<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FALCON BUILDING PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3563,3446,3261 36-3931893
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
TWO NORTH RIVERSIDE PLAZA
SUITE 1100
CHICAGO, ILLINOIS 60606
(312) 906-9700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
GUS J. ATHAS
FALCON BUILDING PRODUCTS, INC.
SUITE 1100
TWO NORTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(312) 906-9700
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------
COPIES TO:
JAMES J. JUNEWICZ, ESQ. CHARLES K. MARQUIS, ESQ.
Mayer, Brown & Platt Gibson, Dunn & Crutcher LLP
190 S. LaSalle Street 200 Park Avenue, 48th Floor
Chicago, Illinois 60603-3441 New York, New York 10166
(312) 782-0600 (212) 351-3914
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AND THE
CONDITIONS TO THE CONSUMMATION OF THE OFFER HAVE BEEN SATISFIED OR WAIVED.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED PER SHARE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Class A Common Stock (par value $.01
per share).......................... 1,034,020 $17.25(2) $17,836,845 $5,406
</TABLE>
(1) This Registration Statement relates to Class A Common Stock of the
registrant to be retained by holders of the registrant's Class A Common
Stock in the proposed merger of FBP Acquisition Corp., Inc. with and into
the registrant, with the registrant continuing as the surviving corporation
in the merger.
(2) Estimated solely for the purpose of determining the registration fee under
Rule 457(f) of the Securities Act of 1933.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY THE EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FALCON BUILDING PRODUCTS, INC.
TWO NORTH RIVERSIDE PLAZA
SUITE 1100
CHICAGO, ILLINOIS 60606
, 1997
Dear Fellow Stockholders:
You are invited to attend a special meeting of the stockholders of Falcon
Building Products, Inc. ("Falcon") to vote on the proposed merger (the "Merger")
of Falcon with FBP Acquisition Corp., Inc., a Delaware corporation ("FBP"),
organized on behalf of Investcorp S.A., certain of its affiliates and other
international investors.
At the special meeting, Falcon stockholders will be asked to approve and
adopt the Agreement and Plan of Merger, dated as of March 20, 1997 (the "Merger
Agreement") and the consummation of the transactions contemplated thereby,
including the Merger. The Merger Agreement provides, among other things, for the
merger of FBP with and into Falcon (the "Merger") pursuant to which each share
of Falcon's Class A Common Stock, $.01 par value per share ("Falcon Class A
Stock"), (other than (i) shares of Falcon Class A Stock held by Falcon, its
subsidiaries, FBP or any of its affiliates, which will be cancelled and retired,
and (ii) shares of Falcon Class A Stock subject to dissenters' rights) will be
converted, at the election of the holder thereof, into either (a) the right to
receive $17.75 in cash or (b) the right to retain one share of Falcon Class A
Stock which, upon consummation of the Merger, will have those rights, powers,
privileges and restrictions described in the enclosed Proxy
Statement/Prospectus, subject to the requirement that of the 20,048,275
presently issued and outstanding shares of Falcon Class A Stock, 19,014,255 of
such shares must be converted into cash and 1,034,020 of such shares must be
retained by existing stockholders of Falcon.
Because the Subject Stockholders (as defined below) have committed to elect
to retain 1,034,020 shares of Falcon Class A Stock, all stockholders who do not
elect to retain Falcon Class A Stock will be assured that they will receive
$17.75 in cash for each share held by such stockholders, and all stockholders
who elect to retain Falcon Class A Stock will experience proration of such
shares, resulting in their retaining only a portion of the shares of Falcon
Class A Stock they elect to retain and receiving $17.75 per share in cash for
each of their other shares of Falcon Class A Stock.
Detailed information concerning the Merger is set forth in the enclosed
Proxy Statement/Prospectus, which you are urged to read carefully. A copy of the
Merger Agreement is attached as Annex I to the enclosed Proxy
Statement/Prospectus.
Holders of Falcon Class A Stock will be entitled to dissenters' rights under
Delaware law in connection with the Merger as described in the accompanying
Proxy Statement/Prospectus.
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding shares of Falcon Class A Stock held by
stockholders of record on May 5, 1997 (the "Record Date"). Equity Holdings
Limited, an Illinois limited partnership ("EHL"), beneficially owned, as of the
Record Date, approximately 69.8% of the outstanding shares of Falcon Class A
Stock entitled to vote at the Special Meeting. Pursuant to voting agreements
among FBP, Falcon and EHL, and among FBP, Falcon and certain other stockholders
who are members of Falcon's management (collectively with EHL, the "Subject
Stockholders"), each dated as of March 20, 1997 (collectively, the "Voting
Agreements"), the Subject Stockholders have agreed, subject to certain
conditions, to vote their shares in favor of the approval and the adoption of
the Merger Agreement and the Merger. Thus, the requisite vote of the holders of
shares of Falcon Class A Stock to approve and adopt the Merger Agreement and the
Merger is assured.
At a meeting on March 20, 1997, Falcon's Board of Directors, and the
non-management members of Falcon's Board of Directors, each unanimously
determined, among other things, that the Merger Agreement and the transactions
contemplated thereby, including the Merger, taken together, are fair and in the
<PAGE>
best interests of the stockholders of Falcon. In reaching this determination,
the Board of Directors received and considered the written opinions, dated March
20, 1997, of each of Smith Barney Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, financial advisors to Falcon, to the effect that, as of such date
and based upon and subject to certain matters stated in such opinions, the
consideration to be received in the Merger by holders of Falcon Class A Stock
was fair, from a financial point of view, to such holders.
The Board, and the non-management members of the Board, each recommends that
holders of Falcon Class A Stock vote FOR the approval and adoption of the Merger
Agreement and the transactions contemplated thereby, including the Merger.
The Special Meeting will be held at Conference Center, 3rd Floor, Two North
Franklin, Chicago, Illinois, on , 1997, beginning at a.m.,
Central Time.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND PERSONALLY. THEREFORE, YOU SHOULD COMPLETE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE
SPECIAL MEETING.
EXCEPT FOR FALCON CLASS A STOCK CERTIFICATES TO BE SURRENDERED WITH A FORM
OF ELECTION PURSUANT TO AN ELECTION TO RETAIN FALCON CLASS A STOCK IN THE
MERGER, STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE AGENT
UNTIL THEY HAVE RECEIVED A LETTER OF TRANSMITTAL AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
Yours very truly,
/s/ WILLIAM K. HALL
William K. Hall
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
FALCON BUILDING PRODUCTS, INC.
TWO NORTH RIVERSIDE PLAZA
SUITE 1100
CHICAGO, ILLINOIS 60606
(312) 906-9700
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1997
---------------------
To the Stockholders of
FALCON BUILDING PRODUCTS, INC.
NOTICE IS HEREBY GIVEN that a Special Meeting of the stockholders (including
any adjournments or postponements thereof, the "Special Meeting") of Falcon
Building Products, Inc., a Delaware corporation ("Falcon"), will be held at
Conference Center, 3rd Floor, Two North Franklin, Chicago, Illinois on
, , 1997, beginning at a.m. Central Time for the
following purposes, all of which are more fully described in the accompanying
Proxy Statement/Prospectus.
To consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of March 20, 1997 (the "Merger Agreement"), between
Falcon and FBP Acquisition Corp., Inc., a Delaware corporation ("FBP") organized
on behalf of Investcorp S.A., certain of its affiliates and other international
investors, and the consummation of the transactions contemplated thereby,
including the Merger. The Merger Agreement provides, among other things, for the
merger of FBP with and into Falcon (the "Merger") pursuant to which each share
of Falcon's Class A Stock, $.01 par value per share ("Falcon Class A Stock"),
(other than (i) shares of Falcon Class A Stock held by Falcon, its subsidiaries,
FBP or any of its affiliates, which will be cancelled and retired, and (ii)
shares of Falcon Class A Stock subject to dissenters' rights) will be converted,
at the election of the holder thereof, into either (a) the right to receive
$17.75 in cash or (b) the right to retain one share of Falcon Class A Stock
which, upon consummation of the Merger, will have those rights, powers,
privileges and restrictions described in the enclosed Proxy
Statement/Prospectus. Pursuant to the terms of the Merger Agreement, the number
of shares of Falcon Class A Stock to be retained by existing Falcon stockholders
must equal 1,034,020. Because the Subject Stockholders (as defined below) have
committed to elect to retain 1,034,020 shares of Falcon Class A Stock, all
stockholders who do not elect to retain Falcon Class A Stock will be assured
that they will receive $17.75 in cash for each share held by such stockholders,
and all stockholders who elect to retain Falcon Class A Stock will experience
proration of such shares, resulting in their retaining only a portion of the
shares of Falcon Class A Stock they elect to retain and receiving $17.75 per
share in cash for each of their other shares of Falcon Class A Stock. A copy of
the Merger Agreement is attached as Annex I to the accompanying Proxy
Statement/Prospectus.
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding shares of Falcon Class A Stock held by
stockholders of record on May 5, 1997 (the "Record Date"). Equity Holdings
Limited, an Illinois limited partnership ("EHL"), beneficially owned, as of the
Record Date, approximately 69.8% of the outstanding shares of Falcon Class A
Stock entitled to vote at the Special Meeting. Pursuant to voting agreements
among FBP, Falcon and EHL, and among FBP, Falcon and certain other stockholders
who are members of Falcon's management (collectively with EHL, the "Subject
Stockholders") dated as of March 20, 1997 (collectively, the "Voting
Agreements"), the Subject Stockholders have agreed, subject to certain
conditions, to vote their shares in favor of the approval and the adoption of
the Merger Agreement and the Merger. Thus, the requisite vote of the holders of
shares of Falcon Class A Stock to approve and adopt the Merger Agreement is
assured.
<PAGE>
Only holders of record of shares of Falcon Class A Stock at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Special Meeting. A complete list of stockholders entitled to vote at the Special
Meeting will be available for examination, for proper purposes, during ordinary
business hours at Falcon's corporate offices, Two North Riverside Plaza, Suite
1100, Chicago, Illinois, 60606 during the 10 days prior to the Special Meeting.
In connection with the proposed Merger, appraisal rights will be available to
those stockholders of Falcon who meet and comply with the requirements of
Section 262 of the Delaware General Corporation Law (the "DGCL"), a copy of
which is included as Annex IV to the accompanying Proxy Statement/Prospectus.
Reference is made to the section entitled "THE MERGER--Dissenting Stockholders'
Rights" in the accompanying Proxy Statement/Prospectus for a discussion of the
procedures to be followed in asserting appraisal rights under Section 262 of the
DGCL in connection with the proposed Merger.
YOUR VOTE IS VERY IMPORTANT. REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE
SPECIAL MEETING, YOU ARE REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY
AT ANY TIME PRIOR TO ITS EXERCISE. IF YOU ARE PRESENT AT THE SPECIAL MEETING OR
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, YOU MAY REVOKE YOUR PROXY AND VOTE
PERSONALLY ON THE MATTERS PROPERLY BROUGHT BEFORE THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ GUS J. ATHAS
Gus J. Athas
SECRETARY
, 1997
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
STOCKHOLDERS ELECTING TO RETAIN FALCON CLASS A STOCK (WHICH UPON
CONSUMMATION OF THE MERGER WILL HAVE THE RIGHTS, POWERS, PRIVILEGES AND
RESTRICTIONS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS) SHOULD RETURN THE
ENCLOSED FORM OF NON-CASH ELECTION TOGETHER WITH DULY ENDORSED FALCON CLASS A
STOCK CERTIFICATES AS INSTRUCTED IN THE PROXY STATEMENT/ PROSPECTUS.
EXCEPT FOR FALCON CLASS A STOCK CERTIFICATES TO BE SURRENDERED WITH A FORM
OF ELECTION PURSUANT TO AN ELECTION TO RETAIN FALCON CLASS A STOCK IN THE
MERGER, STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE AGENT
UNTIL THEY HAVE RECEIVED A LETTER OF TRANSMITTAL AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ADDITIONAL MATERIAL, PLEASE CONTACT
MORROW & CO., INC. AT (TOLL FREE) OR (COLLECT).
2
<PAGE>
FALCON BUILDING PRODUCTS, INC.
PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to stockholders of Falcon Building Products, Inc., a Delaware
corporation ("Falcon" or the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Special Meeting
of stockholders of the Company, including any adjournments or postponements
thereof, scheduled to be held on , 1997 at a.m., Central Time,
at Conference Center, 3rd Floor, Two North Franklin, Chicago, Illinois (the
"Special Meeting"). This Proxy Statement/Prospectus relates to the proposed
merger (the "Merger") of FBP Acquisition Corp., Inc., a Delaware corporation
("FBP") organized on behalf of Investcorp S.A. ("Investcorp"), certain of its
affiliates and other international investors, with and into the Company pursuant
to the Agreement and Plan of Merger, dated as of March 20, 1997 (the "Merger
Agreement"), between FBP and the Company, and the transactions contemplated
thereby.
Pursuant to the Merger, each share of Falcon Class A Stock, par value $.01
per share ("Falcon Class A Stock"), issued and outstanding immediately prior to
the effective time of the Merger (the "Effective Time") (other than (i) shares
of Falcon Class A Stock held by Falcon, its subsidiaries, FBP or any of its
affiliates, which will be cancelled and retired and will cease to exist, and
(ii) shares of Falcon Class A Stock subject to dissenters' rights) will be
converted at the election of the holder thereof, subject to the terms and
conditions described herein, into either (a) the right to receive $17.75 in
cash, or (b) the right to retain one share of Falcon Class A Stock which, upon
consummation of the Merger, will have those rights, powers, privileges and
restrictions described herein. As part of the Merger, Falcon's capital structure
will be modified as described herein.
Because, pursuant to the terms of the Merger Agreement, the number of shares
of Falcon Class A Stock to be retained by existing Falcon stockholders must
equal 1,034,020, the right to retain shares of Falcon Class A Stock is subject
to proration, as set forth in the Merger Agreement and described herein. The
Subject Stockholders have committed to elect to retain 1,034,020 shares of
Falcon Class A Stock. Thus, all stockholders who do not elect to retain Falcon
Class A Stock will be assured that they will receive $17.75 in cash for each
share held by such stockholders, and all stockholders who elect to retain Falcon
Class A Stock will experience proration of such shares, resulting in their
retaining only a portion of the shares of Falcon Class A Stock they elect to
retain and receiving $17.75 per share in cash for each of their other shares of
Falcon Class A Stock. SEE "THE MERGER--Merger Consideration." Holders of Falcon
Class A Stock will be entitled to dissenters' rights under the Delaware General
Corporation Law (the "DGCL") in connection with the Merger as described herein.
A copy of the Merger Agreement is attached as Annex I to this Proxy
Statement/Prospectus. The summaries of the portions of the Merger Agreement set
forth in this Proxy Statement/Prospectus do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the text of the
Merger Agreement.
In addition, the Merger Agreement provides that each option to purchase
shares of Falcon Class A Stock issued under the Company's 1994 Stock Option and
Restricted Share Plan (each an "Option" and collectively the "Options") issued
and outstanding immediately prior to the Effective Time shall be cancelled,
extinguished and converted into the right to receive an amount in cash equal to
the excess, if any, of $17.75 over the per share exercise price of such Option,
provided that the holder thereof waives all rights with respect to such Option
and any shares of Falcon Class A Stock subject thereto other than the right to
receive such cash amount, less any required withholding taxes.
This Proxy Statement/Prospectus constitutes a prospectus of the Company with
respect to the 1,034,020 shares of Falcon Class A Stock to be retained by
stockholders upon consummation of the Merger.
<PAGE>
Approval and adoption of the Merger Agreement requires the affirmative vote
of a majority of the outstanding shares of Falcon Class A Stock held by
stockholders of record on May 5, 1997 (the "Record Date"). Equity Holdings
Limited, an Illinois limited partnership ("EHL"), beneficially owned, as of the
Record Date, approximately 69.8% of the outstanding shares of Falcon Class A
Stock entitled to vote at the Special Meeting. Pursuant to voting agreements
among FBP, Falcon and EHL, and among FBP, Falcon and certain other stockholders
who are members of Falcon's management (collectively with EHL, the "Subject
Stockholders"), dated as of March 20, 1997 (collectively, the "Voting
Agreements"), the Subject Stockholders have agreed, subject to certain
conditions, to vote their shares in favor of the approval and the adoption of
the Merger Agreement and the Merger. Thus, the requisite vote of the holders of
shares of Falcon Class A Stock to approve and adopt the Merger Agreement and the
Merger is assured.
The Board of Directors and the non-management members of the Board of
Directors, after careful consideration, each unanimously approved the Merger
Agreement and the Merger, and determined that the Merger is fair to and in the
best interests of Falcon and its stockholders, and recommends that you vote FOR
approval and adoption of the Merger Agreement and the transactions contemplated
thereby. In reaching their determination, the members of the Board of Directors
considered, among other things, the opinions of Smith Barney Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (collectively, the "Financial
Advisors") as to the fairness of the consideration to be received by the holders
of Falcon Class A Stock in the Merger from a financial point of view. The
Financial Advisors' respective opinions are included as Annex III-A and Annex
III-B to this Proxy Statement/Prospectus. You are urged to read the opinions in
their entirety for further information with respect to the assumptions made,
matters considered and limits of the reviews undertaken by the Financial
Advisors.
Falcon Class A Stock is currently listed for trading on the New York Stock
Exchange ("NYSE") under the symbol "FB". On November 29, 1996, the last trading
day prior to the public announcement that Falcon was pursuing strategic
alternatives, the last sale price of the Falcon Class A Stock as reported on the
NYSE was $12 3/8 per share. On March 19, 1997, the last trading day before
public announcement of the execution of the Merger Agreement, the last sale
price of the Falcon Class A Stock as reported on the NYSE was $16 3/8 per share.
On , 1997, the last reported sale price of the Falcon Class A Stock
was $ per share. If the Merger is approved, the Company intends to seek to
have the Falcon Class A Stock delisted from the NYSE. SEE "RISK
FACTORS--Delisting; Loss of Liquidity."
This Proxy Statement/Prospectus, the accompanying form of proxy (the
"proxy") and the other enclosed documents are first being mailed to stockholders
of the Company on or about , 1997.
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN
IMPORTANT RISKS RELATING TO THE RETENTION OF FALCON CLASS A STOCK THAT SHOULD BE
CONSIDERED BY HOLDERS OF FALCON CLASS A STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is , 1997.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION................................................................. 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 5
FORWARD LOOKING STATEMENTS............................................................ 6
SUMMARY............................................................................... 7
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA OF FALCON
BUILDING PRODUCTS, INC. AND SUBSIDIARIES............................................ 15
PRICES OF FALCON CLASS A STOCK........................................................ 18
RISK FACTORS.......................................................................... 18
THE COMPANY........................................................................... 23
THE SPECIAL MEETING................................................................... 27
Matters to be Considered............................................................ 27
Required Votes...................................................................... 27
Voting and Revocation of Proxies.................................................... 28
Record Date; Stock Entitled to Vote; Quorum; Dissenters' Rights..................... 28
Dissenters' Rights.................................................................. 29
Solicitation of Proxies............................................................. 29
THE MERGER............................................................................ 29
Background of the Merger............................................................ 29
Recommendation of the Board of Directors; Reasons for the Merger.................... 33
Opinions of Falcon's Financial Advisors............................................. 35
Information Concerning the Company's Financial Advisors............................. 41
Merger Consideration................................................................ 42
Non-Cash Election................................................................... 44
Non-Cash Election Procedure......................................................... 44
Effective Time of the Merger........................................................ 45
Retention of Shares; Procedures for Exchange of Certificates........................ 46
Fractional Shares................................................................... 46
Conduct of Business Pending the Merger.............................................. 47
Conditions to the Consummation of the Merger........................................ 47
Federal Income Tax Consequences..................................................... 47
Accounting Treatment................................................................ 50
Effect on Employee Benefit Matters.................................................. 50
Interests of Certain Persons in the Merger.......................................... 51
Delisting of Falcon Class A Stock from NYSE......................................... 53
Termination of SEC Reporting........................................................ 54
Resale of Retained Falcon Class A Stock following the Merger........................ 54
Merger Financings................................................................... 54
Unaudited Pro Forma Consolidated Financial Statements............................... 54
DESCRIPTION OF FALCON CAPITAL STOCK................................................... 62
Falcon's Existing Capital Stock..................................................... 62
Falcon's Capital Stock Following the Merger......................................... 63
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
CERTAIN PROVISIONS OF THE MERGER AGREEMENT............................................ 68
The Merger.......................................................................... 68
Representations and Warranties...................................................... 68
Certain Pre-Closing Covenants....................................................... 69
No Solicitation of Transactions..................................................... 70
Board of Directors and Officers of the Company following the Merger................. 71
Stock and Employee Benefit Plans.................................................... 71
Access to Information............................................................... 71
Cooperation and Reasonable Best Efforts............................................. 71
Public Announcements................................................................ 72
Indemnification and Insurance....................................................... 72
Conditions to the Consummation of the Merger........................................ 72
Termination......................................................................... 73
Expenses and Certain Required Payments.............................................. 74
Amendment and Waiver................................................................ 75
CERTAIN RELATED AGREEMENTS............................................................ 75
Agreements with Certain Stockholders................................................ 75
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 76
REGULATORY APPROVALS.................................................................. 77
FBP................................................................................... 77
DISSENTING STOCKHOLDERS' RIGHTS....................................................... 77
EXPERTS............................................................................... 79
LEGAL OPINIONS........................................................................ 79
OTHER INFORMATION AND STOCKHOLDER PROPOSALS........................................... 79
</TABLE>
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger dated as of March 20, 1997
Annex II-A Voting Agreement among FBP, Falcon and EHL, dated as of March 20, 1997
Annex II-B Form of Voting Agreements among FBP, Falcon and Certain Other Stockholders,
dated as of March 20, 1997
Annex III-A Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated dated March 20,
1997
Annex III-B Opinion of Smith Barney Inc. dated March 20, 1997
Annex IV Excerpts from the DGCL Relating to Dissenters' Rights
Annex V Form of Restated Certificate of Incorporation of FBP Acquisition Corp., Inc.
(to become effective as of the Effective Time)
</TABLE>
4
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN AS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, IN
CONNECTION WITH THE MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY FALCON OR
FBP. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES TO WHICH IT RELATES IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Falcon is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1034, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the web site (http://www.sec.gov) maintained by the Commission; or at its
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports, proxy statements and other information are also available
for inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
This Proxy Statement/Prospectus constitutes a prospectus of the Company
filed as part of a Registration Statement on Form S-4 under the Securities Act
of 1933, as amended (the "Securities Act"). This Proxy Statement/Prospectus
omits certain information contained in the Registration Statement and related
exhibits with respect to the Company and the retention of Falcon Class A Stock.
Any statement herein concerning the provision of any document is not necessarily
complete, and in each instance reference is made to the copy of the document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus incorporates by reference documents which
are not presented herein or delivered herewith. Copies of any such documents
relating to the Company, other than exhibits to such documents (unless such
exhibits specifically are incorporated by reference in such documents), are
available without charge, upon written or oral request from Falcon Building
Products, Inc., Two North Riverside Plaza, Suite 1100, Chicago, Illinois 60606,
Attention: Gus J. Athas, Secretary: telephone: (312) 906-9700. In order to
ensure timely delivery of the documents requested, any such request should be
made by , 1997.
The following documents previously filed by the Company with the Commission
are incorporated in this Proxy Statement/Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(2) The description of Falcon Class A Stock set forth in the Company's
Registration Statement on Form 8-A, dated October 20, 1994.
(3) The Company's Current Report on Form 8-K dated March 20, 1997.
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All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the date of
the Special Meeting shall be deemed to be incorporated by reference herein and
to be part hereof from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Proxy
Statement/Prospectus.
FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus includes "forward-looking statements" within
the meaning of various provisions of the Securities Act and the Exchange Act.
All statements, other than statements of historical facts, included in this
Proxy Statement that address activities, events or developments that the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy and measures to implement strategy, competitive strengths, goals,
expansion and growth of the Company's and its subsidiaries' business and
operations, plans, references to future success and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analysis made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances. However,
whether actual results and developments will conform to the Company's
expectations and predictions is subject to a number of risks and uncertainties,
including the significant considerations and risks discussed in this Proxy
Statement/ Prospectus; general economic, market or business conditions; the
opportunities (or lack thereof) that may be presented to and pursued by the
Company and its subsidiaries; competitive actions by other companies; changes in
laws or regulations; and other factors, many of which are beyond the control of
the Company and its subsidiaries. Consequently, all of the forward-looking
statements made in this Proxy Statement/ Prospectus are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company and its subsidiaries or their business or operations.
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SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS MADE TO THE MORE DETAILED
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES HERETO. STOCKHOLDERS OF THE COMPANY ARE
URGED TO READ THIS PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO IN THEIR
ENTIRETY.
FOR A DISCUSSION OF CERTAIN IMPORTANT RISKS RELATED TO THE RETENTION OF
FALCON CLASS A STOCK, SEE "RISK FACTORS."
THE SPECIAL MEETING
TIME AND PLACE; RECORD DATE
A Special Meeting of the stockholders of Falcon will be held on ,
, 1997, at a.m., at Conference Center, 3rd Floor, Two North
Franklin, Chicago, Illinois. Stockholders of record at the close of business on
May 5, 1997 (the "Record Date") will be entitled to notice of, and to vote at,
the Special Meeting. The date of the mailing of this Proxy Statement/Prospectus
to stockholders of the Company will be on or about , 1997. At the
close of business on the Record Date, there were outstanding and entitled to
vote 20,048,275 shares of Falcon Class A Stock.
MATTERS TO BE CONSIDERED
The purpose of the Special Meeting is to vote upon a proposal to approve and
adopt the Merger Agreement and the Merger, pursuant to which FBP will merge with
and into the Company, the separate existence of FBP will terminate and the
stockholders of the Company will receive the consideration described below under
"--The Merger--Effect of the Merger".
REQUIRED VOTES
Approval of the Merger Agreement requires the affirmative vote of a majority
of the shares of Falcon Class A Stock entitled to vote at the Special Meeting.
The Subject Stockholders, who beneficially owned, as of the Record Date, an
aggregate of approximately 71% of the Falcon Class A Stock outstanding, have
agreed, subject to certain conditions, to vote all shares of Falcon Class A
Stock held by them in favor of all matters to be considered by the stockholders
at the Special Meeting. SEE "THE SPECIAL MEETING-- Required Votes" and "THE
MERGER--Interests of Certain Persons in the Merger." Thus, the requisite vote of
the holders of shares of Falcon Class A Stock to approve and adopt the Merger
Agreement and the Merger is assured.
VOTING OF PROXIES
Shares of Falcon Class A Stock represented by all properly executed proxies
received in time for the Special Meeting will be voted in the manner specified
in the proxy. Proxies that do not contain any instruction to vote for or against
or to abstain from voting on a particular matter will be voted in favor of such
matter. SEE "THE SPECIAL MEETING--Required Votes."
ADJOURNMENTS; REVOCABILITY OF PROXIES
If the Special Meeting is adjourned, for whatever reason, the approval of
the Merger Agreement shall be considered and voted upon by stockholders at the
subsequent, reconvened meeting, if any.
You may revoke your proxy at any time prior to its exercise (i) by attending
the Special Meeting and voting in person (although attendance at the Special
Meeting will not in and of itself constitute revocation of a proxy), (ii) by
giving notice of revocation of your proxy at the Special Meeting, or (iii) by
delivering (a) a written notice of revocation of your proxy, or (b) a duly
executed proxy relating to the matters to be
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considered at the Special Meeting, bearing a date later than the proxy
previously executed, to the Secretary of Falcon, Two North Riverside Plaza,
Suite 1100, Chicago, Illinois 60606. Unless revoked in one of the manners set
forth above, proxies will be voted at the Special Meeting as described above.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. The Company may
solicit proxies and the Company's directors, officers and employees may also
solicit proxies by telephone, telegram or personal interview. These persons will
receive no additional compensation for their services, but may be reimbursed for
reasonable out-of-pocket expenses in connection therewith. Arrangements will be
made to furnish copies of proxy materials to fiduciaries, custodians and
brokerage houses for forwarding to beneficial owners of Falcon Class A Stock.
Such persons will be paid reasonable out-of-pocket expenses. Morrow & Co., Inc.
will assist in the solicitation of proxies by the Company for a fee of
approximately $2,500, plus reasonable out-of-pocket expenses. HOLDERS OF FALCON
CLASS A STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS. SEE
"THE MERGER--NON-CASH ELECTION" FOR INSTRUCTIONS FOR STOCKHOLDERS ELECTING TO
RETAIN SHARES OF FALCON CLASS A STOCK.
SECURITY OWNERSHIP OF MANAGEMENT
As of the Record Date, directors and executive officers of the Company and
their affiliates were beneficial owners of an aggregate of 448,075 shares of
Falcon Class A Stock (approximately 2.2% of the outstanding shares). The
directors and executive officers of the Company have indicated that they intend,
and certain of such executive officers are, pursuant to the terms of the Voting
Agreements, obligated to vote their shares of Falcon Class A Stock in favor of
the Merger.
THE MERGER
EFFECT OF THE MERGER
At the Effective Time, FBP will be merged with and into Falcon and Falcon
will continue as the surviving corporation in the Merger. Subject to certain
provisions as described herein with respect to shares owned by Falcon, any
subsidiary of Falcon, FBP and its affiliates, and with respect to fractional
shares and Dissenting Shares (as defined under "Dissenting Stockholders' Rights"
below), each issued and outstanding share of Falcon Class A Stock will be
converted at the election of the holder thereof into either (i) the right to
receive $17.75 in cash (the "Cash Price") or (ii) the right to retain one fully
paid and nonassessable share of Falcon Class A Stock which, upon consummation of
the Merger, will have those rights, powers, privileges and restrictions as
described in this Proxy Statement/Prospectus (a "Non-Cash Election Share");
provided, that the aggregate number of shares of Falcon Class A Stock to be
retained at the Effective Time shall, pursuant to the terms of the Merger
Agreement, be 1,034,020 (the "Non-Cash Election Number").
The Merger Agreement requires that 19,014,255 of the presently issued and
outstanding shares of Falcon Class A Stock be converted into cash, as described
above, and that 1,034,020 of such shares be retained by existing Falcon
stockholders. The Subject Stockholders have committed to elect to retain
1,034,020 shares of Falcon Class A Stock. Thus, all stockholders who do not
elect to retain Falcon Class A Stock will be assured that they will receive
$17.75 in cash for each share held by such stockholders, and all stockholders
who elect to retain Falcon Class A Stock will experience proration of such
shares, resulting in their retaining only a portion of the shares of Falcon
Class A Stock they elect to retain and receiving $17.75 per share in cash for
each of their other shares of Falcon Class A Stock. SEE "THE MERGER-- MERGER
CONSIDERATION" for examples illustrating the potential effects of proration.
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Upon the effectiveness of the Merger, the Company will have shares of four
classes of stock outstanding: 1,034,020 shares of Falcon Class A Stock;
6,876,464 shares of Class B Common Stock; 689,346 shares of Class C Common Stock
and 17,000 shares of Class D Common Stock. The 1,034,020 shares of Falcon Class
A Stock to be outstanding after the Merger will have, as they currently do, one
vote per share, will represent approximately 12% of the outstanding equity
capital of the Company and will have approximately 12% of the voting power. The
shares of Class B Common Stock, Class C Common Stock and Class D Common Stock
will represent approximately 88% of the outstanding equity capital of the
Company after the Merger. Shares of Class D Common Stock will have approximately
88% of the voting power after the Merger and shares of Class B Common Stock and
Class C Common Stock will not have voting rights. SEE "DESCRIPTION OF FALCON
CAPITAL STOCK--Falcon Capital Stock Following the Merger." With respect to
certain risks related to retaining Falcon Class A Stock, SEE "RISK FACTORS"
below.
RECOMMENDATION OF THE BOARD OF DIRECTORS
At its March 20, 1997 meeting, the Board of Directors of the Company, with
all members in attendance, and the non-management members of the Board each
unanimously (i) determined that the Merger was fair to and in the best interests
of the Company's stockholders, and (ii) recommended that the Company's
stockholders approve and adopt the Merger Agreement and the transactions
contemplated thereby. SEE "THE MERGER--Background of the Merger" and
"--Recommendation of the Board of Directors; Reasons for the Merger."
OPINIONS OF FALCON'S FINANCIAL ADVISORS
On March 20, 1997, each of Smith Barney Inc. ("Smith Barney") and Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Falcon's financial
advisors (collectively, the "Financial Advisors"), delivered to Falcon's Board
of Directors its oral opinion (which opinion was subsequently confirmed by
delivery of a written opinion dated March 20, 1997) to the effect that, as of
such date and based upon and subject to certain matters stated in such opinions,
the consideration to be received by the holders of Falcon Class A Stock in the
Merger was fair, from a financial point of view, to such holders. The opinions
of the Financial Advisors are directed to the Board of Directors of Falcon and
relate only to the fairness of the consideration to be received in the Merger
from a financial point of view, do not address any other aspect of the Merger or
related transactions and do not constitute a recommendation to any stockholder
as to how such stockholder should vote at the Special Meeting. The full text of
the written opinions of the Financial Advisors dated March 20, 1997, which set
forth the assumptions made, matters considered, and limitations on the review
undertaken, are attached as Annex III-A and Annex III-B to this Proxy
Statement/Prospectus and should be read carefully in their entirety. SEE "THE
MERGER--Opinions of Falcon's Financial Advisors."
NON-CASH ELECTION
Record holders of shares of Falcon Class A Stock will be entitled to make an
unconditional election (a "Non-Cash Election"), on or prior to the Election Date
(as defined below), to retain Non-Cash Election Shares. If, however, the number
of shares of Falcon Class A Stock with respect to which an election to retain
Falcon Class A Stock has been made and not withdrawn in accordance with the
Merger Agreement (each, an "Electing Share") exceeds the Non-Cash Election
Number, then (1) the number of Electing Shares covered by each Non-Cash Election
will be determined by multiplying the total number of Electing Shares covered by
such Non-Cash Election by a proration factor determined by dividing the Non-Cash
Election Number by the total number of Electing Shares and (2) such number of
Electing Shares will be so retained. All Electing Shares, other than those
permitted to be retained as described in the immediately preceding sentence,
will be converted into cash as if such shares were not Electing Shares. The
number of Electing Shares permitted to be retained as Non-Cash Election Shares
or the right to receive cash will be
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determined on a consistent basis among stockholders who made the election to
retain Non-Cash Election Shares, pro rata to the number of shares as to which
they made such election.
If Non-Cash Elections respecting more than 1,034,020 shares of Falcon Class
A Stock are made, any stockholder who elects to retain shares of Falcon Class A
Stock would experience proration. Because the Subject Stockholders have
committed to elect to retain 1,034,020 shares of Falcon Class A Stock, all
stockholders who do not elect to retain Falcon Class A Stock will be assured
that they will receive $17.75 in cash for each share held by such stockholder,
and all stockholders who elect to retain Falcon Class A Stock will experience
proration of such shares, resulting in their retaining only a portion of the
shares of Falcon Class A Stock they elect to retain and receiving $17.75 per
share in cash for each of their other shares of Falcon Class A Stock. SEE "THE
MERGER--Non-Cash Election."
Upon consummation of the Merger, the Non-Cash Election Shares will have
those rights, powers, privileges and restrictions as described in this Proxy
Statement/Prospectus, including, among other things, certain "tag-along" rights,
being subject to mandatory redemption in certain circumstances and being
automatically converted into shares of common stock of Falcon in certain
circumstances. SEE "DESCRIPTION OF FALCON CAPITAL STOCK--Falcon Capital Stock
Following the Merger" and Annex V attached hereto.
NON-CASH ELECTION PROCEDURE
Stockholders of Falcon Class A Stock electing to retain Non-Cash Election
Shares must properly complete and sign the Non-Cash Election Form (the "Form of
Election") accompanying this Proxy Statement/Prospectus. Such Form of Election,
together with all certificates representing shares of Falcon Class A Stock duly
endorsed in blank or otherwise in a form acceptable for transfer on the books of
the Company (or by appropriate guarantee of delivery, as set forth in such Form
of Election), must be received by The Bank of New York (the "Exchange Agent") at
one of the addresses listed on the Form of Election by 5:00 p.m., Eastern time,
on the second business day (the "Election Date") preceding the date of the
Special Meeting and must not be withdrawn. SEE "THE MERGER--Non-Cash Election
Procedure."
FRACTIONAL SHARES
Fractional shares of Falcon Class A Stock will not be issued in the Merger.
Holders of Falcon Class A Stock otherwise entitled to a fractional share of
Falcon Class A Stock following the Merger will be paid cash in lieu of such
fractional share determined and paid as described in "THE MERGER--Fractional
Shares."
CONDITIONS TO THE MERGER
The obligations of Falcon and FBP to consummate the Merger are subject to
various conditions, including, without limitation, obtaining requisite
stockholder approval, the termination or expiration of the relevant waiting
period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the absence of any injunction or other legal
restraint or prohibition preventing the consummation of the Merger. The Company
and FBP do not believe that a filing under the HSR Act is required or that any
associated waiting period is applicable to the Merger. SEE "CERTAIN PROVISIONS
OF THE MERGER AGREEMENT--Conditions to the Consummation of the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For a summary of the material U.S. federal income tax consequences of the
Merger, SEE "THE MERGER--Federal Income Tax Consequences."
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BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER, IT IS RECOMMENDED THAT
STOCKHOLDERS OF FALCON CLASS A STOCK CONSULT THEIR TAX ADVISORS CONCERNING THE
FEDERAL (AND ANY STATE, LOCAL AND FOREIGN) TAX CONSEQUENCES OF THE MERGER IN
THEIR PARTICULAR CIRCUMSTANCES.
TREATMENT OF COMPANY STOCK OPTIONS
Immediately prior to the Effective Time, each holder of an outstanding
option to purchase shares of Falcon Class A Stock granted under the Company's
1994 Stock Option and Restricted Share Plan (each such option, an "Option" and,
collectively, the "Options"), whether or not then exercisable, will be entitled
to receive from the Company for each share subject to an Option an amount in
cash equal to the excess, if any, of the Cash Price over the per share exercise
price of such Option, and such Option will be cancelled; provided, that with
respect to any person subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") who waives all rights with respect to such
Options and any shares subject thereto other than the right to receive such
amount of cash, any such amount shall be paid as soon as practicable after the
first date payment can be made without liability to such person under Section
16(b) of the Exchange Act. All applicable withholding taxes attributable to the
payments or to distributions so contemplated will be deducted from such amounts
and all such taxes attributable to the exercise of Options will be withheld from
the proceeds received in respect of the shares issuable on such exercise.
Pursuant to the Merger Agreement, FBP and Falcon agreed that, unless and
until such agreements are amended, modified or terminated, from and after the
Effective Time, Falcon will honor, in accordance with their respective terms as
in effect on the date hereof, all of the employment, termination, severance,
indemnity and bonus agreements and arrangements identified in the Merger
Agreement. The Merger Agreement provides that if Falcon or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary
to effectuate the foregoing, proper provision shall be made so that the
successors and assigns of Falcon shall succeed to the obligations set forth in
the preceding sentence and none of the actions described in clause (i) or (ii)
shall be taken until such provision is made.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and officers of the Company have interests, described
herein, that may present them with potential conflicts of interest in connection
with the Merger. The Board of Directors (including the non-management members of
the Board) is aware of the conflicts described below and considered them in
addition to the other matters described under "THE MERGER--Recommendation of the
Board of Directors; Reasons for the Merger" when it approved the Merger
Agreement and recommended that stockholders vote in favor of the Merger. SEE
"THE MERGER--Interests of Certain Persons in the Merger."
Seven of the executive officers of the Company, together with three other
employees, will be entitled to receive transaction incentive bonuses as a result
of the Merger. These bonuses will total approximately $3.0 million.
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Shares of Falcon Class A Stock held by officers and directors of Falcon will
be converted into the right to receive the same consideration as shares of
Falcon Class A Stock held by other stockholders. Options held by the officers
and directors of Falcon will be treated in the same manner as any Options held
by other Option holders, as described above under "Treatment of Company Stock
Options". SEE "THE MERGER--Interests of Certain Persons in the Merger." Pursuant
to the Merger Agreement, the Company has agreed for six years after the
Effective Time to indemnify directors, officers, employees and agents of the
Company and its subsidiaries and will, subject to certain limitations, maintain
for six years a directors' and officers' insurance and indemnification policy
substantially similar to its current policy. SEE "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT--Indemnification and Insurance."
EMPLOYMENT AGREEMENTS
The Company and Messrs. William K. Hall, Sam A. Cottone, and Gus J. Athas,
its President and Chief Executive Officer, Senior Vice President--Finance,
Treasurer and Chief Financial Officer and Senior Vice President, General Counsel
and Secretary, respectively, as well as two other of its officers have entered
into employment agreements, effective as of the Effective Time (the "Employment
Agreements") (a) requiring each of such officers to retain or purchase an equity
investment in Falcon and (b) providing each of such officers with, among other
benefits, (i) continuation in a similar position with Falcon after the Merger,
(ii) a minimum base salary, subject to adjustment, (iii) in the case of Messrs.
Hall, Cottone and Athas, transaction incentive bonuses upon completion of the
Merger, (iv) an annual bonus to be paid to such officers in accordance with
goals to be mutually agreed upon by the Company and such officers, (v) a funded
supplemental executive retirement agreement in which such officers will
participate, (vi) ten-year stock options on various percentages of the
outstanding capital stock of the Company as of the Effective Time, and (vii)
certain rights to put to the Company (with the Company having certain rights to
call from such officers) unrestricted shares of capital stock owned by such
officers and certain vested stock options held by such officers.
STOCK OPTION PLAN
Prior to the Effective Time, the Company will adopt the Falcon Building
Products, Inc. Stock Option Plan (the "Stock Option Plan"). The number of shares
that may be awarded under the Stock Option Plan shall be approximately 10% of
the then-outstanding shares of capital stock of Falcon at the Effective Time.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by mutual consent of FBP and Falcon; (ii) by either FBP or Falcon (a)
if a court or other governmental entity shall have issued a final and
nonappealable order, decree or ruling or taken any other final and nonappealable
action restraining, enjoining or otherwise prohibiting the Merger or (b) if the
Merger shall not have been consummated on or before September 16, 1997 (other
than due to the failure of the party seeking to terminate the Merger Agreement
to perform its obligations under the Merger Agreement required to be performed
at or prior to the Effective Time); or (iii) by FBP or Falcon in certain other
situations. Under certain circumstances generally related to the presence of a
third party transaction proposal or the acquisition by a third party of Falcon
Class A Stock or of all or substantially all of Falcon's assets, termination of
the Merger Agreement prior to the Effective Time will result in the payment of a
fee of $20 million from Falcon to FBP. Falcon and FBP have also agreed to
reimburse each other in certain circumstances for certain fees and expenses. SEE
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT--Termination" and "--Expenses and
Certain Required Payments."
AGREEMENTS WITH CERTAIN STOCKHOLDERS
EHL and certain officers of Falcon (collectively, the "Subject
Stockholders"), have entered into voting agreements (the "Voting Agreements")
with FBP and Falcon. Pursuant to the Voting Agreements, the
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Subject Stockholders, who beneficially owned, as of the Record Date, an
aggregate of approximately 71% of the outstanding shares of Falcon Class A
Stock, have agreed, among other things and subject to certain conditions, to
vote in favor of the Merger Agreement and the Merger. The Voting Agreements also
provide that the Subject Stockholders will make Non-Cash Elections for 1,034,020
shares of Falcon Class A Stock. If the aggregate number of Electing Shares
(pursuant to elections made by all stockholders, including the Subject
Stockholders) exceeds 1,034,020, the Subject Stockholders will be subject to
proration with respect to the number of Non-Cash Election Shares they will
receive in the Merger in the same manner as all other electing stockholders. In
addition, the Subject Stockholders are prohibited, subject to certain conditions
and exceptions, from soliciting or responding to certain inquiries or proposals
made by any person or entity with respect to the Company that constitutes or
could reasonably be expected to lead to acquisition of the Company by another
party or the sale of a material portion of the Company's assets. Subject to
certain conditions and exceptions, the Subject Stockholders are also not
permitted to dispose of, or enter into any contract, option or other arrangement
or understanding with respect to or consent to the disposition of, any or all of
such Subject Stockholders' Falcon Class A Stock or any interest therein. The
covenants and agreements in the Voting Agreement terminate on the first to occur
of (i) the Effective Time and (ii) the termination of the Merger Agreement in
accordance with its terms; provided that certain covenants will survive the
Effective Time of the Merger. For a summary of the foregoing provisions and
certain other provisions of the Voting Agreements, SEE "CERTAIN RELATED
AGREEMENTS-- Agreements with Certain Stockholders."
The Voting Agreement among EHL, FBP and Falcon creates certain rights and
obligations in addition to those set forth in the Voting Agreements among
Falcon, FBP and certain officers of Falcon. Among other things, this agreement
provides that EHL will cause its wholly-owned subsidiary Eagle Industries, Inc.
to agree to provide certain corporate services to Falcon after the Merger at
commercially reasonable rates and that, prior to the Merger, EHL and Falcon,
along with the investors in FBP who receive Falcon voting stock pursuant to the
Merger, will enter a stockholder rights agreement containing provisions relating
to the following: (i) the right of first offer in favor of Falcon and an
affiliate of Investcorp in the event that EHL proposes to sell its Falcon Class
A Stock to another person; (ii) the right in favor of the investors in FBP who
received voting or non-voting stock in the Merger to require EHL to sell its
entire equity interest in Falcon upon the same terms and conditions as such
investors are selling their shares; (iii) the right in favor of EHL to purchase
securities offered by the Company in certain equity financings in order to allow
EHL to maintain its level of equity ownership interest; (iv) the right in favor
of EHL to sell its shares of Falcon Class A Stock in certain change-of-control
transactions; (v) certain registration rights in favor of EHL; (vi) the
obligation of EHL to enter into certain "lock-up" agreements with underwriters
in future public offerings; and (vii) so long as EHL holds a certain percentage
of the Falcon Class A Stock, the right of EHL to receive certain information
about the business and financial performance of Falcon.
DISSENTING STOCKHOLDERS' RIGHTS
Under Section 262 of the DGCL, a stockholder of the Company may dissent from
the Merger and seek to obtain payment for the fair value of his or her shares of
Falcon Class A Stock. In order to dissent, (i) the dissenting stockholder must
deliver to the Company, prior to the vote being taken on the Merger at the
Special Meeting, written notice of his or her intent to demand payment for his
or her shares of Falcon Class A Stock if the Merger is effected and (ii) the
dissenting stockholder must not vote in favor of the Merger. SEE "DISSENTING
STOCKHOLDERS' RIGHTS" and Annex IV.
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PARTIES TO THE MERGER
FALCON
Falcon is a leading domestic manufacturer and distributor of products for
the residential and commercial construction and home improvement markets. The
Company's products include air distribution products; ceramic, enameled steel
and acrylic plumbing fixtures; and air compressors, electric generators, power
washers and OEM compressors. The Company's principal executive offices are
located at Two North Riverside Plaza, Suite 1100, Chicago, Illinois 60606;
telephone number (312) 906-9700.
FBP
FBP, a Delaware corporation, was organized on behalf of Investcorp, certain
of its affiliates and other international investors for the purpose of
consummating the Merger and has not carried on any activities to date other than
those incident to its formation and the transactions contemplated by the Merger
Agreement. Immediately prior to the Effective Time, 100% of the outstanding
shares of capital stock of FBP will be owned by Investcorp, certain of its
affiliates and other international investors. Upon consummation of the Merger,
FBP will merge into Falcon and the separate existence of FBP will terminate. The
principal offices of FBP are located at 200 Park Avenue, 48th floor, New York,
New York, 10166 c/o Gibson, Dunn & Crutcher LLP; telephone number (212)
351-3914.
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SELECTED CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA OF
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
Set forth on the following pages are certain selected consolidated
historical and unaudited pro forma financial and other data relating to Falcon.
The selected consolidated historical data should be read in conjunction with
Falcon's historical consolidated financial statements, including the notes
thereto, incorporated by reference in this Proxy Statement/Prospectus. The
selected unaudited pro forma consolidated financial data should be read in
conjunction with the Unaudited Pro Forma Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus.
