receiving from the
Committee a written demand for substantial performance that
specifically identifies the manner in which the Committee believes that
the Participant has not substantially performed his duties. No act, or
failure to act, on the Participant's part shall be considered "willful"
unless done, or omitted to be done, by the Participant not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
(d) The Company has the right to accelerate the principal and
interest due under the Loan if any of the following events occurs: (i)
the Participant defaults in the payment of any amount due under the
Loan and the default remains uncured for a period of ten (10) days
after the date the Company gives the Participant notice of the default,
(ii) the Participant defaults under or breaches any other covenant,
representation or warranty under the Loan note, the Pledge Agreement or
any other agreement under the Plan and the default or breach remains
uncured for a period of thirty (30) days after the date the Company
gives the Participant notice of his default or breach, (iii) the
Participant applies for or consents to the appointment of a receiver,
trustee, custodian or liquidator of any of his property, admits in
writing his inability to pay his debts as they mature, makes a general
assignment as a bankrupt or insolvent or is the subject of an order for
relief under Chapter 13 of the United States Bankruptcy Code or files a
voluntary petition in bankruptcy or a petition or answer seeking an
arrangement with creditors to take advantage of any bankruptcy,
insolvency, readjustment or debt or liquidation law or statute, or an
answer admitting the material allegations of a petition filed against
him in any proceeding under any such law, or (iv) any court of
competent jurisdiction enters an order, judgment or decree, without the
application, approval or consent of the Participant, approving a
petition appointing a receiver, trustee, custodian or liquidator of all
or a
3
<PAGE> 4
substantial part of the assets of the Participant, and such order,
judgment or decree continues unstayed and in effect for a period of
thirty (30) days.
(e) If a Participant fails to make any payment required under
his Loan when due, the Company may foreclose on the Pledged Property
(as defined in subsection 5.4) and may otherwise enforce its rights
under the Plan and any Loan note or other agreement entered into under
the Plan.
5.4. Pledge of Shares.
(a) Each Participant shall enter into an agreement with the
Company in such form as the Committee shall approve (the "Pledge
Agreement") to pledge to the Company all of the Purchased Shares (the
"Pledged Shares"), any non-cash dividends or distributions payable with
respect to such shares and any securities or other property (other than
cash) payable in respect of or in exchange for such shares pursuant to
any merger, reorganization, consolidation, recapitalization, exchange
offer or other similar corporate transaction ("Related Property") and
all proceeds thereof (collectively, the "Pledged Property") to secure
repayment of the Loan. Notwithstanding the foregoing, in the event that
the Committee determines that a Participant would recognize a net
increase in taxable income from the receipt of any such dividends or
distributions, the Committee may in its discretion permit the
Participant to retain a portion of the dividends or distributions so as
to be able to pay all or part of his related increase in taxes.
(b) Certificates representing shares of stock that consist of
Pledged Property shall bear the following legend in addition to any
other legends that the Company may deem appropriate:
THIS CERTIFICATE AND THE SHARES OF STOCK AND ALL RIGHTS HEREBY
REPRESENTED ARE SUBJECT TO THE TERMS, CONDITIONS AND
RESTRICTIONS SET FORTH IN THE FALCON BUILDING PRODUCTS, INC.
SENIOR EXECUTIVE STOCK PURCHASE PLAN, ANY AGREEMENT UNDER THAT
PLAN AND THE PLEDGE AGREEMENT BETWEEN THE OWNER OF SUCH SHARES
AND FALCON BUILDING PRODUCTS, INC. AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OF SUCH PLAN AND AGREEMENTS, COPIES OF WHICH ARE ON FILE AT
THE OFFICES OF FALCON BUILDING PRODUCTS, INC.
(c) Any cash received upon an exchange or conversion of
Pledged Property shall be applied to reduce the outstanding Loan
balance (with principal and interest being reduced proportionately).
Any cash in excess of that applied against the outstanding Loan balance
shall be paid to the Participant, provided, that if the Pledged
Property was subject to restriction under section 6, the Company shall
delay payment of the excess
4
<PAGE> 5
cash and interest until the earlier of the end of the Restricted Period
(as defined in section 6) or the date of repurchase (described in
section 8).
5.5. Prepayments of Loan and Releases from Pledge.
(a) A Participant may make voluntary prepayments on the Loan
at any time without penalty in such minimum amounts as the Committee
may determine, which shall be applied first to accrued but unpaid
interest, and then to principal.
