<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FALCON BUILDING PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- -------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
FALCON LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 17, 1996
To the Stockholders of Falcon Building Products, Inc.
The rescheduled Annual Meeting of Stockholders of Falcon Building Products,
Inc. will be held at the Conference Center, One North Franklin Street, Chicago,
Illinois on Wednesday, July 17, 1996 at 11:00 a.m., for the purpose of:
(1) election of seven Directors; and
(2) transaction of such other business as may properly be brought before
the meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on June 4, 1996 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting or any adjournment(s) thereof. A complete list of the
stockholders entitled to vote at the meeting will be open for examination by any
stockholder for any purpose germane to the meeting during ordinary business
hours for ten days prior to the meeting at the office of Falcon Building
Products, Inc., Two North Riverside Plaza, Suite 1100, Chicago, Illinois 60606,
and will also be available at the meeting.
A copy of Falcon Building Products, Inc.'s Annual Report to Stockholders
for the fiscal year ended December 31, 1995 is being mailed to all registered
holders. Additional copies of the Annual Report may be obtained without charge
by writing to the Secretary of Falcon Building Products, Inc., Two North
Riverside Plaza, Suite 1100, Chicago, Illinois 60606.
BY ORDER OF THE BOARD OF DIRECTORS
Gus J. Atlas
Gus J. Athas, Secretary
Chicago, Illinois
June 10, 1996
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
EXPECT TO ATTEND, PLEASE DATE, SIGN AND COMPLETE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE PREPAID ENVELOPE PROVIDED.
<PAGE> 3
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
OF FALCON BUILDING PRODUCTS, INC.
TO BE HELD JULY 17, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Falcon Building Products, Inc., a Delaware
corporation ("Falcon" or the "Company," which as used herein shall mean together
with or without its subsidiaries, as the context may require). Falcon's
corporate headquarters are located at Two North Riverside Plaza, Suite 1100,
Chicago, Illinois 60606 (telephone 312-906-9700). The Proxy Statement and form
of proxy were first mailed to stockholders on or about June 10, 1996. Proxies
solicited by the Board of Directors of Falcon are to be voted at the rescheduled
Annual Meeting of Stockholders of Falcon to be held at 11:00 a.m. on Wednesday,
July 17, 1996, at the Conference Center, One North Franklin Street, Chicago,
Illinois or any adjournment(s) thereof.
This solicitation is being made by mail, although directors, officers and
regular employees of the Company may solicit proxies from stockholders
personally or by telephone, telegram or letter. The costs of this solicitation
will be borne by the Company. The Company may request brokerage houses, nominees
or fiduciaries and other custodians to solicit their principals or customers for
their proxies, and may reimburse them for their reasonable expenses in so doing.
In addition, the Company has retained Morrow & Co. to assist in the solicitation
for a fee of $2,000 plus expenses.
VOTING
Falcon now has one class of common stock: Class A Common Stock, $.01 par
value ("Common Stock").
Shares of Common Stock represented by proxies in the accompanying form
which are properly executed and returned to Falcon (and which are not
effectively revoked) will be voted at the meeting in accordance with the
stockholders' instructions contained therein. In the absence of contrary
instructions, shares represented by such proxies will be voted IN FAVOR OF the
election as directors of the nominees listed herein, and in the discretion of
the appointed proxies upon such other business as may properly be brought before
the meeting.
Each stockholder has the power to revoke his or her proxy at any time
before it is voted by (i) delivering to Falcon prior to or at the meeting
written notice of revocation or a later dated proxy or (ii) attending the
meeting and voting his or her shares in person.
The Board of Directors has fixed the close of business on June 4, 1996 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting or any adjournment(s) thereof.
As of June 4, 1996, 20,070,500 shares of Common Stock were outstanding.
14,000,000 of these shares were held by Equity Holdings Limited, an Illinois
limited partnership ("EHL").