The following table sets forth selected consolidated historical financial
data of Falcon which for the five fiscal years ended December 31, 1996 have been
derived from, and should be read in conjunction with, the audited consolidated
financial statements of Falcon incorporated by reference herein. SEE "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The
following table also sets forth selected unaudited pro forma consolidated
financial data of Falcon, as adjusted to give effect to the Merger, which have
been derived from, and should be read in conjunction with, the Unaudited Pro
Forma Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Proxy Statement/Prospectus. SEE "THE MERGER--Unaudited Pro
Forma Consolidated Financial Statements." The selected unaudited pro forma
consolidated financial data are not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
consummated on the dates indicated, nor are they necessarily indicative of
future operating results or financial position. The unaudited pro forma balance
sheet information reflects the Merger as if it had occurred as of December 31,
1996. The unaudited pro forma income statement information reflects the Merger
as if it had occurred on January 1, 1996 and excludes nonrecurring items
directly attributable to the Merger. The pro forma adjustments were applied to
the historical financial statements to reflect and
15
<PAGE>
account for the Merger as a recapitalization. Accordingly, the historical basis
of Falcon's assets and liabilities have not been affected by the Merger.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
UNAUDITED
PRO FORMA
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.......................................... $ 345.2 $ 372.3 $ 440.7 $ 471.3 $ 633.2 $ 633.2
Cost of goods sold................................. 274.6 295.7 350.5 384.4 520.3 520.3
--------- --------- --------- --------- --------- -----------
Gross profit....................................... 70.6 76.6 90.2 86.9 112.9 112.9
Selling, general and administrative................ 28.2 31.4 36.6 37.8 49.0 50.8
Securitization expense............................. -- -- 1.9 3.3 4.1 4.1
--------- --------- --------- --------- --------- -----------
Operating income................................... 42.4 45.2 51.7 45.8 59.8 58.0
Net interest expense............................... 10.0 8.0 8.3 10.0 11.0 44.1
--------- --------- --------- --------- --------- -----------
Income before income taxes......................... 32.4 37.2 43.4 35.8 48.8 13.9
Provision for income taxes......................... 13.7 15.1 17.5 13.7 18.8 5.4
--------- --------- --------- --------- --------- -----------
Income before cumulative effect of change in
accounting principles............................ 18.7 22.1 25.9 22.1 30.0 8.5
Cumulative effect of change in accounting
principles, less income tax benefit of $0.4...... -- (3.6) -- -- -- --
--------- --------- --------- --------- --------- -----------
Net income......................................... $ 18.7 $ 18.5 $ 25.9 $ 22.1 $ 30.0 $ 8.5(a)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
OTHER DATA:
Gross margin....................................... 20.4% 20.6% 20.5% 18.4% 17.8% 17.8%
Depreciation and amortization(b)................... $ 11.3 $ 12.1 $ 12.8 $ 14.5 $ 15.5 $ 15.9
Capital expenditures............................... 8.5 10.1 19.7 16.4 20.0 20.0
Net cash interest expense.......................... 10.0 8.0 7.6 10.3 11.0 29.3
Ratio of earnings to fixed charges(c).............. 4.2x 5.6x 6.2x 4.6x 5.4x 1.3x
BALANCE SHEET DATA:
(END OF PERIOD)
Working capital(d)................................. $ 50.9 $ 42.1 $ (12.0) $ 8.1 $ 14.7 $ 31.3
Total assets....................................... 212.2 218.9 187.5 210.8 261.7 296.8
Total debt (including current maturities)(e)....... 96.2 75.6 115.2 123.6 124.3 397.8
Common stockholders' equity (deficit).............. 55.6 73.6 (24.6) (2.2) 27.9 (203.6)
EARNINGS PER SHARE:
Income before cumulative effect of change in
accounting principles............................ $ 0.93 $ 1.10 $ 1.29 $ 1.10 $ 1.50 $ 0.99
Cumulative effect of change in accounting
principles....................................... -- (0.18) -- -- -- --
--------- --------- --------- --------- --------- -----------
Net income....................................... $ 0.93 $ 0.92 $ 1.29 $ 1.10 $ 1.50 $ 0.99
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Weighted average shares outstanding (in
millions)........................................ 20.1 20.1 20.1 20.1 20.1 8.6
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Data
16
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) The unaudited pro forma consolidated net income excludes the following
nonrecurring items that are directly attributable to the Merger:
(1) Compensation charges totaling $3.0 million for amounts to be paid to
management in connection with the Merger, and related income tax benefit
of $1.2 million.
(2) Estimated other charges totaling $24.8 million for expenses to be
incurred by the Company in connection with the Merger, and related income
tax benefit of $2.6 million.
(3) Charge of $5.2 million resulting from the purchase of outstanding stock
options in connection with the Merger, and related income tax benefit of
$2.0 million.
(4) Write-off of $2.5 million of debt issuance costs on debt to be retired
in connection with the Merger, and related income tax benefit of $1.0
million.
(5) Charge of $0.4 million associated with the accelerated vesting of
restricted stock, and related income tax benefit of $0.1 million.
(b) Depreciation and amortization excludes amortization of debt issuance costs.
(c) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and fixed charges. Fixed
charges consist of interest expense, which includes the amortization of
deferred debt issuance costs.
(d) Represents total current assets less total current liabilities, excluding
current portion of long-term debt.
(e) Includes advances from affiliates of $94.2 million and $72.8 million as of
December 31, 1992 and 1993, respectively.
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<PAGE>
PRICES OF FALCON CLASS A STOCK
Falcon Class A Stock is currently listed and traded on the New York Stock
Exchange (the "NYSE") under the symbol "FB." The following table sets forth, for
the periods indicated, the high and low closing sale prices per share of Falcon
Class A Stock.
<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1995
First Quarter........................................................... $ 11 5/8 $ 9 3/4
Second Quarter.......................................................... 10 5/8 8 1/2
Third Quarter........................................................... 11 3/4 8 5/8
Fourth Quarter.......................................................... 9 3/4 7 3/8
Fiscal Year Ended December 31, 1996
First Quarter........................................................... $ 10 1/2 $ 8 1/4
Second Quarter.......................................................... 12 7/8 8 3/4
Third Quarter........................................................... 13 1/2 10
Fourth Quarter.......................................................... 14 3/4 11 1/8
Fiscal Year Ending December 31, 1997
First Quarter........................................................... $ 17 1/2 $ 14
Second Quarter (through , 1997)..............................
</TABLE>
On November 29, 1996, the last trading day before the public announcement
that the Company was pursuing strategic alternatives, the last sale price of
Falcon Class A Stock as reported on the NYSE was 12 3/8 per share. On March 19,
1997 the last trading day before public announcement of execution of the Merger
Agreement, the last sale price of Falcon Class A Stock as reported on the NYSE
was $16 3/8 per share. On , 1997, the last sale price of Falcon Class
A Stock as reported on the NYSE was $ per share. Falcon's stockholders
should obtain current market quotations for Falcon Class A Stock. No dividends
have been paid to stockholders since Falcon's initial public offering in 1994,
and no dividends are expected to be declared prior to or after the Merger. In
addition, it is anticipated that the terms of any debt instruments to be entered
into in connection with the Merger Financings (as defined below) will prohibit
or otherwise restrict any future payment of dividends.
RISK FACTORS
Holders of Falcon Class A Stock should carefully consider the following
factors in connection with their consideration of their potential election to
retain Falcon Class A Stock in the Merger.
SUBSTANTIAL LEVERAGE; STOCKHOLDERS' DEFICIT; LIQUIDITY
The Company is expected to issue subordinated debt securities and enter into
a new senior secured credit facility (collectively, the "Merger Financings") to
finance the cash consideration to be paid to the holders of Falcon Class A Stock
in the Merger, to refinance substantially all of the outstanding indebtedness of
the Company, to pay the fees and expenses incurred in connection with the Merger
and the Merger Financings and to provide for working capital requirements and
financing of acquisitions. Although the definitive terms of the debt instruments
to be issued in the Merger Financings have not been finalized as of the date of
this Proxy Statement/Prospectus, the Company expects that such terms will
include significant operating and financial restrictions, such as limits on
Falcon's ability to incur indebtedness, create liens, sell assets, engage in
mergers or consolidations, make investments and pay dividends. Upon consummation
of the Merger, it is expected that Falcon will have substantial consolidated
indebtedness. As of December 31, 1996, after giving pro forma effect to the
Merger and the Merger Financings and the application of the net proceeds
therefrom, Falcon would have had (i) $397.8 million of consolidated indebtedness
and (ii) since the Cash Price paid to stockholders as well as all of the Merger
expenses will be charged to stockholders'
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<PAGE>
equity, a deficit of $203.6 million in stockholders' equity. In addition, Falcon
expects to incur additional indebtedness in connection with its post-Merger
strategy of pursuing strategic acquisitions and expanding through internal
growth. Any such high leverage may have important consequences for Falcon,
including the following: (a) Falcon's ability to obtain additional financing for
such acquisitions, working capital, capital expenditures or other purposes may
be impaired or any such financing may not be on terms favorable to Falcon; (b)
interest expense may reduce the funds that would otherwise be available to
Falcon for its operations and future business opportunities; (c) a substantial
decrease in net operating cash flows or an increase in expenses of Falcon could
make it difficult for Falcon to meet its debt service requirements or force it
to modify its operations; and (d) substantial leverage may place Falcon at a
competitive disadvantage and may make it more vulnerable to a downturn in its
business or the economy generally. SEE "THE MERGER--Merger Financings."
In addition, the substantial leverage will have a negative effect on
Falcon's net income. For the fiscal year ended December 31, 1996, Falcon's net
income, on a pro forma basis as adjusted to give effect to the Merger and the
Merger Financings, but excluding non-recurring items directly attributable to
the Merger, would have been $8.5 million, compared to the historical amount for
Falcon for such period of $30.0 million. Pro forma net interest expense would
have been $44.1 million for the year ended December 31, 1996, as compared to
$11.0 million for the same period on a historical basis.
After the Merger is consummated, Falcon's principal sources of liquidity are
expected to be cash flow from operations, borrowings under the revolving credit
portion of the senior secured credit facility and funds from its accounts
receivable securitization program. It is anticipated that Falcon's principal
uses of liquidity under the new revolving credit facility will be to finance
working capital, meet debt service requirements and finance acquisitions, and a
portion thereof will be available for the issuance of letters of credit. The
term loan portion of the senior secured credit facility will be drawn in full
upon consummation of the Merger. SEE "THE MERGER--Merger Financings."
DELISTING OF COMMON STOCK FROM NYSE
As a result of the Merger, it is likely that the Falcon Class A Stock will
no longer meet the listing requirements of the NYSE and the NYSE many
unilaterally act to delist the Falcon Class A Stock from the NYSE. Even if the
NYSE does not act unilaterally to delist the Falcon Class A Stock, it is FBP's
intention that, after the Effective Time, the Falcon Class A Stock will not be
listed on the NYSE or any other national securities exchange. The delisting of
the Falcon Class A Stock is likely to have a material adverse effect on the
trading market for, and the value of, the Falcon Class A Stock and there can be
no assurance that any trading market will exist for the Falcon Class A Stock
after the Merger.
TERMINATION OF SEC REPORTING
As a result of the Merger, the shares of Falcon Class A Stock may be held by
fewer than 300 stockholders of record. In such a case, the Company may
deregister the Falcon Class A Stock from the reporting requirements of the
Exchange Act. If the Falcon Class A Stock is so deregistered, the Company will
not be required to comply with the proxy or periodic reporting requirements of
the Exchange Act, which in turn could reduce the information available to
stockholders on the business and financial condition of the Company and have a
material adverse effect on the value of the Falcon Class A Stock.
CONTROL OF FALCON
Upon completion of the Merger, approximately 88% of the outstanding shares
of voting capital stock of Falcon will be held by a subsidiary of Investcorp and
ten entities which have entered into revocable management services or similar
agreements with an affiliate of Investcorp, pursuant to which such affiliate has
the authority to direct the voting of such shares for as long as such agreements
are in effect. Accordingly, Investcorp and its affiliate will control Falcon and
have the power to elect all of its directors,
19
<PAGE>
to appoint new management and to approve any action requiring the approval of
the holders of its capital stock voting as a single class, including adopting
most amendments to Falcon's certificate of incorporation and approving mergers
or sales of substantially all of Falcon's assets. The directors so elected will
have the authority to effect decisions affecting the capital structure of
Falcon, including the issuance of additional capital stock, the implementation
of stock repurchase programs and the declaration of dividends.
In addition, the existence of a small group of controlling stockholders of
Falcon may have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from seeking to acquire, a majority of
the outstanding equity securities of Falcon. A third party would be required to
negotiate any such transaction with such stockholders and the interests of such
stockholders may be different from the interests of other Falcon stockholders.
TERMS OF FALCON CLASS A STOCK--MANDATORY REDEMPTION
If a stockholder elects to retain shares of Falcon Class A Stock, upon
consummation of the Merger such shares will have rights, powers, privileges and
restrictions which differ in certain respects from the current rights, powers,
privileges and restrictions associated with the Falcon Class A Stock. Among
other things, the Falcon Class A Stock will have certain "tag-along" rights,
will be subject to mandatory redemption in certain circumstances and will be
automatically converted into shares of common stock of Falcon in certain
circumstances. SEE "DESCRIPTION OF FALCON CAPITAL STOCK--Falcon Capital Stock
Following the Merger" and Annex V-A attached hereto.
NO DIVIDENDS
No dividends on shares of Falcon Class A Stock following the Merger are
presently contemplated. In addition, it is anticipated that the terms of the
debt instruments to be entered into in connection with the Merger Financings
will prohibit or otherwise restrict any future payment of dividends.
POTENTIAL DILUTION OF FALCON STOCKHOLDERS
Following the Merger, Falcon will grant to members of management options to
purchase shares of Falcon capital stock, the exercise of which would dilute the
holdings of persons holding shares of Falcon Class A Stock. Falcon has been
informed by FBP that it intends to establish a stock option plan prior to the
Effective Time pursuant to which members of management will be granted options
for approximately 10% of the capital stock of Falcon outstanding at the
Effective Time.
NON-CASH ELECTION AND PRORATION INTO CASH
As described herein, a stockholder may make a Non-Cash Election and thereby
elect to retain shares of Falcon Class A Stock in the Merger, subject to the
proration procedures described herein under "THE MERGER--Non-Cash Election."
Because the Subject Stockholders have already committed to elect to retain the
maximum number of shares of Falcon Class A Stock permitted to be retained under
the Merger Agreement, all stockholders who elect to retain Falcon Class A Stock
are assured that they will experience proration of such shares, resulting in
their retaining only a portion of the shares of Falcon Class A Stock they elect
to retain and receiving $17.75 per share in cash for each of their other shares
of Falcon Class A Stock. SEE "THE MERGER--Federal Income Tax Consequences" for a
more detailed discussion of the tax consequences of receiving cash.
ACHIEVING POST-MERGER BUSINESS STRATEGY
The post-Merger business strategy that has been developed is based on the
Company's operations and strategic planning process. SEE "THE
COMPANY--Post-Merger Business Strategy." After the Merger and after gaining
experience with the Company's operations, the Company's management and new Board
of Directors may decide to alter or discontinue certain parts of the post-Merger
business strategy described
20
<PAGE>
herein and may adopt alternative or additional strategies. There can be no
assurance that such post-Merger business strategy, if implemented, will be
successful or will improve operating results. Further, other conditions may
occur, such as increased competition, or an economic downturn, which may offset
any improved operating results that are attributable to such business strategy.
COMPETITION
The industries in which the Company operates are highly competitive. The
Company competes with several national and regional suppliers of building
products in each of its product areas. In the heating, ventilating and air
conditioning ("HVAC") industry, the Company competes with several national and
regional suppliers of HVAC products. In bathroom fixtures, the Company competes
with other national manufacturers of plumbing products as well as with several
regional producers. In air compressors, the Company is one of the three primary
suppliers of consumer and commercial air compressors. In power washers, the
Company competes primarily with two large manufacturers and several other
smaller producers. Some of the Company's competitors are larger, have greater
financial resources and are less leveraged than the Company. As described
herein, after the Merger, the Company will be substantially more leveraged than
prior to the Merger.
DEPENDENCE ON CONSTRUCTION MARKETS
Demand for the Company's products depends in large part on the residential
construction market and, to a lesser extent, on the commercial construction
market. The level of activity in the residential construction market depends on
new housing starts and residential alteration and repair projects, which are a
function of many factors not within the Company's control, including mortgage
rates, inflation, unemployment, demographic trends, gross domestic product
growth and consumer confidence. According to the U.S. Department of Commerce,
domestic housing starts declined from approximately 1.8 million in 1986 to a low
of approximately 1.0 million in 1991, improving to approximately 1.5 million in
1996. There can be no assurance that this recent improvement will continue. The
decline in residential housing starts resulted in pricing pressures in the
building products industry that have not yet been alleviated. According to the
U.S. Department of Commerce, residential alteration and repair expenditures have
grown from $91 billion in 1986 to approximately $113 billion in 1995. The
Company estimates, based on management's industry experience, that the
residential alteration and repair market accounts for approximately 40% of the
Company's net sales. The level of activity in the commercial construction market
depends largely on vacancy rates and general economic conditions. According to
the U.S. Department of Commerce, commercial construction activity declined from
1986 to 1992 and since then has generally remained flat. Because the residential
and commercial construction markets are sensitive to cyclical changes in the
economy, future downturns in the economy or lack of substantial improvement in
the economy could negatively affect Falcon's operating results. In addition,
sales of certain of the Company's products are subject to seasonal variation due
to factors associated with the construction industry.
DEPENDENCE ON KEY CUSTOMERS
The Company's four largest customers accounted for approximately 35% of the
Company's 1996 net sales. The Company does not have contractual agreements with
any of such customers for the supply of products. The loss of any of such
customers or a significant decrease in the volume of products supplied to any of
such customers could have a material adverse effect on the Company. SEE "THE
COMPANY-- Marketing and Distribution."
ENVIRONMENTAL REGULATION AND LEGAL PROCEEDINGS
The Company's operations are subject to federal, state and local laws and
regulations governing, among other things, emissions to air, discharge to
waters, the generation, handling, storage, transportation, treatment and
disposal of waste and other materials and health and safety matters. The Company
believes
21
<PAGE>
that its operations and facilities have been and are being operated in
compliance in all material respects with applicable environmental and health and
safety laws and regulations, many of which provide for substantial fines and
criminal sanctions for violations. However, the operation of manufacturing
plants entails risks in these areas, and the Company is currently involved in
various proceedings that are expected to result in the incurrence of costs for
clean-up and other remedial activities. The Company believes that its
liabilities for these matters will not have a material adverse effect on its
financial condition, results of operations or competitive position; however,
there can be no assurance that the Company will not incur costs in the future
that will have a material adverse effect on the Company. In addition,
potentially significant expenditures could be required in order to comply with
evolving environmental and health and safety laws, regulations or requirements
that may be adopted or imposed in the future. SEE "THE COMPANY--Environmental
Matters."
LEGAL PROCEEDINGS
The Company is involved from time to time in various legal proceedings and
claims incident to the normal conduct of its business, including the
environmental matters described above. Although it is impossible to predict the
outcome of any pending legal proceeding, the Company believes that such legal
proceedings and claims, individually and in the aggregate, are either without
merit, are covered by insurance or are adequately reserved for, and will not
have a material adverse effect on its financial condition or results of
operations.
In addition to the matters covered by the preceding paragraph, in May 1994,
Underwriters' Laboratories of Canada ("ULC") suspended its recognition of high
temperature plastic venting systems for gas appliances, including the Ultravent
system manufactured by the Company. This action resulted from reports of
problems with high temperature plastic venting systems, including improper
installation, cracking, inadequate joint adhesion, and related safety hazards,
including potential for carbon monoxide emission. In June 1994, as a result of
the ULC action, the Ontario Ministry of Consumer and Commercial Relations
("MCCR") banned sales of these plastic venting systems in the Province of
Ontario. Other provinces of Canada have taken similar action. Pursuant to an
MCCR order, high temperature plastic venting systems in Ontario have been
corrected.
The Company is a defendant in a suit that has been filed against 24 entities
representing heating appliance manufacturers, plastic vent manufacturers, public
utilities and listing agencies by the Ontario New Home Warranty Program, which
is responsible for the cost of replacing vent materials in new home construction
in Ontario. This suit seeks damages of Cdn $125 million from all of the
defendants. Most gas appliance manufacturers in Canada and the United States no
longer certify these venting systems for use with their products. The Company is
also a defendant in a lawsuit filed by Goodman Manufacturing, an appliance
manufacturer that is replacing its own installations and has sued three
defendants for reimbursement of its costs. The Company has been named in a class
action lawsuit which has been filed in the United States regarding high
temperature plastic venting.
The Company is engaged in ongoing discussions with the United States
Consumer Product Safety Commission ("CPSC") which has been advised of the ULC
action and the actions taken by the MCCR. The CPSC continues to investigate high
temperature plastic venting and has met with all of the manufacturers of high
temperature plastic vents, various appliance manufacturers and other entities
with technical expertise. CPSC concerns focus on the heating appliance system,
the plastic resin used to manufacture the venting, vent sealant compounds and
improper installation. While no definitive action has been decided upon, the
Company is aware that the CPSC is considering a corrective action program
involving plastic venting, and it is probable that in the near term the CPSC
will mandate a corrective program which would impact heating appliance
manufacturers, plastic resin manufacturers, and plastic venting manufacturers,
including the Company. Several appliance manufacturers have announced their
intention to replace plastic vent product with alternative systems which have
been approved by the CPSC. Company sales of Ultravent products in the United
States and Canada in 1995 and 1996 were minimal.
22
<PAGE>
While it is impossible at this time to give a firm estimate of the ultimate
cost to the Company, management currently believes that the after-tax cost to
the Company of resolving the Ultravent matter could range from a non-material
amount to $20.0 million, after considering reimbursements and insurance
recoveries. With respect to this matter, the Company has filed a lawsuit against
its insurance carriers. Although no assurances can be given, the Company
believes at this time that the ultimate resolution of these matters will not
have a material effect on the Company's financial condition, but may have a
material effect on future results of operations in the period recognized.
THE COMPANY
GENERAL
Falcon is a leading domestic manufacturer and distributor of products for
the residential and commercial construction and home improvement markets. The
Company's products include air distribution products; ceramic, enameled steel
and acrylic plumbing fixtures; and air compressors, electric generators, power
washers and OEM compressors. The products that contributed more than 10% of net
sales in 1996, 1995 and 1994 were as follows: residential grilles, registers and
diffusers as a group were 9%, 11% and 11%, respectively; ceramic china bathroom
fixtures were 17%, 22% and 25%, respectively; and air compressors were 23%, 28%
and 27%, respectively. Power washers accounted for 13% of net sales in 1996. The
Company believes that its products are well regarded as being innovative, of
high-quality and competitively priced.
Eagle Industries, Inc. ("Eagle") incorporated the Company in January 1994 as
part of a reorganization of all of the entities comprising Eagle's building
products segment. Eagle is a wholly-owned subsidiary of Great American
Management and Investment, Inc., a Delaware corporation ("GAMI"), which is
wholly owned by Equity Holdings Limited, an Illinois limited partnership
("EHL"). In November 1994, the Company completed an initial public offering of
6,000,000 shares of Falcon Class A Stock. In May 1996, Eagle distributed its
ownership of the Company's Class B common stock (14,000,000 shares) to EHL.
Accordingly, Eagle and GAMI have no continuing ownership in the Company.
Pursuant to provisions in the Company's charter, the transfer of the Class B
common stock resulted in its conversion to Falcon Class A Stock. EHL
beneficially owned, as of the Record Date, shares of Falcon Class A Stock
representing approximately 69.8% of the outstanding shares of Falcon Class A
Stock.
COMPANY PRODUCTS
AIR DISTRIBUTION PRODUCTS--The Company is a leading supplier of air
distribution products and is the leading manufacturer of residential and light
commercial grilles, registers and diffusers for heating, ventilating and air
conditioning ("HVAC") applications. These products are marketed under the Hart &
Cooley-Registered Trademark-, Metlvent-Registered Trademark-, Reliable-TM-,
Tuttle & Bailey-Registered Trademark-, Woodwinds-TM- and Valley-TM- brand names.
The Company manufactures more than 8,000 air distribution items, including metal
grilles, registers and diffusers, gas vent and chimney systems, flexible ducts,
louvers, 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.
PLUMBING FIXTURES--The Company is a leading domestic producer of ceramic
china bathroom fixtures, including toilets and lavatories. The Company also
produces enameled steel bathroom tubs and sinks, and acrylic whirlpool tubs as
well as brass and plastic trim and fittings. These products are sold to the
residential construction market under the Mansfield-Registered Trademark- and
Swirl-way-Registered Trademark- brand names.
AIR POWER PRODUCTS--The Company is a leading producer of consumer and
commercial air compressors for home improvement applications. The Company
manufactures a broad line of air compressors in the 3/4 to 10 horsepower range.
These air compressors are electric or gasoline-driven with either oil-lubricated
or oil-free pumps and are marketed under several brand names, including Air
America-Registered Trademark-, Charge Air Pro-Registered Trademark-, Pro
4000-TM-, Pro Air II-TM- and Steel Driver-Registered Trademark-. The Company
also manufactures air compressors
23
<PAGE>
under private-label programs, the most significant of which is the
Craftsman-Registered Trademark- label for Sears Roebuck and Co. In addition, the
Company sells a variety of accessory items such as paint spray guns, nailers and
staplers, pneumatic tools, sanders and air hoses for use in home improvement
applications. In 1995, several new product lines were introduced, including
electric generators, power washers and OEM compressors. These new products, as
is the case with compressors, are marketed primarily into retail and home center
outlets. In January 1996, Falcon completed the acquisition of Ex-Cell
Manufacturing Co., Inc. ("Ex-Cell"). Headquartered in Decatur, Arkansas, Ex-Cell
is a leading manufacturer of power washers, marketed through the retail/home
center distribution channel under the Ex-Cell-Registered Trademark- brand name.
BUILDING PRODUCTS INDUSTRY
The building products industry depends primarily on the residential and
commercial construction markets. The level of activity in the residential
construction market depends on new housing starts and residential alteration and
repair projects, which are generally a function of interest rates, inflation,
unemployment, demographic trends, gross domestic product growth and consumer
confidence. According to the U.S. Department of Commerce, domestic housing
starts declined from approximately 1.8 million in 1986 to approximately 1.0
million in 1991, improving to approximately 1.5 million in 1996. Domestic
housing starts have fluctuated between 1.3 million and 1.5 million from 1993 to
1996. The decline in residential housing starts from the mid 1980's to the
present has resulted in pricing pressures in the industry that have not yet been
alleviated. However, according to the U.S. Department of Commerce, residential
alteration and repair expenditures have grown over the same period, from $91
billion in 1986 to a high of approximately $113 billion in 1995. The Company
estimates, based upon management's industry experience, that the residential
alteration and repair market accounts for approximately 40% of the Company's net
sales. The level of activity of the commercial construction market depends
largely on vacancy rates and general economic conditions. According to the U.S.
Department of Commerce, commercial construction activity declined from 1986 to
1992 and since then has generally remained flat.
MARKETING AND DISTRIBUTION
The Company markets and distributes its products nationwide through a
variety of distribution channels. Based on 1996 net sales, approximately 52% of
the Company's products are distributed to wholesalers and manufacturers'
representatives who sell to contractors serving the residential and commercial
construction markets. Approximately 48% of the Company's net sales are made to
mass merchandisers and retail chains, which sell to homeowners and contractors.
The Company utilizes a combination of internal sales forces and independent
representatives to market and sell its products. The Company markets its
residential and light commercial air distribution products nationwide to HVAC
contractors through over 750 wholesale distributors. The Company provides sales
support to these distributors through a direct field sales staff and a customer
service group. Independent representatives are also used to supplement the field
sales coverage. The Company markets its commercial and industrial air
distribution products nationwide primarily to HVAC contractors through over 150
commercial representatives. The Company's commercial representative organization
is supported by regional sales managers and a customer service group. The
Company markets its ceramic china, acrylic whirlpool baths and enameled steel
bathroom fixtures and brass fittings primarily through manufacturers'
representatives, who sell to wholesale distributors. These distributors sell to
plumbers, building contractors and remodelers. The Company also supplies
bathroom fixture products to the retail distribution channel, primarily through
Home Depot. The Company markets its air compressor products primarily through
consumer distribution channels. These consumer distribution channels constitute
approximately 95% of the Company's air compressor sales and include mass
merchants, warehouse clubs, home centers, hardware cooperatives and farm and
fleet cooperatives. The Company services these consumer channels through a
direct sales staff and manufacturers' representatives.
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COMPETITION
Falcon competes with several national and regional suppliers of building
products in each of its product areas. In HVAC, the Company competes primarily
with other large HVAC manufacturers and with several national and regional
suppliers of HVAC products. In bathroom fixtures, the Company competes with
other national manufacturers of plumbing products as well as with regional
producers. In air compressors, the Company is one of the three primary suppliers
of consumer and commercial air compressors. In power washers, the Company
competes primarily with two other large manufacturers and several other smaller
producers. Some of the Company's competitors are larger, have greater financial
resources and are less leveraged than the Company. The Company believes that it
has competed successfully in its market on the basis of quality, service and
product differentiation.
PATENTS, TRADEMARKS AND LICENSES
The Company has been issued several patents worldwide. The Company believes
that its patents are important to its business operations; however, the Company
does not believe that the expiration or loss of any of its patents would have a
material adverse effect on the Company.
The Company owns a number of trademarks, including Hart & Cooley-Registered
Trademark-, Metlvent-Registered Trademark-, Reliable-TM-, Tuttle &
Bailey-Registered Trademark-, Woodwinds-TM-, Valley-TM-, Mansfield-Registered
Trademark-, Swirl-Way-Registered Trademark-, Kilgore-TM-, Air America-Registered
Trademark-, Charge Air Pro-Registered Trademark-, Ex-Cell-Registered Trademark-
and Pro Air II-TM-. The Company also has several licenses for various
trademarks, including a license to use the DeVilbiss trademark. The DeVilbiss
license has a ten-year term (expiring in April 2000) and may be renewed for two
successive ten-year renewal periods. The Company believes that its trademarks
and its licenses are important to its business operations, but does not believe
that the expiration or loss of any trademark or license would have a material
adverse effect on the Company.
RAW MATERIALS AND SUPPLIERS
The raw materials and component parts used in the Company's operations
include steel, aluminum, clay, mylar and electric motors. Most of the Company's
purchases are sourced domestically and nearly all of the Company's purchases are
readily available through multiple sources. During 1995 a world-wide shortage of
mylar occurred, restricting availability and increasing cost. By the end of
1995, availability had improved. In the last five years, the Company has not
experienced any other shortages that materially affected production. Purchases
are typically made through blanket order releases that span a period from
several months up to one year. In 1995, double-digit inflation was encountered
in certain of the basic raw materials and components used in the manufacturing
process. The total raw material cost inflation in 1995 added approximately $18
million to Falcon's 1995 cost of sales. During 1996, raw material costs eased
and, in some specific items, have declined below year-end 1995 levels
BACKLOG
The Company's backlog at December 31, 1996 and 1995 was $22.0 million and
$10.6 million, respectively. In accordance with its past experience,
substantially all of the Company's backlog at December 31, 1996 was shipped
during the first quarter of 1997.
EMPLOYEES
The Company employed approximately 4,100 persons as of December 31, 1996.
Approximately 2,200 hourly employees are covered by six collective bargaining
agreements expiring through 1999. The Company believes that its labor relations
are satisfactory at all of its facilities.
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ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws and
regulations governing, among other things, emissions to air, discharge to
waters, the generation, handling, storage, transportation, treatment and
disposal of waste and other materials and health and safety matters. The Company
believes that its business, operations and facilities have been and are being
operated in compliance in all material respects with applicable environmental
and health and safety laws and regulations, many of which provide for
substantial fines and criminal sanctions for violations. However, the operation
of manufacturing plants entails risks in these areas, and there can be no
assurance that the Company will not incur material costs or liabilities in the
future. In addition, potentially significant expenditures could be required in
order to comply with evolving environmental and health and safety laws,
regulations or requirements that may be adopted or imposed in the future.
The Company is involved in environmental proceedings initiated by state or
local governmental agencies pertaining to two of its facilities. The Company is
currently working with the appropriate agencies on a remedial plan for the
closure of an on-site landfill at the Company's Holland, Michigan facility that
is currently estimated to cost approximately $400,000. The Company is also
working with the appropriate agencies on a remedial plan for the closure of one
on-site and four off-site landfills at or near the Company's Perrysville, Ohio
facility that is currently estimated to cost approximately $1,000,000. In
addition, the Company is in the process of making capital alterations at its
Perrysville, Ohio foundry in response to an environmental compliance variance.
The Company believes that its reserves are adequate and that its liabilities for
these matters will not have a material adverse effect on the Company's financial
condition, annual results of operations or competitive position; however, there
can be no assurance that the Company will not incur costs or liabilities in the
future that will have a material adverse effect on the Company. Capital
expenditures and expenses (including ordinary course of business hauling and
disposal expenses) in 1996 attributable to environmental matters were not
material in relation to the Company's consolidated financial position or results
of operations.
POST-MERGER BUSINESS STRATEGY
The Company's business strategy has emphasized, and will continue to
emphasize after consummation of the Merger, long term value creation through the
manufacturing and distribution of highly engineered building products for the
residential, light commercial and home improvement markets. Key elements of this
strategy include:
EMPHASIS ON QUALITY AND CUSTOMER SERVICE. The Company believes that the
continued production of high-quality products and maintenance of superior
customer service are essential to its growth. The Company emphasizes the
importance of product quality to all of its employees, incorporates high-quality
materials into its products and continues to implement total quality management
initiatives at its operating locations.
LOW COST PRODUCTION. The Company believes that it is a low cost producer in
each of the markets it serves and will strive to maintain this position in the
future. The Company has reduced costs through the development of cost-effective
product designs, careful attention to manufacturing processes, employee
involvement, capital investment and the consolidation of manufacturing
facilities.
DOMESTIC AND INTERNATIONAL MARKET EXPANSION. The Company intends to
continue to expand market share in domestic markets while further pursuing
expansion into international markets. The Company has identified significant
growth opportunities in several international markets, particularly in Canada,
Mexico, Latin America and Asia, and plans to pursue these opportunities by
increasing exports and entering into strategic alliances with local
manufacturers and distributors.
NEW PRODUCTS AND PRODUCT LINE EXTENSIONS. The Company plans to expand its
offering of innovative and high-quality products at competitive prices.
Significant product innovations have been developed by
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the Company, and several new products were recently introduced, including a line
of decorative residential registers, one-piece plumbing fixtures, pneumatic
nailers and staplers, and electric generators.
DISTRIBUTION CHANNEL EXPANSION. The Company intends to expand into
additional distribution channels while further penetrating existing distribution
channels. One area of focus is to continue to capitalize on the growing trend of
homeowners and small contractors to purchase building products from home centers
and other retail outlets.
STRATEGIC AND COMPLEMENTARY ACQUISITIONS. The Company plans to continue to
aggressively focus on acquiring complementary product lines and businesses. The
Company intends to pursue acquisitions which are closely related to its
businesses, complement current manufacturing and distribution capabilities and
provide the Company with opportunities to add capacity, consolidate operations
and achieve economies of scale. The Company also plans to explore strategic
acquisitions of manufacturers and distributors of highly engineered building
products which can be integrated into the Company's business strategy.
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED
The purpose of the Special Meeting is to vote upon a proposal to approve and
adopt the Merger Agreement entered into between FBP and Falcon and the
transactions contemplated thereby, including the Merger. If the Merger is
approved by the stockholders of Falcon, FBP will merge with and into Falcon and
19,014,255 million shares of Falcon Class A Stock currently held by Falcon's
stockholders will be converted into cash. The remaining 1,034,020 shares of the
presently issued and outstanding shares of Falcon Class A Stock will be retained
by existing stockholders of Falcon and, upon consummation of the Merger, will
have those rights, powers, privileges and restrictions described in this Proxy
Statement/ Prospectus.
The shares which are to be retained will represent approximately 12% of the
shares of Falcon Class A Stock to be issued and outstanding immediately after
the Merger. In addition to the 1,034,020 shares of Falcon Class A Stock to be
issued and outstanding upon the effectiveness of the Merger, the Company will
have shares of three other classes of stock outstanding: 6,876,464 shares of
Class B Common Stock; 689,346 shares of Class C Common Stock and 17,000 shares
of Class D Common Stock. The 1,034,020 shares of Falcon Class A Stock to be
outstanding will represent approximately 12% of the outstanding equity capital
of the Company and will have approximately 12% of the voting power after the
Merger. The shares of Class B Common Stock, Class C Common Stock and Class D
Common Stock will represent approximately 88% of the outstanding equity capital
of the Company after the Merger. Shares of Class D Common Stock will have
approximately 88% of the voting power after the Merger and shares of Class B
Common Stock and Class C Common Stock will not have voting rights. SEE
"DESCRIPTION OF FALCON CAPITAL STOCK--Falcon's Capital Stock Following the
Merger."
The Merger Agreement is attached to this Proxy Statement/Prospectus as Annex
I. SEE "THE MERGER" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT." The Board
of Directors of Falcon, and the non-management members of the Board of Directors
of Falcon, have each, by unanimous vote, approved the Merger Agreement and each
recommend a vote FOR approval of the Merger Agreement and the Merger.
REQUIRED VOTES
The affirmative vote of the holders of at least a majority of the shares of
Falcon Class A Stock entitled to vote thereon is required to adopt and approve
the Merger Agreement and the actions contemplated thereby, including the Merger.
Pursuant to the Voting Agreements, the Subject Stockholders, who
beneficially owned, as of the Record Date, an aggregate of approximately 71% of
the outstanding Falcon Class A Stock, have agreed,
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subject to certain conditions, to vote all shares of Falcon Class A Stock held
by them in favor of the Merger Agreement and the Merger. The stockholders who
are parties to the Voting Agreements consist of EHL, Messrs. Hall, Cottone and
Athas and five other officers of the Company and its subsidiaries. The forms of
the Voting Agreements appear as Annex II to this Proxy Statement/Prospectus. SEE
"CERTAIN RELATED AGREEMENTS--Voting Agreements."
As of the Record Date, directors and executive officers of the Company and
their affiliates were beneficial owners of an aggregate of 448,075 shares
(approximately 2.2%) of the outstanding Falcon Class A Stock. The directors and
executive officers of the Company who have not executed the Voting Agreements,
who beneficially owned as of the Record Date an aggregate of 176,200 shares
(approximately 0.9%) of the outstanding Falcon Class A Stock, have indicated
that they intend to vote their shares of Falcon Class A Stock in favor of the
Merger Agreement and the Merger.
VOTING AND REVOCATION OF PROXIES
Shares of Falcon Class A Stock that are entitled to vote and are represented
by a proxy properly signed and received at or prior to the Special Meeting,
unless subsequently properly revoked, will be voted in accordance with the
instructions indicated thereon. If a proxy is signed and returned without
indicating any voting instructions, shares of Falcon Class A Stock represented
by such proxy will be voted FOR the proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby. The persons appointed as
proxies may not exercise their discretionary voting authority to vote any such
proxy in favor of any adjournments or postponements of the Special Meeting if
instruction is given to vote against the approval of the Merger and the other
proposals. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the shares represented by such proxy are
voted at the Special Meeting by (i) attending and voting in person at the
Special Meeting, (ii) giving notice of revocation of the proxy at the Special
Meeting, or (iii) delivering to the Secretary of Falcon (a) a written notice of
revocation or (b) a duly executed proxy relating to the same shares and matters
to be considered at the Special Meeting, bearing a date later than the proxy
previously executed. Attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed to
Falcon as follows: Two North Riverside Plaza, Suite 1100, Chicago, Illinois
60606 Attention: Gus J. Athas, Secretary, and must be received before the taking
of the votes at the Special Meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of Falcon Class A Stock at the close of business on May 5, 1997
will be entitled to receive notice of and to vote at the Special Meeting. At the
close of business on the Record Date, the Company had outstanding and entitled
to vote 20,048,275 shares of Falcon Class A Stock. Shares of Falcon Class A
Stock represented by proxies which are marked "abstain" or which are not marked
as to any particular matter or matters will be counted as shares present for
purposes of determining the presence of a quorum on all matters. Proxies
relating to "street name" shares that are voted by brokers will be counted as
shares present for purposes of determining the presence of a quorum on all
matters, but will not be treated as shares having voted at the Special Meeting
as to any proposal as to which authority to vote is withheld by the broker.
The presence, in person or by proxy, at the Special Meeting of the holders
of at least a majority of the votes entitled to be cast at the Special Meeting
is necessary to constitute a quorum for the transaction of business. Abstentions
will be counted as present for the purposes of determining whether a quorum is
present but will not be counted as votes cast in favor of the Merger. Because
the vote on the Merger requires the approval of a majority of the votes entitled
to be cast by the stockholders of the outstanding shares of Falcon Class A
Stock, abstentions will have the same effect as a negative vote on the proposal.
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DISSENTERS' RIGHTS
Each stockholder of Falcon Class A Stock has a right to dissent from the
Merger, and, if the Merger is consummated, to seek to receive "fair value" for
his shares in cash by complying with the provisions of Delaware law, including
Section 262 of the DGCL. The dissenting stockholder must deliver to the Company,
prior to the vote being taken on the Merger at the Special Meeting, written
notice of his or her intent to demand payment for his or her shares if the
Merger is effected and must not vote in favor of the Merger. The full text of
Section 262 of the DGCL is attached as Annex IV hereto. SEE "DISSENTING
STOCKHOLDERS' RIGHTS" for a further discussion of such rights and the legal
consequences of voting shares of Falcon Class A Stock in favor of the Merger.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies and the cost
of printing and mailing this Proxy Statement/Prospectus. In addition to
solicitation by mail, the directors, officers and employees of the Company may
solicit proxies from stockholders of the Company by telephone, telegram or in
person. Such directors, officers and employees will not be additionally
compensated for any such solicitation but may be reimbursed for outstanding
out-of-pocket expenses in connection therewith. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of shares held of
record by such persons and the Company will reimburse such custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses in connection
therewith.
Morrow & Co., Inc. will assist in the solicitation of proxies by the Company
for a fee of approximately $2,500, plus reasonable out-of-pocket expenses. If
you have any questions or require additional material, please call Morrow & Co.,
Inc. at (800) (toll free) or ( ) (collect).
HOLDERS OF FALCON CLASS A STOCK SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS. ONLY HOLDERS OF FALCON CLASS A STOCK WHO WISH TO MAKE A
NON-CASH ELECTION ARE REQUIRED TO SEND STOCK CERTIFICATES WITH THEIR FORM OF
ELECTION (AS DEFINED BELOW). SEE "THE MERGER--NON-CASH ELECTION" AND "--NON-CASH
ELECTION PROCEDURE."
THE MERGER
BACKGROUND OF THE MERGER
At a regularly scheduled Board of Directors meeting on September 6, 1996,
the Company's management expressed concern over the fact that, notwithstanding
the Company's solid operating performance in 1996 and a good market for equity
securities, the Company's stock price had not risen significantly since the
Company's initial public offering on November 2, 1994. Management advised the
Board that over the past several months it had explored and implemented a
variety of operating, administrative and financial measures to enhance
stockholder value. Accordingly, the Board asked management to determine if there
were any strategic measures available to increase stockholder value.
Pursuant to the Board's directive, management asked Merrill Lynch and Smith
Barney, with whom the Company had ongoing investment banking relationships, to
investigate various strategies to enhance stockholder value, including (i)
merging the Company with logical strategic partners and (ii) selling all or
parts of the Company to strategic and/or financial buyers. Company officials met
with representatives of Merrill Lynch on October 17, 1996 and with
representatives of Smith Barney on October 23, 1996 to discuss alternative
strategies for the enhancement of stockholder value. As a result of these
meetings, management asked Merrill Lynch and Smith Barney to make preliminary
inquiries among a limited number of highly qualified potential buyers and to
discuss alternatives for the enhancement of stockholder value at the next
meeting of the Board of Directors.
At the regularly scheduled meeting of the Board of Directors on November 13,
1996, the Board, management, Merrill Lynch and Smith Barney assessed the
Company's current market valuation and stock
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price performance and discussed, among other alternatives, the possibility of
enhancing stockholder value through the sale of the Company, in whole or in
part, to a financial or strategic buyer. Management, Merrill Lynch and Smith
Barney also indicated to the Board that, in the event the Board elected to
explore alternatives leading to the sale of the Company, it could proceed in any
of the following ways: (i) continue discussions with the small group of
potential buyers that Merrill Lynch and Smith Barney had contacted in the hope
that one or more of them, in an effort to avoid a lengthy auction process, would
offer a premium price and move quickly to consummate a transaction, (ii) conduct
a "controlled auction" with a larger group (5-20) of potential buyers or (iii)
conduct a full-scale, publicly disclosed auction of the Company.
After extensive discussion and evaluation of the advantages and
disadvantages of each option, the Board authorized management to continue to
pursue discussions with the buyers that had already been contacted to determine
their interest in offering a premium price for the Company in order to preempt
other buyers. The Board and management noted that this approach could avoid the
business and personnel disruption attending a full public auction. The Board
also authorized management to retain both Merrill Lynch and Smith Barney as
financial advisors (collectively, the "Financial Advisors") to the Company.
Pursuant to the Board's directives and authorization, the Company retained
Smith Barney on November 19, 1996 and Merrill Lynch on November 20, 1996.
Thereafter, as directed by Board, Merrill Lynch and Smith Barney continued
discussions with the five potential buyers previously selected, each of whom had
signed confidentiality agreements and received confidential information about
the Company. Two of these possible buyers submitted preliminary indications of
interest.
At a Board meeting on November 21, 1996, management and the Financial
Advisors reviewed the two indications of interest that the Company had received.
The Board noted that (i) each indication of interest contained substantial
contingencies and risks regarding the ultimate consummation of a transaction at
the indicated price levels and (ii) neither indication of interest was at a
price sufficient to justify foregoing a broader sale process. At the meeting,
and on the basis of advice received from the Financial Advisors and the
Company's legal counsel, the Board decided that a full-scale, publicly disclosed
auction represented the best way to maximize value for all shareholders. The
Company's legal counsel then explained to the Board the principal events and
timing of the full auction process.
The Company, with the assistance of the Financial Advisors, then prepared a
confidential memorandum (the "Confidential Memorandum") for distribution to
potential buyers and assembled comprehensive lists of possible buyers to be
contacted directly regarding their interest in a possible transaction.
On December 2, 1996, the Company issued a press release stating that the
Company had hired the Financial Advisors to explore strategic alternatives,
including the possible sale of the Company or one or more of its business units.
The Financial Advisors contacted or, as a result of the public announcement,
were contacted by 151 parties interested in considering the potential
acquisition of the entire Company or one or more of its operating units.
Confidentiality agreements were entered into with 87 potential buyers and,
beginning on December 6, 1996, copies of the Confidential Memorandum were sent
to such potential buyers. Each potential buyer also received a letter setting
forth the procedures of the auction process, the deadline for offers, and other
bidding requirements.
By mid-January 1997, the Company had received 32 written indications of
interest from potential buyers, 12 of which expressed interest in acquiring the
Company as a whole. Management, with the Financial Advisors' assistance,
evaluated each indication of interest and selected 15 potential buyers to
proceed to the next stage of the auction process. The Company's tax counsel
advised that the sale of either Hart & Cooley or Mansfield in separate
transactions would be highly inefficient from a tax standpoint. Management did
not believe that the bids that the Company received for either Hart & Cooley or
Mansfield were sufficiently attractive to overcome this tax inefficiency.
Accordingly, after conferring with its legal counsel and the Financial Advisors,
management decided to give preference to either (i) the sale of the stock of the
entire Company to a single buyer or (ii) the sale of the stock of its DeVilbiss
subsidiary, to one buyer, and the subsequent sale of the stock of the Company
(excluding DeVilbiss but including the
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Hart & Cooley and Mansfield subsidiaries) to a different buyer. These 15
potential buyers received access to a special "Data Room" set up by the Company
and also the opportunity to meet with the management of the Company and its
subsidiaries and to visit the Company's various manufacturing sites. The Company
included in this group 11 of the 12 bidders that expressed interest in acquiring
the Company as a whole and four bidders that expressed interest in acquiring
DeVilbiss alone. From January 16 through February 4, each of the 15 potential
buyers conducted meetings with management and 11 of them visited selected
manufacturing sites. The remaining four parties elected not to proceed further.
On January 28, 1997, at its regularly scheduled meeting, the Board received
a progress report on the auction process. At this meeting, the Board asked
specific questions about various potential buyers as well as the business and
tax implications of pursuing the separate sale of subsidiaries rather than the
Company as a whole. The Board reviewed and affirmed management's judgment in
selecting, from among the 32 submitted indications of interest, 15 potential
buyers to proceed to the next stage of the auction. At this meeting, the
Financial Advisors told the Board that financial buyers had uniformly indicated
that the availability of recapitalization accounting would be an essential
element of their proposals.