(b) In the event that any cash dividend or distribution is
paid by the Company with respect to any Pledged Property relating to
the Loan, the Participant shall make a mandatory prepayment with
respect to the Loan equal to the amount of such dividend or
distribution, which shall be applied first to accrued but unpaid
interest under the Loan, then to principal. Notwithstanding the
foregoing, in the event that the Committee determines that a
Participant would recognize a net increase in taxable income from the
receipt of any such dividends or distributions after giving effect to
any deduction for the related payment under the Loan, the Committee may
in its discretion permit the Participant to retain a portion of the
dividends or distributions so as to be able to pay all or part of his
related increase in taxes.
(c) In the event that the Participant at any time desires to
obtain a release of all or part of any Pledged Property securing the
Loan, whether for the purpose of selling such Pledged Property or
otherwise, as a condition to the release, the Participant shall make
arrangements satisfactory to the Company for the prepayment by the
Participant of an amount equal to the higher of (i) a percentage of the
outstanding Loan balance as of the date of the release equal to the
percentage in value of the Pledged Property sought to be released and
(ii) a sufficient portion of the outstanding Loan balance so that the
amount of the outstanding Loan balance remaining unpaid after giving
effect to such payment does not exceed eighty percent (80%) of the fair
market value of the Pledged Property that will remain subject to the
Pledge Agreement after giving effect to the release, which shall be
applied first to accrued but unpaid interest under the Loan, then to
principal.
(d) In the event of any prepayment of principal under the
Loan, the Company will release from the pledge under the Pledge
Agreement a portion of the Pledged Property equal to the percentage of
the outstanding principal balance so paid, provided, that (i) the
Company will retain Pledged Property with an aggregate fair market
value equal to at least one hundred twenty-five percent (125%) of the
outstanding Loan balance as of the date of the prepayment (after giving
effect to the prepayment) and (ii) to the extent any of the released
Pledged Property is subject to restriction under section 6, the Company
will retain custody of the property until the end of the Restricted
Period.
6. Restrictions on Shares. From the date of the purchase of the
Purchased Shares until the third anniversary of such date (the "Restricted
Period"):
5
<PAGE> 6
(a) Purchased Shares may not be sold, assigned, transferred,
pledged or otherwise encumbered;
(b) the certificate representing such shares shall be
registered in the name of the Participant and shall be deposited with
the Company, together with a stock power (in such form as the Company
may determine); and
(c) the Participant shall be treated as a stockholder with
respect to the Purchased Shares, including the right to vote such
shares.
7. Transfers at Termination of Restricted Period. At the end of
the Restricted Period with respect to a Participant's Purchased Shares, the
certificate representing such shares shall be transferred to the Participant (or
the Participant's legal representative or heir) free of all restrictions;
provided, that if the shares are still Pledged Shares, the certificate
representing such shares shall continue to be held by the Company until its
release under the Pledge Agreement.
8. Repurchase. Notwithstanding any other provisions of the Plan,
if prior to the last day of the Restricted Period the Participant's employment
with the Company and its affiliates terminates by reason of the Participant's
death or Disability or his retirement on or after age 65 or his employment is
terminated for a reason other than Cause or a Change in Control (as defined in
subsection 9.8) shall have occurred, the Company shall repurchase from the
Participant and the Participant (or his legal representative) shall sell to the
Company all Pledged Property held by the Participant as of the date of
termination or the Change in Control for a price equal to the greater of (i) the
fair market value of the property and (ii) the Participant's Purchase Price plus
accrued but unpaid interest on the associated Loan less the aggregate amount of
dividends and distributions paid on the Participant's Purchased Shares from his
date of purchase. The repurchase price will be applied first to the payment of
the Participant's outstanding Loan balance and then any excess amount will be
paid to or on behalf of the Participant. In the case of a shortfall, the
Participant will be required to pay any remaining Loan balance.
9. General.
9.1. Effective Date and Duration. The Plan will become
effective upon its approval by the Company's shareholders. Offers made under the
Plan prior to such approval are subject to such approval. No offers will be made
under the Plan after the IPO Date.
9.2. Agreements Evidencing Participation. At the time of his
designation as a Participant, the Committee may require a Participant to enter
into one or more agreements with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may in its discretion prescribe.
9.3. Nontransferability. No right provided under the Plan to
any Participant may be transferred, pledged or assigned by the Participant
(except, in the event of the Participant's death, by will or the laws of descent
and distribution), and the Company shall not be required to
6
<PAGE> 7
recognize any attempted assignment of such rights by any Participant. During a
Participant's lifetime, purchases may be made only by him or by his guardian or
legal representative.