A quorum for purposes of the meeting is a majority of the outstanding
Common Stock. If a quorum is present, in person or by proxy, the directors will
be elected by the affirmative vote of the majority of the shares represented at
the meeting. Shares represented at the meeting which abstain from voting or
withhold votes for directors will be counted in determining a quorum and will,
in effect, be counted against the election of directors.
ELECTION OF DIRECTORS
In the absence of contrary instructions, the proxies received will be voted
for the election as directors of the nominees listed below, all of whom
presently serve on the Board of Directors, to hold office until the next annual
meeting of stockholders or until their successors are elected and qualified.
Although the Board of Directors does not contemplate that any nominee will
decline or be unable to serve as a director, in either such
1
<PAGE> 4
event the proxies will be voted for another person selected by the Board of
Directors, unless the Board acts to reduce the size of the Board of Directors in
accordance with the provisions of Falcon's by-laws. Effective at the rescheduled
Annual Meeting of Stockholders, the number of directors has been set by the
Board at seven.
The following table sets forth the name and age as of June 4, 1996 of each
director of the Company, the year such person was first elected as a director,
his position with the Company, his or her principal occupation(s) during the
last five years and any other directorships held by such person in companies
which have a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to
the requirements of Section 15(d) of the Exchange Act or directorships of
issuers registered as investment companies under the Investment Company Act of
1940.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND AGE MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------------ -------------------------------------------------------------
<S> <C>
Rod F. Dammeyer, 55........... Director of Falcon since 1994; Director and President since
1985, and Chief Executive Officer since 1993 of Anixter
International Inc. a provider of networking and cabling
solutions; President and Chief Executive Officer since 1994
of Great American Management and Investment, Inc. ("GAMI"), a
diversified manufacturing company; Managing Director since
1996 of EGI Corporate Investments, Inc., a diversified
management and investment company; a Managing Director since
1995 of the general partner of Zell/Chilmark Fund, L.P.;
Director of Sealy Corporation, ANTEC Corporation, IMC Global
Inc., Capsure Holdings Corp., Jacor Communications, Inc.,
Revco D.S., Inc., and Lukens, Inc.; Trustee of Van Kampen
Merritt closed-end mutual funds and series trusts.*
Bradbury Dyer, III, 53........ Director of Falcon since 1994; founder and sole general
partner of Paragon Associates, a private investment
partnership; Director of Capsure Holdings Corp. and Roosevelt
Financial Group, Inc.*
William K. Hall, 52........... Director, President and Chief Executive Officer of Falcon
since 1994; President since 1988 and Chief Executive Officer
and director since 1990 of Eagle Industries, Inc.; Director
of A.M. Castle & Co., Huffy Corporation and Gencorp.*
Philip C. Kantz, 52........... Director of Falcon since 1995; President and Chief Operating
Officer since 1995 of Trans Ocean Ltd., a lessor of
intermodal cargo containers; President and Chief Executive
Officer from 1994 to 1995 of Transcisco Industries, Inc., an
industrial services company; interim President and Chief
Executive Officer from 1992 to 1993 of Genetrix, Inc., a
biotechnology services business; President and Chief
Executive Officer from 1988 to 1991 of Itel Container
International Corporation, then a subsidiary of Anixter
International Inc. engaged in the leasing of intermodal cargo
containers; Director of 3COM Corporation, and Blue Cross of
California.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND AGE MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------------ -------------------------------------------------------------
<S> <C>
1995.*Richard G. Sim, 51...... Director of Falcon since 1995; Chairman, President and Chief
Executive Officer of Applied Power, Inc., a manufacturer and
distributor of engineered products, tools and consumables,
for more than the past 5 years; Director of IPSCO, Inc.
B. Joseph White, 49........... Director of Falcon since 1995; Dean since 1991 and Professor
since 1987 at the University of Michigan Business School;
Trustee of Equity Residential Properties Trust; Director of
Union Pump Company, Kelly Services, Inc. and Three D
Departments, Inc.*
</TABLE>
- -------------------------
* Anixter International Inc., GAMI, Eagle Industries, Inc., EGI Corporate
Investments, Inc., Zell/Chilmark Fund, L.P., Equity Group Investments, Inc.,
Capsure Holdings Corp., CFI Industries, Inc., ANTEC Corporation, Jacor
Communications, Inc., Revco D.S. Inc., Sealy Corporation, American Classic
Voyages, Inc., and Equity Residential Properties Trust are, or could be deemed
to be, affiliates of EHL.