On February 10, each of the 11 remaining potential buyers received a second
letter requesting that they submit their "best and final" offer, including the
price per share and the key terms and conditions of their bid, by March 12,
1997. Those potential buyers interested in the entire Company also received a
draft merger agreement and were instructed to submit their comments thereon with
their final offers. The Company's letter stated that such offers should not be
conditioned on financing or further due diligence.
On March 12, 1997, the Company received three offers for the Company and two
offers for the separate sale of DeVilbiss.
A special Board of Directors' meeting was held on March 14, 1997 to review
these offers with the Company's legal counsel and the Financial Advisors. The
Board, with the assistance of management and the Financial Advisors, determined
at that time that the sale of the entire Company provided the most attractive
alternative for the Company's stockholders and that the offer from Investcorp
was economically and structurally superior to the other two offers for the
entire Company. In particular, the Investcorp offer represented the highest
price per share ($19 per share, less the amount of the legal and financial
advisory fees to be incurred by the Company in connection with the transaction),
was not contingent upon the receipt of financing or the completion of
significant further due diligence, and treated all stockholders equally by
giving each of them the opportunity to retain an equity interest in the Company.
Because the Company estimated that its fees and expenses would approximate $.50
per share, the Company regarded the Investcorp offer as essentially offering
$18.50 per share. The Investcorp offer was conditioned on, among other things,
(i) the execution of employment agreements with key members of the Company's
management, (ii) the availability of recapitalization accounting treatment for
the transaction, (iii) the agreement of EHL, the Company's majority stockholder,
to vote in favor of its transaction and to give Investcorp an option to purchase
EHL's shares and (iv) the receipt of certain indemnification arrangements from
EHL or an affiliate thereof satisfactory to Investcorp. In particular, the
Investcorp offer required EHL to indemnify the Company for 80% of all future
expenses and costs for which the Company may become responsible as a result of
the alleged defects in the Ultravent product offered by the Company's Hart &
Cooley subsidiary.
The second highest offer was deemed less attractive because it (i) offered a
lower price per share, (ii) contained a more onerous request for indemnification
regarding the Ultravent matter from the majority stockholder (which reduced the
probability that the offer would be acceptable to such stockholder), (iii)
proposed a transaction structure that provided for recapitalization accounting
but did not give the Company's minority stockholders the opportunity to retain
equity ownership in the surviving corporation and (iv) was conditioned on the
absence of a material change in the capital markets between execution and the
closing of the acquisition agreement.
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The proposal submitted by the lowest of the three bidders (i) was
conditioned upon the completion of its due diligence investigation, (ii) offered
a price per share that was substantially less than the price offered by either
of the two other bidders, (iii) was conditioned on the availability of financing
(although a "highly confident" letter was provided by a prominent investment
banking firm) and (iv) requested a more onerous indemnification related to the
Ultravent matter than that requested by Investcorp. In addition, this offer was
substantially less complete than the other offers because it did not include
proposed revisions to the draft merger agreement supplied by the Company, even
though the Company had expressly requested that all bids contain such proposed
revisions. The Board, after conferring with management, legal counsel and the
Financial Advisors, determined that the conditions as to due diligence and
financing, plus the fact that this buyer provided no comments on the draft
merger agreement, substantially increased the uncertainty of ultimately reaching
a satisfactory agreement with this bidder.
At the conclusion of the Board meeting, the Board directed management: (i)
to negotiate with Investcorp, (ii) to notify the second highest bidder that its
bid was inadequate and (iii) not to pursue further discussions with the lowest
bidder for the entire Company or with those bidders offering to purchase
DeVilbiss alone.
Mr. Hall, Falcon's President and Chief Executive Officer, discussed with the
Board, that, in contrast to the other two offers, the Investcorp offer was
conditioned on the continued employment of certain key executive officers,
including himself, by the Company after the consummation of the proposed
transaction. Mr. Hall requested that the Board appoint an AD HOC committee
comprised of two independent directors to monitor potential conflicts of
interest created by the Investcorp negotiations. The Board then appointed
Messrs. Sim and Smialek to such a committee.
Negotiations with Investcorp began on March 17 and continued through March
20, 1997. Early in the negotiations, Investcorp and the Company agreed to split
the estimated $0.50 per share cost of investment banking and legal fees by
reducing the proposed purchase price by $0.25 per share to $18.75 per share.
However, Investcorp refused to drop its condition relating to recapitalization
accounting, stating that in order to do so it would have to substantially reduce
its offered price per share, perhaps by as much as $4.00 to $5.00 per share. In
separate negotiations between EHL and Investcorp, EHL indicated that it would
agree to Investcorp's requirement that the Subject Stockholders agree to elect
to retain that number of shares of Falcon Class A Stock equal to the Non-Cash
Election Number in order to satisfy the requirements of recapitalization
accounting and to enter into a voting agreement to support the transaction,
subject to obtaining stockholder rights commensurate with its ownership
position. Investcorp indicated that EHL's willingness to take these steps was
fundamental to Investcorp's willingness to proceed with a transaction at the
price of $18.75 per share.
On Tuesday, March 18, 1997, the second highest bidder submitted a revised
bid, but its offer price remained less than the price per share ultimately
offered by Investcorp even though the second bidder continued to require a full
indemnity from EHL with respect to the Ultravent matter.
In addition to its negotiations with the Company, Investcorp began separate
negotiations with EHL regarding the Ultravent matter. EHL refused to supply an
indemnity on the Ultravent matter on the grounds that the Ultravent matter is a
liability of the Company and not an obligation of EHL. Investcorp determined
that it was impractical to structure and administer indemnity arrangements in
which all of the Company's stockholders bore responsibility for the Ultravent
matter. As a result, on Wednesday, March 19, Investcorp orally presented to the
Company a revised offer pursuant to which it would modify its offer so that it
would pay $17.75 per share and would drop its request that EHL provide an
Ultravent indemnity.
At a special meeting of the Board of Directors on March 20, 1997, management
and the Financial Advisors advised the Board of the progress of the negotiations
with Investcorp and that the revised bid submitted by the second highest bidder
remained inferior to the current Investcorp proposal. The Board, management and
the Financial Advisors extensively discussed the Investcorp offer and, in
particular, the requirement of Investcorp and the other bidders that the
transaction be accounted for as a recapitalization for financial reporting
purposes. Management and the Financial Advisors stated that, in order to obtain
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maximum value for all stockholders, it was essential that the Company accept the
contractual provisions that Investcorp required relating to recapitalization
accounting.
Representatives of EHL were invited to attend this special meeting of the
Board in order that they might address the requirements related to
recapitalization accounting. The EHL representatives told the Board that, in
order to allow Investcorp to obtain recapitalization accounting treatment, while
at the same time permitting all other stockholders to receive cash if they chose
to do so, EHL was willing to commit to retain a specified number of shares, but
that if other stockholders also determined to retain Falcon Class A Stock, EHL
would share PRO RATA with such stockholders the opportunity to retain equity in
the surviving corporation.
The Board noted that a key distinction between the Investcorp offer and the
other two offers received for the sale of the Company was that the Investcorp
offer provided for equal treatment of all stockholders by giving each
stockholder the opportunity to retain an equity interest in the Company after
the transaction, while the other offers were structured to preclude stockholders
other than EHL from having this opportunity.
Legal counsel reviewed the applicable legal principles and the key
differences in the form of merger agreement previously distributed to the Board
and the form of the Merger Agreement presented for Board approval. The Financial
Advisors then rendered to the Board their respective oral opinions (which
opinions were subsequently confirmed by delivery of written opinions dated March
20, 1997) to the effect that, as of such date and based upon and subject to
certain matters stated in such opinions, the consideration to be received by the
holders of Falcon Class A Stock in the proposed Merger was fair to such holders
from a financial point of view, and reviewed with the Board the financial
analyses performed by the Financial Advisors in connection with their respective
opinions (see "--Opinions of Falcon's Financial Advisors"). Each Financial
Advisor also indicated that it believed that, based on the exhaustive auction
process that had been conducted, the current Investcorp offer was the best offer
reasonably available to the Company.
For the reasons summarized above, and on the basis of the advice of the
Financial Advisors and its legal counsel, the Board, and the non-management
members of the Board, each then voted unanimously to accept the Investcorp offer
on the grounds that it was fair to, and in the best interests of, Falcon's
stockholders and was the best offer available at the end of a comprehensive
auction process.
The Board also approved the Voting Agreement among the Company, Investcorp
and EHL, because Investcorp had advised the Board that it would not sign the
Merger Agreement unless such agreement was in place. The Board also reviewed a
form of the Employment Agreements (which take effect upon consummation of the
Merger) with Messrs. Hall, Cottone and Athas and two other officers of the
Company and was advised of the amount of the transaction incentive bonuses
payable by the Company to management upon consummation of the Merger. The AD HOC
committee comprised of Messrs. Sim and Smialek reported that it had reviewed
these arrangements and found them to be reasonable.
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
At its meeting on March 20, 1997, the Board, and the non-management members
of the Board, each unanimously determined, among other things, that the
transactions contemplated by the Merger Agreement, including the Merger and the
Voting Agreement among the Company, EHL and FBP and the transactions
contemplated thereby, taken together, are fair and in the best interests of the
stockholders of Falcon. The Board, and the non-management members of the Board,
each recommends that holders of Falcon Class A Stock vote FOR the Merger.
The Board's and the non-management Board members' decision to enter into the
Merger Agreement was based, in large part, upon balancing the risks and benefits
of the Merger against the risks and benefits of the other strategic alternatives
available to the Company. Of the strategic alternatives available to the
Company, the Merger was deemed by the Board and by the non-management Board
members to be the
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alternative which would yield the best results to the stockholders of the
Company from a financial point of view. SEE "--Background of the Merger."
The recommendation by the Board that the Company's stockholders approve and
adopt the Merger Agreement and the Merger is not, and should not be considered
to be, a recommendation as to whether stockholders should retain shares of
Falcon Class A Stock.
In the course of reaching its decision to approve the Merger Agreement and
the Merger, the Board consulted with the Company's legal counsel and the
Financial Advisors and considered a number of factors, including, among others,
the following:
(i) the reports and opinions of Company management as to the possibility
for improvement in the Company's operating, financial and administrative
operations;
(ii) the options available to EHL as the Company's majority stockholder,
including the sale of its control position without sharing the control
premium with other stockholders;
(iii) that the Board agreed to the Merger only after the Company and its
Financial Advisors contacted a substantial number of potential bidders over
an extended period of time in a lengthy "auction" process designed to elicit
third party proposals to acquire the Company and enhance stockholder value;
this process consisted of, among other things, the issuance by the Company
of a press release regarding its review of strategic alternatives and the
passage of a significant period of time between issuance of the press
release and approval of the Merger Agreement;
(iv) that the "auction" process was conducted in an evenhanded manner
and that third parties interested in the Company had been afforded
sufficient time and information to submit such a proposal had they wished to
do so;
(v) that the $17.75 per share Cash Price to be paid in the Merger
represents a premium for the Falcon Class A Stock of approximately 43.4%
over the closing price of $12 3/8 per share of the Falcon Class A Stock on
November 29, 1996, the last trading day prior to the public announcement
that the Company was considering strategic alternatives and had retained the
Financial Advisors to assist in this process;
(vi) the fact that the Investcorp offer treats all shareholders equally
by giving all stockholders the opportunity to receive cash for their shares
or to retain shares of Falcon Class A Stock (subject to proration);
(vii) the opinions dated March 20, 1997 delivered to the Board by the
Financial Advisors to the effect that as of the date of such opinions and
based upon and subject to certain matters stated therein, the consideration
to be received in the Merger by holders of Falcon Class A Stock was fair
from a financial point of view to such holders;
(viii) the Board's belief that, based upon the advice of the Financial
Advisors and other factors, the Merger constituted the best transaction
reasonably available to maximize stockholder value;
(ix) the fact that the Company's majority stockholder was willing to
agree to vote its shares in favor of the Merger; and
(x) the fact that the Company may terminate the Merger Agreement in
order to pursue a superior offer if its Board of Directors determines that
doing so is required by its fiduciary duty to the stockholders of the
Company.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Board
did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weight to different factors.
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OPINIONS OF FALCON'S FINANCIAL ADVISORS
OPINION OF MERRILL LYNCH
On March 20, 1997, Merrill Lynch delivered its oral opinion (which opinion
was subsequently confirmed by delivery of a written opinion dated March 20,
1997) (the "Merrill Lynch Opinion") to the Company's Board of Directors to the
effect that, as of such date, and based upon the assumptions made, matters
considered and limits of review set forth in such opinion, the proposed
consideration to be received by the holders of Falcon Class A Stock in the
Merger was fair to such stockholders from a financial point of view.
A copy of the Merrill Lynch Opinion, which sets forth the assumptions made,
matters considered and certain limitations on the scope of review undertaken by
Merrill Lynch, is attached as Annex III-A to this Proxy Statement/Prospectus.
Company stockholders are urged to read such opinion in its entirety. The summary
of the Merrill Lynch Opinion set forth in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion. The
Merrill Lynch Opinion was intended only for the use and benefit of the Board of
Directors of the Company, was directed only to the fairness of the proposed
consideration to be received by the holders of Falcon Class A Stock from a
financial point of view, and does not constitute a recommendation to any
shareholder as to how such stockholder should vote with respect to the Merger or
any transaction related thereto or as to whether any stockholder should elect to
receive cash or to retain Falcon Class A Stock.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other things,
(i) reviewed (a) the Company's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1995, (b) a draft of
the Company's Form 10-K and related financial information for the fiscal year
ended December 31, 1996, (c) the Company's Prospectus dated November 2, 1994
relating to its initial public offering of common stock, and (d) the Company's
Forms 10-Q and the related unaudited financial information for the quarterly
periods ending September 30, 1995, March 31, 1996, June 30, 1996 and September
30, 1996; (ii) reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Company, and information relating to certain pro forma effects on the Company's
capital structure after giving effect to the Merger; (iii) conducted discussions
with members of senior management of the Company concerning the foregoing,
including its businesses and prospects and certain pro forma effects on the
Company's capital structure after giving effect to the Merger; (iv) reviewed the
historical market prices and trading activity for the Falcon Class A Stock and
compared them with that of certain publicly traded companies which Merrill Lynch
deemed to be reasonably similar to the Company; (v) compared the results of
operations of the Company with that of certain companies which Merrill Lynch
deemed to be reasonably similar to the Company; (vi) compared the proposed
financial terms of the transactions contemplated by the Merger Agreement with
the financial terms of certain other mergers and acquisitions which Merrill
Lynch deemed to be relevant; (vii) reviewed the Merger Agreement dated March 20,
1997; (viii) reviewed the Voting Agreements dated March 20, 1997; and (ix)
reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as Merrill Lynch deemed
appropriate, including, without limitation, Merrill Lynch's assessment of
general economic, industry and market conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch has assumed and relied
on the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch or publicly available, and Merrill Lynch has not
independently verified such information and did not assume any responsibility
for verifying such information or undertaking an independent appraisal of the
assets or liabilities of the Company or been furnished with any such appraisal.
With respect to the financial forecasts furnished by the Company and information
relating to certain pro forma effects on the Company's capital structure after
giving effect to the Merger, Merrill Lynch has assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's management as to the expected future financial
performance of the Company and as to such pro forma effects on the
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Company's capital structure. The Merrill Lynch Opinion was necessarily based
upon general economic, industry and market conditions as they existed on, and
could be evaluated as of, the date of the Merrill Lynch Opinion. The Merrill
Lynch Opinion did not address the merits of the underlying decision by the
Company to engage in the Merger. Merrill Lynch's opinion and analyses were only
one of numerous factors considered by the Board in its evaluation of the Merger
and should not be viewed as determinative of the views of the Board with respect
to the Merger or the consideration to be received by holders of Falcon Class A
Stock in the Merger.
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in arriving at the Merrill Lynch Opinion
delivered to the Company's Board of Directors on March 20, 1997.
STOCK PRICE AND PREMIUM STUDY. Merrill Lynch reviewed the closing market
price and trading volume of the Falcon Class A Stock for the period beginning
November 2, 1994 and ending March 18, 1997. Merrill Lynch compared the closing
market price performance of the Falcon Class A Stock for the period beginning
November 2, 1994 and ending March 18, 1997 to the Standard and Poor's 500
Composite Index to provide perspective on the current and historical stock price
relative to such index. Merrill Lynch observed that the $17.75 Cash Price
represented a (i) 43.4% premium when compared to the closing market price of
such stock on November 29, 1996 (the "Pre-Announcement Date"), which was the
last trading date prior to the public announcement on December 2, 1996 that the
Company was pursuing strategic alternatives, (ii) 32.7% premium when compared to
the highest closing market price of such stock during the 52 week period prior
to the Pre-Announcement Date, and (iii) 32.7% premium when compared to the
highest closing market price of such stock during the period from November 2,
1994, the date of the initial public offering of the Falcon Class A Stock, to
the Pre-Announcement Date.
COMPARABLE COMPANY TRADING MULTIPLES ANALYSIS. Using publicly available
information, including earnings per share and growth rate estimates obtained
from First Call Corporation ("First Call") and Institutional Brokers Estimate
System ("IBES"), Merrill Lynch reviewed certain financial ratios of each of the
following publicly traded companies that Merrill Lynch deemed to be reasonably
similar to the Company: American Standard Companies Inc., Armstrong World
Industries, Inc., The Black & Decker Corporation, Danaher Corporation, Masco
Corporation, Nortek, Inc., Owens Corning, PlyGem Industries, Inc., PPG
Industries, Inc., The Stanley Works, Triangle Pacific Corp. and USG Corporation
(the "Publicly-Traded Comparables"). Merrill Lynch analyzed the multiples
obtained by dividing (i) the per share market price of the common stock of each
of the Publicly-Traded Comparables by (x) the earnings per share of the then
publicly available latest twelve month period ("LTM") and (y) the projected 1997
earnings per share, and (ii) the aggregate market capitalization (defined as the
aggregate market equity value plus the liquidation value of preferred stock,
plus the principal amount of debt, plus minority interest, less cash and
marketable securities) of each of the Publicly Traded Comparables by the then
publicly available LTM (x) earnings before interest, taxes, depreciation and
amortization ("EBITDA"), (y) earnings before interest and taxes ("EBIT") and (z)
revenue for such companies. Such financial ratios were compared to the
corresponding historical and projected operating results of the Company,
including earnings per share and growth rate estimates obtained from First Call
and IBES, to derive valuation estimates for the Company.
Utilizing this methodology, Merrill Lynch derived estimated per share
valuations for the Falcon Class A Stock ranging from approximately $15.50 to
$19.50.
COMPARABLE ACQUISITION TRANSACTIONS ANALYSIS. Using publicly available
information, Merrill Lynch reviewed nineteen transactions since January 3, 1989
that have closed or were announced involving the acquisition of building
products companies (the "Comparable Building Products Acquisition Transaction"),
to derive estimated per share valuations for the Falcon Class A Stock. The
Comparable Building Products Acquisition Transactions and the announcement date
of each transaction are as follows: Eljer Industries, Inc./Zurn Industries, Inc.
(December 1996); Overhead Door Corporation/Sanwa Shutter Corporation (July
1996); Amtrol Inc./Cypress Group, Inc. (April 1996); Steelcraft
(MascoTech)/Ingersoll-
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Rand Company (January 1996); American Olean Tile Company/Dal-Tile International
Inc. (December 1995); FM Holdings (Formica Corporation)/BTR Nylex Limited
(December 1994); CECO Entry Systems (United Dominion Industries Ltd)/Premdor
Inc. (August 1994); GMI Holdings (The Genie Company)/ Overhead Door Corporation
(August 1994); Bird Corporation/Jannock Ltd. (September 1994); Norandex
Inc./Fibreboard Corporation (July 1994); Automatic Door (Ideal Door Co.)/Clopay
Corporation (Instrument Systems Corporation) (February 1992); Gardenamerica
Corporation (The Black & Decker Corporation)/James Hardie Industries Ltd.
(October 1990); Philips Industries Inc./Tomkins PLC (June 1990); Ceco Industries
Inc./Robertson-Ceco Corporation (May 1990); Dallas Corp (Overhead Door Inc.)/
DCO Holdings Corp (Bessemer Securities Corp.) (November 1989);
Nichols-Homeshield Inc./Quanex Corporation (May 1989); JPI Plumbing Products (JP
Industries Inc.)/Briggs Industries Holdings Corp. (March 1989); SNE Enterprises
Limited Partnership/Ply Gem Industries, Inc. (February 1989); and American
Standard-Steelcraft (ASI Holding Corp.)/Masco Industries Inc. (MascoTech Inc.)
(January 1989).
With respect to each of the Comparable Building Products Acquisition
Transactions, Merrill Lynch compared (i) the equity purchase price as a multiple
of LTM net income prior to the transaction (the "Net Income Multiple") and (ii)
the transaction value (defined as the equity purchase price plus the liquidation
value of preferred stock, plus the principal amount of debt, plus minority
interest, less cash and marketable securities) as a multiple of the (x) LTM
EBITDA prior to the transaction (the "EBITDA Multiple"), (y) LTM EBIT prior to
the transaction (the "EBIT Multiple") and (z) LTM revenue prior to the
transaction (the "Revenue Multiple") of such companies. Based on its review of
the Comparable Building Products Acquisition Transactions, for the Net Income
Multiple, EBITDA Multiple, EBIT Multiple and Revenue Multiple, respectively,
Merrill Lynch utilized values of 9.3x to 12.6x, 6.5x to 7.8x, 8.0x to 9.6x and
0.83x to 1.00x.
Utilizing this methodology, Merrill Lynch derived estimated per share
valuations for the Falcon Class A Stock ranging from approximately $14.50 to
$19.50.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow ("DCF") analysis of the Company using management operating projections for
the years 1997 through 1999 and operating projections extrapolated therefrom for
the years 2000 through 2006. The DCF was calculated assuming discount rates
ranging from 12% to 14% for the Company, and was comprised of the sum of the net
present value of (i) the projected unleveraged free cash flow for the years 1997
through 2006 and (ii) the year 2006 terminal value based upon a range of
multiples of 6.0x to 7.0x projected EBITDA in such year for the Company, less
the current net debt of the Company.
Utilizing this methodology, Merrill Lynch derived estimated per share
valuations for the Falcon Class A Stock ranging from approximately $14.50 to
$21.25.
LEVERAGED RECAPITALIZATION ANALYSIS. Merrill Lynch performed a leveraged
recapitalization analysis for the Company using management operating projections
for the years 1997 through 1999 and operating projections extrapolated therefrom
for the years 2000 through 2006. In its analyses, among other assumptions,
Merrill Lynch assumed a pro forma leveraged capitalization structure for the
Company, that the public stockholders of the Company would own between 10% to
15% of the Falcon Class A Stock, on a fully diluted basis immediately following
a hypothetical leveraged recapitalization and that such a transaction would
qualify for recapitalization accounting treatment. Merrill Lynch analyzed the
impact of the leveraged recapitalization structure on the Company's pro forma
financial performance including, without limitation, the impact on its earnings,
cash flow, balance sheet and related financial measures.
LEVERAGED BUY-OUT ANALYSIS. Merrill Lynch performed a leveraged buy-out
analysis for the Company using management operating projections for the year
1997 through 1999 and operating projections extrapolated therefrom for the years
2000 through 2006. In its analysis, among other assumptions, Merrill Lynch
assumed a pro forma leveraged capitalization structure for the Company, and that
the public stockholders of the Company would not own any of the Falcon Class A
Stock immediately following a
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hypothetical leveraged buy-out. Merrill Lynch analyzed the impact of the
leveraged buy-out structure on the Company's pro forma financial performance,
including, without limitation, the impact on its earnings, cash flow, balance
sheet, and related financial measures.
Based upon the foregoing leveraged recapitalization and buy-out analyses,
Merrill Lynch derived estimated per share valuations for the Falcon Class A
Stock ranging from approximately $15.50 to $18.00.
BREAK UP ANALYSIS. Merrill Lynch performed a break up analysis for the
Company (a "Break Up") which among other assumptions, assumed the following
transactions: (i) (x) a sale of the stock of DeVilbiss, and (y) a separate sale
of the stock of the Company (excluding DeVilbiss but including Hart & Cooley and
Mansfield) and (ii) a (x) sale of the stock of DeVilbiss, (y) a separate sale of
the stock and/or assets and liabilities of Mansfield, and (z) a separate sale of
the stock and/or assets and liabilities of Hart & Cooley. In evaluating the
potential proceeds that could be received under such alternative transactions,
Merrill Lynch considered, among other factors, the indications of interests
received from potential purchasers with respect to a potential acquisition of
the individual operating units and/or combinations of such operating units.
Utilizing this methodology and after giving effect to the tax consequences from
the foregoing alternative transactions, Merrill Lynch derived estimated per
share valuations for the Falcon Class A Stock ranging from approximately $13.00
to $17.25. Merrill Lynch noted that a Break Up of a company may take a
significant amount of time and that there is substantial risk and uncertainty as
to the ability to complete each component of such a Break Up at the values
estimated when multiple persons or entities are involved.
The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch. Arriving at a fairness opinion is a
complex process not necessarily susceptible to partial analysis or summary
description. Merrill Lynch believes that its analysis must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all such factors and analyses, could create a
misleading view of the processes underlying its opinion. Merrill Lynch did not
assign relative weights to any of its analyses in preparing its opinion. The
matters considered by Merrill Lynch in its analyses were based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the Company's control and involve the application of complex
methodologies and educated judgment. Any estimates incorporated in the analyses
performed by Merrill Lynch are not necessarily indicative of actual past or
future results or values, which may be significantly more or less favorable than
such estimates. Estimated values do not purport to be appraisals and do not
necessarily reflect the prices at which businesses or companies may be sold in
the future, and such estimates are inherently subject to uncertainty. No public
company utilized as a comparison is identical to the Company, and none of the
Comparable Building Products Acquisition Transactions, or other business
combinations utilized as a comparison is identical to the proposed Merger.
Accordingly, an analysis of publicly traded comparable companies and comparable
business combinations is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading or acquisition value of the comparable companies or company
to which they are being compared.
OPINION OF SMITH BARNEY
Smith Barney was retained to act as a financial advisor to Falcon in
connection with the proposed Merger. In connection with such engagement, Falcon
requested that Smith Barney evaluate the fairness, from a financial point of
view, to the holders of Falcon Class A Stock of the consideration to be received
by such holders in the Merger. On March 20, 1997, at a meeting of the Board of
Directors of Falcon held to evaluate the proposed Merger, Smith Barney delivered
an oral opinion (which opinion was subsequently confirmed by delivery of a
written opinion dated March 20, 1997) to the Board of Directors of Falcon to the
effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein,
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the consideration to be received by holders of Falcon Class A Stock in the
Merger was fair, from a financial point of view, to such holders of Falcon Class
A Stock.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of Falcon and certain senior officers and other
representatives of Investcorp concerning the business, operations and prospects
of Falcon. Smith Barney examined certain publicly available business and
financial information relating to Falcon as well as certain financial forecasts
and other information and data for Falcon which were provided to or otherwise
discussed with Smith Barney by the management of Falcon. Smith Barney reviewed
the financial terms of the Merger as set forth in the Merger Agreement in
relation to, among other things: current and historical market prices and
trading volumes of Falcon Class A Stock; the historical and projected earnings
and other operating data of Falcon; and the capitalization and financial
condition of Falcon. Smith Barney also considered, to the extent publicly
available, the financial terms of certain other similar transactions recently
effected which Smith Barney considered relevant in evaluating the Merger and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations Smith
Barney considered relevant in evaluating those of Falcon. In connection with its
engagement, Smith Barney was requested to approach, and held discussions with,
third parties to solicit indications of interest in a possible acquisition of
Falcon. In addition to the foregoing, Smith Barney conducted such other analyses
and examinations and considered such other financial, economic and market
criteria as Smith Barney deemed appropriate in arriving at its opinion. Smith
Barney noted that its opinion was necessarily based upon information available,
and financial, stock market and other conditions and circumstances existing and
disclosed, to Smith Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Smith Barney. With respect to financial forecasts
and other information and data furnished to or otherwise reviewed by or
discussed with Smith Barney, the management of Falcon advised Smith Barney that
such forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Falcon as to the future financial performance of Falcon. Smith
Barney assumed, with the consent of the Board of Directors of Falcon, that the
Merger will be treated as a recapitalization in accordance with generally
accepted accounting principles. Smith Barney did not express any opinion as to
what the value of Falcon Class A Stock actually will be when issued pursuant to
the Merger or the price at which the Falcon Class A Stock will trade or
otherwise be transferable subsequent to the Merger. Smith Barney did not make
and was not provided with an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of Falcon nor did Smith Barney make any
physical inspection of the properties or assets of Falcon. Although Smith Barney
evaluated the consideration to be received by holders of Falcon Class A Stock in
the Merger from a financial point of view, Smith Barney was not asked to and did
not recommend the specific consideration payable in the Merger, which was
determined through negotiation between Falcon and Investcorp. No other
limitations were imposed by Falcon on Smith Barney with respect to the
investigations made or procedures followed by Smith Barney in rendering its
opinion.
The full text of the written opinion of Smith Barney dated March 20, 1997,
which sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached hereto as Annex III-B and is incorporated herein
by reference. The summary of the opinion of Smith Barney set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. Holders of Falcon Class A Stock are urged to read the opinion
carefully in its entirety. The opinion of Smith Barney is directed to the Board
of Directors of Falcon and relates only to the fairness of the consideration to
be received by holders of Falcon Class A Stock in the Merger from a financial
point of view, does not address any other aspect of the Merger or related
transactions and does not constitute a recommendation to any stockholder as to
how such stockholder should vote at the Special Meeting.
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In preparing its opinion, Smith Barney performed a variety of financial and
comparative analyses, including those described below. The summary of such
analyses does not purport to be a complete description of the analyses
underlying Smith Barney's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Smith Barney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In its analyses, Smith Barney made
numerous assumptions with respect to Falcon, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Falcon. The estimates contained in such analyses
and the valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Smith Barney's
opinion and analyses were only one of numerous factors considered by the Board
in its evaluation of the Merger and should not be viewed as determinative of the
views of the Board with respect to the Merger or the consideration to be
received by holders of Falcon Class A Stock in the Merger.
SELECTED COMPANY ANALYSIS. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
Falcon and 13 selected publicly traded companies in the general building
products industry, consisting of: ABT Building Products Corporation, Armstrong
World Industries, Inc., The Black & Decker Corporation, Congoleum Corporation,
Dal-Tile International Inc., Drew Industries, Inc., Fibreboard Corp., Masco
Corporation, Nortek, Inc., PlyGem Industries, Inc., Schuller Corporation, The
Stanley Works and Triangle Pacific Corp. (collectively, the "Selected
Companies"). Smith Barney compared market values as multiples of, among other
things, calendar 1996 net income, and adjusted market values (equity market
value, plus total debt and contingent liabilities, less cash and cash
equivalents) as multiples of calendar 1996 revenue and EBITDA. Net income
multiples for the Selected Companies were based on estimates of selected
investment banking firms and net income multiples for Falcon were based on
internal estimates of the management of Falcon. All multiples were based on
closing stock prices as of March 13, 1997. Applying a range of selected
multiples for the Selected Companies of calendar 1996 net income, revenue and
EBITDA of 14.0x to 15.0x, 0.9x to 1.0x and 6.0x to 7.2x, respectively, to
corresponding financial data for Falcon resulted in an equity reference range
for Falcon of approximately $16.36 to $19.46 per share, as compared to the
consideration to be received in the Merger of $17.75 per share.
SELECTED MERGER AND ACQUISITION TRANSACTIONS ANALYSIS. Using publicly
available information, Smith Barney analyzed the purchase price and implied
transaction value multiples paid or proposed to be paid in 25 selected
transactions in the building products industry, consisting of (acquiror/target):
H.I.G. Investment Group L.P./Thermal Industries, Inc; Sanwa Shutter
Corporation/Overhead Door Corporation; Cypress Group/Amtrol Inc.; Ingersoll-Rand
Co./Steelcraft (MascoTech, Inc.); Dal-Tile International, Inc./ American Olean
division of Armstrong World Industries Inc.; MascoTech, Inc./Gale Industries;
BTR Nylex Ltd. (Australia)/FM Holdings (Formica Corp.); Premdor, Inc./CECO Entry
Systems (United Dominion Industries Corporation); Overhead Door Corporation/GMI
Holdings (The Genie Company); Jannock Ltd./Bird Corporation (Vinyl building
products manufacturing operations); Fibreboard Corporation/ Norandex Inc.;
Owens-Corning Fiberglas Corp./UC Industries, Inc.; Owens-Corning Fiberglas
Corp./ Pilkington Insulation Limited and Kitsons Insulation Products Limited;
Linsalata Capital Partners/CareFree Aluminum Products; Clopay (Instrument
Systems Corp.)/Automatic Door (Ideal Door Co.); James Hardie Industries
Ltd./Garden America Corp. (The Black & Decker Corp.); Tomkins PLC/Philips
Industries Inc.; HH Robertson Co. (Robertson--Ceco Corp./Ceco Industries Inc.;
Wayne-Dalton Corp./Kinnear Division (Harsco Corp.); Nalcor Inc./Builders
Hardware (JP Industries Inc.); DCO Holdings Corp.
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(Bessemer Securities Corp.)/Dallas Corp. (Overhead Door Corporation); Quantax
Corp./Nichols-Homeshield Inc.; Briggs Industries Holding Corp./JPI Plumbing
Products Inc. (JP Industries Inc.); Ply-Gem Industries Inc./SNE Enterprises
Limited Partnership; and Masco Industries, Inc. (MascoTech, Inc.)/ American
Standard-Steelcraft (ASI Holding Corp.) (collectively, the "Selected
Transactions"). Smith Barney compared, among other things, the purchase prices
of such transactions as multiples of latest 12 months' net income, and
transaction values as multiples of latest 12 months' revenue and EBITDA. All
multiples for the Selected Transactions were based on information available at
the time of announcement of the transaction. Applying a range of selected
multiples for the Selected Transactions of latest 12 months' net income, revenue
and EBITDA of 14.5x to 16.0x, 0.6x to 0.8x and 6.5x to 7.5x, respectively, to
corresponding financial data for Falcon resulted in an equity reference range
for Falcon of approximately $14.91 to $18.62 per share, as compared to the
consideration to be received in the Merger of $17.75 per share.
No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to Falcon or the Merger. Accordingly, an analysis of the results of
the foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the Selected Companies, Selected Transactions or the
business segment, company or transaction to which they are being compared.
DISCOUNTED CASH FLOW ANALYSIS. Smith Barney performed a discounted cash
flow analysis of the projected free cash flow of Falcon for the fiscal years
1997 through 2001, based on internal estimates of the management of Falcon. The
stand-alone discounted cash flow analysis of Falcon was determined by (i) adding
(x) the present value of projected free cash flows over the five-year period
from 1997 to 2001 and (y) the present value of Falcon's estimated terminal value
in year 2001 and (ii) subtracting the current net debt of Falcon. The range of
estimated terminal values for Falcon at the end of the five-year period was
calculated by applying terminal value multiples ranging from 6.0x to 7.0x to
Falcon's projected 2001 EBITDA, representing Falcon's estimated value beyond the
year 2001. The cash flows and terminal values of Falcon were discounted to
present value using discount rates ranging from 12.0% to 15.0%. Utilizing such
discount rates and terminal values, this analysis resulted in an equity
reference range for Falcon of approximately $14.70 to $21.85 per share, as
compared to the consideration to be received in the Merger of $17.75 per share.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) indications of interest
received from third parties other than Investcorp; (ii) Falcon's historical and
projected financial results; (iii) the history of trading prices and volume for
Falcon Class A Stock; and (iv) the premiums implied by the consideration to be
received in the Merger based on the closing price of Falcon Class A Stock on
November 29, 1996 of $12.38 per share (the last trading day before Falcon
publicly announced that it was evaluating strategic alternatives) and based on
the closing price of Falcon Class A Stock on March 19, 1996 of $16.375 per
share, which indicated premiums as of such dates of approximately 43.4% and
8.4%, respectively.
INFORMATION CONCERNING THE COMPANY'S FINANCIAL ADVISORS
Merrill Lynch and Smith Barney are both internationally recognized
investment banking firms and, as a customary part of their investment banking
activities, are regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and other purposes.
Management selected Smith Barney and Merrill Lynch because of their expertise,
reputation and familiarity with the Company and its industry.
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Merrill Lynch and Smith Barney have advised Falcon that, in the ordinary
course of their respective businesses, they actively trade in Falcon Class A
Stock for their respective own accounts and for the account of their respective
customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, Merrill Lynch was a managing underwriter for
Falcon's initial public offering and has provided other investment banking
services for the Company in the past. Smith Barney has in the past provided
certain investment banking services to Falcon unrelated to the proposed Merger,
for which services Smith Barney has received compensation. In addition, Smith
Barney and its affiliates (including Travelers Group Inc. and its affiliates)
may maintain relationships with Falcon, Investcorp and their respective
affiliates.
Pursuant to the terms of Merrill Lynch's engagement, the Company has agreed
to pay Merrill Lynch for its services, if the Merger is consummated, an
aggregate financial advisory fee equal to a percentage of the total
consideration payable in connection with the Merger. It is currently estimated
that such financial advisory fee will be approximately $ million. The Company
has also agreed to reimburse Merrill Lynch for its reasonable out-of-pocket
expenses including the reasonable fees and disbursements of its outside legal
counsel and to indemnify Merrill Lynch and related persons against certain
liabilities, including liabilities under the federal securities laws, arising
out of Merrill Lynch's engagement. In addition, Merrill Lynch is acting as a
co-manager for the sale of subordinated debt securities in connection with the
Merger Financings. Pursuant to this arrangement, Merrill Lynch will receive a
fee if such proposed Merger Financings are consummated as contemplated of
approximately $1.0 million.
Pursuant to the terms of Smith Barney's engagement, the Company has agreed
to pay Smith Barney for its services, if the Merger is consummated, an aggregate
financial advisory fee equal to a percentage of the total consideration payable
in connection with the Merger. It is currently estimated that such financial
advisory fee will be approximately $ million. The Company has also agreed to
reimburse Smith Barney for its reasonable out-of-pocket expenses including the
reasonable fees and expenses of its outside legal counsel and to indemnify Smith
Barney and related persons against certain liabilities, including liabilities
under the federal securities laws, arising out of Smith Barney's engagement. In
addition, Smith Barney is acting as lead manager for the sale of subordinated
debt securities in connection with the Merger Financings. Pursuant to this
arrangement, Smith Barney will receive a fee of approximately $3.3 million if
such proposed Merger Financings are consummated as contemplated.
MERGER CONSIDERATION
Subject to certain provisions as described herein with respect to shares of
Falcon Class A Stock owned by the Company, any subsidiary of the Company or by
FBP or its affiliates, and with respect to fractional shares and Dissenting
Shares, each issued and outstanding share of Falcon Class A Stock will be
converted into either (i) the right to receive in cash from Falcon following the
Merger an amount equal to $17.75 (the "Cash Price") or (ii) the right to retain
one fully paid and nonassessable share of Falcon Class A Stock, which upon
consummation of the Merger, will have those rights, powers, privileges and
restrictions as described herein (a "Non-Cash Election Share"); provided, that
the aggregate number of shares of Falcon Class A Stock to be converted into the
right to retain Falcon Class A Stock at the Effective Time shall be equal to
1,034,020 (the "Non-Cash Election Number"). With respect to certain risks
related to holding Falcon Class A Stock, SEE "RISK FACTORS" above.
The Merger Agreement contemplates that 19,014,255 of the presently issued
and outstanding shares of Falcon Class A Stock will be converted into cash and
that 1,034,020 of such shares will be retained by existing stockholders.
Pursuant to the Voting Agreements, the Subject Stockholders have agreed to elect
to retain 1,034,020 shares of Falcon Class A Stock. Thus, all stockholders who
do not elect to retain Falcon Class A Stock will be assured that they will
receive $17.75 in cash for each share held by such stockholders, and all
stockholders who elect to retain Falcon Class A Stock will experience proration
of such shares, resulting in their retaining only a portion of the shares of
Falcon Class A Stock they elect to retain and receiving $17.75 per share in cash
for each of their other shares of Falcon Class A Stock.
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The following examples illustrate the potential effects of proration:
A. HOLDER A OWNS 100 SHARES AND DOES NOT ELECT TO RETAIN ANY SHARES.
Because the Subject Stockholders have committed to elect to retain at least
1,034,020 shares of Falcon Class A Stock, all stockholders who do not elect to
retain shares of Falcon Class A Stock will be assured that their shares will be
converted into cash. Therefore, Holder A will receive $1,175.00 for its 100
shares in the Merger.
B. HOLDER B OWNS 100 SHARES AND ELECTS TO RETAIN ALL ITS SHARES.
Because the Subject Stockholders have committed to elect to retain 1,034,020
shares of Falcon Class A Stock, Holder B will not be able to retain all its
shares and will be required to receive some cash. This is because the Non-Cash
Election Number requirement has been exceeded and thus the number of shares
which have been elected to be retained must be reduced in order to meet exactly
the Non-Cash Election Number requirement. For example, if stockholders elect to
retain 10,000,000 shares in the aggregate, then each holder, including Holder B,
would be able to retain only 10.34% of his shares in order to reduce the number
of retained shares to 1,034,020 to meet the Non-Cash Election Number
requirement. Therefore, Holder B would be able to retain only 10 shares (or 10%
of his 100 shares) and would receive $1,597.50 in cash (90 shares at $17.75 per
share). In the case of maximum proration (i.e., all stockholders elect to retain
all their shares), Holder B would be able to retain only 5 shares and would
receive $1,686.25 in cash.
C. HOLDER C OWNS 100 SHARES AND ELECTS TO RETAIN 50 SHARES AND CONVERT 50
SHARES TO CASH.
Because the Subject Stockholders have committed to elect to retain 1,034,020
shares of Falcon Class A Stock, all stockholders, including Holder C, who elect
to retain Falcon Class A Stock will experience proration of such shares,
resulting in their retaining only a portion of the shares of Falcon Class A
Stock they elect to retain and receiving $17.75 per share in cash for each of
their other shares of Falcon Class A Stock. Therefore, Holder C will not be able
to retain 50 shares, as elected. Again, this is because the Non-Cash Election
Number requirement has been exceeded and thus the number of shares which have
been elected to be retained must be reduced in order to meet exactly the
Non-Cash Election Number requirement. For example, if stockholders elected to
retain 10,000,000 shares in the aggregate, then each holder, including Holder C,
would be able to retain only 10.34% of its shares in order to reduce the number
of retained shares to 1,034,020 and thus meet the Non-Cash Election Number
requirement. Therefore, Holder C would be able to retain only 5 shares and would
receive $798.75 in cash (45 shares at $17.75 per share) for the remaining shares
Holder C sought to retain, plus $887.50 in cash for the shares Holder C elected
to convert to cash. If the stockholders elected to retain more than 10,000,000
shares in the aggregate, Holder C would receive fewer shares than in the example
above, but would receive a commensurately greater amount of cash.
Fractional shares of Falcon Class A Stock will not be issued in the Merger.
Holders of Falcon Class A Stock otherwise entitled to a fractional share of
Falcon Class A Stock following the Merger will be paid cash in lieu of such
fractional share determined and paid as described under "--Fractional Shares"
below.
Any shares of Falcon Class A Stock owned by the Company, by any subsidiary
of the Company, or by FBP or its affiliates, will automatically be cancelled at
the Effective Time and will cease to exist.
NON-CASH ELECTION
Record holders of shares of Falcon Class A Stock will be entitled to make an
unconditional election (a "Non-Cash Election") on or prior to the Election Date
(as defined below) to retain Non-Cash Election Shares. If the number of Electing
Shares exceeds the Non-Cash Election Number, then (i) the number of Electing
Shares covered by each Non-Cash Election will be determined by multiplying the
total number of
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Electing Shares covered by such Non-Cash Election by a proration factor (the
"Non-Cash Proration Factor") determined by dividing the Non-Cash Election Number
by the total number of Electing Shares and (ii) such number of Electing Shares
will be so retained. All Electing Shares, other than those permitted to be
retained as described in the immediately preceding sentence, will be converted
into cash as if such shares were not Electing Shares. The number of Electing
Shares permitted to be retained as Non-Cash Election Shares or the right to
receive cash will be determined on a consistent basis among stockholders who
made the election to retain Non-Cash Election Shares, pro rata to the number of
shares as to which they made such election.
Because the Subject Stockholders have committed to elect to retain 1,034,020
shares of Falcon Class A Stock, all stockholders who do not elect to retain
Falcon Class A Stock will be assured that they will receive $17.75 in cash for
each share held by such stockholder, and all stockholders who elect to retain
Falcon Class A Stock will experience proration of such shares, resulting in
their retaining only a portion of the shares of Falcon Class A Stock they elect
to retain and receiving $17.75 per share in cash for each of their other shares
of Falcon Class A Stock. SEE "THE MERGER--Federal Income Tax Consequences." If,
however, for any reason the number of Electing Shares is less than the Non-Cash
Election Number, then (i) all Electing Shares will be converted into the right
to retain Non-Cash Election Shares in accordance with the Merger Agreement, (ii)
additional shares of Falcon Class A Stock, other than Electing Shares and
Dissenting Shares, will be converted into the right to retain Non-Cash Election
Shares, which number of additional shares shall be determined by multiplying the
total number of shares, other than Electing Shares, by a proration factor (the
"Cash Proration Factor") determined by dividing (x) the difference between the
Non-Cash Election Number and the number of Electing Shares by (y) the total
number of shares of Falcon Class A Stock, other than Electing Shares and
Dissenting Shares, and (iii) such additional shares of Falcon Class A Stock
shall be converted into the right to retain Non-Cash Election Shares in
accordance with the Merger Agreement (on a consistent basis among stockholders
who held shares of Falcon Class A Stock as to which they did not make the
Non-Cash Election, pro rata to the number of shares as to which they did not
make such election).
Upon consummation of the Merger, Non-Cash Election Shares will have those
rights, powers, privileges and restrictions described in this Proxy
Statement/Prospectus, including, among other things, certain "tag-along" rights,
will be subject to mandatory redemption in certain circumstances and will be
automatically converted into shares of common stock of Falcon in certain
circumstances. SEE "DESCRIPTION OF FALCON CAPITAL STOCK--Falcon Capital Stock
Following the Merger" and Annex V-A attached hereto.
With respect to certain risks related to retaining Falcon Class A Stock, SEE
"RISK FACTORS" above.
NON-CASH ELECTION PROCEDURE
The form for making a Non-Cash Election (the "Form of Election") is being
mailed to holders of record of Falcon Class A Stock together with this Proxy
Statement/Prospectus. FOR A FORM OF ELECTION TO BE EFFECTIVE, HOLDERS OF FALCON
CLASS A STOCK MUST PROPERLY COMPLETE SUCH FORM OF ELECTION, AND SUCH FORM OF
ELECTION, TOGETHER WITH ALL CERTIFICATES FOR SHARES OF FALCON CLASS A STOCK HELD
BY SUCH HOLDER, DULY ENDORSED IN BLANK OR OTHERWISE IN FORM ACCEPTABLE FOR
TRANSFER ON THE BOOKS OF THE COMPANY (OR BY APPROPRIATE GUARANTEE OF DELIVERY AS
SET FORTH IN SUCH FORM OF ELECTION), MUST BE RECEIVED BY THE BANK OF NEW YORK
(THE "EXCHANGE AGENT") AT ONE OF THE ADDRESSES LISTED ON THE FORM OF ELECTION
AND NOT WITHDRAWN, BY 5:00 P.M., EASTERN TIME, ON THE SECOND BUSINESS DAY (THE
"ELECTION DATE") PRECEDING THE DATE OF THE SPECIAL MEETING.
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The determinations of the Exchange Agent as to whether or not Non-Cash
Elections have been properly made or revoked, and when such election or
revocations were received, will be binding.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware or such later date as is
specified in such Certificate of Merger (the "Effective Time"). The filing of
the Certificate of Merger will occur as soon as practicable on or after the
closing of the Merger unless another date is agreed to in writing by the Company
and FBP. Subject to certain limitations, the Merger Agreement may be terminated
by either party if, among other reasons, the Merger has not been consummated on
or before September 16, 1997. SEE "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT--Conditions to the Consummation of the Merger" and "Termination."