9.4. Compliance with Applicable Law and Withholding.
(a) Notwithstanding any other provision of the Plan, the
Company shall have no obligation to issue any shares of Class A Stock
under the Plan if such issuance would violate any applicable law or any
applicable regulation or requirement of any securities exchange or
similar entity.
(b) Prior to the issuance of any shares of Class A Stock under
the Plan, the Company may require a written statement that the
recipient is acquiring the shares for investment and not for the
purpose or with the intention of distributing the shares and will not
dispose of them in violation of the registration requirements of the
Securities Act of 1933.
(c) With respect to any person who is subject to section 16(a)
of the Exchange Act, the Committee may, at any time, add such
conditions and limitations to any award under the Plan that it deems
necessary or desirable to comply with the requirements of Rule 16b-3.
(d) If at any time the Company in its sole discretion
determines that the listing, registration or qualification (or any
updating of any such document) of the shares of Class A Stock issuable
under the Plan is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the consent or
approval of any governmental regulatory body is necessary or desirable
as a condition of, or in connection with, the issuance of shares of
Class A Stock under the Plan, the shares of Class A Stock shall not be
issued in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Company.
(e) The Company shall have the right to require a Participant
to pay to the Company the amount of any taxes that are required to be
withheld with respect to a Participant's participation in the Plan,
including any such taxes required to be withheld in connection with (i)
the purchase by the Participant of any Purchased Shares, (ii) any
dividend or distribution in respect of the Purchased Shares or any
Related Property, (iii) any repayment of a Loan, (iv) the lapse of the
Restricted Period, (v) any release of Pledged Property or (vi) any sale
of Purchased Shares or any Related Property. To the extent permitted by
the Committee, a Participant may elect to have any distribution
otherwise required to be made under the Plan to be withheld to fulfill
any tax withholding obligation.
9.5. No Employment Rights. The Plan does not constitute a
contract of employment, and participation in the Plan will not give any
Participant the right to be retained in the employ of the Company or an
affiliate or the right to continue as a director of the Company
7
<PAGE> 8
or any right or claim to any benefit under the Plan unless such right or claim
has specifically accrued under the terms of the Plan or the terms of any award
under the Plan.
9.6. Shareholder Status. No award to a Participant under the
Plan shall create any rights in such Participant as a shareholder of the Company
until shares of Class A Stock are registered in the name of the Participant.
9.7. Amendment of the Plan. Subject to any approval of the
shareholders of the Company which may be required, the Board may at any time
amend, suspend or terminate the Plan or any award outstanding under the Plan;
provided, however, that no such amendment shall alter or impair the rights of
any Participant with respect to any award previously made under the Plan without
the consent of the holder thereof or make any change that would disqualify the
Plan, intended to be so qualified, from the exemption provided by Rule 16b-3.
9.8. Immediate Acceleration in Event of a Change in Control.
Notwithstanding any provision of the Plan to the contrary or the normal terms of
vesting under any award, all Purchased Shares will become fully vested
immediately if a Change in Control occurs. For purposes of the Plan, a "Change
in Control" shall have occurred if:
(a) any person, entity or group (other than the Company or a
subsidiary) acquires 50% or more of the outstanding common stock of the
Company from the holders thereof;
(b) there has been a merger or combination of the Company with
one or more other entities after which 50% or more of the voting stock
of the surviving corporation is held by persons other than former
stockholders of the Company; or
(c) 20% or more of the directors elected by stockholders to
the Board of Directors of the Company are persons who were not
nominated by management in the most recent proxy statement of the
Company.
9.9. Governing Law. The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by the laws of
the United States, shall be governed by the internal laws of the State of
Illinois and construed accordingly.