BOARD AND COMMITTEE MEETINGS
The Audit Committee, currently consisting of Messrs. Kantz, Dyer and White,
provides general review of the Company's accounting and auditing procedures,
meets with the Company's independent auditors to review their recommendations
and reviews related party transactions. The Audit Committee held three meetings
in 1995.
The Compensation Committee, currently consisting of Messrs. Dammeyer, Kantz
and White, exercises all powers of the Board of Directors in connection with
compensation matters, including incentive compensation, benefit plans and stock
grants. The Compensation Committee held three meetings in 1995.
The Board of Directors held seven meetings in 1995. Each of the directors,
other than Mr. Zell, attended 75 percent or more of the total of all meetings
held by the Board and the committees on which the director served.
Candidates for election to the Board of Directors are selected by the
entire Board of Directors, not a committee thereof.
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<PAGE> 6
EXECUTIVE COMPENSATION
The following tables set forth information about the compensation of the
chief executive officer and the four other most highly compensated executive
officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
----------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
--------------------------- AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(2) (#) ($)(3)
- ------------------------------------------ ---- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William K. Hall (1)....................... 1995 241,551 53,300 6,200
President and Chief Executive Officer 1994 234,058 214,500 79,800 40,000 5,938
1993 183,385 30,000 3,537
C. Clifford Brake (1)..................... 1995 142,164 6,200
Senior Vice President -- Operations 1994 132,500 132,000 53,400 5,938
1993 121,493 32,959 3,537
William E. Allen.......................... 1995 171,102 50,117 22,100 12,399
President, DeVilbiss Air Power Co. 1994 162,537 160,796 198,000 15,000 9,313
1993 147,135 125,534 4,497
Paul G. Fischer........................... 1995 172,000 22,100 13,881
President, Mansfield Plumbing Products, 1994 161,250 161,573 198,000 15,000 10,022
Inc. 1993 143,004 100,368 5,667
Lawrence B. Lee........................... 1995 185,562 22,100 12,399
President, Hart & Cooley, Inc. 1994 173,472 164,764 210,000 15,000 11,876
1993 155,757 118,592 7,570
</TABLE>
- ------------------------------
1. The annual and all other compensation shown for Messrs. Hall and Brake
represent 50% of such compensation paid to them by a subsidiary of Eagle
Industries, Inc. (together with its subsidiaries, "Eagle") and reimbursed by
the Company.
2. Value on date of grant, November 3, 1994, of 6,650, 4,450, 16,500, 16,500
and 17,500 restricted shares of Common Stock granted to the above named
officers, respectively. On December 31, 1995, the remaining unvested shares
of 4,987, 3,337, 12,375, 12,375 and 13,125 had a value of $48,000, $32,119,
$119,109, $109,109 and $126,328, respectively. Subject to forfeiture for
non-vesting, the grantees would be entitled to any dividends declared on
these shares. Shares vest at the rate of 25% over a 4 year period from date
of grant.
3. Amounts contributed to the Eagle Employee Savings Plan and accrued under an
unfunded Supplemental Plan and as to Messrs. Hall and Brake represents 50%
of the actual contributions made by an Eagle subsidiary.