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RETENTION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
As soon as practicable after the Effective Time, the Exchange Agent will
send a letter of transmittal to each holder of Falcon Class A Stock (other than
holders of Falcon Class A Stock making a Non-Cash Election who have properly
submitted Forms of Election and share certificates to the Exchange Agent). The
letter of transmittal will contain instructions with respect to the surrender of
certificates representing shares of Falcon Class A Stock in exchange for cash
and, under certain circumstances, certificates representing shares of retained
Falcon Class A Stock, or the amount of cash in lieu of any fractional interest
in a share of retained Falcon Class A Stock for which the shares represented by
the certificates so surrendered are exchangeable pursuant to the Merger
Agreement.
EXCEPT FOR FALCON CLASS A STOCK CERTIFICATES SURRENDERED WITH A FORM OF
ELECTION AS DESCRIBED ABOVE UNDER "--NON-CASH ELECTION PROCEDURE," STOCKHOLDERS
OF THE COMPANY SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE AGENT UNTIL
THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL.
After the Effective Time, each holder of an outstanding certificate or
certificates which prior thereto represented shares of Falcon Class A Stock
shall, upon surrender to the Exchange Agent of such certificate or certificates
and acceptance thereof by the Exchange Agent, be entitled to the amount of cash,
if any, into which the number of shares of Falcon Class A Stock previously
represented by such certificate or certificates surrendered shall have been
converted pursuant to the Merger Agreement and a certificate or certificates
representing the number of full shares of retained Falcon Class A Stock, if any,
to be received by the holder thereof pursuant to the Merger Agreement. The
Exchange Agent will accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After the
Effective Time, there will be no further transfer on the records of the Company
or its transfer agent of certificates representing shares of Falcon Class A
Stock which have been converted, in whole or in part, pursuant to the Merger
Agreement into the right to receive cash, and if such certificates are presented
to the Company for transfer, they will be cancelled against delivery of cash.
Until surrendered as contemplated by the Merger Agreement, each certificate for
shares of Falcon Class A Stock will be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the
consideration contemplated by the Merger Agreement. No interest will be paid or
will accrue on any cash payable as consideration in the Merger or in lieu of any
fractional shares of Falcon Class A Stock.
No dividends or other distributions with respect to retained Falcon Class A
Stock with a record date after the Effective Time of the Merger will be paid to
the holder of any unsurrendered certificate for shares of Falcon Class A Stock
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to the Merger Agreement until the surrender of such certificate
in accordance with the Merger Agreement. Subject to the effect of applicable
laws, following surrender of any such certificate, there shall be paid to the
holder of the certificate representing whole shares of retained Falcon Class A
Stock, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of retained Falcon Class A Stock to
which such holder is entitled pursuant to the Merger Agreement and the
proportionate amount of dividends or other distributions, if any, with a record
date after the Effective Time theretofore paid with respect to such whole shares
of retained Falcon Class A Stock, and (ii) at the appropriate payment date, the
proportionate amount of dividends or other distributions, if any, with a record
date after the Effective Time of the Merger but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such whole
shares of retained Falcon Class A Stock.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of retained Falcon
Class A Stock will be issued in connection with the Merger, and such fractional
share interests will not entitle the owner thereof to vote
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or to any rights of a stockholder of the Company after the Merger. Each holder
of shares of Falcon Class A Stock who would otherwise have been entitled to
receive a fraction of a share of retained Falcon Class A Stock (after taking
into account all shares of Falcon Class A Stock delivered by such holder) will
receive, in lieu thereof, a cash payment (without interest) equal to such
fraction multiplied by the Cash Price.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed to carry on its
business and that of its subsidiaries prior to the Effective Time in the
ordinary and usual course of business consistent with past practice. SEE
"CERTAIN PROVISIONS OF THE MERGER AGREEMENT--Certain Pre-Closing Covenants."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of the Company and FBP to consummate the Merger are subject
to various conditions, including, without limitation, obtaining requisite
stockholder approval, the termination or expiration of the relevant waiting
period, if any, under the HSR Act and the absence of any injunction or other
legal restraint or prohibition preventing the consummation of the Merger. The
Company and FBP do not believe that a filing under the HSR Act is required or
that any associated waiting period is applicable to the Merger. SEE "CERTAIN
PROVISIONS OF THE MERGER AGREEMENT--Conditions to the Consummation of the
Merger" and "REGULATORY APPROVALS."
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material United States federal income tax
consequences of the Merger is based on the opinion of Mayer, Brown & Platt,
counsel to Falcon. This discussion is based on the Internal Revenue Code of
1986, as amended (the "Code"), its legislative history, Treasury Regulations
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change (possibly on a retroactive
basis). This summary does not discuss all the tax consequences that may be
relevant to a particular stockholder in light of the stockholder's particular
circumstances and it is not intended to be applicable in all respects to all
categories of stockholders, some of whom--such as insurance companies,
tax-exempt persons, financial institutions, regulated investment companies,
dealers in securities or currencies, persons that hold Falcon Class A Stock
received in the exchange as a position in a "straddle," as part of a "synthetic
security," "hedge," "conversion transaction" or other integrated investment,
persons who received Stock as compensation or persons whose functional currency
is other than United States dollars--may be subject to different rules not
discussed below. In addition, this summary does not address any state, local or
foreign tax considerations that may be relevant to a stockholder's decision
whether to retain Falcon Class A Stock pursuant to the Merger. This summary
discusses only Falcon Class A Stock held as capital assets within the meaning of
Section 1221 of the Code.
ALL HOLDERS OF FALCON CLASS A STOCK ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
CHARACTERIZATION OF THE MERGER FOR U.S. FEDERAL INCOME TAX PURPOSES. For
U.S. federal income tax purposes, FBP will be disregarded as a transitory
entity, and the Merger of FBP with and into the Company will be treated as a
sale of a portion of a tendering stockholder's Falcon Class A Stock to the
shareholders of FBP and as a redemption of a portion of the stockholder's Falcon
Class A Stock by the Company. It is unclear how the allocation of proceeds
between the sale and redemption should be determined. The Company intends to
take the position that the percentage of a stockholder's Falcon Class A Stock
disposed of by the stockholder pursuant to the Merger which will be treated as
sold to the shareholders of FBP will be a percentage of such Stock equal to (a)
the amount contributed to FBP by the shareholders of FBP in exchange for FBP
stock divided by (b) the aggregate amount of cash paid to
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stockholders pursuant to the Merger. The remainder of the stockholder's Falcon
Class A Stock disposed of in the Merger will be treated as redeemed by the
Company. The IRS could, however, adopt a different approach in determining the
portion, if any, of a stockholder's Stock which is treated as redeemed by the
Company. SEE "--Stockholders Receiving Cash" below for a discussion of the
consequences of cash being deemed paid in redemption of Falcon Class A Stock.
STOCKHOLDERS RECEIVING CASH. As described more fully below, the U.S.
federal income tax consequences of the Merger with respect to a particular
stockholder will depend upon, among other things, (i) whether the stockholder
received any cash proceeds pursuant to the Merger, (ii) the extent to which a
stockholder is deemed to have sold its Falcon Class A Stock to the shareholders
of FBP or is deemed to have had its Falcon Class A Stock redeemed by the Company
and (iii) whether the redemption of a holder's Falcon Class A Stock by the
Company will qualify as a sale or exchange under Section 302 of the Code. First,
to the extent that a stockholder is considered to have sold Falcon Class A Stock
to the shareholders of FBP, such stockholder will recognize either capital gain
or loss (assuming the Falcon Class A Stock is held by such stockholder as a
capital asset) equal to the difference between the amount realized on its deemed
sale of Falcon Class A Stock to the shareholders of FBP (i.e., the cash proceeds
properly allocated to such sale) and the stockholder's adjusted tax basis in
such Falcon Class A Stock. Such gain or loss generally will be long-term capital
gain or loss if the Falcon Class A Stock is held as a capital asset by the
stockholder for more than one year. Second, a stockholder also will recognize
either capital gain or loss to the extent such redemption is treated as a sale
or exchange under Section 302 of the Code with respect to such stockholder.
Under Section 302 of the Code, a redemption of Falcon Class A Stock pursuant to
the Merger will, as a general rule, be treated as a sale or exchange; provided
that at least one of the following tests is met: (a) as a result of the
exchange, the stockholder's equity interest in the Company is completely
terminated; (b) there results from the exchange a "substantially
disproportionate" reduction in the stockholder's equity interest in the Company;
or (c) the receipt of cash in exchange for the stockholder's Falcon Class A
Stock is not "essentially equivalent to a dividend."
In applying the foregoing tests, the constructive ownership rules of Section
318 of the Code apply. Thus, a stockholder generally takes into account Falcon
Class A Stock actually owned by the stockholder as well as Falcon Class A Stock
actually (and in some cases constructively) owned by others, but which the
stockholder is treated as owning by reason of the application of the
constructive ownership rules. Pursuant to the constructive ownership rules, a
stockholder will be considered to own Falcon Class A Stock owned, directly or
indirectly, by certain members of the stockholder's family and certain related
entities (such as corporations, partnerships, trusts and estates) in which the
stockholder has an interest, as well as Falcon Class A Stock which the
stockholder has an option to purchase. Under certain circumstances, sales of
Falcon Class A Stock by a stockholder which are contemporaneous with such
stockholder's exchange of Falcon Class A Stock for cash pursuant to the Merger
may be taken into account in determining whether any of the above tests are
satisfied.
If a stockholder could meet the complete termination of interest test except
for attribution from family members, such attribution can be waived if a number
of requirements are met, including the timely filing of an agreement with the
Internal Revenue Service (the "IRS").
A "substantially disproportionate" reduction will occur if the stockholder's
percentage interest in the voting and common stock of the Company immediately
after the exchange is less than 80% of such stockholder's percentage interest in
the voting and common stock of the Company immediately before the exchange.
The receipt of cash by a stockholder pursuant to the Merger may not be
"essentially equivalent to a dividend" if, as a result of the exchange, the
stockholder has had a "meaningful reduction" in its proportionate equity
interest in the Company. The IRS has stated that the "meaningful reduction" test
is generally met by a minority stockholder with a minimal interest when there is
any reduction in such a stockholder's interest, so long as such stockholder does
not exercise any control over the affairs of the
48
<PAGE>
Company. Each stockholder should consult his or her own tax advisor as to the
application of these rules to his or her particular situation.
If an exchange of Falcon Class A Stock for cash pursuant to the Merger is
treated as a sale because a stockholder meets any of the above three tests, the
stockholder will recognize gain or loss on the exchange in an amount equal to
the difference between the amount of cash received allocable to the redemption
of such stockholder's Falcon Class A Stock by the Company and such stockholder's
tax basis in such Falcon Class A Stock. Provided the stockholder holds the
Falcon Class A Stock as a capital asset, such gain or loss will be a capital
gain or loss and will be long-term capital gain or loss if the Falcon Class A
Stock were held more than one year. Calculation of gain or loss must be made
separately for each block of Falcon Class A Stock owned by a stockholder (i.e.,
Falcon Class A Stock acquired in a single transaction). A stockholder may be
able to designate which blocks and the order of such blocks of Falcon Class A
Stock to be tendered pursuant to the Merger.
If a stockholder's exchange of Falcon Class A Stock for cash pursuant to the
Merger satisfies none of the foregoing three tests, the receipt of cash by the
stockholder will be treated as a distribution from the Company and will be taxed
to the stockholder as ordinary dividend income to the extent of the Company's
current and accumulated earnings and profits. Any portion of such a distribution
that is not taxed to the stockholder as a dividend will be treated first as a
tax-free return of capital to the stockholder, reducing the tax basis of the
stockholder's Falcon Class A Stock by the amount of such distribution (but not
below zero), with any amount of the distribution in excess of the stockholder's
tax basis taxable as capital gain (if the Falcon Class A Stock were held as a
capital asset).
STOCKHOLDERS RETAINING STOCK AND RECEIVING NO CASH. Stockholders who retain
their Falcon Class A Stock and receive no cash will not incur any tax liability
as a result of the consummation of the Merger.
STOCKHOLDERS RETAINING A PORTION OF THEIR STOCK AND RECEIVING CASH. To the
extent that a stockholder elects to retain a portion of his or her Falcon Class
A Stock and exchange a portion of his or her Falcon Class A Stock for cash, or
to the extent a stockholder is prorated into receiving cash in exchange for some
portion of his or her Falcon Class A Stock, the tax treatment of the
stockholder's receipt of such cash will be the same as set forth above under
"--Stockholders Receiving Cash."
As described above under "--Stockholders Retaining Stock and Receiving No
Cash," the Merger will have no tax consequences to a stockholder (and thus a
stockholder will not incur any tax liability as a result of the consummation of
the Merger), to the extent such stockholder retains, or is prorated into Falcon
Class A Stock. See "--Stockholders Receiving Cash," above for a discussion of
the U.S. federal income tax consequences to a stockholder receiving cash in the
Merger.
BACKUP FEDERAL INCOME TAX WITHHOLDING. Payments in connection with the
Merger may be subject to "backup withholding" at a 31% rate. Backup withholding
generally applies if the stockholder (i) fails to furnish such stockholder's
social security number or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) fails to properly report to the IRS interest
or dividends or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN provided is such
stockholder's current number and that such stockholder is not subject to backup
withholding. To prevent backup withholding, each stockholder should complete the
substitute IRS Form W-9 included in the Letter of Transmittal or the Non-Cash
Election Form, as applicable. Certain persons generally are exempt from backup
withholding, including corporations, financial institutions and certain foreign
share stockholders. In order to qualify for an exemption from backup
withholding, a foreign stockholder must submit a properly executed IRS Form W-8
to the Company.
WITHHOLDING FOR NON-U.S. STOCKHOLDERS. Although a non-U.S. stockholder may
be exempt from U.S. federal backup withholding, certain payments to non-U.S.
stockholders are subject to U.S. withholding tax at a rate of 30%. The Company
will withhold the 30% tax from the amount of gross cash payments made to
non-U.S. stockholders pursuant to the Merger which is allocable to the
redemption of such non-U.S.
49
<PAGE>
stockholder's Falcon Class A Stock unless the Company determines that a non-U.S.
stockholder is either exempt from the withholding tax or entitled to a reduced
withholding rate under an income tax treaty. For purposes of this discussion, a
"non-U.S. stockholder" means a stockholder who is not (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
the United States or under the law of the United States or of any State or
political subdivision of the foregoing, (iii) an estate whose income is
includible in gross income for U.S. federal income tax purposes regardless of
its source, or (iv) a "United States Trust". A United States Trust is (a) for
taxable years beginning after December 31, 1996, or if the trustee of a trust
elects to apply the following definition to an earlier taxable year, any trust
if, and only if, (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and (ii) one or more
U.S. trustees have the authority to control all substantial decisions of the
trust, and (b) for all other taxable years, any trust whose income is includible
in gross income for United States federal income tax purposes regardless of its
source. A non-U.S. stockholder will not be subject to the withholding tax if the
payment from the Company is effectively connected with the conduct of a trade or
business in the United States by such non-U.S. stockholder (and, if certain tax
treaties apply is attributable to a United States permanent establishment
maintained by such non-U.S. stockholder) and the non-U.S. stockholder has
furnished the Company with a properly executed IRS Form 4224 prior to the time
of payment. A non-U.S. stockholder who is eligible for a reduced rate of
withholding pursuant to a U.S. income tax treaty must certify such to the
Company by providing to the Company a properly executed IRS Form 1001 prior to
the time payment is made. A non-U.S. stockholder may be eligible to obtain from
the IRS a refund of tax withheld if such non-U.S. stockholder is able to
establish that no tax (or a reduced amount of tax) is due.
ACCOUNTING TREATMENT
The Merger is being accounted for as a recapitalization for financial
reporting purposes. Accordingly, the historical basis of the Company's assets
and liabilities will not be impacted by the transaction.
EFFECT ON EMPLOYEE BENEFIT MATTERS
Subject to the provisions of the plans, the employee benefit plans
maintained by the Company immediately prior to the Effective Time will continue
to be maintained by the Company after the Effective Time.
Immediately prior to the Effective Time, each holder of an outstanding
option to purchase shares of Falcon Class A Stock granted under the Company's
1994 Stock Option and Restricted Share Plan (the "1994 Plan"), (each such
option, an "Option" and collectively, the "Options"), whether or not then
exercisable, will be entitled to receive from the Company for each share subject
to an Option an amount in cash equal to the excess, if any, of the Cash Price
over the per share exercise price of such Option, and such Option will be
cancelled; provided, that, with respect to any person subject to Section 16 of
the Exchange Act who waives all rights with respect to such Options and any
shares subject thereto other than the right to receive such amount of cash, any
such amount shall be paid as soon as practicable after the first date payment
can be made without liability to such person under Section 16(b) of the Exchange
Act.
Pursuant to the Merger Agreement, FBP and Falcon agreed that, unless and
until such agreements are amended, modified or terminated, from and after the
Effective Time, Falcon will honor, in accordance with their respective terms as
in effect on the date thereof, all of the employment, termination, severance,
indemnity and bonus agreements and arrangements identified in the Merger
Agreement. The Merger Agreement provides that if Falcon or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary
to effectuate the foregoing, proper provision shall be made so that the
successors and assigns of Falcon shall succeed to the obligations set forth in
the preceding sentence and none of the actions described in clause (i) or (ii)
shall be taken until such provision is made.
50
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and officers of the Company have interests, described
below, that may present them with potential conflicts of interest in connection
with the Merger. The Board of Directors (including the non-management members of
the Board) is aware of the conflicts described below and considered them in
addition to the other matters described under "--Background of the Merger" and
"--Recommendation of the Board of Directors; Reasons for the Merger" when it
approved the Merger Agreement and recommended that stockholders vote in favor of
the Merger.
Seven of the executive officers of the Company, including Messrs. Hall,
Cottone and Athas, together with three other employees, will be entitled to
receive transaction incentive bonuses as a result of arrangements approved by
the Company's existing Board of Directors which are triggered by the Merger.
These bonuses will total approximately $3.0 million.
Another executive officer of the Company has an agreement with the Company
which provides certain benefits in the event that his employment with the
Company is terminated, other than for cause, within two years following a change
in control or ownership of the Company prior to September 30, 1997. Three other
executive officers have similar agreements with the respective subsidiaries of
the Company of which they are Presidents. Upon termination, the affected party
would be entitled to receive a lump sum payment equal to two times base salary
plus target bonus in effect at the time of their termination, plus continuation
of certain benefits. Similar agreements have been entered into with twenty-two
other employees of the Company's subsidiaries which provide for a lump sum
payment equal to from six to eighteen months of the employee's base salary plus
target bonus at the time of such employee's termination and the continuation of
certain benefits for a period of time after such employee's termination.
Certain of the Options issued to employees under the 1994 Plan, which have
not as yet vested, will vest as a result of the Merger transaction, including
Options issued to Falcon's executive officers, and be treated as described in
"--Effect on Employee Benefit Matters" above.
The following table reflects the estimated value of the payments to which
certain executive officers of the Company will be entitled, upon consummation of
the Merger, under the transaction incentive arrangements and the 1994 Plan
described above:
<TABLE>
<CAPTION>
TRANSACTION
INCENTIVE NET OPTION
NAME BONUS PROCEEDS
- -------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
William E. Allen.................................................... $ 500,000 $ 373,095
Gus J. Athas........................................................ 300,000 675,618
Sam A. Cottone...................................................... 300,000 675,618
Paul G. Fischer..................................................... 375,900 361,936
William K. Hall..................................................... 700,000 902,447
Lawrence B. Lee..................................................... 399,000 378,566
</TABLE>
51
<PAGE>
The estimated total amount of all such bonuses and payments with respect to
such Options to executive officers is approximately $6.9 million. Payment of the
transaction incentive bonuses and such vesting of such Options are dependent
upon the consummation of the Merger.
Shares of Falcon Class A Stock held by executive officers and directors of
the Company will be converted into the right to receive the same consideration
as shares of Falcon Class A Stock held by other stockholders. Options held by
executive officers and directors of the Company will be treated in the same
manner as Options held by other Option holders.
EMPLOYMENT AGREEMENTS
The Company and Messrs. Hall, Cottone and Athas, as well as two other of its
executive officers have entered into employment agreements, effective as of the
Effective Time (collectively, the "Employment Agreements"). Under the terms of
the Employment Agreements, Mr. Hall will serve as Chairman, President and Chief
Executive Officer and will receive a minimum base salary payable at an annual
rate of $600,000, subject to adjustment, Mr. Cottone will serve as Executive
Vice President and Chief Financial Officer and will receive a minimum base
salary payable at an annual rate of $400,000, subject to adjustment, and Mr.
Athas will serve as Executive Vice President, General Counsel and Secretary and
will receive a minimum base salary payable at an annual rate of $330,000,
subject to adjustment.
The Employment Agreements also provide (i) for an annual bonus to be paid to
the officers in accordance with goals to be mutually agreed upon by the Company
and such officers, (ii) that the Company will establish a funded supplemental
executive retirement agreement in which such officers will participate, (iii)
that such officers will receive ten-year stock options on various percentages of
the outstanding Falcon capital stock as of the Effective Time, and (iv) that
such officers have certain rights to put to the Company and the Company has
certain rights to call from such officers unrestricted shares of Falcon capital
stock owned by such officers and certain vested stock options held by such
officers, and (v) that such officers are each required to retain or purchase a
specific percentage of shares of Falcon capital stock as of the Effective Time.
In addition, the Employment Agreements provide that the Company will continue to
maintain the Falcon Building Products, Inc. Senior Executive Stock Purchase Plan
(the "Stock Purchase Plan") after the Merger, that the change in control
provision of the Stock Purchase Plan will not take effect as a result of the
Merger and that the Company will consider implementing a new plan similar to the
Stock Purchase Plan after the Merger.
If an Employment Agreement is terminated by the Company, the termination is
not effective until the later of three years after the Effective Time or two
years after the notice of termination. If an Employment Agreement is terminated
by an officer, the termination is not effective until two years after the notice
of termination. The Employment Agreements provide for severance benefits to be
paid in the event an officer's employment is terminated prior to the time set
forth above and such termination is, in the case of termination by the Company,
without "Good Cause," or, in the case of termination by an officer, for "Good
Reason." If the Company terminates the employment of an officer without Good
Cause or the officer terminates his employment for Good Reason, the officer is
entitled to receive severance benefits which include (i) the ability to exercise
vested and outstanding stock options for the period ending on the earlier of the
date that is 18 months from the date his employment is terminated or the
specific expiration date stated in the options and (ii) for the period ending on
the later of three years after the Effective Time or two years after such
termination, payment of the officer's compensation at the rate most recently
determined and an annual bonus in an amount equal to the latest bonus that would
be paid if target goals are achieved, the continuation of health, life and
disability benefits, the provision of office space and secretarial services, the
reimbursement for outplacement services, and the full vesting in all retirement
and savings plans. If the officer dies while he is receiving severance benefits,
such benefits will continue to his spouse, and if such spouse subsequently dies,
to the officer's estate.
52
<PAGE>
"Good Cause" is defined as (i) the officer's conviction of any embezzlement
or any felony involving fraud or breach of trust relating to the performance of
the officer's duties, (ii) the officer's willful engagement in gross misconduct
in the performance of his duties, (iii) the officer's death, or (iv) permanent
disability which materially impairs the officer's performance of his duties.
"Good Reason" exists if (i) the Company continues a reduction in
compensation or expenditures for benefit plans, relocates outside the Chicago
area or commits another material breach of the Employment Agreement for more
than 30 days after being notified by the officer of such breach provided the
officer has given notice to the Company within 30 days of first becoming aware
of the facts constituting such breach, (ii) the Company gives the officer a
notice of termination without Good Cause provided the officer terminates the
Employment Agreement within 30 days of receiving such notice, (iii) a "Change in
Control" occurs and the officer's employment is terminated by either party for
any reason other than Good Cause, or (iv) the officer retires from the Company
on a date that is mutually agreed upon by the Company and the officer.
STOCK OPTION PLAN
Prior to the Effective Time, the Company will adopt the Falcon Building
Products, Inc. Stock Option Plan (the "Stock Option Plan"). The number of shares
that will be awarded under the Stock Option Plan will be approximately 10% of
the then-outstanding shares of capital stock of Falcon at the Effective Time.
The Stock Option Plan will be administered by Falcon's Board of Directors or
a committee designated by the Board. The Board will designate which employees of
the Company shall be eligible to receive awards under the Stock Option Plan, and
the amount, timing and other terms and conditions applicable to such awards.
Notwithstanding the foregoing, the Employment Agreements provide that each
executive officer will receive a certain percentage of ten-year options
exercisable at a price equal to the Cash Price. Specifically, Messrs. Hall,
Cottone and Athas and other current executive officers and employees of the
Company will receive options for approximately nine percent of the outstanding
shares of capital stock of Falcon at the Effective Time. Options for the
remaining approximately one percent of the outstanding shares of capital stock
of Falcon will be reserved for future officers and employees of the Company.
Options will be exercisable in accordance with the terms established by the
Board. Options will expire on the date determined by the Board, which shall not
be later than the tenth anniversary of the grant date. The Stock Option Plan
will give an optionee certain rights to put to the Company and will give the
Company certain rights to call from the optionee, certain vested stock options.
The method for determining the option price and the price at which an optionee
may put to the Company or the Company may call from the optionee is to be
mutually agreed upon by the Company and the executive officers prior to the
Effective Time.
Pursuant to the Merger Agreement, the Company has agreed for six years after
the Effective Time of the Merger to indemnify directors and officers of the
Company and its subsidiaries and will, subject to certain limitations, maintain
for six years a directors' and officers' insurance and indemnification policy
substantially similar to its current policy. SEE "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT--Indemnification and Insurance."
Additional information relating to executive compensation and various
benefit arrangements of the Company is set forth in and incorporated herein by
reference to the Company's Annual Report on Form 10-K.
DELISTING OF FALCON CLASS A STOCK FROM NYSE
As a result of the Merger, it is likely that the Falcon Class A Stock will
no longer meet the listing requirements of the NYSE and the NYSE may
unilaterally act to delist the Falcon Class A Stock from the NYSE. Even if the
NYSE does not act unilaterally to delist the Falcon Class A Stock, it is FBP's
intention that, after the Effective Time, the Falcon Class A Stock will not be
listed on the NYSE or any other
53
<PAGE>
national securities exchange. The delisting of the Falcon Class A Stock is
likely to have a material adverse effect on the trading market for, and the
value of, the Common Stock and there can be no assurance that any trading market
will exist for the Falcon Class A Stock after the Merger.
TERMINATION OF SEC REPORTING
As a result of the Merger, the shares of Falcon Class A Stock may be held by
fewer than 300 stockholders of record. In such a case, the Company may
deregister the Falcon Class A Stock from the reporting requirements of the
Exchange Act. If the Falcon Class A Stock is so deregistered, the Company will
not be required to comply with the proxy or the periodic reporting requirements
of the Exchange Act, which in turn could reduce the information available to
stockholders on the business and financial condition of the Company and have a
material adverse effect on the value of the Falcon Class A Stock.
RESALE OF RETAINED FALCON CLASS A STOCK FOLLOWING THE MERGER
The Falcon Class A Stock to be retained in connection with the Merger will
be freely transferable, except that shares retained by any stockholder who may
be deemed to be an "affiliate" (as defined under the Securities Act and
generally including, without limitation, directors, certain executive officers
and beneficial owners of 10% or more of a class of capital stock) of the Company
for purposes of Rule 145 under the Securities Act will not be transferable
except in compliance with the Securities Act. This Proxy Statement/Prospectus
does not cover sales of Falcon Class A Stock retained by any person who may be
deemed to be an affiliate of the Company.
MERGER FINANCINGS
At the time of the Merger, FBP expects to have received equity contributions
of approximately $135 million. In addition, at the Effective Time, Falcon
currently intends to issue debt securities for approximately $245 million of
gross proceeds in either the public or private markets and enter into a
syndicated, senior secured term loan facility for approximately $150 million.
The proceeds of these equity and debt issuances and funds drawn under the term
loan facility will be used to finance the conversion into cash, in the Merger,
of approximately 19,014,255 shares of Falcon Class A Stock currently
outstanding, to refinance substantially all of the outstanding indebtedness of
Falcon and to pay the fees and expenses associated with the Merger. Falcon also
expects to enter into a $150 million senior secured revolving credit facility to
provide liquidity for strategic acquisitions and working capital requirements a
portion of which may be drawn down at the Effective Time. In addition, the
Company also expects to modify its existing accounts receivable securitization
program, increasing it to $100 million of availability. Consummation of these
financing arrangements are not conditions to the consummation of the Merger.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements (the
"Pro Forma Financial Statements") have been derived by the application of pro
forma adjustments to the Company's historical financial statements incorporated
by reference in this Proxy Statement/Prospectus. The unaudited pro forma income
statement for the period presented give effect to the Merger and related
transactions, including consummation of the Merger Financings, as if such
transactions were consummated as of January 1, 1996. The unaudited pro forma
balance sheet gives effect to the Merger and related transactions as if such
transactions had occurred as of December 31, 1996. The adjustments are described
in the accompanying notes. The Unaudited Pro Forma Financial Statements should
not be considered indicative of actual results that would have been achieved had
the Merger and related transactions been consummated on the date or for the
periods indicated and do not purport to indicate balance sheet data or results
of operations as of any future date or for any future period. The Pro Forma
Financial Statements should be read in conjunction with the Company's historical
financial statements and the notes thereto incorporated
54
<PAGE>
herein by reference. SEE "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
The pro forma adjustments were applied to the historical financial
statements to reflect and account for the Merger as a recapitalization.
Accordingly, the historical basis of the Company's assets and liabilities have
not been impacted by the Merger.
55
<PAGE>
FALCON BUILDING PRODUCTS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER FOR THE
HISTORICAL ADJUSTMENTS MERGER
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.................................................. $ 3.9 $ 9.7(a) $ 13.6
Receivables................................................................ -- -- --
Inventories, net........................................................... 76.2 -- 76.2
Other current assets....................................................... 15.6 -- 15.6
----------- ----------- -----------
95.7 9.7 105.4
----------- ----------- -----------
Property and Equipment, net.................................................. 97.4 -- 97.4
----------- ----------- -----------
Non-current Assets:
Goodwill................................................................... 59.1 -- 59.1
Other, net................................................................. 9.5 25.4(b) 34.9
----------- ----------- -----------
68.6 25.4 94.0
----------- ----------- -----------
Total Assets................................................................. $ 261.7 $ 35.1 $ 296.8
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of debt................................................. $ 15.2 $ (14.5)(c) $ 0.7
Accounts payable........................................................... 50.1 -- 50.1
Accrued liabilities........................................................ 30.9 (6.9)(e) 24.0
----------- ----------- -----------
96.2 (21.4) 74.8
Noncurrent Liabilities:
Long-term debt............................................................. 109.1 288.0(c) 397.1
Accrued employee benefit obligations....................................... 8.7 -- 8.7
Other long-term liabilities................................................ 19.8 -- 19.8
----------- ----------- -----------
233.8 266.6 500.4
----------- ----------- -----------
Stockholders' equity (deficit)
Common stock............................................................... 0.2 (0.1)(d) 0.1
Paid-in capital............................................................ 18.0 (202.8)(d) (184.8)
Pension liability adjustment............................................... (0.5) -- (0.5)
Unearned compensation...................................................... (0.4) 0.4(e) --
Notes receivable arising from stock purchase plan.......................... (2.2) -- (2.2)
Retained earnings (deficit)................................................ 12.8 (29.0)(e) (16.2)
----------- ----------- -----------
27.9 (231.5) (203.6)
----------- ----------- -----------
Total Liabilities and Stockholders' Equity................................... $ 261.7 $ 35.1 $ 296.8
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
56
<PAGE>
FALCON BUILDING PRODUCTS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The Unaudited Pro Forma Consolidated Balance Sheet reflects the Merger as if
it had occurred as of December 31, 1996. The Merger is being accounted for as a
recapitalization which will have no impact on the historical basis of assets and
liabilities. The pro forma adjustments are based on available information and
certain assumptions that management believes are reasonable.
(a) Reflects the following:
<TABLE>
<S> <C>
Total sources:
Proceeds of Senior Credit Facility term loan..................... $ 150.0
Proceeds of Senior Subordinated Notes............................ 145.0
Proceeds of Junior Subordinated Notes............................ 100.0
Proceeds from issuance of 7,582,810 shares....................... 134.6
---------
529.6
---------
Total uses:
Consideration to convert to cash 19,014,255 shares at $17.75 per
share.......................................................... 337.5
Consideration to convert to cash 798,300 options at an average
exercise price of $11.19 per share............................. 5.2
Refinancing of revolving credit facility......................... 39.0
Refinancing of term loan......................................... 82.5
Estimated transaction fees and expenses.......................... 55.7
---------
519.9
---------
$ 9.7
---------
---------
</TABLE>
(b) Reflects the following:
<TABLE>
<S> <C>
Estimated debt issuance costs for the Senior Credit Facility,
Senior and Junior Subordinated Notes, and extension of the
Securitization Program......................................... $ 22.9
Management fees prepaid in connection with the Merger............ 5.0
Write-off of deferred issuance costs associated with retired
debt........................................................... (2.5)
---------
$ 25.4
---------
---------
</TABLE>
(c) Reflects the following:
<TABLE>
<S> <C>
Refinancing of revolving credit facility......................... $ (39.0)
Refinancing of term loan......................................... (82.5)
Net adjustment of current maturities............................. 14.5
Proceeds of Senior Credit Facility term loan..................... 150.0
Proceeds of Senior Subordinated Notes............................ 145.0
Proceeds of Junior Subordinated Notes............................ 100.0
---------
$ 288.0
---------
---------
</TABLE>
57
<PAGE>
FALCON BUILDING PRODUCTS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(d) Reflects the following:
<TABLE>
<S> <C>
Purchase of 19,014,255 shares at $17.75 per share and
cancellation of such shares.................................... $ (337.5)
Issuance of 7,582,810 shares..................................... 134.6
Net adjustment for $.01 par value common......................... 0.1
---------
$ (202.8)
---------
---------
</TABLE>
(e) Reflects the following:
<TABLE>
<S> <C>
Estimated fees and expenses to be paid by the Company in
connection with the Merger including advisory fees, legal and
accounting fees, standby commitment fees, and management
transaction bonuses............................................ $ (27.8)
Conversion of 798,300 options with an average exercise price of
$11.19 per share to cash....................................... (5.2)
Accelerated vesting of restricted stock.......................... (0.4)
Write-off of deferred issuance costs associated with retired
debt........................................................... (2.5)
Tax benefit of management transaction bonuses, certain legal and
accounting fees, standby commitment fees, conversion of
options, accelerated vesting of restricted stock, and write-off
of deferred issuance costs associated with retired debt,
assuming an effective income tax rate of 38.5%................. 6.9
---------
$ (29.0)
---------
---------
</TABLE>
Management has assumed that there will be no changes to the existing receivables
securitization program as a result of the Merger, except for an increase in the
maximum availability from $85 million to $100 million and an extension of the
program until 2002.
58
<PAGE>
FALCON BUILDING PRODUCTS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER FOR THE
HISTORICAL ADJUSTMENTS MERGER
----------- ------------- -----------
<S> <C> <C> <C>
Net sales.................................................................... $ 633.2 -- $ 633.2
Cost of goods sold........................................................... 520.3 -- 520.3
----------- ------ -----------
Gross profit................................................................. 112.9 -- 112.9
Selling, general and administrative.......................................... 49.0 1.8(a) 50.8
Securitization expense....................................................... 4.1 -- 4.1
----------- ------ -----------
Operating income............................................................. 59.8 (1.8) 58.0
Net interest expense......................................................... 11.0 33.1(b) 44.1
----------- ------ -----------
Income before income taxes................................................... 48.8 (34.9) 13.9
Provision for income taxes................................................... 18.8 (13.4)(c) 5.4
----------- ------ -----------
Net income................................................................... $ 30.0 $ (21.5) $ 8.5
----------- ------ -----------
----------- ------ -----------
Weighted average shares outstanding (in millions)............................ 20.1 8.6
----------- -----------
----------- -----------
Earnings per share........................................................... $ 1.50 $ 0.99
----------- -----------
----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income
59
<PAGE>
FALCON BUILDING PRODUCTS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The Unaudited Pro Forma Consolidated Statement of Income for the year ended
December 31, 1996 reflects the Merger as if it had occurred on January 1, 1996
and excludes nonrecurring items directly attributable to the Merger. The Merger
is being accounted for as a recapitalization which will have no impact on the
historical basis of assets and liabilities. The pro forma adjustments are based
on available information and certain assumptions that management believes are
reasonable.
<TABLE>
<S> <C> <C>
(a) Reflects the following:
Incremental administrative expenses anticipated to be incurred by the
Company.................................................................... $ 0.8
Amortization of prepaid management fees...................................... 1.0
---------
$ 1.8
---------
---------
(b) Reflects the following:
Elimination of historical net interest expense including amortization of debt
issuance costs on the retired debt of $0.7 million......................... $ (11.0)
Interest resulting from borrowings under the $150.0 million revolving credit
facility under the Senior Credit Facility at an assumed interest rate of
LIBOR + 2.5%............................................................... 1.4
Interest resulting from $150.0 million term loan under the Senior Credit
Facility, at an assumed interest rate of LIBOR + 3.0%...................... 12.7
Interest resulting from $145.0 million of debt issued under the Senior
Subordinated Notes, at an assumed interest rate of 10.5%................... 15.2
Interest resulting from $100.0 million of debt issued under the Junior
Subordinated Notes, at an assumed effective interest rate of 12.0%......... 12.0
Amortization of debt issuance costs associated with the Senior Credit
Facility, Senior and Junior Subordinated Notes, and extension of
Securitization Program..................................................... 2.8
---------
$ 33.1
---------
---------
(c) Reflects the tax effect of items (a) and (b) above at an assumed effective
tax rate of 38.5%.......................................................... $ 13.4
---------
---------
</TABLE>
60
<PAGE>
FALCON BUILDING PRODUCTS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma consolidated net income excludes the following
nonrecurring items that are directly attributable to the Merger:
(1) Compensation charges totaling $3.0 million for amounts paid to
management in connection with the Merger, and related income tax benefit
of $1.2 million;
(2) Estimated other charges totaling $24.8 million for expenses incurred by
the Company in connection with the Merger, and related income tax benefit
of $2.6 million;
(3) Charge of $5.2 million resulting from the conversion of outstanding
stock options in connection with the Merger, and related income tax
benefit of $2.0 million;
(4) The write-off of $2.5 million of debt issuance costs on debt retired in
connection with the Merger, and related income tax benefit of $1.0
million;
(5) Charge of $0.4 million associated with the accelerated vesting of
restricted stock and related income tax benefit of $0.1 million.
Because interest rates in connection with the Merger Financings have not
been determined as of the date of this Proxy Statement/Prospectus, this
presentation is indicative of the Company's best current estimate of interest
expense. A 25 basis point increase or decrease in the assumed average interest
rate on the debt issued in connection with the Merger would change the pro forma
interest expense by approximately $1.0 million, the pro forma net income by
approximately $0.6 million and the pro forma earnings per share by approximately
$.07.
61
<PAGE>
DESCRIPTION OF FALCON CAPITAL STOCK
FALCON'S EXISTING CAPITAL STOCK
GENERAL. Falcon is authorized by its Restated Certificate of Incorporation
to issue an aggregate of 30,000,000 shares of Class A Common Stock, par value
$.01 per share (referred to herein as the "Falcon Class A Stock"), 14,000,000
shares of Class B Common Stock, par value $.01 per share ("Falcon Class B
Stock") and 10,000,000 shares of preferred stock, par value $.01 per share (the
"Falcon Preferred Stock"). There are no shares of Falcon Class B Stock or Falcon
Preferred Stock issued or outstanding. The following is a summary of certain of
the rights and privileges pertaining to Falcon's capital stock. For a full
description of Falcon Class A Stock, reference is made to the Company's Restated
Certificate of Incorporation as currently in effect, a copy of which is on file
with the Commission.
COMMON STOCK
VOTING RIGHTS. Except as otherwise required by law and except with respect
to the election of directors, the holders of Falcon Class A Stock and the
holders of Falcon Class B Stock have one vote per share and vote as a single
class with respect to all matters submitted to a vote of stockholders. Under the
DGCL, any proposal to amend the Restated Certificate of Incorporation to change
the rights, preferences and limitations of Falcon Class A Stock must be approved
by the holders of Falcon Class A Stock voting separately as a class. The number
of directors shall not be less than seven nor more than 15, with the precise
number to be determined by resolution of the Board of Directors of the Company.
Because all previously issued shares of Falcon Class B Stock have been converted
into Falcon Class A Stock, the holders of Falcon Class A Stock are entitled to
elect all of the directors, subject to the rights of any holders of Preferred
Stock. Shares of Falcon Class A Stock and Falcon Class B Stock do not have
cumulative voting rights.
DIVIDEND RIGHTS. Each share of Falcon Class A Stock is entitled to
dividends if, as and when dividends are declared by the Board of Directors of
the Company. Any dividend declared and payable in cash, capital stock of the
Company (other than Falcon Class A Stock or Falcon Class B Stock) or other
property must be paid equally on a share for share basis on Falcon Class A Stock
and Falcon Class B Stock. Dividends and distributions payable in shares of
Falcon Class A Stock may be paid only on shares of Falcon Class A Stock, and
dividends and distributions payable in shares of Falcon Class B Stock may be
paid only on shares of Falcon Class B Stock. If a dividend or distribution
payable in Falcon Class A Stock is made on Falcon Class A Stock at a time when
Falcon Class B Stock is outstanding, a simultaneous and equivalent dividend or
distribution in Falcon Class B Stock must be made on Falcon Class B Stock. If a
dividend or distribution payable in Falcon Class B Stock is made on Falcon Class
B Stock a simultaneous and equivalent dividend or distribution in Falcon Class A
Stock must be made on Falcon Class A Stock.
CONVERSION RIGHTS. The Falcon Class A Stock is not convertible. Each share
of Falcon Class B Stock is convertible into one share of Falcon Class A Stock at
any time at the option of and without cost to the holder thereof and
automatically in certain other events. No Falcon Class B Stock is currently
outstanding.
LIQUIDATION RIGHTS. The holders of Falcon Class A Stock and the holders of
Falcon Class B Stock are entitled to participate equally on a share for share
basis in all distributions to the holders of common stock in any liquidation,
distribution or winding up of the Company.
PREEMPTIVE RIGHTS. Neither the holders of Falcon Class A Stock nor the
holders of Falcon Class B Stock have preemptive rights to purchase shares of
such stock or shares of stock of any other class that the Company may issue.
62
<PAGE>
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue, by resolution
and without any action by stockholders, up to 10,000,000 shares of Falcon
Preferred Stock and may establish the designations, dividend rights, dividend
rate, conversion rights, voting rights, terms of redemption, liquidation
preference, sinking fund terms and all other preferences and rights of any
series of Falcon Preferred Stock, including rights that could adversely affect
the voting power of the holders of Falcon Class A Stock. No shares of Falcon
Preferred Stock are currently outstanding.
FALCON'S CAPITAL STOCK FOLLOWING THE MERGER
INTRODUCTION. If the Merger is approved by the requisite vote of the
stockholders of Falcon Class A Stock at the Special Meeting, at the Effective
Time the current Certificate of Incorporation of FBP will be amended pursuant to
the Restated Certificate of Incorporation substantially in the form of Annex V
attached hereto, and, as so amended will be the certificate of incorporation of
the Company following the Merger.
The following is a summary of certain of the rights and privileges
pertaining to Falcon's capital stock as it is expected to exist immediately
after giving effect to the Merger. For a full description of such capital stock,
reference is made to Annex V attached hereto.
GENERAL. Falcon will be authorized to issue an aggregate of 20,000,000
shares of capital stock, consisting of five classes as follows, each of such
shares having a par value of $.01:
<TABLE>
<CAPTION>
SHARES EXPECTED TO BE
OUTSTANDING AS OF
TITLE AUTHORIZED SHARES THE EFFECTIVE TIME
- ------------------------------------------------------------ ----------------- -----------------------
<S> <C> <C>
Falcon Class A Stock........................................ 1,034,020 1,034,020
Falcon Class B Stock........................................ 6,900,000 6,876,464
Falcon Class C Stock........................................ 2,048,980 689,346
Falcon Class D Stock........................................ 17,000 17,000
Falcon Common Stock......................................... 10,000,000 0
----------------- ----------
Total....................................................... 20,000,000 8,616,830
----------------- ----------
----------------- ----------
</TABLE>
The Falcon Class A Stock, Falcon Class B Common Stock ("Falcon Class B
Stock"), Falcon Class C Common Stock ("Falcon Class C Stock"), Falcon Class D
Common Stock ("Falcon Class D Stock") and Falcon Common Stock are sometimes
referred to collectively herein as the "Falcon Stock." Falcon may, by an
amendment to the Falcon Certificate of Incorporation duly adopted, increase or
decrease at any time, and from time to time (but not below the number of shares
of Falcon Class A Stock, Falcon Class B Stock, Falcon Class C Stock, Falcon
Class D Stock or Falcon Common Stock then outstanding), the number of authorized
shares of Falcon Class A Stock, Falcon Class B Stock, Falcon Class C Stock,
Falcon Class D Stock or Falcon Common Stock, as the case may be. Shares of
Falcon Stock redeemed, purchased or otherwise acquired by Falcon, pursuant to
the Falcon Certificate of Incorporation, shall be retired and shall revert to
authorized but unissued Falcon Class A Stock, Falcon Class B Stock, Falcon Class
C Stock, Falcon Class D Stock or Falcon Common Stock, as the case may be.
VOTING. Holders of shares of Falcon Class A Stock and Falcon Common Stock
shall be entitled to one vote per share and holders of Falcon Class D Stock
shall be entitled to 446 votes for each share of such stock held on all matters
as to which stockholders may be entitled to vote pursuant to the DGCL.
Holders of Falcon Class B Stock or Falcon Class C Stock shall not have any
voting rights, except that the holders of the Falcon Class B Stock and Falcon
Class C Stock shall have the right to vote as a class to the extent required
under the laws of the State of Delaware. Unless otherwise required by the terms
of the
63
<PAGE>
Restated Certificate of Incorporation of Falcon, paragraph (2) of subsection (b)
of Section 242 of the DGCL shall not entitle the holders of shares of Falcon
Class B Stock or Falcon Class C Stock to vote as a class on the increase of the
number of authorized shares of such class of Falcon Stock or the decrease of the
number of authorized but not outstanding shares of such class of Falcon Stock.
Any amendment, alteration or repeal of any provision of the Restated
Certificate of Incorporation of Falcon, whether by merger, consolidation or
otherwise, that would alter or change the relative powers, preferences, or
special rights of any class of capital stock so as to affect the Falcon Class A
Stock materially and adversely, will require, in addition to any other approvals
required by the DGCL and the Restated Certificate of Incorporation, the approval
by the holders of a majority of the then outstanding shares of Falcon Class A
Stock.
LIQUIDATION RIGHTS. Except as set forth below, any distribution made upon
the liquidation, dissolution or winding up of the affairs of Falcon, whether
voluntary or involuntary, shall be allocated PRO RATA based upon the number of
shares of Falcon Stock held by each stockholder. None of the sale, transfer,
conveyance or lease of all or substantially all of the property or business of
Falcon, the merger or consolidation of Falcon into or with any other corporation
or the merger or consolidation of any other corporation into or with Falcon
shall be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for this purpose.
If the assets of Falcon or the proceeds thereof available for distribution
to the holders of shares of the Falcon Class A Stock, Falcon Class B Stock or
Falcon Class C Stock upon any dissolution, liquidation or winding up of Falcon,
whether voluntary or involuntary, shall be insufficient to pay in full all
preference amounts to which such holders are entitled, no distribution shall be
made on any shares of Falcon Class D or Falcon Common Stock.
RESTRICTIONS ON TRANSFER. Except for Transfers (as defined) to a Permitted
Transferee (as defined), no Falcon Class D Stockholder shall Transfer any share
of Falcon Class D Stock owned by such Falcon Class D Stockholder except in
accordance with the terms of the Restated Certificate of Incorporation.