8
<PAGE> 1
EXHIBIT 21.0
LIST OF SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OTHER NAMES UNDER
OF WHICH THE SUBSIDIARY
SUBSIDIARY INCORPORATION TRANSACTS BUSINESS
- ------------------------------------------- -------------- --------------------------------
<S> <C> <C>
Amerace Corporation Delaware Elastimold, Amerace Electronic
Components and MRS Power Systems
Amerace Ltd. Canada
Amerace Limited United Kingdom
Burns Aerospace Corporation Delaware
Conductron Corporation Massachusetts Hendrix Wire & Cable
Denman Tire Corporation Delaware
DeVilbiss Air Power Company Delaware
Eagle Environmental Management, Inc. Delaware
Eagle Industrial Products Corporation Delaware
Eagle Leasing Corporation Delaware
Falcon Building Products, Inc. Delaware
First Capital Financial Corporation Florida
Hart & Cooley, Inc. Delaware
Hialeah Hotel, Inc. Florida
Lapp Insulator Company Delaware
Mansfield Plumbing Products, Inc. Delaware Kilgore Plumbing Products and
Norris Plumbing Products
Mighty Distributing System of America, Inc. Delaware
North Riverside Holdings, Inc. Delaware
The Parts House, Inc. Florida
SWC Industries, Inc. Texas
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated March 15, 1996, included in this Form 10-K, into the Company's
previously filed Form S-8 Registration Statement File No. 33-50745.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 15, 1996
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Bradbury Dyer, III, having an
address at 500 Crescent Court, Dallas, Texas 75201, has made, constituted and
appointed and BY THESE PRESENTS, does make, constitute and appoint GUS J. ATHAS,
having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his
true and lawful Attorney-in Fact for him and in his name, place and stead to
sign and execute in any and all capacities to sign this Annual Report on Form
10-K and any or all amendments to this Annual Report on form 10-K, and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, giving and granting unto Gus J.
Athas, said Attorney-in-Fact, full power and authority to do and perform each
and every act and thing, requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes as he might or could do if
personally present at the doing thereof, with full power of substitution and
revocation, hereby ratifying and confirming all that said Attorney-in-Fact or
her substitutes shall lawfully do or cause to be done by virtue hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, Bradbury Dyer, III, has hereunto set his hand
this 20th day of February, 1996.
/s/ Bradbury Dyer, III
----------------------
Bradbury Dyer, III
STATE OF TEXAS )
) SS
COUNTY OF )
I, Kathleen Wright, a Notary Public in and for said County in the
State aforesaid, do hereby certify that Bradbury Dyer, III, personally known to
me to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as his own free and voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 20th day of February,
1996.
/s/ Kathleen Wright
----------------------
(Notary Public)
My Commission Expires:
8/26/98
- ----------------------
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that David A. Gardner, having an
address at 445 Park Avenue, New York, NY. 10022, has made, constituted and
appointed and BY THESE PRESENTS, does make, constitute and appoint GUS J. ATHAS,
having an address at Two North Riverside Plaza, Chicago, Illinois 60606, his
true and lawful Attorney-in Fact for him and in his name, place and stead to
sign and execute in any and all capacities to sign this Annual Report on Form
10-K and any or all amendments to this Annual Report on form 10-K, and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, giving and granting unto Gus J.
Athas, said Attorney-in-Fact, full power and authority to do and perform each
and every act and thing, requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes as he might or could do if
personally present at the doing thereof, with full power of substitution and
revocation, hereby ratifying and confirming all that said Attorney-in-Fact or
her substitutes shall lawfully do or cause to be done by virtue hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, David A. Gardner, has hereunto set his hand
this 20th day of February, 1996.
/s/ David A. Gardner
--------------------
David A. Gardner
STATE OF NEW YORK )
) SS
COUNTY OF )
I, Mary Lee, a Notary Public in and for said County in the State
aforesaid, do hereby certify that David A. Gardner, personally known to me to be
the same person whose name is subscribed to the foregoing instrument appeared
before me this day in person and acknowledged that he signed and delivered said
instrument as his own free and voluntary act for the uses and purposes therein
set forth.
Given under my hand and notarial seal this 20th day of February,
1996.
/s/ Mary Lee
--------------------
(Notary Public)
My Commission Expires:
9/8/96
- ----------------------
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that F. Philip Handy, having an
address at 200 East New England Avenue, Winter Park, Florida 32789, has made,
constituted and appointed and BY THESE PRESENTS, does make, constitute and
appoint GUS J. ATHAS, having an address at Two North Riverside Plaza, Chicago,
Illinois 60606, his true and lawful Attorney-in Fact for him and in his name,
place and stead to sign and execute in any and all capacities to sign this
Annual Report on Form 10-K and any or all amendments to this Annual Report on
form 10-K, and to file the same with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, giving and
granting unto Gus J. Athas, said Attorney-in-Fact, full power and authority to
do and perform each and every act and thing, requisite and necessary to be done
in and about the premises, as fully, to all intents and purposes as he might or
could do if personally present at the doing thereof, with full power of
substitution and revocation, hereby ratifying and confirming all that said
Attorney-in-Fact or her substitutes shall lawfully do or cause to be done by
virtue hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, F. Philip Handy, has hereunto set his hand this
19th day of February, 1996.