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<PAGE> 7
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------ ----------------------------
NUMBER OF % OF TOTAL 5% ($) 10% ($)
SECURITIES OPTIONS (ASSUMES (ASSUMES
UNDERLYING GRANTED TO EXERCISE OR $15.23 PRICE $24.25 PRICE
OPTIONS EMPLOYEES IN BASE PRICE DATE OF AT END OF AT END OF
NAME GRANTED (#)(1) FISCAL YEAR ($/SH.) EXPIRATION 10 YEARS)(2) 10 YEARS)(2)
- ------------------------ -------------- ------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William K. Hall......... 53,300 17.2% 9.35 12/7/05 811,759 1,285,250
William E. Allen........ 22,100 7.1% 9.35 12/7/05 336,583 535,925
Paul G. Fischer......... 22,100 7.1% 9.35 12/7/05 336,583 535,925
Lawrence B. Lee......... 23,400 7.6% 9.35 12/7/05 356,382 567,450
</TABLE>
- ------------------------------
1. Options are for Common Stock and become exercisable over 4 years at the rate
of 25% per year.
2. These numbers are for presentation purposes only and are not predictions of
future stock prices.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
------------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
William K. Hall....................... 0 0 10,000/83,300 0/0
William E. Allen...................... 0 0 3,750/33,350 0/0
Paul G. Fischer....................... 0 0 3,750/33,350 0/0
Lawrence B. Lee....................... 0 0 3,750/34,650 0/0
C. Clifford Brake..................... 0 0 0/0 0/0
</TABLE>
PENSION PLAN TABLE
The Eagle Cash Balance Pension Plan (the "Pension Plan") is a qualified
"cash balance" defined benefit plan that covers eligible salaried and hourly
employees of Eagle and its subsidiaries that adopt the Pension Plan, including
the Company. The normal form of retirement benefit under the Pension Plan is an
annuity payable at age 65 (the normal retirement age), although, in lieu of an
annuity, a participant may elect to receive a lump sum payment at retirement or
other termination of service. A participant's benefit is based on an account
balance, which is the sum of 5% of the participant's compensation for each of
the first 15 years of service and 6.5% of compensation for each year of service
thereafter. The account balances are further credited with interest. The
interest credit is based on the One Year Treasury Constant Maturities as
published in the Federal Reserve Statistical Release over the one year period
ending on the November 30 immediately preceding the applicable plan year. The
interest rate for the plan year ending December 31, 1995 was 5%. Covered
compensation includes salary, annual bonus, 401(k) deferrals and overtime, but
excludes long-term incentive compensation.
The estimated annual annuity benefits payable under the Pension Plan at
normal retirement are $31,623, $20,099, $49,183, $59,859 and $44,135, for
Messrs. Hall, Brake, Allen, Fischer and Lee, respectively at December 31, 1995.
The Company is bearing part of the current costs of these benefits for Messrs.
Hall and Brake pursuant to the Service Agreement described below.
5
<PAGE> 8
COMPENSATION OF DIRECTORS
The Company pays its directors who are not officers or employees of the
Company or a subsidiary, annual retainers of $20,000 and fees of $1,000 for each
board and committee meeting attended. Directors are reimbursed for any expenses
they incur in attending meetings. Each director is granted upon initial election
and at each annual meeting of stockholders thereafter, a ten year option
(vesting at the rate of 25% per year) to purchase 2,000 shares of Common Stock
for its fair market value on the date of grant.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Under an agreement with Eagle, Mr. Brake is obligated to perform services
for Eagle and is currently entitled to receive an annual base salary and an
annual incentive bonus target of up to 60% of salary based upon financial
performance and individual goals. In connection with this agreement, Eagle has
adopted a supplemental retirement benefit plan for Mr. Brake which entitles him
to receive monthly retirement payments in the amount of 100% of his final
highest three year average salary, offset for Primary Social Security and the
Pension Plan benefits, payable for a period of ten years beginning at age 65. In
order for Mr. Brake to receive this benefit, he must continue employment to age
65 or his earlier disability. His supplemental benefit will not be payable if he
voluntarily terminates employment, is terminated for cause or dies before such
date. The estimated annual benefit payable to Mr. Brake under the supplemental
plan beginning at age 65 prior to the prescribed offsets is $294,600. The
Company has not assumed any obligation under this agreement or plan. The
services of Mr. Brake are made available to the Company under a Service
Agreement with Eagle, see "Compensation Committee Interlocks and Insider
Participation."