No Falcon Stockholder may Transfer any shares of Falcon Stock unless such
Transfer complies with the conditions specified in the Restated Certificate of
Incorporation of Falcon which are intended to ensure compliance with the
provisions of the Securities Act. Prior to any Transfer, the holder of the
shares of Falcon Stock proposed to be Transferred (other than a holder of Falcon
Class A Stock who is not an affiliate of the Company) shall give written notice
to Falcon of such holder's intention to effect such Transfer. Each such notice
shall describe the manner and circumstances of the proposed Transfer in
sufficient detail, and, if requested by Falcon, shall be accompanied by either
(i) a written opinion of legal counsel who is reasonably satisfactory to Falcon,
addressed to Falcon and reasonably satisfactory in form and substance to
Falcon's counsel, to the effect that the proposed Transfer may be effected
without registration under the Securities Act and qualification under applicable
state securities laws, or (ii) a "no action" letter from the SEC to the effect
that the Transfer of such securities without registration under the Securities
Act will not result in a recommendation by the staff of the SEC that action be
taken with respect thereof, or a combination of (i) and (ii) above, whereupon
the holder of such shares of Falcon Stock shall be entitled to Transfer such
shares in accordance with the terms of the Restated Certificate of Incorporation
and the written notice delivered by such holder to Falcon. Each certificate
evidencing the shares of Falcon Stock Transferred as above provided shall bear
the appropriate restrictive legend set forth in the Restated Certificate of
Incorporation, PROVIDED THAT, following the Initial Public Offering (as
defined), such certificates shall bear the legend set forth in the Restated
Certificate of Incorporation or another legend only if, in the opinion of
counsel to Falcon, the imposition of such legend is required under the
Securities Act or other applicable law. Any purported Transfer in violation of
the Restated Certificate of Incorporation shall be null and void and of no force
or effect, and Falcon shall not record any such Transfer on its stock transfer
books. These restrictions on Transfer shall not apply to Transfers of shares of
Falcon Stock (i) in the Initial Public Offering (as defined), or (ii) following
the Initial Public Offering, PROVIDED THAT such
64
<PAGE>
Transfer is made in compliance with the Securities Act and applicable state
securities laws and in accordance with any restrictions on transfer contained in
any restrictive legend set forth on the certificates representing such shares.
TAG-ALONG RIGHTS. If, other than in connection with the Initial Public
Offering, any Falcon Class D Stockholder or Stockholders (for purposes of this
section, singularly or collectively, the "Proposed Transferor"), at any time or
from time to time in one transaction or in a series of transactions, desires to
enter into an agreement (whether oral or written) to Transfer its shares of
Falcon Class D Stock or any part thereof in a transaction which is a sale for
consideration consisting exclusively of cash to any Person (as defined) other
than a Permitted Transferee (the "Proposed Transferee"), such proposed Transfer
shall be deemed a "Tag-Along Transfer" and, each of the Falcon Class A
Stockholders, Falcon Class B Stockholders and Falcon Class C Stockholders
(collectively, the "Other Falcon Stockholders") shall have the right, but not
the obligation, as a condition to such Tag-Along Transfer, to have the Proposed
Transferee purchase from each such Other Falcon Stockholder up to the number of
shares (the "Tag-Along Pro Rata Amount") of Falcon Class A Stock, Falcon Class B
Stock or Falcon Class C Stock derived by multiplying the total number of shares
of Falcon Class A Stock, Falcon Class B Stock or Falcon Class C Stock exclusive
of Non-Redeemable Shares (as defined), as the case may be, owned by such Other
Falcon Stockholder by a fraction, the numerator of which is equal to the number
of shares of Falcon Class D Stock that is proposed to be Transferred by the
Proposed Transferor to the Proposed Transferee (the "Proposed Purchase Amount")
and the denominator of which is the total number of shares of Falcon Class D
Stock (other than shares of Falcon Class D Stock that have previously been
Transferred pursuant to a Tag-Along Transfer) outstanding as of the Notice Date
(as defined below). All Tag-Along Transfers by Other Falcon Stockholders shall
be on the same terms and conditions (with such changes as are necessary to apply
such terms and conditions to a sale by such Other Falcon Stockholders) as the
proposed Tag-Along Transfer by the Proposed Transfer or, PROVIDED that no Other
Falcon Stockholder may be required to make any representation or warranty in
connection with the Tag-Along Transfer other than as to its ownership and
authority to Transfer the shares of Falcon Stock to be Transferred by it, free
and clear of any and all liens and encumbrances (other than under the Restated
Certificate of Incorporation) and in compliance with all applicable laws.
The Proposed Transferor participating in a Tag-Along Transfer shall at least
thirty (30) Business Days prior to the closing date thereof provide Falcon and
the Other Falcon Stockholders with written notice (the "Transfer Notice") of the
proposed Tag-Along Transfer containing the following:
(i) the name and address of the Proposed Transferor and the Proposed
Transferee;
(ii) the Proposed Purchase Amount;
(iii) the proposed amount to be paid for such shares of Falcon Class D
Stock, the terms and conditions of payment offered by the Proposed
Transferee, the closing date for the proposed Tag-Along Transfer and the
estimated expenses payable in connection therewith;
(iv) the aggregate number of shares of Falcon Class A Stock, Falcon
Class B Stock or Falcon Class C Stock, as the case may be, held of record as
of the date the Transfer Notice is sent (the "Notice Date") by the Other
Falcon Stockholder to whom the notice is sent;
(v) the aggregate number of shares of Falcon Class A Stock, Falcon Class
B Stock or Falcon Class C Stock, as the case may be, held of record as of
the Notice Date by all Other Falcon Stockholders as a group;
(vi) the Tag-Along Pro Rata Amount; and
(vii) a statement confirming that the Proposed Transferee has agreed (i)
to the tag-along rights and (ii) to purchase the number of shares of Falcon
Stock redeemed pursuant to the Restated Certificate of Incorporation.
65
<PAGE>
Upon written request by the Proposed Transferor, Falcon shall provide to the
Proposed Transferor the information referred to in (iv) and (v) above for
inclusion in the Transfer Notice and such other information as may be required
to enable the Proposed Transferor to comply with the terms of Section 4(b) of
the Securities Act.
Each Other Falcon Stockholder desiring to participate in the proposed
Tag-Along Transfer shall provide a written notice (the "Tag-Along Notice") to
the Proposed Transferor on or before the expiration of ten (10) Business Days
after the Notice Date (the "Tag-Along Acceptance Date") stating the number of
shares held by such Other Falcon Stockholder (up to its Tag-Along Pro Rata
Amount) to be included in the proposed Tag-Along Transfer on the terms and
conditions specified in the Transfer Notice. The Tag-Along Notice given by each
Other Falcon Stockholder shall include and constitute such Other Falcon
Stockholder's binding agreement to include a number of shares equal to its
Tag-Along Pro Rata Amount (or such lesser amount as stated in the Tag-Along
Notice) in the Tag-Along Transfer on the terms and conditions specified in the
Transfer Notice and in the Restated Certificate of Incorporation. If the
Proposed Transferee does not purchase all of the shares of Falcon Stock of the
Proposed Transferor and the Other Falcon Stockholders included in such proposed
Tag-Along Transfer, as well as shares to be issued under the Restated
Certificate of Incorporation in connection with the Tag-Along Transfer, then the
proposed Tag-Along Transfer to such Proposed Transferee shall be prohibited and
any attempt to consummate the proposed Tag-Along Transfer shall be null and void
and of no force and effect.
Each Proposed Transferor and each Other Falcon Stockholder whose shares are
sold in a Tag-Along Transfer shall be required to bear its pro rata share, based
on the number of shares included in such Tag-Along Transfer, of the expenses of
the transaction including, without limitation, legal, accounting and investment
banking fees and expenses, such determination of expenses to be made in the sole
discretion of the Board of Directors of Falcon.
The foregoing provisions shall not apply to a subsequent Transfer of any
share of Falcon Class D Stock that has previously been the subject of a
completed Tag-Along Transfer which complied with the provisions of the Restated
Certificate of Incorporation.
REDEMPTION. The number of shares of Falcon Class A Stock, Falcon Class B
Stock or Falcon Class C Stock equal to the difference (the "Difference Shares")
between (i) the number of shares included in any Tag-Along Transfer by the
Falcon Class A Stockholder, Falcon Class B Stockholder or Falcon Class C
Stockholder pursuant to the foregoing Tag-Along Transfer provisions and (ii) the
Tag-Along Pro Rata Amount for each such Falcon Class A Stockholder, Falcon Class
B Stockholder or Falcon Class C Stockholder shall be redeemed by Falcon, to the
extent it is lawfully permitted to do so, out of funds legally available
therefor PRO RATA based upon the number of Difference Shares held by such
Stockholder from each of the Falcon Class A Stockholders, Falcon Class B
Stockholders and Falcon Class C Stockholders who elected to include in the
Tag-Along Transfer a number of shares of Falcon Stock less than the number of
shares that constitute their Tag-Along Pro Rata Amount or any such Falcon
Stockholders that did not elect to participate in a Tag-Along Transfer at a
redemption price (the "Tag-Along Redemption Price") for each share of Falcon
Class A Stock, Falcon Class B Stock or Falcon Class C Stock so redeemed equal to
the per share price paid for the Falcon Class D Stock by the Proposed Transferee
less such Other Falcon Stockholder's PRO RATA SHARE, based on the number of
shares of Stock so redeemed from such Other Falcon Stockholder, of the expenses
of the Tag-Along Transfer including, without limitations, legal, accounting and
investment banking fees and expenses, such determination of expenses to be made
in the sole discretion of the Board of Directors of Falcon. The shares of Falcon
Class A Stock, Falcon Class B Stock or Falcon Class C Stock so redeemed by
Falcon shall be retired and upon such retirement shall automatically revert to
authorized but unissued shares of Falcon Class A Stock, Falcon Class B Stock or
Falcon Class C Stock, as relevant, and Falcon shall issue, to the extent it is
lawfully permitted to do so, to the Proposed Transferee a number of shares of
Falcon Class A Stock, Falcon Class B Stock or Falcon Class C Stock equal to the
number of shares of such classes of Falcon Stock so redeemed. The provisions of
this section shall not apply to the Non-Redeemable Shares. Redemption under this
subsection is conditioned upon the
66
<PAGE>
contemporaneous purchase by the Proposed Transferee of the shares issuable below
in connection with the applicable Tag-Along Transfer.
The Restated Certificate of Incorporation contemplates the issuance to an
affiliate of Investcorp of a warrant (the "Class B Warrant") to purchase shares
of Falcon Class B Stock (the "Warrant Shares"). If the holder of the Class B
Warrant exercises the Class B Warrant, Falcon shall redeem, to the extent it is
lawfully permitted to do so, from the Class B Stockholders, PRO RATA based on
the number of shares of such Falcon Class B Stock then owned by each such Class
B Stockholders, out of funds legally available therefor, a number of shares of
Falcon Class B Stock equal to the number of Warrant Shares at a redemption price
(the "Warrant Redemption Price") equal to the par value of each share of Falcon
Class B Stock so redeemed. The shares of Falcon Class B Stock so redeemed by
Falcon shall be retired and upon such retirement shall automatically revert to
authorized but unissued shares of Falcon Class B Stock, and Falcon shall
immediately after such redemption, issue, to the extent it is lawfully permitted
to do so, to the Warrant Holder a number of shares of Falcon Common Stock equal
to the number of Warrant Shares. Because the number of shares of Falcon Class B
Stock to be issued in connection with the exercise of the Class B Warrant will
not exceed the number of shares of Falcon Class B Stock so redeemed, the
exercise of the Class B Warrant will not have a dilutive effect on the holders
of shares of Falcon's capital stock.
Falcon shall give to each holder of record of the shares of Falcon Class A
Stock, Falcon Class B Stock or Falcon Class C Stock to be redeemed prior written
notice of such redemption no less than two Business Days prior to the date such
shares will be redeemed (the "Redemption Date").
CONVERSION. If the Initial Public Offering or a Sale (as defined) of Falcon
(whether pursuant to a Single Transaction Sale (as defined) or a series of
Staggered Sales (as defined)) occurs, each issued and outstanding share of
Falcon Class A Stock, Falcon Class B Stock, Falcon Class C Stock, and Falcon
Class D Stock not otherwise redeemed by Falcon pursuant to the mandatory
redemption provisions shall automatically convert into one share of Falcon
Common Stock upon the closing of such Initial Public Offering or Sale (the
"Conversion Date"). Prior to or on the Conversion Date, each holder of shares of
Falcon Class A Stock, Falcon Class B Stock, Falcon Class C Stock, or Falcon
Class D Stock shall surrender such holder's certificates evidencing such shares
at the principal office of Falcon or at such other place as Falcon shall
designate to such holder in writing at least ten Business Days prior to the
Conversion Date, and shall, within ten Business Days after the Conversion Date,
be entitled to receive from Falcon certificates evidencing the number of shares
of Falcon Common Stock into which such shares of Falcon Class A Stock, Falcon
Class B Stock, Falcon Class C Stock or Falcon Class D Stock are converted. On
the Conversion Date, each holder of shares of Falcon Class A Stock, Falcon Class
B Stock, Falcon Class C Stock or Falcon Class D Stock shall be deemed to be a
holder of record of the Falcon Common Stock issuable upon such conversion,
notwithstanding that the certificates representing such Falcon Class A Stock,
Falcon Class B Stock, Falcon Class C Stock or Falcon Class D Stock shall not
have been surrendered at the principal office of Falcon or such other place as
Falcon may have designated, that notice from Falcon shall not have been given
or, if given, shall not have been received by any holder of shares of Falcon
Class A Stock, Falcon Class B Stock, Falcon Class C Stock or Falcon Class D
Stock, or that certificates evidencing such shares of Falcon Common Stock shall
not then be actually delivered to such holder. All certificates representing the
converted shares of Falcon Class A Stock, Falcon Class B Stock, Falcon Class C
Stock or Falcon Class D Stock, including all certificates not so delivered by
such Falcon Class A Stockholders, Falcon Class B Stockholders, Falcon Class C
Stockholders or Falcon Class D Stockholders, shall be, or shall be deemed to be,
cancelled by Falcon as of the Conversion Date and shall thereafter no longer be
of any force or effect and Falcon shall not thereafter issue any such shares of
Falcon Class A Stock, Falcon Class B Stock, Falcon Class C Stock or Falcon Class
D Stock.
LEGENDS. The Restated Certificate of Incorporation provides for legends to
appear on certificates evidencing shares of Falcon Stock with respect to the
restrictions on transfer and the mandatory redemption provisions described
above.
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<PAGE>
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which appears as Annex I to this Proxy Statement and is incorporated
herein by reference. This summary is qualified in its entirety by reference to
the Merger Agreement.
THE MERGER
The Merger Agreement provides that, following the approval of the Merger and
the adoption of the Merger Agreement by the vote of a majority of the shares of
Falcon Class A Stock entitled to vote thereon and the satisfaction or waiver of
the other conditions to the Merger, FBP will be merged with and into Falcon, and
Falcon will continue as the surviving corporation after the Merger.
If the conditions to the Merger are satisfied or waived, the parties will
file with the Secretary of State of the State of Delaware a duly executed
Certificate of Merger, and the Merger will become effective upon the filing and
acceptance thereof or at such date thereafter as is provided in the Certificate
of Merger. Each share of Falcon Class A Stock outstanding at the Effective Time
(other than Falcon Class A Stock held by the Company, its subsidiaries, FBP and
its affiliates, which will be cancelled and retired, and any Dissenting Shares)
will be converted into , at the election of the holder thereof, either (i) the
Cash Price or (ii) a Non-Cash Election Share, as more fully described under "THE
MERGER--Merger" and "THE MERGER--Merger Consideration" and "THE MERGER--Non-Cash
Election". With regard to the treatment of fractional share interests, SEE "THE
MERGER--Fractional Shares."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
the Company relating, with respect to the Company and its subsidiaries, to,
among other things, (a) organization, standing and similar corporate matters;
(b) subsidiaries; (c) the Company's capital structure; (d) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
related matters; (e) documents filed by the Company with the Commission, the
accuracy of information contained therein and the absence of undisclosed
liabilities; (f) the accuracy of information supplied by the Company in
connection with this Proxy Statement/Prospectus; (g) the absence of certain
changes or events since the date of the most recent audited financial statements
filed with the Commission, including material adverse changes with respect to
the Company; (h) the absence of pending or threatened material litigation; (i)
certain labor matters; (j) benefit plans and other matters relating to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
employment matters; (k) filing of tax returns and payment of taxes; (l) title to
owned real property, valid leasehold and subleasehold interests in leased real
property, enforceable third party leases, possession of required permits, and
other real-estate related matters; (m) environmental matters; (n) the absence of
defaults under material contracts; (o) brokers' fees and expenses; (p) the
receipt of an opinion of the Company's financial advisor; (q) the recommendation
of the Board of Directors of the Company with respect to the Merger Agreement,
the Merger and related transactions; (r) the required vote of the Company's
stockholders; (s) required permits and consents and the lack of any provisions
in the Company's organizational documents restricting the Merger Agreement, the
Merger or related agreements and transactions; and (t) intellectual property
matters. The Merger Agreement also contains customary representations and
warranties of FBP relating to, among other things, (a) organization, standing
and similar corporate matters; (b) subsidiaries; (c) FBP's capital structure;
(d) the authorization, execution, delivery, performance and enforceability of
the Merger Agreement and related matters; (e) broker's fees and expenses; (f)
interim operations of FBP; and (g) availability of funds to consummate the
Merger and transactions contemplated thereby.
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CERTAIN PRE-CLOSING COVENANTS
The Company has agreed, until the Effective Time (except as otherwise
specifically required by the terms of the Merger Agreement), that it will, and
it will cause its subsidiaries to, act and carry on their respective business in
the usual and ordinary course of business consistent with past practice and use
their respective reasonable best efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, distributors and others having business dealings with it; provided
that any action or inaction by the Company (i) in respect of the Ultravent
product that does not result in, or result in the reasonable expectation, of
certain material adverse consequences or (ii) in respect of entering into any
collective bargaining agreement at the applicable facility that would not result
in, or result in the reasonable expectation of certain material adverse
consequences shall not constitute a breach of such covenant. Without limiting
the generality of the foregoing, until the Effective Time, the Company will not,
and will not permit any of its subsidiaries to, without the prior consent of FBP
(which consent is not to be unreasonably withheld):
(a) amend their respective Certificates of Incorporation or By-Laws;
(b) issue, sell, encumber or deliver or agree or commit to issue, sell,
encumber or deliver any shares of capital stock, or issue any securities
convertible into, exchangeable for or representing a right to purchase or
receive, or enter into any contract or arrangement with respect to the
issuance of, shares of capital stock, except in the ordinary course of
business under current employee benefit plans and as required by employee
stock option agreements in effect on the date of the Merger Agreement and
other than shares issuable upon exercise of Options;
(c) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or to any affiliate of a stockholder; or redeem or otherwise
acquire any of its securities or any securities of its subsidiaries;
(d) (i) incur or assume any long-term debt, excluding the amount
attributable to operating leases, or, (ii) except in the ordinary course of
business or (up to a specified limit) to finance any acquisition, make any
permitted borrowing under the Company's existing revolving credit facility;
(e) with certain exceptions, enter into, amend any existing, or adopt
any new bonus, pension, change of control, deferred compensation, health,
plant closing, profit sharing, severance or other employee benefit
agreements that materially increase or benefit any director or officer or
any employee, or materially increase the compensation or fringe benefits of
any director, officer or materially increase the compensation or fringe
benefits of any director, officer or employee, pay benefits not required by
existing plans or arrangements, forgive, extend, modify, or guarantee any
existing loans to any officer, director or employee or enter into any new
loans or loan guarantees to or for any officer, director or employee or
enter into any contract, agreement, commitment or arrangement to do any of
the foregoing;
(f) with certain exceptions, acquire (whether by merger, consolidation
or otherwise), sell (whether by merger, consolidation or otherwise), lease,
encumber, transfer or dispose of in excess of a certain amount of assets
except in the ordinary course of business; provided, however, that this
paragraph shall in no way limit or restrict the Company from the sale of its
accounts receivable pursuant to its asset securitization program;
(g) with certain exceptions, authorize or make or commit to make any
capital expenditure in excess of a certain amount;
(h) make any material tax elections or settle or compromise any material
federal, state or local income tax liability, or waive or extend the statute
of limitations in respect of any such taxes;
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(i) (i) materially modify, amend or terminate any material contract or
agreement to which it is a party or waive, release or assign any material
rights or claims thereunder, (ii) settle any suit or claim of liability
against the Company which is reasonably likely to materially negatively
impact the Company's position with respect to any similar pending or
threatened material suit or claim, or (iii) pay or agree to pay in
settlement or compromise of any suits or claims of liability against the
Company, net of insurance recoveries, more than a certain amount for any
such suit or claim or more than an aggregate of a certain amount for all
such suits and claims;
(j) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, methods or practices used by it;
(k) adopt a plan of complete or partial liquidation, dissolution,
consolidation, restructuring, (except as contemplated by the Merger
Agreement) recapitalization, reorganization or (except with respect to FBP)
merger;
(l) enter into any collective bargaining agreement that would result in
certain material adverse consequences; and
(m) take, or agree in writing or otherwise to take, any of the foregoing
actions or take or fail to take any action which would make any
representation or warranty of the Company contained in the Merger Agreement
untrue or incorrect as of the date when made or as if made as of the
Effective Time (other than representations and warranties which address
matters only as of a certain date(s), in which case untrue or incorrect as
of such certain date(s)).
The Company has agreed to give prompt notice to FBP, and FBP has agreed to
give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of either party contained in the Merger Agreement to
be untrue or inaccurate and (ii) any failure of the Company or FBP to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by either party thereunder; PROVIDED, HOWEVER, that the delivery of
any such notice shall not limit or otherwise affect the remedies available under
the Merger Agreement to the party given or receiving such notice.
The Company has agreed to terminate, effective as of the Effective Time (i)
the Registration Rights Agreement among the Company, Eagle Industries, Inc.,
O.D.E. Manufacturing Company, Eagle Industrial Products Corporation and Amerace
Corporation, dated as of November 2, 1994 and (ii) the Corporate Services
Agreement between the Company and Eagle Industries, Inc. dated as of June 22,
1994, subject only to the agreement of the other parties thereto.
FBP has agreed that, upon consummation of the Merger, the Merger Financings
and the disposition of funds to the stockholders of the Company pursuant to the
Merger, not less than $120 million shall have been contributed to FBP, in cash
or cash equivalents. FBP has agreed that it will deliver to the Company, as soon
as available (but in any event prior to the Effective Time), any certificates or
opinions relating to the expected solvency of the Company after the Merger and
related financings and shall cause such certificates or opinions to be addressed
to the Board of Directors of the Company so that the Board is entitled to rely
thereon.
Investcorp Bank E.C. has agreed to cause FBP to perform FBP's obligations
and agreements under the Merger Agreement and expressly agreed to be liable in
the event FBP fails to perform any of its obligations or agreements under the
Merger Agreement; PROVIDED, HOWEVER, that this undertaking and agreement
terminates immediately following the Effective Time.
NO SOLICITATION OF TRANSACTIONS
The Company may, directly or indirectly, furnish information and access, in
each case only in response to unsolicited requests therefor, to the same extent
described under "--Access to Information and
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Confidentiality" below, to any corporation, partnership, person or other entity
or group pursuant to appropriate confidentiality agreements, and may participate
in discussions and negotiate with such entity or group concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction involving
the Company or any subsidiary or division of the Company, if the Board by a
majority vote determines in its good faith judgment (i) after consultation with
its financial advisors, that such corporation, partnership, person or other
entity or group has the financial ability to consummate such proposal and that
such proposal is superior to the Merger and (ii) on the advice of counsel, that
the Board has a fiduciary duty to take such action. In addition, the Company
shall direct its officers and other appropriate personnel to cooperate with and
be reasonably available to consult with any such entity or group. Except as set
forth above, the Company, shall not, directly or indirectly, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, persons or other entity or group
(other than FBP or any of its affiliates or associates) concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction involving
the Company or any subsidiary or division of the Company; PROVIDED THAT nothing
in the Merger Agreement shall prevent the Board from taking and disclosing to
the Company's stockholders a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer. The Company
has agreed to notify FBP promptly if any discussions or negotiations are sought
to be initiated, any inquiry or proposal is made, or any such information is
requested in respect of any such transaction and to promptly communicate to FBP
the terms of any material proposal, discussion, negotiation or inquiry which it
may receive in respect of any such transaction and the identity of the offeror
or potential offeror unless such notice or disclosure could be deemed to cause
the members of the Board to breach their fiduciary duties under applicable law.
BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY FOLLOWING THE MERGER
The Merger Agreement provides that the directors of FBP at the Effective
Time will be the directors of the Company following the Merger. The directors of
FBP at the Effective Time will be Sam A. Cottone, William K. Hall, Christopher
J. O'Brien, Charles J. Philippin and Christopher J. Stadler. SEE Schedule I for
more information on the FBP directors. The Board of Directors of the Company
will be subject to change from time to time. The Merger Agreement also provides
that the officers of the Company at the Effective Time will be officers of the
Company following the Merger, subject to change from time to time.
STOCK AND EMPLOYEE BENEFIT PLANS
The treatment in the Merger of outstanding Options and of the Company's
employee benefit plans will be as described in "THE MERGER--Effect on Employee
Benefit Matters."
ACCESS TO INFORMATION
The Company has agreed to, and to cause each of its subsidiaries to, cause
its and such subsidiaries' officers, directors, employees and auditors and
agents to (i) give FBP and its accountants, counsel and other authorized
representatives reasonable access during normal business hours to the plants,
offices, warehouses and other facilities and to the books and records of it and
the subsidiaries, (ii) permit FBP and its authorized representatives to make
such reasonable inspections as they may require and (iii) furnish to FBP and its
authorized representatives such financial and operating data and other
information with respect to the business and properties of the Company and the
subsidiaries as FBP may from time to time reasonably request. No such
investigation shall affect any representations or warranties of the parties in
the Merger Agreement or the conditions to the obligations of the parties.
COOPERATION AND COMMERCIALLY REASONABLE BEST EFFORT
The parties have agreed to cooperate with each other and to use their
respective commercially reasonable best efforts to take certain specified and
other actions, including cooperation in the arrangement of financing, so that
the transactions contemplated in the Merger Agreement and the Voting
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Agreements may be consummated. The Company and FBP each agreed to use its
commercially reasonable best efforts to cause the Merger to be recorded as a
recapitalization for financial reporting purposes. After the filing of the
registration statement pertaining to the Non-Cash Election Shares, of which this
Proxy Statement/Prospectus is a part, with the Commission, FBP may initiate
discussions relating to the method of recording the Merger for financial
reporting purposes with the Commission staff upon reasonable notice to the
Company. The Company and FBP agreed to cooperate with each other in preparing
any presentation to the Commission with regard to such recording and are
entitled (with their respective advisors, counsel and/or accountants) to attend
any meeting with, participate in any telephone conferences with, and review and
comment on any materials to be submitted to, the Commission relating to such
recording. FBP intends to take all actions necessary to delist the Falcon Class
A Stock from the NYSE, effective after the Effective Time.
PUBLIC ANNOUNCEMENTS
The parties have agreed not to make any public announcements with respect to
the Merger except as required by law or by mutual agreement.
INDEMNIFICATION AND INSURANCE
FBP has agreed that all rights to indemnification now existing in favor of
the directors, officers, employees and agents of the Company and the
subsidiaries as provided in their respective certificates of incorporation or
by-laws or contract or otherwise as in effect on the date hereof with respect to
matters occurring prior to the Effective Time of the Merger shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time (or, in the case of matters occurring prior to
the Effective Time as to which on or prior to such sixth anniversary a claim,
suit, action, proceeding or investigation has been brought or threatened and has
not been resolved prior to the sixth anniversary of the Effective Time, until
such matters are finally resolved). Falcon will advance expenses to each present
and former director, officer, employee and agent of the Company ("Indemnified
Parties") to the fullest extent permitted by the DGCL and the by-laws of the
surviving corporation (which shall be no less advantageous to directors and
officers than the current By-Laws of the Company) for all claims, losses,
damages, liabilities, costs, judgments and amounts paid in settlement including
advancement of expenses (including attorneys' fees) as incurred in respect of
any potential, threatened, pending or contemplated claim, action, suit or
proceeding, whether criminal, civil, administrative or investigative, including,
without limitation, any action by or on behalf of any or all stockholders of the
Company or by or in the right of the Company or the surviving corporation, or
investigation relating to any action or omission by such party in its capacity
as such (including service to any other entity, plan, trust or the like at the
Company's request) occurring on or prior to the Effective Time (including,
without limitation, any which arise out of or relate to the transactions
contemplated by the Merger Agreement), subject to such Indemnified Party's
agreement to return such advanced funds if a court of competent jurisdiction,
after all avenues of appeal have been exhausted, shall have determined that such
Indemnified Party is not entitled to such amounts by operation of law. The
surviving corporation will cause to be maintained in effect for not less than
six years from the Effective Time the current policies of the directors' and
officers' liability insurance presently maintained by the Company with respect
to matters occurring prior to the Effective Time; provided, however, that the
surviving corporation shall not be obligated to pay annual premiums for such
insurance in excess of 200% of the last annual premium paid prior to the date of
the Merger Agreement.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The respective obligations of the Company and FBP to effect the Merger are
subject to various conditions which include, in addition to certain other
customary closing conditions, the following:
(a) the Merger Agreement shall have been approved by the requisite vote of
holders of outstanding shares of Falcon Class A Stock;
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<PAGE>
(b) the waiting period (and any extension thereof) applicable to the Merger
under the HSR Act shall have been terminated or shall have expired;
(c) no statute, rule, regulation, order, decree or injunction shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits, restrains, enjoins or restricts the consummation of
the Merger or any other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; and
(d) any registration statement used in connection with the Merger on Form
S-4 (including the registration statement of which this Proxy
Statement/Prospectus is a part) shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceeding seeking a stop
order, and any material "blue sky" and other state securities laws applicable to
the registration and qualification of the Non-Cash Election Shares of the
Company following the Merger shall have been complied with.
FBP's obligations to effect the Merger are further subject, in addition to
certain other customary conditions, to the following additional conditions:
(a) the Commission shall not have refused to declare the registration
statement pertaining to the Non-Cash Election Shares effective in the event that
the Merger is recorded as a recapitalization for financial reporting purposes;
(b) the Company shall not have entered into any collective bargaining
agreement that would result in certain material adverse consequences; and
(c) FBP shall have received certain agreements from each person identified
by the Company to be an "affiliate" of the Company for purposes of Rule 145
under the Securities Act.
The Company's obligations to effect the Merger are further subject to
customary closing conditions and to the further condition that the Company shall
have received an opinion or certificate of a reputable expert firm confirming
the solvency of the Company (after giving effect to the Merger and related
financings) addressed to the Board of Directors of the Company so that the Board
is entitled to rely thereon. SEE "REGULATORY APPROVALS."
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual written consent of FBP and the Company;
(b) by either FBP or the Company if:
(i) the Merger shall not have been consummated on or before September
16, 1997 (other than due to the failure of the party seeking to terminate
the Merger Agreement to perform its obligations under the Merger Agreement
required to be performed at or prior to the Effective Time); or
(ii) any court of competent jurisdiction in the United States or other
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable;
(c) by FBP if prior to the Effective Time of the Merger the Board of
Directors of the Company shall have failed to make or, if necessary, reaffirm,
or shall have withdrawn or modified in a manner adverse to FBP, its approval or
recommendation of the Merger Agreement or the Merger or shall have recommended
another acquisition of the Company or merger thereof or a tender offer for
shares, or shall have resolved to do any of the foregoing; or
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(d) by the Company if prior to the consummation of the Merger, (A) a
corporation, partnership, person or other entity or group shall have made a bona
fide proposal that (1) the Board of Directors of the Company determines in its
good faith judgment, after consultation with its financial advisors, is more
favorable, from a financial point of view, to the Company's stockholders than
the Merger and that such corporation, partnership, person or other entity or
group has the financial ability to consummate such proposal and (2) the Board of
Directors of the Company believes in its good faith judgment, on the advice of
counsel, that the Board of Directors of the Company has a fiduciary duty to
accept such proposal (a "Third Party Proposal") and (B) FBP does not make within
five business days of receiving notice thereof, an offer that the Board of
Directors of the Company believes, in good faith after consultation with its
financial advisors, is at least as favorable, from a financial point of view, to
the Company's stockholders as such Third Party Proposal.
In the event of termination of the Merger Agreement by either the Company or
FBP, the Merger Agreement will become void and will have no effect, without any
liability or obligation on the part of the Company or FBP, other than (i) under
certain specified provisions of the Merger Agreement relating to payment of fees
and expenses and (ii) liability for any breaches of the Merger Agreement. SEE
"--Expenses and Certain Required Payments."
EXPENSES AND CERTAIN REQUIRED PAYMENTS
If the Merger Agreement is terminated as described in item (b)(i) under
"--Termination" above as the result of the Company's failure to satisfy the
conditions to the obligations of FBP to effect the Merger set forth in the
Merger Agreement (except for the condition related to recapitalization
accounting described under "--Conditions to the Consummation of the Merger"
above), the Company shall (provided FBP is not in material breach of its
obligations under the Merger Agreement) reimburse FBP (after submission of
statements therefor) for all undisputed and documented out-of-pocket fees and
expenses actually and reasonably incurred in good faith by it or on its behalf
in connection with the Merger (including, without limitation, reasonable
attorneys' fees and fees payable to banks, financial institutions, investment
bankers and their respective agents in connection with the Merger Agreement
(including, without limitation, any fees and expenses incurred in connection
with any financing transaction)), the amount of such fees and expenses not to
exceed $4,000,000.
If the Merger Agreement is terminated as described in item (b)(i) under
"--Termination" above as the result of FBP's failure to satisfy the conditions
to the obligations of the Company to effect the Merger, FBP shall (provided the
Company is not in material breach of its obligations under the Merger Agreement)
reimburse the Company (after submission of statements therefor) for all
undisputed and documented out-of-pocket fees and expenses actually and
reasonably incurred in good faith by it or on its behalf in connection with the
Merger (including, without limitation, reasonable attorneys' fees and fees
payable to banks, financial institutions, investment bankers and their
respective agents in connection with the Merger Agreement (including, without
limitation, any fees and expenses incurred in connection with any financing
transaction)), the amount of such fees and expenses not to exceed $4,000,000.
If either (i) the Merger Agreement is terminated as described in item (c) or
(d) under "--Termination" above or (ii) (a) a definitive agreement relating to
the acquisition of the Company, arising out of a Third Party Proposal or a
proposal which would have qualified as a Third Party Proposal shall be executed
or (b) a recapitalization of the Company (other than as contemplated by the
Merger Agreement) shall occur, in either case within six months after
termination of the Merger Agreement, or the sale of substantially all of the
Company's assets shall occur in one or more transactions occurring within one
year after termination of the Merger Agreement, the Company shall pay to FBP a
fee of $20,000,000 payable in cash.
Except as specifically described above, each of the Company and FBP shall
bear its own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.
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AMENDMENT AND WAIVER
The Merger Agreement may be amended by action taken by the Company and FBP
at any time before or after approval of the Merger by the stockholders of the
Company, but, after any such approval, no amendment shall be made which changes
the form or decreases the amount of the consideration per share to be paid in
the Merger or which otherwise adversely affects the rights of the Company's
stockholders under the Merger Agreement without the further approval of such
stockholders. At any time prior to the Effective Time, FBP and the Company may
(i) extend the time for the performance of any of the obligations or other acts
of the other parties, (ii) waive any inaccuracies in the representations and
warranties of the other parties contained in the Merger Agreement or in any
document, certificate or writing delivered by the other parties pursuant thereto
or (iii) waive compliance by the other parties with any of the agreements or
conditions contained therein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
CERTAIN RELATED AGREEMENTS
The following is a brief summary of certain provisions of the Voting
Agreements among EHL, FBP and Falcon, and FBP, Falcon and certain other
stockholders copies of the forms of which appear as Annex II-A and II-B to this
Proxy Statement/Prospectus and are incorporated herein by reference. Such
summaries are qualified in their entirety by reference to such copies attached
to the Proxy Statement/ Prospectus.
AGREEMENTS WITH CERTAIN STOCKHOLDERS
The Subject Stockholders have entered into the Voting Agreements with FBP
and Falcon. Pursuant to the Voting Agreements, the Subject Stockholders, who
owned, as of the Record Date, an aggregate of approximately 71% of the
outstanding shares of Falcon Class A Stock, have agreed, among other things and
subject to certain conditions, to vote in favor of the Merger Agreement and the
Merger. The Voting Agreements also provide that the Subject Stockholders will
make Non-Cash Elections for 1,034,020 shares of Falcon Class A Stock. If the
aggregate number of Electing Shares (pursuant to elections made by all
stockholders, including the Subject Stockholders) exceed 1,034,020, the Subject
Stockholders will be subject to proration with respect to the number of Non-Cash
Election Shares they will receive in the Merger in the same manner as all other
electing stockholders. In addition, the Subject Stockholders are prohibited,
subject to certain conditions and exceptions, from soliciting or responding to
certain inquiries or proposals made by any person or entity with respect to the
Company that constitutes or could reasonably be expected to lead to acquisition
of the Company by another party or the sale of a material portion of the
Company's assets. Subject to certain conditions and exceptions, the Subject
Stockholders are also not permitted to dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent to the
disposition of, any or all of such Subject Stockholders' Falcon Class A Stock or
any interest therein. The covenants and agreements in the Voting Agreement
terminate on the first to occur of (i) the Effective Time and (ii) the
termination of the Merger Agreement in accordance with its terms; provided that
certain covenants will survive the Effective Time of the Merger.
The Voting Agreement among EHL, FBP and Falcon creates certain rights and
obligations in addition to those set forth in the Voting Agreements among
certain officers of Falcon, FBP and Falcon. Among other things, this agreement
provides that EHL will cause its wholly-owned subsidiary Eagle Industries, Inc.
to agree to provide certain corporate services to Falcon after the Merger at
commercially reasonable rates and that, prior to the Merger, EHL and Falcon,
along with the investors in FBP who receive Falcon voting stock pursuant to the
Merger ("Voting Stock Investors"), will enter a Stockholder Rights Agreement
containing the following provisions: (i) the right of first offer in favor of
Falcon and Investcorp Investment Equity Limited in the event that EHL proposes
to sell its Falcon stock to another person; (ii) the right in favor of the
investors in FBP who received voting or non-voting stock in the Merger to
require EHL to sell its entire equity interest in Falcon upon the same terms and
conditions agreeable to
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such investors; (iii) the right in favor of EHL to purchase securities offered
by the Company in certain equity financings in order to allow EHL to maintain
its level of equity ownership interest; (iv) the right in favor of EHL to sell
shares in a change-of-control transaction proposed by Voting Stock Investors;
(v) certain registration rights in favor of EHL; (vi) the obligation of EHL to
enter certain "lock-up" agreements with underwriters in future public offerings;
and (vii) so long as EHL holds a certain percentage of the Falcon Class A stock,
the right of EHL to receive certain information about the business and financial
performance of Falcon.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership of certain beneficial owners of five percent or more
of Falcon Class A Stock and officers and directors of the Company as of March
31, 1997, is set forth in the table below.
<TABLE>
<CAPTION>
SHARES OPTIONS(1) TOTAL % OF CLASS
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
EHL(2)....................................................... 14,000,000 -0- 14,000,000 69.8%
William E. Allen(3).......................................... 50,500 13,025 63,525 *
Gus J. Athas(4).............................................. 23,450 25,000 48,450 *
Sam A. Cottone............................................... 29,450 25,000 54,450 *
Rod F. Dammeyer(5)........................................... 15,000 1,500 16,500 *
Bradbury Dyer III(6)......................................... 150,000 1,500 151,500 *
Paul G. Fischer(7)........................................... 40,600 13,025 53,625 *
William K. Hall(8)........................................... 91,550 33,325 124,875 *
Philip C. Kantz.............................................. -0- 1,000 1,000 *
Lawrence B. Lee(9)........................................... 29,325 13,350 42,675 *
Sheli Z. Rosenberg........................................... 2,000 1,500 3,500 *
Richard G. Sim............................................... -0- 500 500 *
B. Joseph White.............................................. 1,500 1,000 2,500 *
All directors & executive officers as a group, including the
above-named persons........................................ 448,075 145,475 593,550 3.0%
</TABLE>
- ------------------------
* Percentage of shares beneficially owned does not exceed one percent.
(1) Shares of stock that are subject to options exercisable within 60 days of
the date of this table.
(2) 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. Mark
Slezak and Ms. Lurie are co-trustees of the Robert H. and Ann Lurie Trust.
Messrs. Zell and Slezak and Ms. Lurie disclaim beneficial ownership of the
shares of Common Stock beneficially owned by EHL. The address of EHL,
Messrs. Zell and Slezak and Ms. Lurie is Two North Riverside Plaza, Chicago,
Illinois, 60606.
(3) Includes 10,000 shares held by Mr. Allen's wife and of which Mr. Allen
disclaims beneficial ownership.
(4) Includes 3,000 shares held by members of Mr. Athas' family and of which Mr.
Athas disclaims beneficial ownership.
(5) Includes 5,000 shares held by Mr. Dammeyer's wife and of which Mr. Dammeyer
disclaims beneficial ownership.
(6) 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 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.
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(7) Includes 100 shares held by a member of Mr. Fischer's family and of which
Mr. Fischer disclaims beneficial ownership.
(8) Includes 750 shares of the Company held by members of Mr. Hall's family and
of which Mr. Hall disclaims beneficial ownership.
(9) Includes 1,000 shares held by a trust for the benefit of of a member of Mr.
Lee's family and of which Mr. Lee disclaims beneficial ownership.
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REGULATORY APPROVALS
The Merger is subject to the expiration or termination of the applicable
waiting period under the HSR Act, if any. The Company and FBP do not believe
that a filing under the HSR Act is required or that any associated waiting
period is applicable to the Merger. Certain aspects of the Merger may require
notification to, and filings with, certain securities and other authorities in
certain states, including jurisdictions where the Company currently operates.
The obligations of FBP under the Merger Agreement may also be subject to the
receipt of all necessary licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and other third parties as
are necessary in connection with the transactions contemplated by the Merger.
FBP
FBP is a Delaware corporation organized on behalf of Investcorp, certain
affiliates of Investcorp and other international investors to effect the Merger
and has not carried on any activities to date other than those incident to its
formation and the transactions contemplated by the Merger Agreement. At the
Effective Time, FBP will be merged into Falcon and the separate corporate
existence of FBP will terminate. The name, business, address, principal
occupation or employment, and five year employment history of each of the
persons who will be directors of FBP at the Effective Time and will, therefore,
become directors of Falcon upon consummation of the Merger, and certain other
information, are set forth in SCHEDULE I to this Proxy Statement/Prospectus.
Immediately prior to the Effective Time, all of the voting stock of FBP will
be owned by Investcorp Investment Equity Limited, a wholly-owned subsidiary of
Investcorp and ten other entities organized by Investcorp. Investcorp will not
own any stock in such other entities or in the beneficial owners of such
entities, but may be deemed to share beneficial ownership of the shares of
voting stock held by such entities because such entities have entered into
revocable management services or similar agreements with an affiliate of
Investcorp, pursuant to which each of such entities has granted such affiliate
the authority to direct the voting and disposition of the stock of FBP or Falcon
owned by such entity for so long as such agreement is in effect.
Investcorp is a Luxembourg corporation with its address at 37 rue Notre
Dame, Luxembourg.
DISSENTING STOCKHOLDERS' RIGHTS
In accordance with Section 262 of the DGCL (the "Delaware Dissent
Provisions"), a stockholder of the Company may dissent from the Merger and
obtain payment for the fair value of his or her shares of Falcon Class A Stock.
Such fair value is exclusive of any appreciation or depreciation in anticipation
of the Merger, unless such exclusion would be inequitable. The appraised value
of shares of Falcon Class A Stock of a dissenting stockholder may differ from
the consideration that a stockholder of the Company is entitled to receive in
the Merger. The following is a summary of the Delaware Dissent Provisions, the
full text of which is set forth as Annex IV to this Proxy Statement/Prospectus.
Under the Delaware Dissent Provisions, a stockholder of the Company may
dissent from the Merger by undertaking the following procedures: (i) the
dissenting stockholder must deliver to the Company, prior to the vote being
taken on the Merger at the Special Meeting, written notice of his or her intent
to demand payment for his or her shares of Falcon Class A Stock if the Merger is
effected (the "Notice Requirement"); and (ii) the dissenting stockholder must
not vote in favor of the Merger (or submit a proxy which results in a vote in
favor of the Merger). A stockholder who does not satisfy these requirements
waives his or her right to demand payment. For example, a stockholder who merely
votes against the Merger without satisfying the Notice Requirement described in
(i) above is not entitled to demand payment for his or her shares of Falcon
Class A Stock under the Delaware Dissent Provisions. However, a stockholder's
mere
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failure to vote on the Merger will not constitute a waiver of his or her right
to demand payment as long as he or she fulfills the Notice Requirement described
in (i) above.
In addition, if the Merger is approved by a vote of the stockholders of the
Company, the Company must deliver written notice of such approval to each such
dissenting stockholder (the "Written Dissenters' Notice"), which must be sent
not later than 10 days after the Merger is effected, and the dissenting
stockholder must make a demand for payment of the fair value of his or her
shares of Falcon Class A Stock in accordance with the terms of the Written
Dissenters' Notice, which demand must be received by the Company by a date to be
specified by the Company in the Written Dissenters' Notice, which date shall be
not fewer than 30 nor more than 60 days after the date on which the Written
Dissenters' Notice is mailed.
Within twenty (20) days after making a formal payment demand, each
stockholder demanding payment shall submit the certificate or certificates
representing his or her shares of Falcon Class A Stock to the Company for
notation thereon by the Company that such demand has been made. The failure to
submit his or her shares of Falcon Class A Stock for such notation shall, at the
option of the Company, terminate the stockholder's rights under the Delaware
Dissent Provisions unless a court of competent
jurisdiction, for good and sufficient cause, shall otherwise direct.
A record stockholder may dissent as to fewer than all of the shares of
Falcon Class A Stock registered in his or her name only if he or she dissents
with respect to all shares of Falcon Class A Stock beneficially owned by any one
person and notifies the Company of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares of Falcon Class A Stock to which he or she
dissents and his or her other shares of Falcon Class A Stock were registered in
the name of a different stockholder. Once a formal demand for payment is made,
such demand cannot be withdrawn by the stockholder except with the consent of
the Company.
Upon the Effective Time, or upon receipt by the Company of a demand for
payment, the Company must offer to pay each dissenting stockholder who has
properly complied with the Delaware Dissent Provisions the amount estimated by
the Company to be the fair value of the shares of Falcon Class A Stock held by
each such dissenting stockholder, plus accrued interest. Such offer must be
accompanied by, among other information, the Company's balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of the
offer, an income statement for that year, the latest available interim financial
statements, if any, a statement of the Company's estimate of the fair value of
the shares, and an explanation of how the interest was calculated. If, within
thirty (30) days after the making of such offer of payment, any dissenting
stockholder accepts the same, then such dissenting stockholder must surrender to
the Company the certificate or certificates representing his or her shares of
Falcon Class A Stock and such dissenting stockholder will cease to have any
interest in the shares. If, however, a dissenting stockholder does not accept
the Company's offer of payment, then such dissenting stockholder must, within
thirty (30) days after the Company offered payment for his or her shares of
Falcon Class A Stock, notify the Company in writing of his or her own estimate
of the fair value of his or her shares of Falcon Class A Stock and amount of
interest due, and demand payment of such estimate, or reject the Company's offer
and demand the fair value of his or her shares of Falcon Class A Stock and
interest due. If this demand by a dissenting stockholder remains unsettled for
sixty (60) days, then the Company must commence a proceeding in the Circuit
Court of Newcastle County, Delaware, to determine the fair value of the shares
of Falcon Class A Stock and accrued interest. If the Company does not commence
this proceeding within the 60-day period, then the Company must pay each
dissenting stockholder whose demand remains unsettled the amount demanded. The
Company must make all dissenting stockholders whose demands remain unsettled
parties to this proceeding. In such proceeding, the court may, if it so elects,
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The Company must pay each dissenting
stockholder the amount found to be due after final determination of the
proceedings. Upon payment of such judgment, the dissenting stockholder will
cease to have any interest in the shares of Falcon Class A Stock.
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The costs and expenses of any such dissent proceeding will be determined by
the court and will be assessed against the Company, but costs and expenses may
be apportioned and assessed against all or some of the dissenting stockholders,
in such amounts as the court deems equitable, to the extent the court finds such
dissenting stockholders acted arbitrarily, vexatiously, or not in good faith in
demanding payment after receiving an offer of payment from the Company. The
court may also assess the reasonable fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable (a) against the
Company and in favor of any or all dissenting stockholders if the court finds
that the Company did not substantially comply with the requirements of the
Delaware Dissent Provisions, or (b) against either of the Company or a
dissenting stockholder, in favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by the
Delaware Dissent Provisions. If the court finds that the services of counsel for
any dissenting stockholder were of substantial benefit to the other dissenting
stockholders similarly situated, and that the fees for the services should not
be assessed against the Company, the court may award such counsel reasonable
fees to be paid out of the amounts awarded to dissenting stockholders who were
benefitted.