/s/ F. Philip Handy
-------------------
F. Philip Handy
STATE OF FLORIDA )
) SS
COUNTY OF ORANGE )
I, Amy S. Pratt, a Notary Public in and for said County in the
State aforesaid, do hereby certify that F. Philip Handy, personally known to me
to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as his own free and voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 19th day of February,
1996.
/s/ Amy S. Pratt
-------------------
(Notary Public)
My Commission Expires:
8/17/97
- ----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1995 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000043287
<NAME> GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 62
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 81
<CURRENT-ASSETS> 484
<PP&E> 227
<DEPRECIATION> (107)
<TOTAL-ASSETS> 745
<CURRENT-LIABILITIES> 241<F1>
<BONDS> 124
0
0
<COMMON> 0
<OTHER-SE> 134
<TOTAL-LIABILITY-AND-EQUITY> 745
<SALES> 601
<TOTAL-REVENUES> 612
<CGS> 495
<TOTAL-COSTS> 500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 80
<INCOME-TAX> 46
<INCOME-CONTINUING> 34
<DISCONTINUED> (71)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37)
<EPS-PRIMARY> (3.67)
<EPS-DILUTED> (3.67)
<FN>
<F1>This number excludes $124 million of bonds which are shown on the line below.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION FOR THE PERIODS
ENDED SEPTEMBER 30, JUNE 30 AND MARCH 31, 1995.
</LEGEND>
<RESTATED>
<CIK> 0000043287
<NAME> GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
<MULTIPLIER> 1,000,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1995 JAN-01-1995
<PERIOD-END> SEP-30-1995 JUN-30-1995 MAR-31-1995
<CASH> 47 57 33
<SECURITIES> 0 0 0
<RECEIVABLES> 8 7 3
<ALLOWANCES> 0 0 0
<INVENTORY> 84 83 78
<CURRENT-ASSETS> 524 550 538
<PP&E> 217 212 204
<DEPRECIATION> (103) (99) (95)
<TOTAL-ASSETS> 847 895 942
<CURRENT-LIABILITIES> 171 167 170
<BONDS> 136 142 161
0 0 47
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 247 282 265
<TOTAL-LIABILITY-AND-EQUITY> 847 895 942
<SALES> 446 292 143
<TOTAL-REVENUES> 455 299 146
<CGS> 367 239 116
<TOTAL-COSTS> 371 241 117
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 11 7 4
<INCOME-PRETAX> 98 38 18
<INCOME-TAX> 37 12 7
<INCOME-CONTINUING> 60 26 11
<DISCONTINUED> 13 6 5
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 73 32 16
<EPS-PRIMARY> 6.56 2.74 1.36
<EPS-DILUTED> 6.56 2.74 1.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION FOR THE PERIODS
ENDED DECEMBER 31, AND SEPTEMBER 30, 1994.
</LEGEND>
<RESTATED>
<CIK> 0000043287
<NAME> GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JAN-01-1994 JAN-01-1994
<PERIOD-END> DEC-31-1994 SEP-30-1994
<CASH> 32 48
<SECURITIES> 0 0
<RECEIVABLES> 13 9
<ALLOWANCES> 0 0
<INVENTORY> 68 68
<CURRENT-ASSETS> 518 557
<PP&E> 201 198
<DEPRECIATION> (91) (90)
<TOTAL-ASSETS> 948 986
<CURRENT-LIABILITIES> 154 184
<BONDS> 180 199
47 46
0 0
<COMMON> 0 0
<OTHER-SE> 249 184
<TOTAL-LIABILITY-AND-EQUITY> 948 986
<SALES> 576 433
<TOTAL-REVENUES> 593 445
<CGS> 472 355
<TOTAL-COSTS> 479 360
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12 15
<INCOME-PRETAX> 75 20
<INCOME-TAX> (18) 4
<INCOME-CONTINUING> 92 16
<DISCONTINUED> (28) (26)
<EXTRAORDINARY> (12) (12)
<CHANGES> 0 0
<NET-INCOME> 52 (22)
<EPS-PRIMARY> 4.38 (2.18)
<EPS-DILUTED> 4.38 (2.18)
</TABLE>