It has been agreed that the Company will repurchase shares of Common Stock
purchased by Messrs. Hall (80,000 shares), Cottone (20,000 shares), Brake
(20,000 shares), Athas (16,000 shares), Allen (24,000 shares), Fischer (24,000
shares), and Lee (12,500 shares) in the public offering of Common Stock if,
prior to November 2, 1997, their employment is terminated or if there is a
change in control as defined below. In the event of a change in control or a
termination of employment for any reason other than voluntary resignation, the
purchase price will be the higher of market value or original purchase price
plus accumulated interest on the related loan by the Company, see "Certain
Relationships and Related Transactions," less any distributions received on
these shares. In the event of a voluntary resignation, the purchase price will
be the lower of these two prices.
Upon a change in control, all options shall become immediately exercisable
and all restricted shares shall become 100% vested. A "change in control" shall
be deemed to occur if (i) any person (other than the Company and its
subsidiaries) acquires 50% or more of the outstanding Common Stock, or (ii)
following a merger or combination of the Company with one or more other
entities, 50% or more of the voting stock of the surviving corporation is held
by persons other than former stockholders of the Company or (iii) 20% or more of
the directors elected by stockholders to the Board of Directors of the Company
are persons who were not nominated by the Board of Directors in the Company's
most recent proxy statement.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
In 1995, the members of the Compensation Committee were Mr. Dammeyer and,
for different portions of the year, Mrs. Rosenberg and Messrs. Kantz, Pasquesi
and White.
In 1995, the following relationships existed: Mr. Hall, President and Chief
Executive Officer of Falcon was a member of the Board of Directors of GAMI and
the Chief Executive Officer and a director of its subsidiary, Eagle; Mr.
Dammeyer was the Chief Executive Officer and a director of GAMI and Chairman of
the Board of Directors of Eagle. EHL owned approximately 87.9% (now 100%) of the
outstanding common stock of GAMI and GAMI's subsidiary Eagle held the 14,000,000
shares of Common Stock of the Company now owned by EHL. EHL's sole general
partners were the Samuel Zell Revocable Trust and the Robert H. and Ann Lurie
Trust; Mr. Zell was the trustee of the Zell Trust; Mrs. Rosenberg and Ms. Lurie
were
6
<PAGE> 9
co-trustees of the Lurie Trust; Messrs. Athas and Cottone were executive
officers and directors of the Company and were executive officers of GAMI and
Eagle and in the case of Mr. Cottone, a director of Eagle. Mr. Dyer was a
director of GAMI and the general partner of partnerships which owned
approximately 3.7% of the common stock of GAMI.
The Company shares management, administrative and other services with Eagle
pursuant to a Service Agreement which renews annually in the absence of
termination by either party. The fee under this agreement is intended to cover
Eagle's expected costs in providing these services to the Company and is
reviewed by the Audit Committee of the Board of Directors of the Company. The
fee paid for 1995 was $2.3 million. The Company also participates in an Eagle
sponsored self-insurance program which includes coverage for medical, workers'
compensation, product liability and general liability insurance for which the
Company reimbursed Eagle for $17 million paid on the Company's behalf to third
party administrators in 1995.
The law firm of Rosenberg & Liebentritt, P.C., of which Mrs. Rosenberg is
President, provides legal service to the Company and was paid $362,918 in 1995
for these services.
The Company, until the public offering of its Common Stock in November
1994, was included in the consolidated federal income tax returns of GAMI. The
Company has agreed to pay to GAMI amounts equal to the amounts the Company would
have paid had it filed its own income tax returns for the periods prior to the
public offering.
In connection with the public offering of its Common Stock, the Company has
agreed with the Pension Benefit Guaranty Corporation that for five years it will
remain jointly and severally liable for certain pension liabilities of GAMI,
Eagle and their subsidiaries without regard to whether or not the sale of the
Common Stock to the public was sufficient to remove the Company from the group
having joint and several liability for these pension plan liabilities. GAMI and
Eagle have agreed to hold the Company harmless from any pension plan liabilities
not attributable to the Company's pension plans and the Company has agreed to
hold them harmless from any liabilities attributable to such plans.