The foregoing is only a summary of the Delaware Dissent Provisions, and is
qualified in its entirety by reference to the provisions thereof, the full text
of which is set forth as Annex IV to this Proxy Statement/ Prospectus. Each
stockholder of the Company is urged to carefully read the full text of the
Delaware Dissent Provisions.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and December 31, 1995 and for each of the three years in the period ended
December 31, 1996, incorporated by reference in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon the
authority of said firm as experts in giving said reports.
Representatives of Arthur Andersen LLP are expected to be present at the
Special Meeting, where they will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
LEGAL OPINIONS
The legality of Falcon Class A Stock being retained in the Merger is being
passed on by Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt has
also delivered an opinion concerning certain Federal income tax consequences of
the Merger. See "THE MERGER--Federal Income Tax Consequences."
OTHER INFORMATION
Management of the Company knows of no other matters that may properly be
brought before the Special Meeting.
THE PROXY SOLICITOR FOR THE MERGER IS:
Morrow & Co., Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
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or
CALL TOLL-FREE (800) 322-2885
Any requests for assistance in filling out or delivering Proxy Cards or
requests for additional copies of this Proxy Statement/Prospectus or the Proxy
Card may be directed to the Proxy Solicitor.
THE EXCHANGE AGENT FOR THE MERGER IS:
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THE BANK OF NEW YORK
- --------------------------------------
Attention:
- -----------------------------
(800) ---------------------------------
BY MAIL: BY HAND:
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
New York, NY ------------------------- New York, NY -------------------------
- --------------------------------------
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BY FACSIMILE (For Eligible Institutions Only): CONFIRM BY TELEPHONE TO:
[ ] [ ]
Any questions or requests for assistance in filling out or delivery of
Non-Cash Election Forms or share certificates or requests for additional copies
of the Non-Cash Election Form may be directed to the Exchange Agent by calling
TOLL FREE (800) .
If the Merger is not consummated, stockholder proposals intended to be
presented at the 1998 Annual Meeting of Stockholders must have been received by
the Company not later than December 31, 1996 for inclusion in the proxy
materials for such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ GUS J. ATHAS
--------------------------------------
SECRETARY Gus J. Athas
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SCHEDULE I
CERTAIN INFORMATION REGARDING THE DIRECTORS OF
THE COMPANY UPON CONSUMMATION OF THE MERGER
The following table sets forth the name, age, principal occupation or
employment at the present time and during the last five years, and current
directorships of the persons who will be the directors of FBP at the Effective
Time and therefore will become directors of the Company upon the consummation of
the Merger. Except for Messrs. Cottone and Hall, whose business address is Suite
1100, Two North Riverside Plaza, Chicago, Illinois 60606, the business addresses
of such persons is 200 Park Avenue, 48th Floor, New York, New York 10166 c/o
Gibson, Dunn & Crutcher LLP. Each person has had the principal occupation or
employment listed for more than the past five years except as otherwise noted.
Sam A. Cottone, 56, will become a director of the Company upon the
consummation of the Merger. He has been the Senior Vice President-Finance,
Treasurer and Chief Financial Officer of the Company since 1994, a Senior Vice
President of GAMI since 1995, and the Senior Vice President-Finance, Chief
Financial Officer and director of Eagle since 1993. He was a partner with Arthur
Andersen LLP from 1973 to 1993.
William K. Hall, 53, will become a director of the Company upon the
consummation of the Merger. He has been a director, the President and Chief
Executive Officer of the Company since 1994, and the President since 1988. He
has been a Chief Executive Officer and director since 1990 of Eagle and a
director of Gencorp and A.M. Castle & Co.
Christopher J. O'Brien, 38, will become a director of the Company upon the
consummation of the Merger. He has been an executive of Investcorp, its
predecessor or one or more of its wholly-owned subsidiaries since December 1993.
Prior to joining Investcorp, Mr. O'Brien was a Managing Director of Mancuso &
Company for four years. Mr. O'Brien is a director of Simmons Holdings, Inc.,
Star Markets Holdings, Inc., Prime Service, Inc., CSK Auto, Inc. and The William
Carter Company.
Charles J. Philippin, 46, will become a director of the Company upon
consummation of the Merger. He has been an executive of Investcorp, its
predecessor or one or more of its wholly-owned subsidiaries since July 1994.
Prior to joining Investcorp, Mr. Philippin was a partner of Coopers & Lybrand
L.L.P. Mr. Philippin is a director of Saks Holdings, Inc., Prime Service, Inc.,
CSK Auto, Inc. and The William Carter Company.
Christopher J. Stadler, 32, will become a director of the Company upon the
consummation of the Merger. He has been an executive of Investcorp, its
predecessor or one or more of its wholly-owned subsidiaries since April 1, 1996.
Prior to joining Investcorp, Mr. Stadler was a Director with CS First Boston
Corporation. Mr Stadler is a director of Prime Service, Inc., CSK Auto, Inc. and
The William Carter Company.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
FALCON BUILDING PRODUCTS, INC.
AND
FBP ACQUISITION CORP., INC.
DATED AS OF MARCH 20, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.1 The Merger.......................................................................................... 1
1.2 Effective Time...................................................................................... 1
1.3 Effects of the Merger............................................................................... 1
1.4 Certificate of Incorporation and By-Laws............................................................ 1
1.5 Directors and Officers.............................................................................. 2
1.6 Conversion of Shares................................................................................ 2
1.7 Conversion of MergerCo's Capital Stock.............................................................. 4
1.8 Stock Options....................................................................................... 4
1.9 Stockholders' Meeting; Proxy Statement.............................................................. 5
1.10 Filing of Certificate of Merger..................................................................... 6
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
2.1 Dissenting Shares................................................................................... 6
2.2 Payment for Shares.................................................................................. 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization........................................................................................ 8
3.2 Capitalization...................................................................................... 8
3.3 Authority Relative to this Agreement................................................................ 9
3.4 Consents and Approvals; No Violations............................................................... 9
3.5 Reports............................................................................................. 10
3.6 Absence of Certain Changes; No Undisclosed Liabilities.............................................. 10
3.7 Proxy Statement..................................................................................... 11
3.8 No Default.......................................................................................... 11
3.9 Litigation.......................................................................................... 11
3.10 Certain Agreements.................................................................................. 11
3.11 Taxes............................................................................................... 12
3.12 Environmental Matters............................................................................... 12
3.13 Employee Benefit Matters............................................................................ 13
3.14 Brokers............................................................................................. 14
3.15 Labor Relations..................................................................................... 14
3.16 Intellectual Property............................................................................... 14
3.17 Real Property....................................................................................... 14
3.18 Opinion of Financial Advisor........................................................................ 15
3.19 Board Recommendation................................................................................ 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO
4.1 Organization........................................................................................ 15
4.2 Authority Relative to this Agreement................................................................ 15
4.3 Consents and Approvals; No Violations............................................................... 16
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4.4 Proxy Statement..................................................................................... 16
4.5 Brokers............................................................................................. 16
4.6 Funds Available..................................................................................... 16
ARTICLE V
COVENANTS
5.1 Conduct of Business of the Company.................................................................. 17
5.2 No Solicitation..................................................................................... 18
5.3 Access to Information............................................................................... 19
5.4 Commercially Reasonable Best Efforts................................................................ 19
5.5 Consents............................................................................................ 20
5.6 Public Announcements................................................................................ 20
5.7 Indemnification; Directors' and Officers' Insurance................................................. 20
5.8 Employee Contracts.................................................................................. 22
5.9 State Takeover Laws................................................................................. 22
5.10 Future Purchases.................................................................................... 22
5.11 Capital Adequacy of the Surviving Corporation....................................................... 22
5.12 New York Stock Exchange Delisting................................................................... 22
5.13 Affiliates.......................................................................................... 22
5.14 Resignation of Directors............................................................................ 22
5.15 Notification of Certain Matters..................................................................... 22
5.16 Termination of Certain Agreements................................................................... 23
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Each Party's Obligation to Effect the Merger.......................................... 23
6.2 Conditions to Obligation of MergerCo to Effect the Merger........................................... 23
6.3 Conditions to Obligation of the Company to Effect the Merger........................................ 23
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 Termination......................................................................................... 24
7.2 Effect of Termination............................................................................... 25
7.3 Fees and Expenses................................................................................... 25
7.4 Amendment........................................................................................... 25
7.5 Extension; Waiver................................................................................... 26
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations, Warranties............................................................. 26
8.2 Entire Agreement; Assignment........................................................................ 26
8.3 Validity............................................................................................ 26
8.4 Notices............................................................................................. 26
8.5 Governing Law....................................................................................... 27
8.6 Descriptive Headings................................................................................ 27
8.7 Parties in Interest................................................................................. 27
8.8 Counterparts........................................................................................ 27
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8.9 Specific Performance................................................................................ 27
8.10 Miscellaneous....................................................................................... 27
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 20, 1997 (the "AGREEMENT"),
between and among Falcon Building Products, Inc., a Delaware corporation (the
"COMPANY") and FBP Acquisition Corp., Inc., a Delaware corporation ("MERGERCO").
WHEREAS, the Board of Directors of the Company (the "Board") and the Board
of Directors of MergerCo have determined that the merger of MergerCo with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth in this Agreement, would be fair to and in the best interests of their
respective stockholders, and such Boards of Directors have approved such Merger,
pursuant to which each share of Class A Common Stock, par value $.01 per share
(the "Shares"), issued and outstanding immediately prior to the Effective Time
(as defined in Section 1.2) will be converted into either (A) the right to
retain at the election of the holder thereof and subject to the terms hereof, a
Share or (B) the right to receive cash, other than for (a) Shares owned,
directly or indirectly, by the Company or any Subsidiary (as defined in Section
3.1) of the Company or by MergerCo or any subsidiary of MergerCo and (b)
Dissenting Shares (as defined in Section 2.1);
WHEREAS, the Merger and this Agreement require the vote of a majority of the
Shares for the approval thereof (the "Company Stockholder Approval");
WHEREAS, as a condition to MergerCo's willingness to enter into this
Agreement and consummate the transactions contemplated hereby, MergerCo has
required that the Stockholders (as defined in the Voting Agreement (as defined
herein)) agree, among other things, to vote Shares beneficially owned by them in
accordance with the Voting Agreement and comply with the other provisions of
such Voting Agreement; and in order to induce MergerCo to enter into this
Agreement, the Stockholders have executed and delivered the Voting Agreement,
dated as of the date hereof, between MergerCo and the Stockholders (the "Voting
Agreement");
WHEREAS, MergerCo and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the Delaware General Corporation Law (the "GCL"),
MergerCo shall be merged with and into the Company (the "MERGER") as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Article VI. Following the Merger, the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION") and the separate corporate existence
of MergerCo shall cease.
Section 1.2 EFFECTIVE TIME. The Merger shall become effective upon the
filing with the Delaware Secretary of State of a certificate of merger or, if
applicable, a certificate of ownership and merger (the certificate of merger and
the certificate of ownership and merger, as the case may be, being referred to
herein as the "CERTIFICATE OF MERGER"), executed in accordance with the relevant
provisions of the GCL (the time the Merger becomes effective being the
"EFFECTIVE TIME").
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the GCL.
Section 1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-Laws of MergerCo in effect immediately preceding the
Effective Time shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation (except that, effective as of the Effective Time,
MergerCo's
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Certificate of Incorporation shall be amended such that MergerCo's corporate
name shall be changed to "Falcon Building Products, Inc."), and thereafter may
be amended or repealed as provided by law.
Section 1.5 DIRECTORS AND OFFICERS. The officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation. The directors of MergerCo immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation.
Section 1.6 CONVERSION OF SHARES.
(a) CONVERSION (OR RETENTION) OF THE SHARES. Except as otherwise
provided herein and subject to Section 1.6(e), each issued and outstanding
Share (other than any such shares to be cancelled pursuant to Sections
1.6(b) and 1.6(c) and any Dissenting Shares (as defined herein) shall be
converted into the following (the "Merger Price"):
(i) for each such Share with respect to which an election to retain
such Share has been effectively made and not revoked or lost, pursuant to
Section 1.6(d) ("Electing Shares"), the right to retain one fully paid
and nonassessable Share (a "Non-Cash Election Share"); and
(ii) for each such Share (other than Electing Shares), the right to
receive in cash from the Company following the Merger an amount equal to
$17.75 (the "Cash Election Price").
(b) Each Share held in the treasury of the Company or by any subsidiary
of the Company immediately prior to the Effective Time shall, at the
Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, be cancelled and retired and cease to exist and no
payment shall be made with respect thereto.
(c) Each Share owned by MergerCo or any of its affiliates immediately
prior to the Effective Time shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be
cancelled and retired and cease to exist and no payment shall be made with
respect thereto.
(d) SHARE ELECTIONS.
(i) Each person who, on or prior to the Election Date referred to in
(iii) below, is a record holder of Shares will be entitled, with respect
to all or any portion of such holder's Shares, to make an unconditional
election (a "Non-Cash Election") on or prior to such Election Date to
retain Non-Cash Election Shares, on the basis hereinafter set forth.
(ii) MergerCo shall prepare and mail a form of election, which form
shall be subject to the reasonable approval of the Company (the "Form of
Election"), with the Proxy Statement (as defined in Section 1.9) to the
record holders of Shares as of the record date for the Stockholders
Meeting (as defined in Section 1.9), which Form of Election shall be used
by each record holder of Shares who wishes to elect to retain Non-Cash
Election Shares for any or all Shares held, subject to the provisions of
Section 1.6(e) hereof, by such holder. The Company will use its
reasonable efforts to make the Form of Election and the Proxy Statement
available to all persons who become holders of Shares during the period
between such record date and the Election Date referred to below. Any
such holder's election to retain Non-Cash Election Shares shall have been
properly made only if the Exchange Agent (as defined in Section 2.2(a))
shall have received at its designated office, by 5:00 p.m., New York City
time on the trading day (the "Election Date") next preceding the date of
the Stockholders Meeting, a Form of Election properly completed and
signed and accompanied by certificates for the Shares to which such Form
of Election relates, duly endorsed in blank or otherwise in form
acceptable for transfer on the books of the Company (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of
Election from a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office or
correspondent in the United States, provided such certificates are in
fact delivered to
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the Exchange Agent within five New York Stock Exchange trading days after
the date of execution of such guarantee of delivery).
(iii) Any Form of Election may be revoked by the stockholder
submitting it to the Exchange Agent only by written notice received by
the Exchange Agent prior to 5:00 p.m., New York City time, on the
Election Date (unless MergerCo and the Company determine not less than
two business days prior to the Election Date that the Effective Time is
not likely to occur within five business days following the date of the
Stockholders Meeting, in which case the Form of Election will remain
revocable until a subsequent date which shall be a date prior to the
Effective Time determined by MergerCo and the Company). In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by MergerCo and the Company that the Merger has been
abandoned. If a Form of Election is revoked, the certificate or
certificates (or guarantees of delivery, as appropriate) for the Shares
to which such Form of Election relates shall be promptly returned to the
stockholder submitting the same to the Exchange Agent.
(iv) The determination of the Exchange Agent shall be binding as to
whether or not elections to retain Non-Cash Election Shares have been
properly made or revoked pursuant to this Section 1.6 with respect to
Shares and when elections and revocations were received by it. If the
Exchange Agent determines that any election to retain Non-Cash Election
Shares was not properly made with respect to Shares, such Shares shall be
treated by the Exchange Agent as Shares which were not Electing Shares at
the Effective Time. The Exchange Agent shall also make all computations
as to the allocation and the proration contemplated by Section 1.6(e),
and any such computation shall be conclusive and binding on the holders
of Shares. The Exchange Agent may, with the mutual agreement of MergerCo
and the Company, make such rules as are consistent with this Section 1.6
for the implementation of the elections provided for herein as shall be
necessary or desirable fully to effect such elections.
(e) PRORATION.
(i) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of Shares to be converted into the right to retain
Shares at the Effective Time (the "Non-Cash Election Number") shall be
equal to 1,034,020 (excluding for this purpose any Shares to be cancelled
pursuant to Sections 1.6(b) or 1.6(c)).
(ii) If the number of Electing Shares exceeds the Non-Cash Election
Number, then each Electing Share shall be converted into the right to
retain Non-Cash Election Shares or receive cash in accordance with the
terms of Section 1.6(a) in the following manner:
(A) A proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing the Non-Cash Election Number by the total
number of Electing Shares.
(B) The number of Electing Shares covered by each Non-Cash
Election to be converted into the right to retain Non-Cash Election
Shares shall be determined by multiplying the Non-Cash Proration
Factor by the total number of Electing Shares covered by such Non-
Cash Election.
(C) All Electing Shares, other than those shares converted into
the right to receive Non-Cash Election Shares in accordance with
Section 1.6(e)(ii)(B), shall be converted into cash (on a consistent
basis among stockholders who made the election referred to in Section
1.6(a)(i), pro rata to the number of Shares as to which they made
such election) as if such Shares were not Electing Shares in
accordance with the terms of Section 1.6(a)(ii).
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(iii) If the number of Electing Shares is less than the Non-Cash
Election Number, then:
A. all Electing Shares shall be converted into the right to
retain Shares in accordance with the terms of Section 1.6(a)(i);
B. additional Shares other than Electing Shares and Dissenting
Shares shall be converted into the right to retain Non-Cash Election
Shares in accordance with the terms of 1.6(a) in the following
manner:
(1) a proration factor (the "Cash Proration Factor") shall be
determined by dividing (x) the difference between the Non-Cash
Election Number and the number of Electing Shares, by (y) the
total number of Shares other than Electing Shares and Dissenting
Shares; and
(2) the number of Shares in addition to Electing Shares to be
converted into the right to retain Non-Cash Election Shares shall
be determined by multiplying the Cash Proration Factor by the
total number of shares other than Electing Shares and Dissenting
Shares; and
C. subject to Section 2.1, Shares subject to clause (B) of this
paragraph 1.6(e)(iii) shall be converted into the right to retain
Non-Cash Election Shares in accordance with Section 1.6(a)(i) (on a
consistent basis among shareholders who held Shares as to which they
did not make the election referred to in Section 1.6(a)(i), pro rata
to the number of Shares as to which they did not make such election).
(f) As of the Effective Time, all the Shares (other than Shares referred
to in Sections 1.6(a)(i), 1.6(b) and 1.6(c)) issued and outstanding
immediately prior to the Effective Time shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall, to the
extent such certificate represents such Shares, cease to have any rights
with respect thereto, except the right to receive cash, upon surrender of
such certificate in accordance with Section 2.2.
Section 1.7 CONVERSION OF MERGERCO'S CAPITAL STOCK. Each share of capital
stock of MergerCo issued and outstanding immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and thereafter represent the
same number of Shares of the same class of capital stock of the Surviving
Corporation as described on Schedule 1.7.
Section 1.8 STOCK OPTIONS. Immediately prior to the Effective Time, each
holder of an outstanding option to purchase Shares granted under the Company's
1994 Stock Option and Restricted Share Plan (the "1994 PLAN") or other right to
acquire Shares described on Schedule 3.2(a)(1) (such options and other rights,
an "OPTION"), whether or not then exercisable, will be entitled to receive from
the Company for each Share subject to an Option an amount in cash equal to the
excess, if any, of the Cash Election Price over the per Share exercise price of
such Option, and such Option will be cancelled; provided, that, with respect to
any person subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") who waives all rights with respect to such Options
and any Shares subject thereto other than the right to receive such amount of
cash, any such amount shall be paid as soon as practicable after the first date
payment can be made without liability to such person under Section 16(b) of the
Exchange Act. All applicable withholding taxes attributable to the payments made
hereunder or to distributions contemplated hereby shall be deducted from the
amounts payable under this Section 1.8 and all such taxes attributable to the
exercise of Options shall be withheld from the proceeds received in respect of
the Shares issuable on such exercise. Prior to the Effective Time, the Company
shall have taken such actions as are necessary in the reasonable judgment of
MergerCo to ensure that from and after the Effective Time, neither the Company
nor any of its subsidiaries is or will be bound by any Options which would
entitle any person, other than MergerCo or its affiliates, to beneficially own,
or receive any payments (other than as
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otherwise contemplated by Section 1.6 and this Section 1.8) in respect of, any
capital stock of the Company or the Surviving Corporation.
Section 1.9 STOCKHOLDERS' MEETING; PROXY STATEMENT.
(a) STOCKHOLDERS' MEETING. The Company, acting through the Board,
will, as promptly as practicable following the date of this Agreement and in
consultation with MergerCo, (i) duly call, give notice of, convene and hold
a meeting of its stockholders for the purpose of considering and approving
this Agreement and the transactions contemplated hereby (the "Stockholders
Meeting") and (ii)(A) include in the Proxy Statement (as defined in (b)
below) the recommendation of the Board that the stockholders of the Company
vote in favor of the approval of this Agreement and the transactions
contemplated hereby and the written opinions of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and Smith Barney Inc. ("Smith
Barney"), the Board's financial advisors, that the consideration to be
received by the stockholders of the Company pursuant to the Merger is fair
to such stockholders from a financial point of view and (B) use its
reasonable best efforts to obtain the necessary approval of this Agreement
and the transactions contemplated hereby by its stockholders, provided,
however, that the Board may fail to make or may withdraw or modify such
recommendation or fail to seek such approval if a corporation, partnership,
person or other entity or group shall have made a bona fide proposal that
(i) the Board believes in its good faith judgment, after consultation with
its financial advisors, is more favorable, from a financial point of view,
to the Company's stockholders than the Merger and that such corporation,
partnership, person or other entity or group has the financial ability to
consummate such proposal and (ii) the Board believes in its good faith
judgment, on the written advice of counsel, that the Board has a fiduciary
duty to accept such proposal.
(b) PROXY STATEMENT. Promptly following the date of this Agreement,
the Company shall prepare a proxy statement relating to the Stockholder's
Meeting (as amended or supplemented, the "Proxy Statement") and the Company
shall prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement on Form S-4 (as amended or supplemented, the
"Form S-4"), in which the Proxy Statement will be included. The Company
shall use its reasonable best efforts to have the Form S-4 declared
effective under the Securities Act of 1933, as amended (the "Securities
Act") as promptly as practicable after such filing. The Company will use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. The Company shall also take any
action required to be taken under any applicable state securities laws in
connection with the registration and qualification of the Non-Cash Election
Shares in connection with the Merger. The information provided by the
Company and MergerCo for use in the Form S-4, shall, at the time the Form
S-4 becomes effective and on the date of the Stockholders Meeting referred
to above, be true and correct in all material respects and shall not omit to
state any material fact required to be stated therein or necessary in order
to make such information not misleading, and the Company and MergerCo each
agree to correct any information provided by it for use in the Form S-4
which shall have become false or misleading. MergerCo and the Company will
cooperate with each other in the preparation of the Proxy Statement; without
limiting the generality of the foregoing, the Company will as promptly as
practicable notify MergerCo of the receipt of any comments from the SEC and
any request by the SEC for any amendment to the Proxy Statement or for
additional information. All filings with the SEC, including the Proxy
Statement and any amendment thereto, and all mailings to the Company's
stockholders in connection with the Merger, including the Proxy Statement,
shall be subject to the prior review, comment and approval of MergerCo
(which approval by MergerCo shall not be unreasonably withheld or delayed).
MergerCo will furnish to the Company the information relating to it required
by the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations promulgated thereunder to be set forth in the
Proxy Statement. The Company agrees to use its reasonable best efforts,
after consultation with the other parties hereto, to
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respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof filed by it and cause such
Proxy Statement to be mailed to the Company's stockholders at the earliest
practicable time.
Section 1.10 FILING OF CERTIFICATE OF MERGER. Upon the terms and subject
to the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VI, the Company shall execute and
file the Certificate of Merger in the manner required by the GCL, and the
parties hereto shall take all such other and further actions as may be required
by law to make the Merger effective. Prior to the filing referred to in this
Section 1.10, a closing will be held at the offices of Gibson, Dunn & Crutcher
LLP, 200 Park Avenue, New York, New York 10166 (or such other place as the
parties may agree) for the purpose of confirming all of the foregoing.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
Section 2.1 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by stockholders who have complied with the
procedures for appraisal set forth in the GCL (the "DISSENTING SHARES") (i)
shall only be entitled to such rights as are granted under Section 262 of the
GCL, and (ii) shall not be converted into or be exchangeable for the right to
receive the consideration provided in Section 1.6, unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
holder's right to appraisal and payment under the GCL. If such holder shall have
so failed to perfect or shall have effectively withdrawn or lost such right,
such Shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
consideration provided for in Section 1.6, without any interest thereon. The
Company shall give MergerCo (i) prompt notice of any written demands for
appraisal of any Shares, attempted withdrawals of such demands, and any other
instruments served pursuant to the GCL received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
GCL. The Company shall not, except with the prior written consent of MergerCo,
voluntarily make any payment with respect to any demands for appraisals of
Shares of the Company, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
Section 2.2 PAYMENT FOR SHARES.
(a) Prior to the Effective Time, MergerCo shall designate a bank or
trust company reasonably acceptable to the Company to act as Exchange Agent
in connection with the Merger (the "EXCHANGE AGENT"). From time to time
after the Effective Time, the Surviving Corporation will provide the
Exchange Agent with the funds necessary to make the payments contemplated by
Section 1.6 on a timely basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder, as of the Effective Time, of any outstanding certificate
or certificates which immediately prior to the Effective Time represented
Shares (the "CERTIFICATES") a (i) notice of the effectiveness of the Merger
and (ii) form letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other
required documents, the holder of such Certificate shall receive in exchange
therefor the consideration set forth in Section 1.6, and such Certificate
shall forthwith be cancelled. No interest will be paid or accrued on any
consideration payable upon the surrender of the Certificates. If any
certificate for any Non-Cash Election Share is to be issued in, or if cash
is to be remitted to, a name other than that in which the Certificate for
Shares surrendered for exchange is
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registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Company or its transfer agent any transfer or
other taxes required by reason of the issuance of certificates for such
Non-Cash Election Shares in a name other than that of the registered holder
of the Certificate surrendered, or establish to the satisfaction of the
Company or its transfer agent that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this
Section 2.2, each Certificate (other than Certificates representing Shares
held in the Company's treasury or by any subsidiary of the Company or by
MergerCo or any of its affiliates and Dissenting Shares) shall represent for
all purposes only the right to receive the consideration set forth in
Section 1.6, without any interest thereon, subject to any required
withholding taxes.
(c) From and after the Effective Time, the holders of Certificates
evidencing ownership of Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law.
(d) Beginning at the Effective Time there shall be no transfers of the
Shares on the stock transfer books of the Surviving Corporation which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the consideration provided in Section 1.6 in
accordance with the procedures set forth in this Article II.
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to retained Shares with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
certificate for Shares with respect to the retained Shares represented
thereby and no cash payment in lieu of fractional Shares shall be paid to
any such holder pursuant to Section 2.2(h) until the surrender of such
certificate in accordance with Article II. Subject to the effect of
applicable laws, following surrender of any such certificate, there shall be
paid to the holder of the certificate representing whole shares of retained
Shares issued in connection therewith, without interest, at the time of such
surrender or as promptly thereafter as practicable, the amount of any cash
payable in lieu of a fractional Share to which such holder is entitled
pursuant to Section 2.2(h) and the proportionate amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole retained Shares, and at the appropriate
payment date, the proportionate amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and
a payment date subsequent to such surrender payable with respect to such
whole retained Shares.
(f) NO FURTHER OWNERSHIP RIGHTS IN SHARES EXCHANGED FOR CASH. All cash
paid upon the surrender for exchange of certificates representing Shares in
accordance with the terms of Article II (including any cash paid pursuant to
Section 2.2(h)) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the Shares exchanged for cash
theretofore represented by such certificates.
(g) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional retained Shares
shall be issued in connection with the Merger, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of
a stockholder of the Company after the Merger; and
(ii) Notwithstanding any other provision of this Agreement, each
record holder of Shares exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a retained Share
(after taking into account all Shares delivered by such holder) shall
receive, in lieu thereof, a cash payment (without interest) equal to such
fraction multiplied by the Cash Election Price.
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(h) TERMINATION OF EXCHANGE FUND. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 2.2
(the "Exchange Fund") which remains undistributed to the holders of the
certificates representing Shares for six months after the Effective Time
shall be delivered to the Surviving Corporation, upon demand, and any
holders of Shares prior to the Merger who have not theretofore complied with
Articles I and II shall thereafter look only to the Surviving Corporation
and only as general creditors thereof for payment of their claim for cash,
if any, retained Shares, if any, any cash in lieu of fractional retained
Shares or any dividends or distributions with respect to retained Shares, as
applicable, to which such holders may be entitled.
(i) NO LIABILITY. Neither MergerCo, the Surviving Corporation nor the
Exchange Agent shall be liable to any person in respect of any retained
Shares (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
Shares shall not have been surrendered prior to one year after the Effective
Time (or immediately prior to such earlier date on which any cash, if any,
any cash in lieu of fractional retained Shares, or any dividends or
distributions with respect to retained Shares in respect of such certificate
would otherwise escheat to or become the property of any governmental
entity), any such cash, dividends or distributions in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to MergerCo as follows:
Section 3.1 ORGANIZATION. Each of the Company and the subsidiaries listed
on Schedule 3.1 is a corporation validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified or licensed or in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to have such
power or authority or to be qualified or licensed and in good standing would not
constitute a Material Adverse Effect (as defined herein). The Company has no
Subsidiaries (as defined below) other than those listed on Schedule 3.1 and
except as set forth on Schedule 3.1 none of the Company or the Subsidiaries owns
or controls, directly or indirectly, any other equity interest in any
corporation, partnership, joint venture, limited liability company, trust, firm
or other entity. The Company has heretofore made available to MergerCo accurate
and complete copies of the Certificate of Incorporation and By-Laws, as
currently in effect, of the Company and each of its Subsidiaries. As used
herein, the term "Subsidiaries" shall mean all corporations, partnerships, joint
ventures, LLCs or other entities in which the Company owns a 50% or larger
interest in the equity or the profits.
Section 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 30,000,000
shares of Class A common stock, par value $.01 per share, of which, as of
March 1, 1997, 20,048,275 such shares were issued and outstanding,
14,000,000 shares of Class B common stock, par value $.01 per share, none of
which are issued or outstanding, 10,000 shares of preferred stock, par value
$1.00 per share, none of which are issued or outstanding and as of March 1,
1997, 22,225 shares of Class A Common Stock were held in the treasury of the
Company, and an aggregate of 798,300 shares of Class A Common Stock were
issuable upon or otherwise deliverable in connection with the exercise of
all outstanding Options. All of the issued and outstanding Shares have been
validly issued, fully paid and are nonassessable and were not issued in
violation of any preemptive rights or rights of any person to acquire such
Shares. Since March 1, 1997, the Company has not granted, issued or agreed
to grant,
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issue or reserved for issuance either (i) any Options or (ii) any shares of
its capital stock, except pursuant to the exercise of Options already issued
and outstanding under the 1994 Plan on such date. Except pursuant to the
1994 Plan and the Company's Senior Executive Stock Purchase Plan or as set
forth on Schedule 3.2(a)(1), there are no subscriptions, options, warrants,
calls, rights, stock appreciation rights, convertible securities or other
agreements or commitments obligating the Company to issue, repurchase,
redeem, transfer or sell any of its capital stock.
(b) All of the outstanding shares of capital stock of each Subsidiary
have been validly issued, fully paid and are non-assessable and were not
issued in violation of any preemptive rights or rights of any person to
acquire such securities. Except as disclosed in the SEC Reports (as defined
in Section 3.5) or on Schedule 3.2(b)(1), all of the outstanding shares of
capital stock of the Subsidiaries is owned by either the Company or another
Subsidiary free and clear of all liens, charges, security interests, claims
or encumbrances. Except as disclosed in the SEC Reports or on Schedule
3.2(b)(2), there are no outstanding subscriptions, options, warrants, calls,
rights, stock appreciation rights, convertible securities or other
agreements or commitments relating to the issued or unissued capital stock
or other securities of any of the Subsidiaries, or otherwise obligating the
Company or any such Subsidiary to issue, transfer or sell any such capital
stock of any such Subsidiary.
(c) Except for the Voting Agreement, there are no voting trusts or other
agreements or understandings to which the Company or any of the Subsidiaries
is a party or is bound with respect to the voting of the capital stock of
the Company or the Subsidiaries.
Section 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board so as to render
inapplicable hereto and thereto the limitation on business combinations
contained in Section 203 of the GCL (or any similar provision). The Board of
Directors of the Company has approved the Voting Agreement and the transactions
contemplated thereby so as to render inapplicable thereto the limitations on
business combinations contained in Section 203 of the GCL (or any similar
provision). No other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the approval and adoption
of this Agreement by a majority of the outstanding Shares in accordance with the
GCL). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
MergerCo, constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights generally
and (ii) is subject to general principles of equity.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except for applicable requirements of the Exchange Act, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), certain state securities or takeover statutes, and the filing and
recordation of the Certificate of Merger, as required by the GCL, no filing
with, and no permit, authorization, consent or approval of any governmental
body or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement or the Voting Agreement.
(b) Except as disclosed on Schedule 3.4 and subject to the approval by
the holders of the majority of Shares, the execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and compliance by the Company with any of
the provisions hereof will not (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws of the Company
or the equivalent organizational documents of any of the Subsidiaries, (ii)
result in a violation or breach of, or constitute (with or without due
notice
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or lapse of time or both) a default or give rise to any right of
termination, cancellation, material modification or acceleration under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, lease, agreement or other instrument or
obligation to which the Company or the Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound, except for
such violations, conflicts and breaches that would not individually or in
the aggregate constitute a Material Adverse Effect or (iii) assuming that
the filings referred to in the first sentence of Section 3.4(a) are duly and
timely made, violate any order, writ, injunction, decree, statute, treaty,
rule or regulation applicable to the Company, the Subsidiaries or any of
their properties or assets, except for such violations that would not
individually or in the aggregate constitute a Material Adverse Effect.
Section 3.5 REPORTS. The Company has filed all required forms, reports,
statements, schedules, and documents with the SEC (collectively, the "SEC
REPORTS," which term, as used herein, shall include the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 (the "1996 10-K") in the form
previously delivered to MergerCo and to be filed contemporaneous with the
parties' execution of this Agreement), all of which (as they may have been
amended prior to the date hereof) were prepared in accordance with the
applicable requirements of the Securities Act and the Exchange Act. The SEC
Reports, at the time filed (other than registration statements under the
Securities Act, in which case at the respective effective date) complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated
under each of those Acts. None of the SEC Reports, including without limitation
any financial statements or schedules included therein (as they may have been
amended prior to the date hereof), as of their respective filing dates (or, in
the case of registration statements, at the time of effectiveness), contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Subsidiaries is required to file any reports,
statements, forms or other documents with the SEC. Each of the audited and
unaudited consolidated financial statements (including the related notes)
included in the SEC Reports has been prepared in accordance with the published
rules and regulations of the SEC with respect thereto and generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and each fairly presents in all material respects the consolidated
financial position of the Company as of the respective dates thereof, and the
consolidated results of its operations and changes in financial position for the
periods indicated, as the case may be, except, in the case of interim financial
statements, for normal year-end audit adjustments. Since December 31, 1997
through the date of this Agreement, no event or development has occurred that
would require the Company to file any report or amendment with the SEC pursuant
to the Exchange Act or the rules and regulations promulgated thereunder.
Section 3.6 ABSENCE OF CERTAIN CHANGES; NO UNDISCLOSED LIABILITIES. Except
as set forth in the 1996 10-K or in any Schedule attached hereto, since the date
of the audited financial statements of the Company included in the 1996 10-K
(the "Report Date"), except in connection with this transaction, the Company and
the Subsidiaries have conducted their business in the ordinary course and have
not (i) except for any Non-Material Ultravent Event (as defined on Schedule
3.6(b)), suffered any change, condition, event or occurrence which, individually
or in the aggregate, could reasonably be expected to constitute a Material
Adverse Effect, (ii) entered into or modified any material transaction, other
than according to the ordinary and usual course of such businesses, (iii) made
any material change in the Company's accounting principles or (iv) taken any
action which, if taken after the date hereof, would have required the consent of
MergerCo pursuant to Section 5.1. Except (i) for liabilities or obligations
incurred in the ordinary course of business, (ii) liabilities or obligations
incurred in connection with the transactions contemplated by this Agreement and
(iii) as disclosed in the SEC Reports, as set forth in Schedule 3.6(a) or for
any Non-Material Ultravent Event, since the Report Date, the Company and its
Subsidiaries have not incurred any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) that would constitute a Material Adverse
Affect and that would be required to be reflected in or reserved against a
consolidated
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balance sheet of the Company prepared in accordance with generally accepted
accounting principles. Except for (i) those liens disclosed on Schedule 3.6(c),
(ii) liens secured by indebtedness described in the SEC Reports, (iii)
mechanics' liens and liens arising out of the revenue and development bonds
disclosed in Schedule 3.17, (iv) liens imposed for real estate taxes and
assessments currently due and payable, (v) machinery equipment, vehicles and
other personalty leased in the ordinary course of the Company and its
Subsidiaries business, and (vi) liens arising out of the matters disclosed in
Schedule 3.9 or Schedule 3.12, there are no liens filed against the equipment,
machinery, personality, or real property of the Company or its Subsidiaries,
except liens securing indebtedness which in the aggregate is not in excess of $1
million.
Section 3.7 PROXY STATEMENT. None of the information supplied by the
Company for inclusion in (i) the Form S-4 will, at the time the Form S-4 is
filed with the SEC, or at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Form S-4 will, as
of its effective date, and the prospectus contained therein will, as of its
date, comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder and the
Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect to
statements made or incorporated by reference in the Form S-4 (or such
prospectus) or the Proxy Statement based on information supplied in writing by
MergerCo specifically for inclusion in the Form S-4 (or such prospectus) or the
Proxy Statement. For purposes of this Agreement, the parties agree that
statements made and information in the Form S-4 (or such prospectus) and the
Proxy Statement relating to the Federal income tax consequences of the
transactions herein contemplated to holders of Shares shall be deemed to be
supplied by the Company and not by MergerCo.
Section 3.8 NO DEFAULT. As of the date hereof, except as disclosed on
Schedules 3.8, 3.9 and 3.12, neither the Company nor the Subsidiaries are in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its Certificate of Incorporation or its By-Laws, (ii) any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which the Company or any of the Subsidiaries is now a party or by
which they or any of their properties or assets may be bound except for any such
defaults or violations which could not be reasonably expected to constitute,
individually or in the aggregate, a Material Adverse Effect or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or the Subsidiaries or any of their properties or assets, in each case except
for any default or violation which could not be reasonably expected to
constitute, individually or in the aggregate, a Material Adverse Effect.
Section 3.9 LITIGATION. Except as disclosed in the SEC Reports or on
Schedule 3.9 or 3.12 there is no action, suit, arbitration, claim, proceeding or
governmental investigation, pending nor, to the knowledge of the Company, has
the Company received any notice or threat of any action, suit, arbitration,
claim, proceeding or governmental investigation involving the Company or the
Subsidiaries before any court or other governmental or regulatory body which, in
the aggregate, if adversely determined, is reasonably expected to constitute a
Material Adverse Effect or have a material adverse effect on the ability of the
Company to consummate the transactions contemplated by this Agreement.
Section 3.10 CERTAIN AGREEMENTS. Except as disclosed on Schedule 3.10 or
in the SEC Reports, neither the Company nor the Subsidiaries are a party to or
bound by any contract, agreement or arrangement regarding the employment,
services, consulting, termination or severance from employment
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of any director, officer or employee of the Company or Subsidiaries that
provides for payments in excess of $100,000.
Section 3.11 TAXES. For the purposes of this Agreement, the term "taxes"
shall mean all taxes (including without limitation, leasing, franchise, excise,
income, gross receipts, sales, use, occupational, tangible and intangible
personal property, real property and stamp taxes and taxes imposed under the
Internal Revenue Code of 1986, as amended (the "Code"), payments in lieu of
taxes, levies, imposts, duties, assessments, fees (including, without
limitation, license, documentation, recording and registration fees), charges
and withholdings of any nature whatsoever, together with any penalties, fines,
additions to tax or interest thereon, howsoever due and owing to any federal,
state, county, local or foreign government or to any governmental agency,
subdivision or taxing authority of any of the foregoing by the Company, any of
its Subsidiaries or (for any taxable year with respect to which tax liability
could be imposed on the Company or any Subsidiary pursuant to Treasury
Regulation Section 1.1502-6) each consolidated, combined or affiliated group of
which the Company or any Subsidiary is or has been a member. Except as disclosed
in the SEC Reports or on Schedule 3.11, the Company, each Subsidiary and each
consolidated, combined or affiliated group of which the Company or any
Subsidiary is or has been a member for any taxable year for which tax liability
could be imposed on the Company or any Subsidiary (a) have filed all federal,
state, foreign and local tax returns in respect of income or similar taxes
required to be filed for tax years ended prior to the date of this Agreement and
in respect of which such filings have become due, except for those tax returns
the failure of which to file would not constitute a Material Adverse Effect or
for which requests for extensions have been filed, and all such returns are
complete and correct in all material respects, (b) have paid or accrued all
taxes shown to be due and payable on such returns, (c) have accrued all such
taxes for such periods subsequent to the periods covered by such returns and (d)
have "open" years for federal income tax returns only as set forth in the SEC
Reports or as disclosed on Schedule 3.11. There are no liens for taxes on the
assets of the Company or Subsidiaries, except for liens that would not
constitute a Material Adverse Effect, and there is no pending tax audit,
examination, refund, litigation or adjustment in controversy which, if
determined adversely, would constitute a Material Adverse Effect. Except as
disclosed in the SEC Reports or on Schedule 3.11, neither the Company nor the
Subsidiaries is a party to any agreement providing for the allocation or sharing
of taxes.
Section 3.12 ENVIRONMENTAL MATTERS. Except as disclosed in the SEC Reports
or on Schedule 3.12, the properties, assets and operations of the Company and
the Subsidiaries are in compliance with applicable federal, state and local
laws, rules, regulations, orders, decrees, judgments, permits, licenses and
other requirements relating to the protection of human health or the natural
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation, release,
threatened release or remediation of Hazardous Materials (collectively, the
"ENVIRONMENTAL LAWS"), other than any such failures to be in compliance which
are not, in the aggregate, reasonably expected to constitute a Material Adverse
Effect. With respect to such properties, assets and operations, to the knowledge
of the Company and except as disclosed in the SEC Reports or on Schedule 3.12,
there are no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of the Company
or the Subsidiaries that are reasonably expected to interfere with or prevent
compliance in all material respects with applicable Environmental Laws, other
than any such interference or prevention as would not constitute a Material
Adverse Effect. The Company has not received any notice of actions under the
Safe Drinking Water and Toxic Waste Act of 1986 (California Health and Safety
Code 25249.7 et seq.). "Hazardous Material" means any substance: (i) the
presence of which requires investigation or remediation under any federal, state
or local statute, regulation, ordinance, order, action policy, or common law; or
(ii) which is or becomes defined as a "hazardous waste," "hazardous substance,"
pollutant, or contaminant under any federal, state, or local statute,
regulation, rule, or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended (42 U.S.C. Section 9601 et seq.) and/or the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.) or
their state equivalents.
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Section 3.13 EMPLOYEE BENEFIT MATTERS. (a) All employee benefit plans
covering current or former employees of the Company and its Subsidiaries or with
respect to which the Company or any Subsidiary has liability (excluding
multiemployer plans as defined in Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) are listed in Schedule 3.13, except
such benefit plans which are not material (the "BENEFIT PLANS"). True and
complete copies of the Benefit Plans and material related documents have been
made available to MergerCo. To the extent applicable, the Benefit Plans comply
in all material respects with the requirements of applicable law including,
without limitation, ERISA and the Code, and any Benefit Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination from the Internal Revenue Service (the "IRS") or the Company
reasonably believes such Benefit Plan is so qualified and such Benefit Plan has
been submitted to the IRS for determination of its qualified status. There has
been no application for waiver or waiver of the minimum funding standards
imposed by Section 412 of the Code and no "accumulated funding deficiency"
within the meaning of Section 412(a) of the Code exists with respect to any
Benefit Plan. Neither the Company nor the Subsidiaries has incurred any
liability or penalty (i) under Section 4975 of the Code or Section 406 of ERISA
with respect to any Benefit Plan, or (ii) to the Pension Benefit Guaranty
Corporation (the "PBGC") (except for PBGC premiums). Each Benefit Plan has been
maintained and administered in all material respects in compliance with its
terms and with applicable law including, without limitation, ERISA and the Code
to the extent applicable thereto. To the knowledge of the Company, there are no
pending, nor has the Company or any of the Subsidiaries received notice of any
threatened, material claims (other than routine claims for benefits) against or
otherwise involving any of the Benefit Plans. All material contributions
required to be made as of the date of this Agreement to the Benefit Plans and to
any multiemployer plans to which the Company or any Subsidiary is required to
contribute have been made or provided for.
(b) Except as provided in Schedule 3.13, no Benefit Plan provides for
post-employment health, life insurance, or other welfare benefit coverage, other
than as may be required under "COBRA" pursuant to Part VI of Title I of ERISA.
Except for any multiemployer plans and plans maintained pursuant to collective
bargaining agreements, each Benefit Plan can be amended or terminated at any
time without approval from any Person (other than the Board of Directors of the
plan sponsor or the plan administrator), without advance notice (other than for
defined benefit pension plans), and without any liability other than for
benefits accrued prior to such amendment or termination. Except as disclosed in
Schedule 3.13, with respect to each Benefit Plan and any other similar
arrangement or plan either currently or previously terminated, maintained, or
contributed to by any entity which either is currently or was previously under
common control with the Company as determined under Code Section 414 or ERISA
Section 4001(a)(14), no event has occurred and no condition exists that after
the Effective Time could subject MergerCo, directly or indirectly, to any
liability (including liability under any indemnification agreement) under
Section 412, 413, 4971, 4975, or 4980B of the Code or Section 302, 502, 515,
601, 606, or Title IV of ERISA. No agreement, commitment, or obligation exists
to increase any benefits under any Benefit Plan or to adopt any new Benefit
Plan. No Benefit Plan has any unfunded accrued benefits that are not fully
reflected in the Financial Statements to the extent required by GAAP. With
respect to the benefit plans which are multiemployer plans (as defined in ERISA
Sections 3(37) or 4001(a)(3) or Code Section 413, and listed on Schedule 3.13),
in which current or former employees of the Company or its Subsidiaries have
participated: (i) during the last six years neither Company nor any Subsidiary
has incurred any complete or partial withdrawal, withdrawal liability, or any
other obligation or liability under Title IV of ERISA (including ERISA Section
4212(c)) or ERISA Section 515; (ii) Company will provide to MergerCo a
contribution history report for the last six years and a copy of any documents
and correspondence received by the Company or any Subsidiary from any such
multi-employer plan that relates to withdrawal liability, if any, from each such
plan; (iii) to the best of the Company's and each Subsidiary's knowledge, no
such plan is in reorganization status, is insolvent, has terminated, or suffered
a mass withdrawal and (iv) neither the Company nor any Subsidiaries participate
in any multiemployer plan other than those
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listed in Schedule 3.13. Neither the Company nor any Subsidiaries contribute to
or maintain any multiple-employer plan within the meaning of Section 413 of the
Code.
Section 3.14 BROKERS. No broker, finder or investment banker (other than
Merrill Lynch and Smith Barney) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company. The
Company has heretofore furnished to MergerCo a complete and correct copy of all
agreements between the Company and/or any of the Subsidiaries and Merrill Lynch
and Smith Barney pursuant to which either of them will be entitled to any
payment relating to the transactions contemplated hereby. The aggregate fees
payable under such agreements will not exceed $10 million.
Section 3.15 LABOR RELATIONS.
(a) Except as set forth in Schedule 3.15(a), there are: (i) no
collective bargaining agreements or other labor agreements to which the
Company or its Subsidiaries are a party or by which they are bound; (ii) no
pending or threatened question concerning representation regarding any
employees of the Company or its Subsidiaries; (iii) no pending, scheduled,
or requested discussions or negotiations regarding the establishment,
modification, or extension of any collective bargaining agreement. Except as
set forth in Schedule 3.15(b), no strikes, work stoppages, work slowdowns,
sick-outs, lock-outs, or, to the knowledge of the Company or its
Subsidiaries, threats of any of the foregoing, have occurred with respect to
any employees or independent contractors of the Company or its Subsidiaries
during the year immediately preceding the date of this Agreement. Except as
set forth on Schedules 3.9 and 3.12, the Company and its Subsidiaries have
complied in all material respects with all applicable laws, rules, and
regulations relating to the employment of labor, including those related to
wages, hours, immigration, health, safety, discrimination, benefits,
collective bargaining, and the payment and withholding of taxes and other
sums as required by appropriate governmental authorities; have withheld and
paid to the appropriate governmental authorities or is holding for payment
not yet due to such authorities all amounts required to be withheld from
their employees; and are not liable for any material arrears of wages,
taxes, penalties, or other sums for failure to comply with any of the
foregoing. All reasonably anticipated material obligations of the Company
and its Subsidiaries with respect to salaries, vacation and holiday pay,
sick pay, bonuses, and other forms of compensation and benefits payable to
or with respect to current and former employees of the Company and its
Subsidiaries have been paid or adequate accruals therefor have been made in
the ordinary course of business in the financial statements of the Company
and its Subsidiaries.