The Company and Eagle have agreed to hold each other harmless from certain
liabilities unrelated to the others' business.
The Company and Eagle have entered into a registration rights agreement
under which the Company, under certain circumstances, must register under the
Securities Act shares held by Eagle's subsidiaries for sale to the public and
must indemnify them from certain liabilities in connection therewith.
In 1994, the Company loaned $888,000 to Mr. Hall, Chief Executive Officer
and a director; $222,000 to Mr. Cottone, Senior Vice President -- Finance,
Treasurer and a director; $222,000 to Mr. Brake, Senior Vice President --
Operations and a director; $176,400 to Mr. Athas, Senior Vice President, General
Counsel and Secretary and a director; $266,400 to Mr. Allen, President,
DeVilbiss Air Power Company, a subsidiary; $266,400 to Mr. Fischer, President,
Mansfield Plumbing Products, Inc., a subsidiary; and $135,000 to Mr. Lee,
President, Hart & Cooley, Inc., a subsidiary. These loans were to enable these
officers to purchase Common Stock in the public offering at $12 per share. The
loans mature in seven years or earlier in certain circumstances and bear
interest at the rate of 7.5% per year, compounded semi-annually, payable upon
maturity of the loans. At December 31, 1995, the balances of these loans were
$921,078, $230,269, $230,269, $182,971, $276,323, $276,323 and $140,029
respectively.
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in part,
the report presented below and the Performance Graph following shall not be
incorporated by reference into any such filings.
7
<PAGE> 10
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The fixed annual compensation of the Company's executive officers who also
have responsibilities for Eagle is not set or paid by the Company, but is
determined and paid by Eagle which furnishes the services of these executives to
the Company for a fee pursuant to a Service Agreement, see "Compensation
Committee Interlocks and Insider Participation." The fee provided by the Service
Agreement is intended to reimburse Eagle for 50% of the annual fixed
compensation costs for these officers. However, annual bonus targets are set and
annual bonuses are paid by the Company for its executives. For 1995, bonus
targets, which were set as described below, ranged from 40% of total salary for
Mr. Hall to 30% of total salary for other executives with Company-wide
responsibilities and 60% of salary for Messrs. Allen, Fischer and Lee.
Achievement of target for Mr. Hall and other executives with Company-wide
responsibility was dependent in 1995 on earnings and cash flow. The minimum
threshold for these targets were not met in 1995 and Mr. Hall and the other
executives with Company-wide responsibilities, except a new executive whose
first year bonus was guaranteed, did not receive any incentive payments from the
Company for 1995. The annual incentives for 1995 for Messrs. Allen, Fischer and
Lee were dependent on the financial performance of their respective product
groups. Only Mr. Allen received an incentive award for 1995 based 25% on
exceeding the cash flow goal and 75% on exceeding the operating earnings goal
for his product group.
The compensation policy of the Company for its executive officers is to pay
base salaries and to provide annual incentive opportunities within the median of
the range paid or made available by others for comparable positions and to
provide long-term incentive opportunities within the high end of the range
provided by others for comparable positions. It is intended that the actual
awards earned under the annual and long term incentive opportunities will be
within this range only in the case of superior financial results. While the
compensation practices of public companies of all sizes and industries without
limitation to the companies included in the published industry index used in the
"Performance Graph" have been reviewed, the determination that current
compensation of executive officers is consistent with this policy is subjective.
This determination in the case of several executive officers of the Company
takes into account the portion of their time allocated to the Company and is
partially not within the Company's control because the fixed compensation of
these officers is set and paid by Eagle.
The stock option grants set forth in the above table were subjectively
determined based on salary and level of responsibility in the manner described
above. These awards were not affected by previous awards.
The components of executive officer compensation which are related to the
performance of the Company are the annual incentive awards and, to the extent
performance affects market value of the Company's stock, the long-term incentive
awards.