Section 3.16 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 3.16,
the Company or a Subsidiary owns or possesses adequate rights to use all
patents, trademarks, trade names, inventions, processes, designs, formulas,
know-how and other intellectual property rights necessary for the conduct of the
business of the Company and its Subsidiaries as presently conducted. Except as
set forth in Schedule 3.16, neither the Company nor any of its Subsidiaries has
received any written notice, nor has any claim been made in writing in the past
year, that any intellectual property owned or used by the Company or a
Subsidiary is invalid or ineffective, that its use infringes in any material way
on similar rights owned or alleged to be owned by others or that any of such
intellectual property is being infringed by others in any material way.
Section 3.17 REAL PROPERTY.
(a) Set forth on Schedule 3.17 is a complete list of all material real
property (the "Owned Property") owned by the Company or a Subsidiary, or in
which the Company or a Subsidiary has legal, beneficial or equitable title
together with the principal use(s) for which each such Owned Property is
used. Set forth on Schedule 3.17 is a complete list of all material real
property (the "Leased Property" and, sometimes referred to collectively with
the Owned Property as the "Real Property") with respect to which the Company
or any Subsidiaries is lessee, sublessee, licensee or other occupant or
user, together with a list of each lease, sublease, license or other
agreement or understanding, oral or
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written, pursuant to which any party other than the Company or a Subsidiary
occupies or uses such Leased Property together with the principal use(s) for
which each Leased Property is used.
(b) With respect to the Real Property Leases, the Company has not
received written notice of any material breach or event of default on its
part and is not aware of any material breach or default on the part of any
other party thereto. All material Real Property Leases are in full force and
effect and are valid and enforceable against the parties thereto in
accordance with their terms. No material rental or other payments are
delinquent under any of the Real Property Leases. The Merger does not
require the consent of any party to, and will not constitute an event of
default under or permit any party to terminate or change the existing terms
of, any material Real Property Lease.
(c) The Company and, as applicable, each Subsidiary, has good and
marketable title in fee simple to the Owned Property, good leasehold title
to the Leased Property, and good and marketable title to all plants,
buildings, fixtures and improvements located on the Real Property, in each
case free and clear of any mortgages, deeds of trust, liens, security
interests, judgments, options, rights, claims, charges, encroachments,
easements, rights-of-way, squatters' rights, encumbrances, covenants,
conditions, restrictions and other imperfections of title which individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect (collectively, "Impairments"), except for those Impairments that are
set forth in Schedule 3.17.
Section 3.18 OPINION OF FINANCIAL ADVISOR. The Company has received the
written opinions of Merrill Lynch and Smith Barney dated the date of this
Agreement, to the effect that the consideration to be received in the Merger by
the Company's stockholders is fair to the holders of the Shares from a financial
point of view.
Section 3.19 BOARD RECOMMENDATION. The Board and the non-management
members of the Board at a Board meeting duly called and held, have each
unanimously (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, and the Voting Agreement and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the stockholders of the Company, and (ii) resolved to recommend that the holders
of the Shares approve this Agreement and the transactions contemplated herein,
including the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF MERGERCO
MergerCo hereby represents and warrants to the Company as follows:
Section 4.1 ORGANIZATION. MergerCo is a corporation validly existing and
in good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified or
licensed or in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to have such power or authority or to be qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on MergerCo. MergerCo was formed on March 19, 1997 solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby. MergerCo has no direct or indirect subsidiaries. MergerCo has delivered
to the Company complete and correct copies of its certificate of incorporation
and by-laws, which certificate of incorporation and by-laws shall not be amended
prior to the Effective Time except in accordance with Schedule 1.7 without the
prior written consent (not to be unreasonably withheld) of the Company.
Section 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. MergerCo has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of MergerCo and its shareholders as required by the GCL, and
no other corporate proceedings on the part of MergerCo are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by MergerCo and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and binding agreement of MergerCo, enforceable against it in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Except for applicable requirements of the Exchange Act, the HSR Act,
certain state securities or takeover statutes, and the filing and
recordation of the Certificate of Merger as required by the GCL, no filing
with, and no permit, authorization, consent or approval of any governmental
body or authority is necessary for the consummation by MergerCo of the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by MergerCo and the
consummation by MergerCo of the transactions contemplated hereby and
compliance by MergerCo with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws of MergerCo, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default or give rise to any right of termination, cancellation, material
modification or acceleration under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which MergerCo is a party or
by which MergerCo or any of its properties or assets may be bound, except
for such violations, conflicts and breaches that would not individually or
in the aggregate constitute a Material Adverse Effect or (iii) assuming that
the filings referred to in the first sentence of this Section 4.3 are duly
and timely made, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to MergerCo or any of its properties or assets,
except for such violations that would not individually or in the aggregate
constitute a Material Adverse Effect.
Section 4.4 PROXY STATEMENT. None of the information supplied in writing
by MergerCo specifically for inclusion in (i) the Form S-4 will, at the time the
Form S-4 is filed with the SEC, and at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) the Proxy Statement will, at the date it is first mailed to the Company's
stockholders and the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Notwithstanding the
foregoing, MergerCo makes no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in or incorporated by reference in any of the foregoing documents.
Section 4.5 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of MergerCo.
Section 4.6 FUNDS AVAILABLE. MergerCo will have available to it, or will
cause to be available to the Company, as of the Effective Time immediately
available funds necessary to consummate the Merger and the transactions
contemplated thereby (including, without limitation, the refinancing of the
Company's existing credit facility and asset securitization program) and to pay
all related fees and expenses (and the availability of such funds is not subject
to any condition).
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ARTICLE V
COVENANTS
Section 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company will, and will cause each of the
Subsidiaries to, conduct its operations according to its ordinary and usual
course of business and consistent with past practices, and the Company will, and
will cause each of the Subsidiaries to, use their respective reasonable best
efforts, consistent with prudent business judgment, to preserve intact its
business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with licensors, suppliers,
contractors, distributors, customers and others having business relationships
with it; provided that any action or inaction by the Company (i) in respect of
the Ultravent Product (as defined on Schedule 3.6(b)) that does not result in,
or result in the reasonable expectation of, an Ultravent Material Obligation (as
defined on Schedule 5.1) or (ii) in respect of entering into any collective
bargaining agreement at the applicable facility that would not result in, or
result in the reasonable expectation of, a Material Labor Event (as defined on
Schedule 8.10(b)) shall not constitute a breach of this Section 5.1. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, prior to the Effective Time, the Company will
not, and will cause each of the Subsidiaries not to, without the prior written
consent (not to be unreasonably withheld) of MergerCo:
(a) amend their respective Certificates of Incorporation or By-Laws;
(b) issue, sell, encumber or deliver or agree or commit to issue, sell,
encumber or deliver any shares of capital stock, or issue any securities
convertible into, exchangeable for or representing a right to purchase or
receive, or enter into any contract or arrangement with respect to the
issuance of, shares of capital stock, except in the ordinary course of
business under current employee benefit plans and as required by employee
stock option agreements in effect on the date hereof and other than Shares
issuable upon exercise of Options;
(c) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or to any affiliate of a stockholder; or redeem or otherwise
acquire any of its securities or any securities of the Subsidiaries;
(d) (i) incur or assume any long-term debt, excluding the amount
attributable to operating leases, or, (ii) except in the ordinary course of
business or (up to an aggregate of $20 million) to finance any acquisition,
make any permitted borrowing under the Company's existing revolving credit
facility;
(e) enter into, amend any existing, or adopt any new bonus, pension,
change of control, deferred compensation, health, plant closing, profit
sharing, severance or other employee benefit agreements that materially
increase or benefit any director or officer or (except, in the ordinary
course of business, for increases consistent with past practice and which,
in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company) any employee, or materially increase
the compensation or fringe benefits of any director, officer or (except for
normal increases in the ordinary course of business that are consistent with
past practices and that, in the aggregate, do not result in a material
increase in benefits or compensation expense to the Company) employee, pay
benefits not required by existing plans or arrangements, forgive, extend,
modify, or guarantee any existing loans to any officer, director or employee
or enter into any new loans or loan guarantees to or for any officer,
director or employee or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(f) except for capital expenditures contemplated by clause (g) below,
acquire (whether by merger, consolidation or otherwise), sell (whether by
merger, consolidation or otherwise), lease,
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encumber, transfer or dispose of in excess of $1 million of assets except in
the ordinary course of business; provided, however, that this paragraph
shall in no way limit or restrict the Company from the sale of its accounts
receivable pursuant to its asset securitization program or from making any
acquisition of assets or a business for not more than $20 million;
(g) authorize or make or commit to make any individual capital
expenditure in excess of $1.0 million, excluding the amount of capital
expenditure; included in the fiscal 1997 budget of the Company and its
Subsidiaries which has been delivered to MergerCo;
(h) make any material tax elections or settle or compromise any material
federal, state or local income tax liability, or waive or extend the statute
of limitations in respect of any such taxes;
(i) (i) materially modify, amend or terminate any material contract or
agreement to which it is a party or waive, release or assign any material
rights or claims thereunder, (ii) settle any suit or claim of liability
against the Company which is reasonably likely to materially negatively
impact the Company's position with respect to any similar pending or
threatened material suit or claim, or (iii) pay or agree to pay in
settlement or compromise of any suits or claims of liability against the
Company, net of insurance recoveries, more than $1 million for any such suit
or claim or more than an aggregate of $5 million for all such suits and
claims;
(j) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, methods or practices used by it;
(k) adopt a plan of complete or partial liquidation, dissolution,
consolidation, restructuring, (except as contemplated by this Agreement)
recapitalization, reorganization or (except with respect to MergerCo)
merger;
(l) enter into any collective bargaining agreement that would result in
a Material Labor Event (as defined on Schedule 8.10(b)); and
(m) take, or agree in writing or otherwise to take, any of the foregoing
actions or take or fail to take any action which would make any
representation or warranty of the Company contained in this Agreement untrue
or incorrect as of the date when made or as if made as of the Effective Time
(other than representations and warranties which address matters only as of
a certain date(s), in which case untrue or incorrect as of such certain
date(s)).
Section 5.2 NO SOLICITATION. The Company may, directly or indirectly,
furnish information and access, in each case only in response to unsolicited
requests therefor, to the same extent permitted by Section 5.3 hereof, to any
corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may participate in discussions and
negotiate with such entity or group concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
Subsidiary or division of the Company, if the Board by a majority vote
determines in its good faith judgment (i) after consultation with its financial
advisors, that such corporation, partnership, person or other entity or group
has the financial ability to consummate such proposal and that such proposal is
superior to the Merger and (ii) on the advice of counsel, that the Board has a
fiduciary duty to take such action. In addition, the Company shall direct its
officers and other appropriate personnel to cooperate with and be reasonably
available to consult with any such entity or group. Except as set forth above
the Company, shall not, directly or indirectly, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, persons or other entity or group (other than MergerCo
or any of its affiliates or associates) concerning any merger, sale of assets,
sale of shares of capital stock or similar transaction involving the Company or
any Subsidiary or division of the Company; provided that nothing herein shall
prevent the Board from taking and disclosing to the Company's stockholders a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer. The Company will notify MergerCo promptly
if any discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any such
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information is requested in respect of any such transaction and will promptly
communicate to MergerCo the terms of any material proposal, discussion,
negotiation or inquiry which it may receive in respect of any such transaction
and the identity of the offeror or potential offeror unless such notice or
disclosure could be deemed to cause the members of the Board to breach their
fiduciary duties under applicable law.
Section 5.3 ACCESS TO INFORMATION. From the date of this Agreement to the
Effective Time, upon reasonable notice, the Company will, and will cause each of
the Subsidiaries to cause its and such officers, directors, employees and
auditors and agents to (i) give MergerCo and its accountants, counsel and other
authorized representatives, reasonable access during normal business hours to
the plants, offices, warehouses and other facilities and to the books and
records of it and the Subsidiaries, (ii) permit MergerCo and its authorized
representatives to make such reasonable inspections as they may require and
(iii) furnish to MergerCo and its authorized representatives such financial and
operating data and other information with respect to the business and properties
of the Company and the Subsidiaries as MergerCo may from time to time reasonably
request. No investigation pursuant to this Section 5.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto. The Company agrees to keep MergerCo informed
as to any agreement by the Company with the Union on any collectively bargained
term or condition of employment relating to wages, benefits, hours of work,
seniority, job progression or bumping rights, work rules, management rights or
subcontracting.
Section 5.4 COMMERCIALLY REASONABLE BEST EFFORTS. (a) Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
commercially reasonable best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations or otherwise to consummate and effect the
transactions contemplated by this Agreement and the Voting Agreement, including
but not limited to (i) cooperation in the preparation and filing of the Form
S-4, the Proxy Statement, any required filings under the HSR Act and any
amendments to any thereof, (ii) determining whether any filings are required to
be made or consents, approvals, waivers, licenses, permits or authorizations are
required to be obtained (or, which if not obtained, would result in an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
entities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Merger and the Voting Agreement, including the transactions
contemplated thereby, and (iii) promptly making any such filings, furnishing
information required in connection therewith and timely seeking to obtain any
such consents, approvals, permits or authorizations. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall take all such necessary or desirable action.
(b) The Company agrees to provide, and will cause its Subsidiaries and its
and their respective officers, employees and advisers to provide, commercially
reasonable cooperation in connection with (i) the arrangement of any financing
to be consummated contemporaneous with or at or after the Effective Time in
respect of the transactions contemplated by this Agreement, including without
limitation, participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda, prospectuses and
similar documents, the execution and delivery of any commitment letters,
underwriting or placement agreements, pledge and security documents, other
definitive financing documents, or other requested certificates or documents,
including a customary certificate of the chief financial officer of the Company
with respect to solvency matters, comfort letters of accountants, legal opinions
and real estate title documentation as may be reasonably requested by MergerCo;
provided that any agreements or other documents to be entered into, provided or
otherwise used in connection with any such financing shall be in form and
substance customary for companies such as the Company. The parties acknowledge
that the payment of any fees by the Company in connection with any commitment
letters shall be subject to the occurrence of the Effective Time and shall not
be obligations of the Company's directors or officers. In addition, in
conjunction with the obtaining of any such financing, the
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Company agrees, at the request of MergerCo, to call for prepayment or
redemption, or to prepay, redeem and/or renegotiate, as the case may be, any
then existing indebtedness of the Company; provided that no such prepayment or
redemption shall themselves actually be made until contemporaneously with or
after the Effective Time.
(c) The Company and MergerCo shall each use its commercially reasonable
efforts to cause the Merger to be recorded as a recapitalization for financial
reporting purposes. Prior to the filing of the S-4 with the SEC, neither
MergerCo nor its advisors, counsel, officers, directors, affiliates or
accountants may initiate discussions relating to the S-4, the Proxy Statement,
the Merger or the method of recording the Merger for financial reporting
purposes with the SEC staff without the prior written consent of the Company
(which consent shall not be unreasonably withheld). After the filing of the S-4
with the SEC, MergerCo may initiate discussions relating to the method of
recording the Merger for financial reporting purposes with the SEC staff upon
reasonable notice to the Company. During either such pre-filing or post-filing
period, the Company and MergerCo shall cooperate with each other in preparing
any presentation to the SEC with regard to such recording and shall each be
entitled (with their respective advisors, counsel and/or accountants) to attend
any meeting with, participate in any telephone conferences with, and review and
comment on any materials to be submitted to, the SEC relating to such recording.
In furtherance of the foregoing, the Company shall provide to MergerCo for the
prior review of MergerCo's advisors any description of the transactions
contemplated by this Agreement which is meant to be disseminated.
(d) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the Shares from the New
York Stock Exchange, provided that such delisting shall not be effective until
after the Effective Time. The parties also acknowledge that it is MergerCo's
intent that the Shares following the Merger will not be quoted on the New York
Stock Exchange or listed on any national securities exchange.
Section 5.5 CONSENTS. MergerCo and the Company each will use its
commercially reasonable best efforts to obtain consents of all third parties and
governmental authorities deemed necessary, proper or advisable for the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the transfer of any governmental licenses, permits or
authorizations. Notwithstanding the foregoing, the Company will not be required
to commit to a divestiture transaction that is to be consummated prior to the
Effective Time.
Section 5.6 PUBLIC ANNOUNCEMENTS. Prior to the Effective Time, no party to
this Agreement shall issue or seek the publication of any press release or other
public announcement with respect to the Merger or other transactions
contemplated by this Agreement or the Voting Agreement without the consent of
all other parties, except as agreed by the parties or where such release or
announcement is required by law or any listing agreement with a national
securities exchange to which MergerCo or the Company is a party (each a
"PERMITTED ANNOUNCEMENT"); provided that, prior to making any Permitted
Announcement, such party will seek advice of counsel as to the need for such
Permitted Announcement and will utilize its commercially reasonable best efforts
to give the other parties notice thereof and to consult with the other parties
regarding the timing and terms thereof.
Section 5.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) MergerCo agree that all rights to indemnification now existing in
favor of the directors, officers, employees and agents of the Company and
the Subsidiaries as provided in their respective certificates of
incorporation or by-laws or contract or otherwise as in effect on the date
hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect for a period
of not less than six years from the Effective Time (or, in the case of
matters occurring prior to the Effective Time as to which on or prior to
such sixth anniversary a claim, suit, action, proceeding or investigation
has been brought or threatened and has not been resolved prior to the sixth
anniversary of the Effective Time, until such matters are finally resolved).
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(b) The Surviving Corporation shall advance expenses to each present and
former director, officer, employee and agent of the Company ("INDEMNIFIED
PARTIES") to the fullest extent permitted by the GCL and the by-laws of the
Surviving Corporation (which shall be no less advantageous to directors and
officers than the By-Laws of the Company as of the date hereof) for all
claims, losses, damages, liabilities, costs, judgments and amounts paid in
settlement including advancement of expenses (including attorneys' fees) as
incurred in respect of any potential, threatened, pending or contemplated
claim, action, suit or proceeding, whether criminal, civil, administrative
or investigative, including, without limitation, any action by or on behalf
of any or all stockholders of the Company or by or in the right of the
Company or the Surviving Corporation, or investigation relating to any
action or omission by such party in its capacity as such (including service
to any other entity, plan, trust or the like at the Company's request)
occurring on or prior the Effective Time (including, without limitation, any
which arise out of or relate to the transactions contemplated by this
Agreement), subject to such Indemnified Party's agreement to return such
advanced funds if a court of competent jurisdiction, after all avenues of
appeal have been exhausted, shall have determined that such Indemnified
Party is not entitled to such amounts by operation of law.
(c) The Surviving Corporation shall cause to be maintained in effect for
not less than six years from the Effective Time the current policies of the
directors' and officers' liability insurance presently maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which
are no less advantageous and issued by a carrier or carriers assigned a
claims-paying ability rating by A.M. Best & Co. of "A (Excellent)" or
higher) with respect to matters occurring prior to the Effective Time;
provided, however, that the Surviving Corporation shall not be obligated to
pay annual premiums for such insurance in excess of 200% of the last annual
premium paid prior to the date hereof (the "Last Premium"), but in such case
shall purchase as much coverage as possible for such amount. The Company
represents to MergerCo that the Last Premium was $92,578. In the event any
claim is made against present or former directors, officers or employees of
the Company that is covered or potentially covered by insurance, neither the
Surviving Corporation nor MergerCo shall do anything that would forfeit,
jeopardize, restrict or limit the insurance coverage available for that
claim until the final disposition thereof.
(d) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or
after the Effective Time) is made or threatened against any Indemnified
Party, on or prior to the sixth anniversary of the Effective Time, the
provisions of this Section 5.7 shall continue in effect until the final
disposition of such claim, action, suit, proceeding or investigation.
(e) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives. The Indemnification provided for herein shall not
be deemed exclusive of any other rights to which an Indemnified Party is
entitled, whether pursuant to law, contract or otherwise. The Surviving
Corporation shall pay all expenses, including attorneys' fees, that may be
incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 5.7.
(f) In the event that the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case,
to the extent necessary to effectuate the purpose of this Section 5.7,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation shall succeed to the obligations set forth in this
Section 5.7 and none of the actions described in clauses (i) or (ii) shall
be taken until such provision is made.
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Section 5.8 EMPLOYEE CONTRACTS. Unless and until such agreements are
amended, modified or terminated, MergerCo agrees to honor, and from and after
the Effective Time shall cause the Surviving Corporation to honor, in accordance
with their respective terms as in effect on the date hereof, all of the
employment, termination, severance, indemnity and bonus agreements and
arrangements to which the Company or any Subsidiary is a party and, which
agreements are set forth on Schedule 3.10. In the event that the Surviving
Corporation or MergerCo or any of their respective successor or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, to the extent necessary to
effectuate the purpose of this Section 5.8, proper provision shall be made so
that the successors and assigns of the Surviving Corporation or MergerCo shall
succeed to the obligations set forth in this Section 5.8 and none of the actions
described in clauses (i) or (ii) shall be taken until such provision is made.
Section 5.9 STATE TAKEOVER LAWS. The Company shall, upon the request of
MergerCo, take all necessary steps to assist in any challenges by MergerCo to
the validity or applicability of any state takeover law to the transactions
contemplated by this Agreement, including the Merger.
Section 5.10 FUTURE PURCHASES. MergerCo agrees that, during the period
beginning on the date hereof and ending on March 31, 1998, it will not increase
its beneficial ownership of the common stock of the Company to more than 5% of
the Common Stock of the Company outstanding, except pursuant to this Agreement
or with the consent of the Board.
Section 5.11 CAPITAL ADEQUACY OF THE SURVIVING CORPORATION. MergerCo
covenants that, upon consummation of the Merger, the related financings and the
disposition of funds to the stockholders of the Company pursuant to the Merger,
not less than $120 million shall have been contributed to MergerCo, in cash or
cash equivalents. MergerCo covenants that it shall deliver to the Company, as
soon as available (but in any event prior to the Effective Time), any
certificates or opinions relating to the expected solvency of the Surviving
Corporation after the Merger and related financings and shall cause such
certificates or opinions to be addressed to the Board so that the Board is
entitled to rely thereon.
Section 5.12 NEW YORK STOCK EXCHANGE DELISTING. Each of the parties agrees
to cooperate with each other in taking, or causing to be taken, all actions
necessary to delist the Shares from the New York Stock Exchange, provided that
such delisting shall not be effective until after the Effective Time. The
parties also acknowledge that it is MergerCo's intent that the Shares following
the Merger will not be quoted on the New York Stock Exchange or listed on any
other national securities exchange.
Section 5.13 AFFILIATES. Prior to the Effective Time, the Company shall
deliver to MergerCo a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to MergerCo at or prior to the Effective Time a written agreement
substantially in the form attached as Exhibit A hereto.
Section 5.14 RESIGNATION OF DIRECTORS. Prior to the Effective Time, the
Company shall deliver to MergerCo evidence satisfactory to MergerCo of the
resignation of all directors of the Company, effective at the Effective Time.
Section 5.15 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to MergerCo, and MergerCo shall give prompt notice to the Company,
of (i) the occurrence or nonoccurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of either party contained in this Agreement to be untrue or inaccurate and (ii)
any failure of the Company or MergerCo to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by either party
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.16 shall not limit or otherwise affect the remedies available
hereunder to the party given or receiving such notice.
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Section 5.16 TERMINATION OF CERTAIN AGREEMENTS. The Company shall
terminate, effective as of the Effective Time, (i) the Registration Rights
Agreement among the Company, Eagle Industries, Inc., O.D.E. Manufacturing
Company, Eagle Industrial Products Corporation and Amerace Corporation, dated as
of November 2, 1994 and (ii) the Corporate Services Agreement between the
Company and Eagle Industries, Inc. dated as of June 22, 1994, subject only to
the agreement of the other parties thereto.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been adopted by the affirmative vote of a
majority of the stockholders of the Company as required by the Company's
Restated Certificate of Incorporation, as amended, and applicable law;
(b) no statute, rule, regulation, order, decree, injunction shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits, restrains, enjoins or restricts the consummation
of the Merger or any other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect;
(c) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired; and
(d) The Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order, and any material "blue sky" and other state securities laws
applicable to the registration and qualification of the Non-Cash Election
Shares following the Merger shall have been complied with.
Section 6.2 CONDITIONS TO OBLIGATION OF MERGERCO TO EFFECT THE MERGER. The
obligation of MergerCo to effect the Merger is further subject to the
satisfaction or waiver at or prior to the Effective Time of the following: (i)
the representations and warranties of the Company were true and correct as of
the date of this Agreement and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters only
as of a certain date(s) which shall be true and correct in all material respects
as of such certain date(s)); PROVIDED, HOWEVER, that the condition set forth in
this Section 6.2(i) shall be considered satisfied unless there exist
inaccuracies in representations and warranties which in the aggregate are
reasonably likely to have a Material Adverse Effect, (ii) the Company shall have
performed in all material respects all agreements herein required to be
performed on or prior to the Effective Time, (iii) the SEC shall not have
refused to declare the S-4 effective in the event that the Merger is recorded as
a recapitalization for financial reporting purposes, (iv) the Company shall not
have entered into any collective bargaining agreement at the applicable facility
that would result in a Material Labor Event (as defined on Schedule 8.10(b)),
(v) MergerCo shall have received a certificate signed on behalf of the Company
by the chief executive officer of the Company to the effect of subsections (i)
and (ii) above, and (vi) MergerCo shall have received the agreements referred to
in Section 5.13; provided that, notwithstanding any other term or provision
hereof, the entering into or modification or amendment of any contract or
agreement, in form and substance mutually agreeable to the parties hereto, in
contemplation of the completion of the Merger (including, without limitation,
employment agreements (and the options granted pursuant thereto), any option
plan, any corporate services agreement and any indemnity agreements) shall not
be deemed to cause any breach of, or inaccuracy in, any of the representations
and warranties or covenants of the parties contained in this Agreement.
Section 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver at or prior to the Effective
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Time of the following: (i) the representations and warranties of MergerCo were
true and correct as of the date of this Agreement and as of the Effective Time
as if made on and as of such date (other than representations and warranties
which address matters only as of a certain date(s) which shall be true and
correct in all material respects as of such certain date(s)); provided, however,
that the condition set forth in this Section 6.3(i) shall be considered
satisfied unless there exist inaccuracies in representations and warranties
which in the aggregate are reasonably likely to have a Material Adverse Effect,
(ii) MergerCo shall have performed in all material respects all agreements
herein required to be performed on or prior to the Effective Time, (iii) the
Company shall have received an opinion or certificate of a reputable expert firm
confirming the solvency of the Surviving Corporation after the Merger and
related financings addressed to the Board so that the Board is entitled to rely
thereon, and (iv) the Company shall have received a certificate signed on behalf
of MergerCo by its chief executive officer to the effect of subsections (i) and
(ii) above; provided that, notwithstanding any other term or provision hereof,
the entering into or modification or amendment of any contract or agreement, in
form and substance mutually agreeable to the parties hereto, in contemplation of
the completion of the Merger (including, without limitation, employment
agreements (and the options granted pursuant thereto), any option plan, any
corporate services agreement and any indemnity agreements) shall not be deemed
to cause any breach of, or inaccuracy in, any of the representations and
warranties or covenants of the parties contained in this Agreement.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent MergerCo and the Company;
(b) by MergerCo or the Company if the Effective Time shall not have
occurred on or before 180 days from the date hereof; provided, however, that
the right to terminate the Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation (including,
without limitation, its failure to satisfy the conditions to the obligation
of the other party to effect the Merger as set out in Sections 6.2 and 6.3,
as the case may be) under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date;
(c) by MergerCo or the Company if any court of competent jurisdiction in
the United States or other governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable.
(d) by MergerCo if prior to the Effective Time the Board shall have
failed to make or, if necessary, reaffirm, or shall have withdrawn or
modified in a manner adverse to MergerCo, its approval or recommendation of
this Agreement or the Merger or shall have recommended another acquisition
of the Company or merger thereof or a tender offer for Shares, or shall have
resolved to do any of the foregoing;
(e) by the Company if prior to the consummation of Merger, (A) a
corporation, partnership, person or other entity or group shall have made a
bona fide proposal that (1) the Board determines in its good faith judgment,
after consultation with its financial advisors, is more favorable, from a
financial point of view, to the Company's stockholders than the Merger and
that such corporation, partnership, person or other entity or group has the
financial ability to consummate such proposal and (2) the Board believes in
its good faith judgment, on the advice of counsel, that the Board has a
fiduciary duty to accept such proposal (a "THIRD PARTY PROPOSAL") and (B)
MergerCo does not make within five business days of receiving notice
thereof, an offer that the Board believes, in good faith
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after consultation with its financial advisors, is at least as favorable,
from a financial point of view, to the Company's Stockholders as such
Third-Party Proposal.
Section 7.2 EFFECT OF TERMINATION. Except as elsewhere specifically
provided in this Agreement, in the event of the termination and abandonment of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers, agents or stockholders, other than the provisions of
Sections 7.2 and 7.3. Nothing contained in this Section 7.2 or Section 7.3 shall
relieve any party from liability for any breach of this Agreement. In the event
of the termination of this Agreement, the confidentiality agreement previously
entered into between the Company and Investcorp International, Inc. shall
survive and be in full force and effect.
Section 7.3 FEES AND EXPENSES.
(a) If this Agreement is terminated pursuant to Section 7.1(b) as the
result of the Company's failure to satisfy the conditions to the obligations
of MergerCo to effect the Merger set forth in Section 6.2 (other than clause
(iii) thereof), the Company shall (provided MergerCo is not in material
breach of its obligations hereunder) reimburse MergerCo (after submission of
statements therefor) for all undisputed and documented out-of-pocket fees
and expenses actually and reasonably incurred in good faith by any of them
or on their behalf in connection with the Merger (including, without
limitation, reasonable attorneys' fees and fees payable to banks, financial
institutions, investment bankers and their respective agents in connection
with this Agreement (including, without limitation, any fees and expenses
incurred in connection with any financing transaction)), the amount of such
fees and expenses not to exceed $4,000,000.
(b) If this Agreement is terminated pursuant to Section 7.1(b) as the
result of MergerCo's failure to satisfy the conditions to the obligations of
the Company to effect the Merger set forth in Section 6.3, MergerCo shall
(provided the Company is not in material breach of its obligations
hereunder) reimburse the Company (after submission of statements therefor)
for all undisputed and documented out-of-pocket fees and expenses actually
and reasonably incurred in good faith by it or on its behalf in connection
with the Merger (including, without limitation, reasonable attorneys' fees
and fees payable to banks, financial institutions, investment bankers and
their respective agents in connection with this Agreement (including,
without limitation, any fees and expenses incurred in connection with any
financing transaction)), the amount of such fees and expenses not to exceed
$4,000,000.
(c) If either (i) this Agreement is terminated pursuant to Section
7.1(d) or 7.1(e) or (ii)(a) a definitive agreement relating to the
acquisition of the Company, arising out of a Third Party Proposal or a
proposal which would have qualified as a Third Party Proposal shall be
executed or (b) a recapitalization of the Company (other than as
contemplated by this Agreement) shall occur, in either case within six
months after termination of this Agreement, or the sale of substantially all
of the Company's assets shall occur in one or more transactions occurring
within one year after termination of this Agreement the Company shall pay to
MergerCo a fee of $20,000,000 payable in cash.
(d) Except as specifically provided in this Section 7.3 and Section 5.7,
each party hereto shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
Section 7.4 AMENDMENT. This Agreement may be amended by action taken by
the Company and MergerCo at any time before or after approval of the Merger by
the stockholders of the Company, if any shall be required pursuant to applicable
law, but, after any such approval, no amendment shall be made which changes the
form or decreases the amount of the consideration per Share to be paid in the
Merger or which otherwise adversely affects the rights of the Company's
stockholders hereunder without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties.
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Section 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
any of the parties hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other parties, (ii) waive any inaccuracies
in the representations and warranties of the other parties contained herein or
in any document, certificate or writing delivered by the other parties pursuant
hereto or (iii) waive compliance by the other parties with any of the agreements
or conditions contained herein. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES. The representations
and warranties made herein, other than the representations and warranties
contained in Section 5.11, shall not survive beyond the Effective Time. The
provisions of Sections 1.8, 5.7 and 5.11 shall survive the Effective Time.
Section 8.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof and (b) may not be assigned by operation of law or otherwise without the
prior written consent of the other parties.
Section 8.3 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
Section 8.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) upon receipt if given by delivery in person, (b) upon
transmission if given by facsimile (receipt confirmed) or (c) five business days
after being deposited in the mail by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
if to MergerCo:
Investcorp International Inc.
280 Park Avenue
37th Floor West
New York, New York 10017
Facsimile: 212/983-7073
Telephone: 212/599-4700
Attention: Christopher Stadler
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
48th Floor
New York, New York 10166
Facsimile: 212/351-4035
Telephone: 212/351-3914
Attention: Charles K. Marquis
26
<PAGE>
if to the Company:
Falcon Building Products, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Facsimile: 312/906-8402
Attention: Gus J. Athas
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Facsimile: 312/701-7711
Attention: James J. Junewicz
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.6 DESCRIPTIVE HEADINGS. The table of contents and descriptive
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 8.7 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, other than Section 1.8, Section 5.7, Section 5.8 and Section
8.2, is intended to or shall confer upon any other person or persons any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 8.9 SPECIFIC PERFORMANCE. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist, and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 8.10 MISCELLANEOUS.
(a) When a representation or warranty is made in this Agreement to a
party's "knowledge," or upon a party's "reasonable belief" such knowledge or
reasonable belief shall be deemed to have been established following due
inquiry by such party.
(b) "Material Adverse Effect" means, with respect to the Company, any
change(s) or effect(s) that, individually or in the aggregate, are
materially adverse to the financial condition, business or results of
operations of the Company and its Subsidiaries, taken as a whole, excluding
in all cases: (i) events or conditions generally affecting the industry in
which the Company and its Subsidiaries operate or arising from changes in
general business or economic conditions; (ii) any effect resulting from any
change in law or generally accepted accounting principles, which generally
affects entities such as the Company; (iii) events resulting from the
execution and/or announcement of this Agreement; (iv) any effect resulting
from compliance by the Company with the terms of this Agreement; and (v) any
change, condition, event, occurrence or effect directly or indirectly caused
by, resulting from, relating to or arising out of (a) any collectively
bargained terms or conditions of employment
27
<PAGE>
that do not result in a Material Labor Event (as defined on Schedule
8.10(b)), or (b) the death or disability of any executive officer of the
Company or any Subsidiary.
(c) "Material Adverse Effect" means with respect to MergerCo, any
change(s) or effect(s) that, individually or in the aggregate, are
materially adverse to the ability of MergerCo to consummate the Merger,
excluding in all cases: (i) events or conditions generally affecting the
industry in which MergerCo operates or arising from changes in general
business or economic conditions; (ii) any effect resulting from any change
in law or generally accepted accounting principles, which generally affects
entities such as MergerCo; (iii) events resulting from the execution and/or
announcement of this Agreement; and (iv) any effect resulting from
compliance by MergerCo with the terms of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed as of the day and year first above written.
FALCON BUILDING PRODUCTS, INC.
By: /s/ WILLIAM K. HALL_______________
Name: William K. Hall
Title: President
FBP ACQUISITION CORP., INC.
By: /s/ CHRISTOPHER J. STADLER________
Name: Christopher J. Stadler
Title:
28
<PAGE>
The undersigned, INVESTCORP BANK E.C., hereby undertakes and agrees to cause
FBP Acquisition Corp., Inc. ("MergerCo") to perform MergerCo's obligations and
agreements under this Agreement and the undersigned expressly agrees to be
liable in the event MergerCo. fails to perform any of its obligations or
agreements under this Agreement; PROVIDED HOWEVER, that this undertaking and
agreement shall terminate immediately following the Effective Time of the
Merger. The undersigned hereby represents and warrants to Falcon Building
Products, Inc. that (i) it has full corporate power and authority to execute and
deliver this Agreement and perform its obligations hereunder, (ii) it has taken
all actions necessary to authorize the execution, delivery and performance of
this Agreement by it (iii) such execution, delivery and performance do not
conflict with, violate or otherwise result in a default under its Certificate of
Incorporation, By-laws or other organizational documents, and (iv) this
Agreement is the legal, valid and binding obligation of Investcorp, enforceable
in accordance with its terms.
INVESTCORP BANK E.C.
By: /s/ ZAHID ZAKIUDDIN_______________
Name: Zahid Zakiuddin
Title:
29
<PAGE>
ANNEX II-A
VOTING AGREEMENT
AMONG
FALCON ACQUISITION CORP., INC.,
FALCON BUILDING PRODUCTS, INC.
AND
EQUITY HOLDINGS LIMITED
Annex II-A-1
<PAGE>
STOCKHOLDER VOTING AGREEMENT
STOCKHOLDER VOTING AGREEMENT, dated as of March 20, 1997 (this "Agreement"),
by and among FBP Acquisition Corp., a Delaware corporation ("MergerCo"), Falcon
Building Products, Inc., a Delaware corporation (the "Company"), and the other
party signatory hereto ("Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, MergerCo and the Company are entering into
an Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement") pursuant to which MergerCo will be merged
with and into the Company (the "Merger");
WHEREAS, Stockholder owns the number of shares, par value $.01 per share, of
Class A Common Stock of the Company set forth opposite Stockholder's name on
Schedule I hereto (the shares so owned by Stockholder are referred to herein as
the "Shares" and the Class A Common Stock, par value $.01 per share, is referred
to as the "Company Common Stock");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement (including the agreement to enter into a Stockholder Rights Agreement
pursuant to Section 11 hereof), MergerCo has required that Stockholder agree,
and the Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. VOTING. Stockholder hereby agrees with MergerCo that, during the period
commencing on the date hereof and continuing until the first to occur of the
Effective Time (as defined in the Merger Agreement) or termination of the Merger
Agreement in accordance with its terms, at any meeting of the Company's
stockholders, however called, or in connection with any written consent of the
Company's stockholders, Stockholder shall vote all shares of capital stock of
the Company owned or controlled by Stockholder, whether now owned or controlled
or hereafter acquired or controlled, (i) in favor of approval of the Merger
Agreement and any actions required in furtherance thereof and hereof as and to
the extent therein provided; (ii) against any action or agreement that would
result in a material breach of the Merger Agreement by the Company; and (iii)
except as otherwise agreed to in writing in advance by MergerCo, against any
proposal which would result in a change of control or recapitalization of the
Company (other than the Merger and the transactions contemplated by the Merger
Agreement). Stockholder shall not enter into any agreement or understanding with
any person or entity the effect of which would be inconsistent or violative of
the provisions and agreements contained in this Agreement. The obligations of
Stockholder under this Section 1 shall be inoperative during any period of time
that the Board of Directors of the Company (the "Board") has properly exercised
its right to refrain from recommending approval of the Merger or has properly
exercised its right to withdraw its recommendation that the Merger be approved
by stockholders of the Company, in either case in accordance with the provisions
of Section 1.9(a) of the Merger Agreement.
2. REPRESENTATIONS AND WARRANTIES. Stockholder hereby represents and
warrants to MergerCo as follows:
(a) OWNERSHIP OF SHARES. Stockholder is the record and beneficial
owner of the Shares. On the date hereof, the Shares constitute all of the
shares of capital stock of the Company owned or controlled by Stockholder.
Stockholder has sole and unqualified voting power with respect to the
Shares.
(b) POWER; BINDING AGREEMENT. Stockholder has the legal capacity,
power and authority to enter into and perform all of Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by Stockholder do not and will not violate any law,
regulation or court order or any other agreement to which Stockholder is a
party including, without limitation, any voting agreement, stockholder
agreement or voting trust. This Agreement has been duly and validly executed
and delivered by Stockholder and constitutes a valid and binding agreement
of Stockholder, enforceable against Stockholder in accordance with its
terms.
<PAGE>
(c) RELIANCE BY MERGERCO. Stockholder understands and acknowledges
that MergerCo is entering into the Merger Agreement in reliance upon
Stockholder's execution, delivery and performance of this Agreement.
3. RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Stockholder
shall not, directly or indirectly: (i) except as contemplated by the Merger
Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any of the
Shares or any interest therein; (ii) grant any proxies or powers of attorney, or
enter into a voting agreement or voting trust with respect to any of the
foregoing that would be inconsistent herewith; or (iii) take any action that
would make any representation or warranty of Stockholder contained herein untrue
or incorrect or have the effect of preventing or disabling Stockholder from
performing Stockholder's obligations under this Agreement. The Company will
direct the Company's transfer agent to place stop transfer order instructions
with respect to the Shares and will notify such transfer agent that this
Agreement places restrictions on the Shares.
4. ACQUISITION PROPOSALS. Stockholder (i) shall immediately cease any
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to recapitalization of the Company or any acquisition of
all or any material portion of the assets of, or any equity interest in, the
Company or its subsidiaries, and (ii) shall not, directly or indirectly,
initiate, solicit or knowingly encourage (including, without limitation, by way
of furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any proposal which would
result in a change of control or recapitalization of the Company or any
acquisition of the types referred to in clause (i) above. During any period of
time that, based upon a proper determination by the Board under the first
sentence of Section 5.2 of the Merger Agreement that the Company may take the
actions permitted thereby, the Company is pursuing any of the activities
permitted by such first sentence of such Section 5.2, Stockholder's obligations
under this Section 4 shall be deemed inoperative such that Stockholder may also
pursue the activities which the Company is permitted to pursue.
5. STOP TRANSFER. Stockholder shall not request that the Company register
the transfer of any interest representing any of the Shares, unless such
transfer is made in compliance with this Agreement. In the event of a stock
dividend or distribution, or any change in the Company Common Stock by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, the term "Shares" shall be deemed for purposes of this Agreement to
include all such stock dividends and distributions and any shares into which or
for which any or all of the Shares may be changed or exchanged.
6. TERMINATION. This Agreement shall terminate upon the earlier of (a)
termination of the Merger Agreement in accordance with its terms or (b) the
Effective Time (as defined in the Merger Agreement).
7. STOCKHOLDER CAPACITY. It is understood and agreed that Stockholder's
commitments in this Agreement are made solely in Stockholder's capacity as a
stockholder of the Company.
8. ELECTION TO RETAIN COMPANY STOCK. Stockholder acknowledges that
recapitalization accounting treatment for the Merger is an essential requirement
for MergerCo to go forward with the Merger. In furtherance thereof, Stockholder
hereby agrees that it will take all actions and execute all documents necessary
to cause that number of Shares specified as "Number of Pre-Closing Electing
Shares" on Schedule I hereto to be "Electing Shares" under the Merger Agreement.
9. TERMINATION OF REGISTRATION RIGHTS AGREEMENT. As used herein, the "1994
Registration Rights Agreement" means the Registration Rights Agreement dated as
of November 2, 1994 by and among the Company and the "Selling Stockholders"
named therein. Stockholder represents and warrants to MergerCo that Stockholder
is the sole owner of all "Subject Stock" (as defined in the 1994 Registration
Rights Agreement), that all rights of the Selling Stockholders under such
Agreement have been assigned to Stockholder, and that none of the Selling
Stockholders have any continuing rights thereunder. Stockholder
2
<PAGE>
and the Company hereby agree for the benefit of MergerCo that, effective upon
the Effective Time of the Merger, the 1994 Registration Rights Agreement shall
for all purposes be considered terminated.
10. CORPORATE SERVICES AGREEMENT. Stockholder will cause its indirect,
wholly-owned subsidiary, Eagle Industries, Inc. ("Eagle") to (a) agree in
writing with the Company to terminate the Corporate Services Agreement dated
June 22, 1994 between the Company and Eagle effective as of the Effective Time
of the Merger and (b) effective as of the Effective Time of the Merger, enter
into a new corporate services agreement with the Company pursuant to which Eagle
will provide selected services to the Company (such services to be selected from
the range of services currently provided) for up to six months following the
Effective Time of the Merger on an as needed basis at rates which are
commercially reasonable in relation to market rates for such services. The
Company will enter into such termination and such new agreement.
11. STOCKHOLDER RIGHTS AGREEMENT. Stockholder, the Company and MergerCo
agree that Stockholder and the Company will prior to the Effective Time of the
Merger enter into a Stockholder Rights Agreement consistent with the provisions
of Exhibit A attached hereto (all of the material terms of which are summarized
therein).
12. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Stockholder agrees that this Agreement and the
obligations hereunder shall attach to Stockholder's Shares and shall be binding
upon any person to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(c) ASSIGNMENT. This Agreement may not be assigned by any party, by
operation of law or otherwise, without the prior written consent of the other
party.
(d) AMENDMENTS. This Agreement may not be amended except by written
agreement executed by MergerCo and Stockholder.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Stockholder: At the address set forth on Schedule I hereto
with a copy to: Rosenberg & Liebentritt, PC
Two North Riverside Plaza, Suite 1600
Chicago, IL 60606
Facsimile: 312.454.0335
Attention: Donald Liebentritt
If to MergerCo: Investcorp International Inc.
280 Park Avenue, 37th Floor West
New York, New York 10017
Facsimile: 212.599.4700
Attention: Christopher Stadler
3
<PAGE>
<TABLE>
<S> <C>
with a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue, 48th Floor
New York, NY 10166
Facsimile: 212.351.4035
Attention: E. Michael Greaney
If to Company: Falcon Building Products, Inc.
Two North Riverside Plaza, Suite 1100
Chicago, IL 60606
Facsimile: 312.906.8402
Attention: Gus J. Athas
with a copy to: Mayer, Brown & Platt
190 South La Salle Street
Chicago, IL 60603
Facsimile: 312.701.7711
Attention: James J. Junewicz
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(f) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it
would not have an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in
equity.
(h) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance. Any waiver of any
provision hereof must be in writing and duly executed by the waiving party.
(i) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(j) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
4
<PAGE>
IN WITNESS WHEREOF, MergerCo, the Company and Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
FBP ACQUISITION CORP., INC.
By: ____/s/ CHRISTOPHER J. STADLER____
Name: _____Christopher J. Stadler_____
Title: _______________________________
FALCON BUILDING PRODUCTS, INC.
By: _________/s/ GUS J. ATHAS_________
Name: __________Gus J. Athas__________
Title: _____Senior Vice-President_____
STOCKHOLDER:
EQUITY HOLDINGS LIMITED, an Illinois
Limited Partnership, by one of its
general partners: Samuel Zell
Revocable Trust dated January 19, 1990
____________/s/ SAMUEL ZELL___________
Samuel Zell, Trustee
5
<PAGE>
SCHEDULE I TO
STOCKHOLDER VOTING AGREEMENT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES OWNED
- ----------------------------------------------------------------------------------------- -----------------------
<S> <C>
Equity Holdings Limited, an Illinois Limited Partnership................................. 14,000,000
Two North Riverside Plaza, Suite 1100
Chicago, IL 60606
</TABLE>
* * * * *
Number of Pre-Closing Electing Shares: 861,683
6
<PAGE>
EXHIBIT A
TO
STOCKHOLDER VOTING AGREEMENT
SUMMARY OF PRINCIPAL TERMS
OF
STOCKHOLDER RIGHTS AGREEMENT
<TABLE>
<S> <C>
Definitions Capitalized terms not separately defined in this Summary have
the meaning ascribed to them in the Merger Agreement.
Purpose The purpose of the Stockholder Rights Agreement is to grant
certain rights to, and impose certain restrictions on, certain
of the stockholders of the Surviving Corporation. The shares of
Company capital stock to be held by such stockholders are also
subject to the applicable provisions of the Company's
Certificate of Incorporation.
Parties The Company, Equity Holdings Limited ("EHL") and the investors
in MergerCo who receive voting Company capital stock in the
Merger (the "I Voting Stock Investors").
Right of First Offer EHL will grant to the Company and to Investcorp Investment
Equity Limited (or an affiliate thereof) a right of first offer
with respect to any proposed sales by EHL (or its transferees)
of any shares of Company capital stock. Reasonable and
customary procedures concerning this right of first offer will
be set forth in the Stockholder Rights Agreement.