It is the policy of the Company to structure its compensation in a manner
which will avoid the limitations imposed by the Omnibus Budget Reconciliation
Act of 1993 on the deductibility of executive compensation under Section 162(m)
of the Internal Revenue Code to the extent it can reasonably do so consistent
with its goal of retaining and motivating its executives in a cost effective
manner.
Rod F. Dammeyer
Philip C. Kantz
B. Joseph White
8
<PAGE> 11
PERFORMANCE GRAPH
Below is a graph comparing total shareholder return on the Company's Common
Stock since November 3, 1994, the day the Company's Common Stock was first
publicly traded, with the Standard and Poor's 500 Index and the Standard and
Poor's Building Materials Index. The stock performance graph assumes the
investment of $100 on November 3, 1994, and the reinvestment of all dividends.
<TABLE>
<CAPTION>
Falcon Build- S & P Build-
Measurement Period ing Products, S & P 500 ing Materials
(Fiscal Year Covered) Inc. Index Index
<S> <C> <C> <C>
11/3/94 100.00 100.00 100.00
12/31/94 92.75 98.15 98.90
12/31/95 80.21 131.63 131.93
</TABLE>
SECTION 16(A) REPORTING DELINQUENCIES
Under the rules of the Securities and Exchange Commission, the Company is
required to report, based upon its review of copies of reports to the Securities
and Exchange Commission about ownership of and transactions in its stock
furnished to the Company and written representations of its directors and
officers about such ownership and transactions, that in 1995, reports required
to be filed on a transaction in Common Stock by William E. Allen, an executive
officer of the Company, and on two transactions in Common Stock by Rod Dammeyer,
a director, were filed late.
9
<PAGE> 12
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of June 4, 1996, certain information
with respect to the Common Stock of the Company that may be deemed to be
beneficially owned by beneficial owners of more than 5% of the Common Stock and
which may be deemed to be beneficially owned by the directors and executive
officers of the Company. Unless otherwise indicated, each beneficial owner has
sole investment power and sole voting power with respect to the securities
beneficially owned.
<TABLE>
<CAPTION>
SHARES OPTIONS(2) TOTAL % OF CLASS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
EHL(1)........................................... 14,000,000 14,000,000 69.8%
William E. Allen (3)............................. 50,500 3,750 54,250 *
C. Clifford Brake................................ 29,450 29,450 *
Rod F. Dammeyer.................................. 22,500 1,000 23,500 *
Bradbury Dyer III (4)............................ 150,000 1,000 151,000 *
Paul G. Fischer (5).............................. 40,600 3,750 44,350 *
William K. Hall (6).............................. 91,550 10,000 101,550 *
Philip C. Kantz.................................. 1,000 1,000 *
Lawrence B. Lee (7).............................. 29,325 3,750 33,075 *
Sheli Z. Rosenberg (1)........................... 1,000 1,000 *
Richard G. Sim...................................
B. Joseph White.................................. 1,500 1,000 2,500 *
All directors & executive officers as a group,
including the above-named persons.............. 472,825 41,250 514,075 2.6%
</TABLE>
- ------------------------------
* Percentage of shares beneficially owned does not exceed one percent.
(1) EHL's general partners are the Samuel Zell Revocable Trust and the Robert H.
and Ann Lurie Trust. Samuel Zell is the trustee of the Zell Trust. Mrs.
Rosenberg and Ms. Lurie are co-trustees of the Lurie Trust. Mr. Zell and
Mesdames Lurie and Rosenberg disclaim beneficial ownership of the shares of
Common Stock beneficially owned by EHL. The address of EHL, Mr. Zell and
Mesdames Lurie and Rosenberg is Two North Riverside Plaza, Chicago,
Illinois, 60606.
(2) Shares of stock that are subject to options exercisable within 60 days of
the date of this table.
(3) Includes 10,000 shares held by Mr. Allen's wife and of which Mr. Allen
disclaims beneficial ownership.
(4) Includes 150,000 shares owned by Paragon Joint Ventures ("Paragon"). Paragon
is a joint venture formed by Paragon Associates and Paragon Associates II,
both Texas limited partnerships. Mr. Dyer is the sole general partner of
Paragon Associates and Paragon Associates II. Under the terms of the joint
venture agreement of Paragon, each partner has beneficial ownership in
proportion to its respective account in Paragon. Mr. Dyer does not have full
direct ownership; however, as the general partner of the partners of
Paragon, he may be deemed to have beneficial ownership.
(5) Includes 100 shares held by a member of Mr. Fischer's family and of which
Mr. Fischer disclaims beneficial ownership.
(6) Includes 750 shares of the Company held by members of Mr. Hall's family and
of which Mr. Hall disclaims beneficial ownership.
(7) Includes 1,000 shares held by a trust of a member of Mr. Lee's family and of
which Mr. Lee disclaims beneficial ownership.
10
<PAGE> 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of transactions and relationships between the Company and
its directors, executive officers and more than 5% stockholders, see
"Compensation Committee Interlocks and Insider Participation."
INDEPENDENT AUDITORS
Arthur Andersen LLP acted as the Company's independent auditor for the year
ended December 31, 1995, and has been selected by the Board of Directors as the
Company's independent auditor for 1996. Representatives of Arthur Andersen LLP,
who are expected to be present at the meeting, will be given an opportunity to
make a statement if they so desire and to respond to appropriate questions asked
by stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by Falcon at its principal offices by
February 1, 1997 in order to be considered for inclusion in Falcon's Proxy
Statement and Proxy relating to the 1997 Annual Meeting of Stockholders.
CONCLUSION
The Board of Directors knows of no other matters to be presented for
stockholder action at the meeting. However, if other matters do properly come
before the meeting, it is intended that the persons named in the proxies will
vote upon them in accordance with their best judgment.
June 10, 1996
BY ORDER OF THE BOARD OF DIRECTORS
Gus Athas Sig
GUS J. ATHAS, Secretary
11
<PAGE> 14
<TABLE>
<S><C>
/ /
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is
returned, such shares will be voted "FOR" all nominees.
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS / /
listed below / / for all nominees listed below / /
Nominees: Rod F. Dammeyer, Bradbury Dyer III, William K. Hall, Phillip C. Kantz, Shell Z. Rosenberg, Richard G. Sim and B. Joseph
White
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in
the space provided below.)
*Exceptions ________________________________________________________________________________________________________________________
2. In their discretion, such other matters as properly may come before the meeting
or any adjournment(s) thereof. FOR / / AGAINST / / ABSTAIN / /
Change of Address or Comments Mark Here / /
IMPORTANT: Please date this proxy and sign exactly as your name
appears hereon. If stock is held jointly, both holders should sign.
Executors, administrators, trustees, guardians and officers
signing in a representative capacity should give full title.
Dated:________________________________,1996
_________________________________________
Signature of Stockholder
________________________________________
Signature of Stockholder
Votes must be indicated.
(x) in Black or Blue Ink. / /
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
</TABLE>
<PAGE> 15
------------------------------
Signature of Stockholder
Votes must be indicated
(x) in Black or Blue Ink. / /
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
FALCON BUILDING PRODUCTS, INC.
PROXY SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William K. Hall, Sam A. Cottone and Gus
J. Athas and each of them (with full power of substitution in each) proxy of
the undersigned to vote at the Annual Meeting of Stockholders of Falcon
Building Products, Inc. to be held at 11:00 a.m., central time, July 17, 1996
at the Conference Center, One North Franklin Street, Chicago, Illinois, and at
any adjournments thereof, all of the shares of Class A Common Stock of Falcon
Building Products, Inc. in the name of the undersigned on the record date.
This proxy, when properly executed will be voted in the manner directed
herein by the undersigned shareholder. UNLESS OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES.
(continued, and to be signed and dated on reverse side)
FALCON BUILDING PRODUCTS
P.O. BOX 11447
NEW YORK, N.Y. 10203-0447