Right to Cause Sale After the occurrence of an event which, under the Company's
charter, triggers the automatic conversion of the various
classes of capital stock of the Company into common stock of
the Company, if the investors in MergerCo who received voting
or nonvoting equity securities of the Company in the Merger
(the "I Investors") decide to sell as a group all of their
remaining equity interests in the Company and such selling
group holds at that time (prior to giving effect to the
proposed sale) more than 50% of the equity interests in the
Company received in the Merger, then such selling group shall
have the right to require EHL to sell its remaining equity
interests in the Company as part of that sale on the same price
and terms.
Rights to Participate in The Company will grant to EHL and the I Investors the right to
Future Equity Financings participate in any equity financings by the Company which take
place during the period beginning immediately after the closing
of the Merger up to but not including an IPO. This
participation right will entitle holders of the right to
purchase from the Company the number of equity securities in
the financing which enables such holder to maintain its
percentage interest of the equity securities of the Company.
The participation right will not apply to issuances of equity
securities by the Company in connection with stock incentive or
compensation plans approved by the Board of Directors of the
Company or business acquisitions by the Company.
Right to Participate in In the event that, during the period beginning immediately
Sale after the closing of the Merger and ending upon an IPO, members
of the I Voting Stock Investor group holding a majority of the
voting power of the Company propose to engage in a sale of
equity interests which would result in a transfer of a majority
of the voting power of the Company to an unaffiliated
purchaser, then EHL shall have the right to participate
</TABLE>
<PAGE>
<TABLE>
<S> <C>
pro rata in such sale transaction on the same price and terms
as other selling stockholders.
Registration Rights In the Stockholder Rights Agreement (or by separate
registration rights agreement) the Company will grant to EHL
and the I Investors "piggyback" registration rights at Company
expense (other than underwriting discounts and selling
commissions), with customary provisions regarding notice of
intent to file a registration statement, cutbacks in the event
of an underwritten offering, indemnification and other
customary provisions. In addition, EHL will be granted the
right to one "demand" registration at Company expense (other
than underwriting discounts and selling commissions),
exercisable by EHL after the fifth anniversary of the closing
of the Merger if no IPO has occurred prior to such fifth
anniversary and provided EHL holds at the time of exercise of
such "demand" registration right at least 75% of the equity
interests in the Company retained by EHL in the Merger.
Lock-Up EHL will, if requested by the underwriters for an underwritten
public offering of equity securities of the Company, agree not
to sell or transfer any equity securities of the Company (other
than equity securities, if any, including in such offering),
without the consent of the underwriters, for a period of not
more than 180 days following effectiveness of the registration
statement relating to an IPO (provided EHL has been given the
opportunity to participate as a selling stockholder in such IPO
pro rata with the I Investors subject to the same conditions as
applicable to the participation of the I Investors).
Information Rights So long as EHL holds both (a) 90% or more of the equity
interests in the Company retained by EHL in the Merger and (b)
5% or more of the outstanding equity interests in the Company
((a) and (b) together, the "EHL Retention Condition"), the
Company will provide EHL with written information about the
Company the content of which will be substantially as would be
required public disclosure for an issuer whose debt securities
are registered under Section 12 of the Securities Exchange Act
of 1934, as amended. In addition, so long as the EHL Retention
Condition remains satisfied, the Company will, on a timely
basis, furnish EHL with the written materials it submits to its
Board members if either of the following occurs and is
continuing: (a) a payment default under any of the Company's
material debt agreements or (b) the fifth anniversary of the
closing of the Merger has occurred and no IPO has occurred.
During any period when EHL is entitled to receive such Board
materials, EHL will also be entitled to have one representative
attend as an observer at one Company Board meeting per calendar
year. If the various information rights set forth above are not
available to EHL because the conditions precedent thereto are
not met, the Company shall nevertheless cooperate with EHL to
respond to reasonable requests for information concerning the
Company as long as EHL owns 50% or more of the equity interests
in the Company retained by EHL in the Merger.
</TABLE>
A-2
<PAGE>
ANNEX II-B
FORM OF VOTING AGREEMENTS
AMONG
FALCON ACQUISITION CORP., INC., FALCON BUILDING
PRODUCTS, INC.
AND
CERTAIN OTHER STOCKHOLDERS
Annex II-B-1
<PAGE>
STOCKHOLDER VOTING AGREEMENT
STOCKHOLDER VOTING AGREEMENT, dated as of March 20, 1997 (this "Agreement"),
by and among FBP Acquisition Corp., a Delaware corporation ("MergerCo"), Falcon
Building Products, Inc., a Delaware corporation (the "Company"), and the other
party signatory hereto ("Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, MergerCo and the Company are entering into
an Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement") pursuant to which MergerCo will be merged
with and into the Company (the "Merger");
WHEREAS, Stockholder owns the number of shares, par value $.01 per share, of
Class A Common Stock of the Company set forth opposite Stockholder's name on
Schedule I hereto (the shares so owned by Stockholder are referred to herein as
the "Shares" and the Class A Common Stock, par value $.01 per share, is referred
to as the "Company Common Stock");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, MergerCo has required that Stockholder agree, and the Stockholder has
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
VOTING. Stockholder hereby agrees with MergerCo that, during the period
commencing on the date hereof and continuing until the first to occur of the
Effective Time (as defined in the Merger Agreement) or termination of the Merger
Agreement in accordance with its terms, at any meeting of the Company's
stockholders, however called, or in connection with any written consent of the
Company's stockholders, Stockholder shall vote all shares of capital stock of
the Company owned or controlled by Stockholder, whether now owned or controlled
or hereafter acquired or controlled, (i) in favor of approval of the Merger
Agreement and any actions required in furtherance thereof and hereof as and to
the extent therein provided; (ii) against any action or agreement that would
result in a material breach of the Merger Agreement by the Company; and (iii)
except as otherwise agreed to in writing in advance by MergerCo, against any
proposal which would result in a change of control or recapitalization of the
Company (other than the Merger and the transactions contemplated by the Merger
Agreement). Stockholder shall not enter into any agreement or understanding with
any person or entity the effect of which would be inconsistent or violative of
the provisions and agreements contained in this Agreement. The obligations of
Stockholder under this Section 1 shall be inoperative during any period of time
that the Board of Directors of the Company (the "Board") has properly exercised
its right to refrain from recommending approval of the Merger or has properly
exercised its right to withdraw its recommendation that the Merger be approved
by stockholders of the Company, in either case in accordance with the provisions
of Section 1.9(a) of the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. Stockholder hereby represents and warrants
to MergerCo as follows:
(a) OWNERSHIP OF SHARES. Stockholder is the record and beneficial owner of
the Shares. On the date hereof, the Shares constitute all of the shares of
capital stock of the Company owned or controlled by Stockholder. Stockholder has
sole and unqualified voting power with respect to the Shares.
(b) POWER; BINDING AGREEMENT. Stockholder has the legal capacity, power and
authority to enter into and perform all of Stockholder's obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder do not and will not violate any law, regulation or court order or
any other agreement to which Stockholder is a party including, without
limitation, any voting agreement, stockholder agreement or voting trust. This
Agreement has been duly and validly executed and delivered by Stockholder and
constitutes a valid and binding agreement of Stockholder, enforceable against
Stockholder in accordance with its terms.
2
<PAGE>
(c) RELIANCE BY MERGERCO. Stockholder understands and acknowledges that
MergerCo is entering into the Merger Agreement in reliance upon Stockholder's
execution, delivery and performance of this Agreement.
RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Stockholder shall
not, directly or indirectly: (i) except as contemplated by the Merger Agreement,
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any of the
Shares or any interest therein; (ii) grant any proxies or powers of attorney, or
enter into a voting agreement or voting trust with respect to any of the
foregoing that would be inconsistent herewith; or (iii) take any action that
would make any representation or warranty of Stockholder contained herein untrue
or incorrect or have the effect of preventing or disabling Stockholder from
performing Stockholder's obligations under this Agreement. The Company will
direct the Company's transfer agent to place stop transfer order instructions
with respect to the Shares and will notify such transfer agent that this
Agreement places restrictions on the Shares.
ACQUISITION PROPOSALS. Stockholder (i) shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to recapitalization of the Company or any acquisition of all or any
material portion of the assets of, or any equity interest in, the Company or its
subsidiaries, and (ii) shall not, directly or indirectly, initiate, solicit or
knowingly encourage (including, without limitation, by way of furnishing
non-public information or assistance), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal which would result in a
change of control or recapitalization of the Company or any acquisition of the
types referred to in clause (i) above. During any period of time that, based
upon a proper determination by the Board under the first sentence of Section 5.2
of the Merger Agreement that the Company may take the actions permitted thereby,
the Company is pursuing any of the activities permitted by such first sentence
of such Section 5.2, Stockholder's obligations under this Section 4 shall be
deemed inoperative such that Stockholder may also pursue the activities which
the Company is permitted to pursue.
STOP TRANSFER. Stockholder shall not request that the Company register the
transfer of any interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed for purposes of this Agreement to
include all such stock dividends and distributions and any shares into which or
for which any or all of the Shares may be changed or exchanged.
TERMINATION. This Agreement shall terminate upon the earlier of (a)
termination of the Merger Agreement in accordance with its terms or (b) the
Effective Time (as defined in the Merger Agreement).
STOCKHOLDER CAPACITY. It is understood and agreed that Stockholder's
commitments in this Agreement are made solely in Stockholder's capacity as a
stockholder of the Company.
ELECTION TO RETAIN COMPANY STOCK. Stockholder acknowledges that
recapitalization accounting treatment for the Merger is an essential requirement
for MergerCo to go forward with the Merger. In furtherance thereof, Stockholder
hereby agrees that it will take all actions and execute all documents necessary
to cause that number of Shares specified as "Number of Pre-Closing Electing
Shares" on Schedule I hereto to be "Electing Shares" under the Merger Agreement.
MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
3
<PAGE>
(b) CERTAIN EVENTS. Stockholder agrees that this Agreement and the
obligations hereunder shall attach to Stockholder's Shares and shall be binding
upon any person to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(c) ASSIGNMENT. This Agreement may not be assigned by any party, by
operation of law or otherwise, without the prior written consent of the other
party.
(d) AMENDMENTS. This Agreement may not be amended except by written
agreement executed by MergerCo and Stockholder.
(e) NOTICES. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if so given) by hand delivery, telegram, telex or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
<TABLE>
<S> <C>
If to Stockholder: At the address set forth on Schedule I hereto
with a copy to: Gus Athas
Two North Riverside Plaza, Suite 1100
Chicago, IL 60606
Facsimile: 312.906.8402
If to MergerCo: Investcorp International Inc.
280 Park Avenue, 37th Floor West
New York, New York 10017
Facsimile: 212.599.4700
Attention: Christopher Stadler
with a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue, 48th Floor
New York, NY 10166
Facsimile: 212.351.4035
Attention: E. Michael Greaney
If to Company: Falcon Building Products, Inc.
Two North Riverside Plaza, Suite 1100
Chicago, IL 60606
Facsimile: 312.906.8402
Attention: Gus J. Athas
with a copy to: Mayer, Brown & Platt
190 South La Salle Street
Chicago, IL 60603
Facsimile: 312.701.7711
Attention: James J. Junewicz
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(f) SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in
4
<PAGE>
such jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) NO WAIVER. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof
at law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance. Any waiver of any provision hereof must be in writing and duly
executed by the waiving party.
(i) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(j) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, MergerCo, the Company and Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
<TABLE>
<S> <C>
FBP ACQUISITION CORP.
By:
Name:
Title:
FALCON BUILDING PRODUCTS, INC.
By:
Name:
Title:
STOCKHOLDER:
Name:
Signature:
</TABLE>
5
<PAGE>
ANNEX III-A
[Merrill Lynch Letterhead]
March 20, 1997
Board of Directors
Falcon Building Products, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Members of the Board:
Falcon Building Products, Inc. ("Falcon" or the "Company") and FBP
Acquisition, Inc. ("MergerCo."), an entity formed by Investcorp International
Inc. (the "Acquiror") propose to enter into an agreement (the "Agreement")
pursuant to which MergerCo will be merged with and into the Company (the
"Merger") in a transaction in which each outstanding share of the Company's
common stock, par value $0.01 per share (the "Shares"), other than shares owned
by the Company or any subsidiary of the Company or by MergerCo or any of its
affiliates and other than Dissenting Shares (as defined in the Agreement) will
be converted into the right to receive, at the time of election of the record
holders thereof and subject to the terms of the Agreement, either (a) $17.75 per
Share in cash ("Cash Election"), or (b) the right to retain one Share ("Rollover
Election").
We understand that pursuant to the Agreement the aggregate number of Shares
to be converted into the right to retain Shares in the Company will equal
1,034,020 (such number the "Rollover Cap" and such Shares the "Non Cash Election
Shares") and that (a) to the extent that the number of Shares subject to the
Rollover Election exceeds the Rollover Cap, each holder making such Rollover
Election will be entitled to retain only a pro rata portion of Shares and will
be entitled to receive a cash payout for the remaining Shares as if a Cash
Election had been made with respect thereto, and (b) to the extent that the
number of Shares subject to the Rollover Election is less than the Rollover Cap,
Equity Holdings Limited ("EHL"), an Illinois limited partnership and principal
shareholder in Falcon, has agreed, pursuant to a voting agreement (the "Voting
Agreement"), to make a Rollover Election to the extent necessary so that the
aggregate number of Shares converted into the right to retain Shares in the
Company equals the Rollover Cap.
The Merger is expected to be considered by the shareholders of the Company
at a special shareholders' meeting to be held within the next 90 days and
consummated on or shortly after the date of such meeting.
You have asked us whether, in our opinion, the proposed consideration to be
received by the holders of the Shares in the Merger is fair to such shareholders
from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed (a) the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31, 1995,
(b) a draft of the Company's Form 10-K and related financial information
for the fiscal year ended December 31, 1996, (c) the Company's Prospectus
dated November 2, 1994 relating to its initial public offering of common
stock, (d) the Company's Forms 10-Q and the related unaudited financial
information for the quarterly periods ending September 30, 1995, March
31, 1996, June 30, 1996 and September 30, 1996;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of the Company,
and information relating to certain pro forma effects on the Company's
capital structure after giving effect to the Merger furnished to us by
the Company;
Annex III-A-1
<PAGE>
(3) Conducted discussions with members of senior management of the Company
concerning the foregoing, including its businesses and prospects and
certain pro forma effects on the Company's capital structure after giving
effect to the Merger;
(4) Reviewed the historical market prices and trading activity for the
Shares and compared them with that of certain publicly traded companies
which we deemed to be reasonably similar to the Company;
(5) Compared the results of operations of the Company with that of certain
companies which we deemed to be reasonably similar to the Company;
(6) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(7) Reviewed the Agreement dated March 20, 1997;
(8) Reviewed the Voting Agreement dated March 20, 1997; and
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed appropriate, including, without limitation, our assessment of
general economic, industry and market conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us or
publicly available, and we have not independently verified such information and
we have not assumed any responsibility for independently verifying such
information or undertaken an independent appraisal of the assets or liabilities
of the Company or been furnished with any such appraisal. With respect to the
financial forecasts furnished by the Company and information relating to certain
pro forma effects on the Company's capital structure after giving effect to the
Merger, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the Company's management as
to the expected future financial performance of the Company and as to such pro
forma effects on the Company's capital structure.
Our opinion is necessarily based upon general economic, industry and market
conditions as they exist on, and can be evaluated as of, the date hereof. Our
opinion does not address the merits of the underlying decision by the Company to
engage in the Merger. This opinion is for the use of the Board of Directors of
the Company and does not constitute a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger or in any
transaction related thereto or as to whether any shareholder should elect to
receive cash or to retain the Non Cash Election Shares. In addition, we express
no opinion as to what the value of the Non Cash Election Shares will be upon
consummation of the Merger.
We have, in the past, provided financial advisory and financing services to
the Company and the Acquiror and have received fees for the rendering of such
services. In addition, we are currently providing financial advisory services to
the Company in connection with the Merger and will receive a fee for such
services, a significant portion of which is contingent upon consummation of the
Merger. In the ordinary course of our business, we and our affiliates may
actively trade the debt and equity securities of the Company for our or their
accounts and for the accounts of customers thereof and, accordingly, may at any
time hold a long or short position in such securities. In addition, the Company
has agreed to indemnify us for certain liabilities arising out of our
engagement.
This opinion may not be reproduced, disseminated, used, quoted or referred
to in whole or in part, orally or in any document, press release or public
statement without the prior written consent of Merrill Lynch unless required by
law or regulations. Notwithstanding the foregoing, the opinion may be
reproduced, in its entirety, in the Proxy Statement to be mailed to the
Company's shareholders and the Form S-4 to be filed with the Securities and
Exchange Commission in connection with the Merger.
Annex III-A-2
<PAGE>
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be received by the holders of the Shares pursuant
to the Merger is fair to such shareholders from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ DANIEL M. DICKINSON
------------------------------------------
Daniel M. Dickinson
INVESTMENT BANKING GROUP
Annex III-A-3
<PAGE>
ANNEX III-B
[Smith Barney, Inc. Letterhead]
March 20, 1997
The Board of Directors
Falcon Building Products, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Falcon Building Products, Inc.
("Falcon") of the consideration to be received by such holders pursuant to the
terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of March 20, 1997 (the "Merger Agreement"), by and between
Falcon and FBP Acquisition Corp. ("MergerCo"), a wholly owned subsidiary of
Investcorp International, Inc. ("Investcorp"). As more fully described in the
Merger Agreement, (i) MergerCo will be merged with and into Falcon (the
"Merger") and (ii) each outstanding share of the Class A Common Stock, par value
$0.01 per share, of Falcon (the "Falcon Common Stock") will be converted into
either (A) the right to retain, at the election of the holder thereof, one share
of Falcon Common Stock (the "Stock Consideration") or (B) the right to receive
$17.75 in cash (the "Cash Consideration" and, together with the Stock
Consideration, the "Merger Consideration"), subject to proration as more fully
specified in the Merger Agreement; PROVIDED that the aggregate number of shares
of Falcon Common Stock to be converted into the Stock Consideration will be
1,034,020 shares.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Falcon and certain senior officers and other representatives and
advisors of Investcorp concerning the business, operations and prospects of
Falcon. We examined certain publicly available business and financial
information relating to Falcon as well as certain financial forecasts and other
information and data for Falcon which were provided to or otherwise discussed
with us by the management of Falcon. We reviewed the financial terms of the
Merger as set forth in the Merger Agreement in relation to, among other things:
current and historical market prices and trading volumes of Falcon Common Stock;
the historical and projected earnings and other operating data of Falcon; and
the capitalization and financial condition of Falcon. We considered, to the
extent publicly available, the financial terms of other transactions recently
effected which we considered relevant in evaluating the Merger and analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations we considered
relevant in evaluating those of Falcon. In connection with our engagement, we
were requested to approach, and held discussions with, third parties to solicit
indications of interest in a possible acquisition of Falcon. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other financial, economic and market criteria as we deemed appropriate in
arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of Falcon that such forecasts and other information
and data were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Falcon as to the future
financial performance of Falcon. We have assumed, with your consent, that the
Merger will be treated as a recapitalization in accordance with generally
accepted accounting principles. We are not expressing any opinion as to what the
value of the Falcon Common Stock actually will be when issued
Annex III-B-1
<PAGE>
pursuant to the Merger or the price at which the Falcon Common Stock will trade
or otherwise be transferable subsequent to the Merger. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Falcon nor have we made any physical
inspection of the properties or assets of Falcon. Our opinion is necessarily
based upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to
Falcon in connection with the proposed Merger and will receive a fee for such
services, which fee is contingent upon the consummation of the Merger. In the
ordinary course of our business, we and our affiliates may actively trade or
hold the securities of Falcon for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities. We have in the past provided investment banking services to
affiliates of Falcon unrelated to the proposed Merger, and may participate in
the financing for the Merger, for which services we have received or would
receive compensation. In addition, we and our affiliates (including Travelers
Group Inc. and its affiliates) may maintain relationships with Falcon,
Investcorp and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Falcon in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Merger. Our opinion may not be published or otherwise used or referred
to, nor shall any public reference to Smith Barney be made, without our prior
written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Merger Consideration is
fair, from a financial point of view, to the holders of Falcon Common Stock.
Very truly yours,
/s/ SMITH BARNEY
- ---------------------------------------------
SMITH BARNEY
Annex III-B-2
<PAGE>
ANNEX IV
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER I. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
8 DEL. C. SECTION 262
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (1) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
Annex IV-1
<PAGE>
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
[the Parent] corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within twenty days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of
Annex IV-2
<PAGE>
any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall not be more than 10 days prior
to the date the notice is given; provided that, if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition was filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware, or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or
Annex IV-3
<PAGE>
expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
Annex IV-4
<PAGE>
ANNEX V
FORM OF RESTATED
CERTIFICATE OF INCORPORATION
OF
FBP ACQUISITION CORP., INC.
Annex V-
<PAGE>
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FALCON BUILDING PRODUCTS, INC.
(Originally incorporated on March 19, 1997)
ARTICLE I -- NAME
The name of the corporation (hereinafter called the "CORPORATION") is Falcon
Building Products, Inc.
ARTICLE II -- REGISTERED OFFICE
The address, including street, number, city, and county, of the registered
office of the Corporation in the State of Delaware is [1013 Centre Road], City
of Wilmington, County of New Castle, Delaware 19805; and the name of the
registered agent of the Corporation in the State of Delaware is [The
Prentice-Hall Corporation System, Inc.]
ARTICLE III -- PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV -- CAPITALIZATION
1. DEFINITIONS. As used in this Article, the following terms shall have
the following meanings:
"AFFILIATE", with respect to a Class D Stockholder that is not a natural
person, means (i) any Person which, directly or indirectly, is in control
of, is controlled by, or is under common control with, such Class D
Stockholder or (ii) any Person who is a director or officer (a) of such
Class D Stockholder, (b) of any subsidiary of such Class D Stockholder or
(c) of any Person described in clause (i) above. For purposes of this
definition, "control" of a Person shall mean the power, directly or
indirectly, (y) to vote fifty percent (50%) or more of the securities having
ordinary voting power for the election of directors of such Person whether
by ownership of securities, contract, proxy or otherwise, or (z) to direct
or cause the direction of the management and policies of such Person whether
by ownership of securities, contract, proxy or otherwise.
"BOARD" means the Board of Directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, Sunday, federal
holiday or other day on which commercial banks in New York City are
authorized or required to close under the laws of the State of New York.
"CERTIFICATE OF INCORPORATION" means this Restated Certificate of
Incorporation of the Corporation.
"CLASS A STOCK" means the Class A Common Stock described in Section 2.
"CLASS B STOCK" means the Class B Common Stock described in Section 2.
"CLASS C STOCK" means the Class C Common Stock described in Section 2.
"CLASS D STOCK" means the Class D Common Stock described in Section 2.
"CLASS A STOCKHOLDER" means a record holder of one or more shares of
Class A Stock.
"CLASS B STOCKHOLDER" means a record holder of one or more shares of
Class B Stock.
Annex V-B-2
<PAGE>
"CLASS C STOCKHOLDER" means a record holder of one or more shares of
Class C Stock.
"CLASS D STOCKHOLDER" means a record holder of one or more shares of
Class D Stock.
"COMMON STOCK" has the meaning set forth in Section 2.
"COMMON STOCKHOLDER" means a record holder of one or more shares of
Common Stock.
"CONVERSION DATE" has the meaning set forth in Section 6.
"CORPORATION" means FBP Acquisition Corp., Inc.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"INITIAL PUBLIC OFFERING" means the effectiveness after ,
1997 of a registration statement under the Securities Act or any of Forms
S-1, S-2, S-3 or any similar successor form covering any of the Stock, and
the completion of a sale of such Stock thereunder, (i) following which the
Corporation is, or becomes, a reporting company under Section 12(b) or 12(g)
of the Exchange Act, and (ii) as a result of which the Stock is traded on
the New York Stock Exchange or the American Stock Exchange, or quoted on the
NASDAQ Stock Market or is traded or quoted on any other national stock
exchange.
"IPO DATE" means the closing date of the Initial Public Offering.
"NON-REDEEMABLE SHARES" means all shares of Class B Stock or Class C
Stock that have been previously sold (whether under Section 4 or Section
5(c)) pursuant to a Tag-Along Transfer other than pursuant to a Single
Transaction Sale.
"NOTICE DATE" has the meaning set forth in Section 4(b).
"OTHER STOCKHOLDERS" has the meaning set forth in Section 4(a).
"PERMITTED TRANSFEREE" with respect to a Transfer by a Class D
Stockholder, means (i) with respect to any Class D Stockholder who is a
natural person, a Transfer to (a) such Stockholder's spouse or issue, or (b)
a trust the beneficiaries of which, and a partnership the limited and
general partners of which, include only the Class D Stockholder, his spouse
or issue; (ii) with respect to any Class D Stockholder that is not a natural
person, (A) a Transfer to an Affiliate of such Class D Stockholder; or (B) a
Transfer to another Class D Stockholder or its Affiliates; PROVIDED such
other Class D Stockholder referenced in clauses (i) and (ii) did not acquire
its shares of Class D Stock pursuant to a Tag-Along Transfer.
"PERSON" means any natural person, partnership, limited liability
company, corporation (including the Corporation), trust or incorporated
organization or a government or a political subdivision thereof.
"PROPOSED PURCHASE AMOUNT" has the meaning set forth in Section 4(a).
"PROPOSED TRANSFEREE" has the meaning set forth in Section 4(a).
"PROPOSED TRANSFEROR" has the meaning set forth in Section 4(a).
"REDEMPTION DATE" has the meaning set forth in Section 5(d).
"SALE OF THE CORPORATION" means, (i) the sale of one hundred percent
(100%) of the outstanding shares of Stock; (ii) a sale of all or
substantially all of the assets of the Corporation; or (iii) a merger,
consolidation or recapitalization of the Corporation as a result of which
the ownership of the Stock of the Corporation (or the voting stock of the
surviving corporation, if the Corporation is not the survivor) is changed to
the extent of one hundred percent (100%).
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<PAGE>
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SINGLE TRANSACTION SALE" means a Sale of the Corporation in a single
transaction.
"STAGGERED SALE" means a Sale of the Corporation in more than one
transaction, each such transaction also being referred to individually as a
"Staggered Sale."
"STOCK" has the meaning set forth in Section 2.
"STOCKHOLDER" means a record holder of one or more shares of Class A
Stock, Class B Stock, Class C Stock, Class D Stock, or Common Stock.
"STOCKHOLDERS' AGREEMENT" means that certain Stockholders' Agreement
being entered into contemporaneously with the effectiveness of this
Certificate of Incorporation among the Corporation, and certain persons who
then are or are then becoming a Stockholder, as the same may be
supplemented, modified, amended and restated from time to time in the manner
provided therein. A copy of the Stockholders' Agreement will be supplied by
the Corporation to any Stockholder party thereto upon written request made
to the Corporation at its registered office.
"TAG-ALONG ACCEPTANCE DATE" has the meaning set forth in Section 4(c).
"TAG-ALONG NOTICE" has the meaning set forth in Section 4(c).
"TAG-ALONG PRO RATA AMOUNT" has the meaning set forth in Section 4(a).
"TAG-ALONG REDEMPTION PRICE" has the meaning set forth in Section 5(a).
"TAG-ALONG TRANSFER" has the meaning set forth in Section 4(a).
"TRANSFER", with respect to any share of Stock, means the sale,
assignment, pledge, hypothecation, gift or other disposition whatsoever
(other than pursuant to the Initial Public Offering or pursuant to the
redemption by the Corporation or the conversion by the Holder of any such
share of Stock, in either case in accordance with the terms of this
Certificate of Incorporation) of such share, or the encumbrance or granting
of any rights or interests whatsoever in or with respect to such share,
except with respect to any such encumbrance or granting of rights or
interests with respect to the Stockholders' Agreement.
"TRANSFER NOTICE" has the meaning set forth in Section 4(b).
"WARRANT" means the Class B Stock Purchase Warrant to be issued on or
about the effective date of this Certificate of Incorporation by the
Corporation which entitles the Warrant Holder(s), upon the occurrence of a
Warrant Triggering Event, to purchase a number of shares of Common Stock of
the Corporation as specified therein.
"WARRANT DATE" means, (i) if the Warrant Triggering Event is the Initial
Public Offering, the IPO Date, or (ii) if the Warrant Triggering Event is a
Sale of the Corporation, the closing date of (A) the Single Transaction
Sale, if the Sale of the Corporation is pursuant to a Single Transaction
Sale, or (B) the Staggered Sale that causes a Sale of the Corporation to
occur, if the Sale of the Corporation is pursuant to a series of Staggered
Sales.
"WARRANT HOLDER(S)" means the Holder(s) of the Warrants.
"WARRANT REDEMPTION PRICE" has the meaning set forth in Section 5(b).
"WARRANT SHARES" means the shares of Common Stock purchasable by the
Warrant Holder(s) pursuant to the exercise of the Warrants, which shall
equal in all cases the number of shares of Class A Stock redeemed in
connection with the exercise of such Warrant.
3
<PAGE>
"WARRANT TRIGGERING EVENT" means the first to occur of (i) an Initial
Public Offering or (ii) a Sale of the Corporation, whether such sale occurs
pursuant to a Single Transaction Sale or a series of Staggered Sales.
2. DESIGNATION AND NUMBER. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 20,000,000. There
shall be five classes of stock of the Corporation. The first class of stock of
the Corporation shall have a par value of $0.01 per share and shall be
designated as "Class A Common Stock" and the number of shares constituting such
class shall be 1,034,020. The second class of stock of the Corporation shall
have a par value of $0.01 per share and shall be designated as "Class B Common
Stock" and the number of shares constituting such class shall be 6,900,000. The
third class of stock of the Corporation shall have a par value of $0.01 per
share and shall be designated as "Class C Common Stock" and the number of shares
constituting such class shall be 2,048,980. The fourth class of stock of the
Corporation shall have a par value of $0.01 per share and shall be designated as
"Class D Common Stock" and the number of shares constituting such class shall be
17,000. The fifth class of stock of the Corporation shall have a par value of
$0.01 per share and shall be designated as "Common Stock" and the number of
shares constituting such class shall be 10,000,000. The Class A Stock, Class B
Stock, Class C Stock, Class D Stock and Common Stock are sometimes referred to
collectively herein as the "Stock". The Corporation may, by an amendment to the
Certificate of Incorporation duly adopted, increase or decrease, at any time and
from time to time (but not below the number of shares of Class A Stock, Class B
Stock, Class C Stock, Class D Stock or Common Stock then outstanding), the
number of authorized shares of Class A Stock, Class B Stock, Class C Stock,
Class D Stock or Common Stock, as the case may be. Shares of Stock redeemed,
purchased or otherwise acquired by the Corporation pursuant to the terms hereof
shall be retired and shall revert to authorized but unissued Class A Stock,
Class B Stock, Class C Stock, Class D Stock or Common Stock, as the case may be.
3. RESTRICTIONS ON TRANSFER.
(a) Except for Transfers to a Permitted Transferee, no Class D Stockholder
shall Transfer any share of Class D Stock owned by such Class D Stockholder
except in accordance with the terms of this Certificate of Incorporation. Any
Transfer or attempt to Transfer any share of Class D Stock in violation of the
terms and conditions of this Certificate of Incorporation shall be null and void
and of no force and effect, the transferee thereof shall not be deemed to be the
registered holder thereof nor entitled to any rights with respect thereto, and
the Corporation shall refuse to Transfer any of such Class D Stock on its books
to such alleged transferee.
(b) No Stockholder shall Transfer any shares of Stock unless such Transfer
complies with the conditions specified in this Section 3(b), which are intended
to ensure compliance with the provisions of the Securities Act. Prior to any
Transfer, the holder of the shares of Stock proposed to be Transferred (other
than a holder of Class A Stock who is not an affiliate of the Corporation) shall
give written notice to the Corporation of such holder's intention to effect such
Transfer. Each such notice shall describe the manner and circumstances of the
proposed Transfer in sufficient detail, and, if requested by the Corporation,
shall be accompanied by either (i) a written opinion of legal counsel who is
reasonably satisfactory to the Corporation, addressed to the Corporation and
reasonably satisfactory in form and substance to the Corporation's counsel, to
the effect that the proposed Transfer may be effected without registration under
the Securities Act and qualification under applicable state securities laws, or
(ii) a "no action" letter from the SEC to the effect that the Transfer of such
securities without registration under the Securities Act will not result in a
recommendation by the staff of the SEC that action be taken with respect
thereof, or a combination of (i) and (ii) above, whereupon the holder of such
shares of Stock shall be entitled to Transfer such shares in accordance with the
terms of this Certificate and the written notice delivered by the holder to the
Corporation. Each certificate evidencing the shares of Stock Transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 9, PROVIDED THAT, following the Initial Public Offering, such
certificates shall bear the legend set forth in Section 9 or another legend only
if, in the opinion of counsel to the Corporation, the imposition of such legend
is required under the Securities Act
4
<PAGE>
or other applicable law. Any purported Transfer in violation of this Section
3(b) shall be null and void and of no force or effect, and the Corporation shall
not record any such Transfer on its stock transfer books. The restrictions on
Transfer contained in this Section 3(b) shall not apply to Transfers of shares
of Stock (i) in the Initial Public Offering; or (ii) following the Initial
Public Offering, PROVIDED THAT such Transfer is made in compliance with the
Securities Act and applicable state securities laws and in accordance with any
restrictions on transfer contained in any restrictive legend set forth on the
certificates representing such shares.
4. TAG-ALONG RIGHTS.
(a) TRANSFER BY CLASS D STOCKHOLDERS. If, other than in connection with the
Initial Public Offering, any Class D Stockholder or Stockholders (for purposes
of this Section 4, singularly or collectively, the "Proposed Transferor"), at
any time or from time to time in one transaction or in a series of transactions,
desires to enter into an agreement (whether oral or written) to Transfer its
shares of Class D Stock or any part thereof in a transaction which is a sale for
consideration consisting exclusively of cash to any Person other than a
Permitted Transferee (the "Proposed Transferee"), such proposed Transfer shall
be deemed a "Tag-Along Transfer" and, each of the Class A Stockholders, Class B
Stockholders and Class C Stockholders (collectively, the "Other Stockholders")
shall have the right, but not the obligation, as a condition to such Tag-Along
Transfer, to have the Proposed Transferee purchase from each such Other
Stockholder up to the number of shares (the "Tag-Along Pro Rata Amount") of
Class A Stock, Class B Stock or Class C Stock derived by multiplying the total
number of shares of Class A Stock, Class B Stock or Class C Stock exclusive of
Non-Redeemable Shares, as the case may be, owned by such Other Stockholder by a
fraction, the numerator of which is equal to the number of shares of Class D
Stock that is proposed to be Transferred by the Proposed Transferor to the
Proposed Transferee (the "Proposed Purchase Amount") and the denominator of
which is the total number of shares of Class D Stock (other than shares of Class
D Stock that have previously been Transferred pursuant to a Tag-Along Transfer)
outstanding as of the Notice Date (as defined in Section 4(b)). All Tag-Along
Transfers by Other Stockholders shall be on the same terms and conditions (with
such changes as are necessary to apply such terms and conditions to a sale by
such Other Stockholders) as the proposed Tag-Along Transfer by the Proposed
Transferor, PROVIDED THAT no Other Stockholder may be required to make any
representation or warranty in connection with the Tag-Along Transfer other than
as to its ownership and authority to Transfer the shares of Stock to be
Transferred by it, free and clear of any and all liens and encumbrances (other
than under this Certificate of Incorporation) and in compliance with all
applicable laws.
(b) TRANSFER NOTICE. The Proposed Transferor participating in a Tag-Along
Transfer shall at least thirty (30) Business Days prior to the closing date
thereof provide the Corporation and the Other Stockholders with written notice
(the "Transfer Notice") of the proposed Tag-Along Transfer containing the
following:
(i) the name and address of the Proposed Transferor and the Proposed
Transferee;
(ii) the Proposed Purchase Amount;
(iii) the proposed amount to be paid for such shares of Class D Stock,
the terms and conditions of payment offered by the Proposed Transferee, the
closing date for the proposed Tag-Along Transfer and the estimated expenses
payable pursuant to Section 4(d);
(iv) the aggregate number of shares of Class A Stock, Class B Stock or
Class C Stock, as the case may be, held of record as of the date the
Transfer Notice is sent (the "Notice Date") by the Other Stockholder to whom
the notice is sent;
(v) the aggregate number of shares of Class A Stock, Class B Stock or
Class C Stock, as the case may be, held of record as of the Notice Date by
all Other Stockholders as a group;
(vi) the Tag-Along Pro Rata Amount; and
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<PAGE>
(vii) a statement confirming that the Proposed Transferee has agreed (i)
to the tag-along rights and, (ii) pursuant to Section 5(c), to purchase the
number of shares of Stock redeemed pursuant to Section 5(a).
Upon written request by the Proposed Transferor, the Corporation shall
provide to the Proposed Transferor the information referred to in (iv) and (v)
above for inclusion in the Transfer Notice and such other information as may be
required to enable the Proposed Transferor to comply with the terms of this
Section 4(b).
(c) TAG-ALONG NOTICE. Each Other Stockholder desiring to participate in the
proposed Tag-Along Transfer shall provide a written notice (the "Tag-Along
Notice") to the Proposed Transferor on or before the expiration of ten (10)
Business Days after the Notice Date (the "Tag-Along Acceptance Date") stating
the number of shares held by such Other Stockholder (up to its Tag-Along Pro
Rata Amount) to be included in the proposed Tag-Along Transfer on the terms and
conditions specified in the Transfer Notice. The Tag-Along Notice given by each
Other Stockholder shall include and constitute such Other Stockholder's binding
agreement to include a number of shares equal to its Tag-Along Pro Rata Amount
(or such lesser amount as stated in the Tag-Along Notice) in the Tag-Along
Transfer on the terms and conditions specified in the Transfer Notice and in
this Certificate of Incorporation. If the Proposed Transferee does not purchase
all of the shares of Stock of the Proposed Transferor and the Other Stockholders
included in such proposed Tag-Along Transfer, as well as shares to be issued
under Section 5(c) in connection with the Tag-Along Transfer, then the proposed
Tag-Along Transfer to such Proposed Transferee shall be prohibited and any
attempt to consummate the proposed Tag-Along Transfer shall be null and void and
of no force and effect.
(d) Each Proposed Transferor and each Other Stockholder whose shares are
sold in a Tag-Along Transfer shall be entitled to receive the proceeds of such
Tag-Along Transfer less its pro rata share, based on the number of shares
included in such Tag-Along Transfer, of the expenses of the transaction
including, without limitation, legal, accounting and investment banking fees and
expenses, such determination of expenses to be made in the sole discretion of
the Board of Directors of the Corporation.
(e) The provisions of this Section 4 shall not apply to a subsequent
Transfer of any share of Class D Stock that has previously been the subject of a
completed Tag-Along Transfer which complied with the provisions of this Section
4.
5. REDEMPTION.
(a) The number of shares of Class A Stock, Class B Stock or Class C Stock
equal to the difference ("Difference Shares") between (i) the number of shares
included in any Tag-Along Transfer by the Class A Stockholder, Class B
Stockholder or Class C Stockholder pursuant to Section 4 and (ii) the Tag-Along
Pro Rata Amount for each such Class A Stockholder, Class B Stockholder or Class
C Stockholder shall be redeemed by the Corporation, to the extent it is lawfully
permitted to do so, out of funds legally available therefor PRO RATA,based on
the number of Difference Shares held by such Stockholders from each of the Class
A Stockholders, Class B Stockholders and Class C Stockholders who elected to
include in the Tag-Along Transfer a number of shares of Stock less than the
number of shares that constitute their Tag-Along Pro Rata Amount or any such
Stockholders that did not elect to participate in a Tag-Along Transfer at a
redemption price (the "Tag-Along Redemption Price") for each share of Class A
Stock, Class B Stock or Class C Stock so redeemed equal to the per share price
paid for the Class D Stock by the Proposed Transferee less such Other
Stockholder's PRO RATA share, based on the number of shares of Stock so redeemed
from such Other Stockholder, of the expenses of the Tag-Along Transfer
including, without limitation, legal, accounting and investment banking fees and
expenses, such determination of expenses to be made in the sole discretion of
the Board of Directors of the Corporation. The provisions of this Section 5(a)
shall not apply to the Non-Redeemable Shares. Redemption under this subsection
is conditioned upon the contemporaneous purchase by the Proposed Transferee of
the shares issuable under Section 5(c) in connection with the applicable
Tag-Along Transfer.
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<PAGE>
(b) If the Warrant Holder(s) exercise(s) the Class B Warrant, the
Corporation shall redeem, to the extent it is lawfully permitted to do so, from
the Class B Stockholders, PRO RATA based on the number of shares of such Class B
Stock then owned by each such Stockholder, out of funds legally available
therefor, a number of shares of Class B Stock equal to the number of Warrant
Shares at a redemption price (the "Warrant Redemption Price") equal to the par
value of each share of Class B Stock so redeemed. The provisions of this Section
5(b) shall not apply to the Non-Redeemable Shares. If a redemption pursuant to
this Section 5(b) occurs as a result of a Sale of the Corporation, such
redemption shall occur, immediately prior to any redemption pursuant to Section
5(a) hereof. Redemption under this subsection is conditioned upon the
contemporaneous purchase of the Warrant Shares by the Warrant Holder(s) pursuant
to the Class B Warrant.
(c) The shares of Class B Stock redeemed by the Corporation pursuant to a
Section 5(b) mandatory redemption shall, on the Redemption Date (as defined in
Section 5(d)), be retired and upon such retirement shall automatically revert to
authorized but unissued shares of Class B Stock, and the Corporation shall, on
the Redemption Date, but immediately after such redemption, issue, to the extent
it is lawfully permitted to do so, to the Warrant Holder(s) a number of shares
of Common Stock equal to the number of Warrant Shares. The shares of Class A
Stock, Class B Stock or Class C Stock redeemed by the Corporation pursuant to a
Section 5(a) mandatory redemption pursuant to a Tag-Along Transfer shall, on the
Redemption Date, be retired and upon such retirement shall automatically revert
to authorized but unissued shares of Class A Stock, Class B Stock or Class C
Stock, as relevant, and the Corporation shall, on the Redemption Date, but
immediately after such redemption, issue, to the extent it is lawfully permitted
to do so, to the Proposed Transferee a number of shares of Class A Stock, Class
B Stock or Class C Stock equal to the number of shares of such classes of Stock
so redeemed. Upon any issuance of shares of Class A Stock, Class B Stock or
Class C Stock equal to the number of shares of such class of Stock redeemed
pursuant to a Section 5(a) mandatory redemption, the Corporation shall receive
from the Proposed Transferee as the purchase price for such shares an amount
equal to the Tag-Along Redemption Price.
(d) The Corporation shall give to each holder of record of the shares of
Class A Stock, Class B Stock or Class C Stock to be redeemed pursuant to the
terms of this Section 5 prior written notice of such redemption not less than
two Business Days prior to the date such shares will be redeemed (the
"Redemption Date") which (i) in the case of a redemption pursuant to Section
5(a) shall be the closing date of the Tag-Along Transfer and (ii) in the case of
a redemption pursuant to Section 5(b) shall be the Warrant Date. Each such
notice shall state: (A) the Redemption Date; (B) the total number of shares of
the Class A Stock, Class B Stock or Class C Stock to be redeemed and, if fewer
than all the shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (C) the Tag-Along Redemption Price or
the Warrant Redemption Price, as relevant; and (D) the fact that the
certificates for the shares subject to redemption are to be surrendered in
exchange for payment of the Tag-Along Redemption Price or Warrant Redemption
Price, as relevant, at the principal office of the Corporation or at such other
place as the Corporation shall designate.
(e) On the Redemption Date, the shares of Class A Stock, Class B Stock or
Class C Stock required to be redeemed pursuant to the terms of this Section 5
shall be deemed to have been so redeemed, notwithstanding that the certificates
representing such Class A Stock, Class B Stock or Class C Stock shall not have
been surrendered at the principal office of the Corporation or such other place
as the Corporation may have designated or that notice from the Corporation shall
not have been given by the Corporation or, if given, shall not have been
received by any holder of Class A Stock, Class B Stock or Class C Stock whose
shares of Stock are to be so redeemed. All certificates representing the
redeemed shares of Class A Stock, Class B Stock or Class C Stock, including all
certificates not so delivered by such Class A Stockholders, Class B Stockholders
or Class C Stockholders, shall be, or shall be deemed to be, canceled by the
Corporation as of the Redemption Date and shall thereafter no longer be of any
force or effect.
7
<PAGE>
6. CONVERSION.
If the Initial Public Offering or a Sale of the Corporation (whether
pursuant to a Single Transaction Sale or a series of Staggered Sales) occurs,
each issued and outstanding share of Class A Stock, Class B Stock, Class C
Stock, and Class D Stock, not otherwise redeemed by the Corporation pursuant to
the mandatory redemption provisions of Section 5(a) or 5(b) hereof shall
automatically convert into one share of Common Stock effective on the Redemption
Date (or, in the case of an Initial Public Offering in which no Redemption Date
occurs, the IPO Date), but immediately after the redemptions and issuances
described in Section 5 (the "Conversion Date"). Prior to or on the Conversion
Date, each holder of shares of Class A Stock, Class B Stock, Class C Stock, or
Class D Stock shall surrender such holder's certificates evidencing such shares
at the principal office of the Corporation or at such other place as the
Corporation shall designate to such holder in writing at least ten (10) Business
Days prior to the Conversion Date, and shall, within ten (10) Business Days
after the Conversion Date, be entitled to receive from the Corporation
certificates evidencing the number of shares of Common Stock into which such
shares of Class A Stock, Class B Stock, Class C Stock or Class D Stock are
converted. On the Conversion Date, each holder of shares of Class A Stock, Class
B Stock, Class C Stock or Class D Stock shall be deemed to be a holder of record
of the Common Stock issuable upon such conversion, notwithstanding that the
certificates representing such Class A Stock, Class B Stock, Class C Stock or
Class D Stock shall not have been surrendered at the principal office of the
Corporation or such other place as the Corporation may have designated, that
notice from the Corporation shall not have been given or, if given, shall not
have been received by any holder of shares of Class A Stock, Class B Stock,
Class C Stock or Class D Stock, or that certificates evidencing such shares of
Common Stock shall not then be actually delivered to such holder. All
certificates representing the converted shares of Class A Stock, Class B Stock,
Class C Stock or Class D Stock, including all certificates not so delivered by
such Class A Stock, Class B Stock, Class C Stock or Class D Stockholders, shall
be, or shall be deemed to be, canceled by the Corporation as of the Conversion
Date and shall thereafter no longer be of any force or effect and the
Corporation shall not thereafter issue any such shares of Class A Stock, Class B
Stock, Class C Stock or Class D Stock.
7. VOTING RIGHTS.
(a) Holders of shares of Class A Stock and Common Stock shall be entitled to
one vote and holders of Class D Stock shall be entitled to 446 votes, for each
share of such stock held on all matters as to which stockholders may be entitled
to vote pursuant to the Delaware General Corporation Law ("DGCL").
(b) Holders of Class B or Class C Stock shall not have any voting rights,
except that the holders of the Class B and Class C Stock shall have the right to
vote as a class to the extent required under the laws of the State of Delaware.
Unless otherwise required by the terms of this Certificate of Incorporation,
paragraph (2) of subsection (b) of 242 of the DGCL shall not entitle the holders
of shares of such Class B Stock or Class C Stock to vote as a class on the
increase of the number of authorized shares of such class of Stock or the
decrease of the number of authorized but not outstanding shares of such class of
Stock.
(c) Any amendment, alteration or repeal of any provision of this Certificate
of Incorporation, whether by merger, consolidation or otherwise, that would
alter or change the relative powers, preferences, or special rights of any class
of capital stock so as to affect the Class A Stock materially and adversely,
will require, in addition to any other approvals required by the DGCL and this
Certificate of Incorporation, the approval by the holders of a majority of the
then outstanding shares of Class A Stock.
8. LIQUIDATION RIGHTS.
(a) Except as set forth in Section 8(c) below, any distribution made upon
the liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, shall be allocated PRO RATA based upon the
number of shares of Stock held by each Stockholder.
(b) None of the sale, transfer, conveyance or lease of all or substantially
all of the property or business of the Corporation, the merger or consolidation
of the Corporation into or with any other
8
<PAGE>
corporation or the merger or consolidation of any other corporation into or with
the Corporation shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section 8.
(c) If the assets of the Corporation or the proceeds thereof available for
distribution to the holders of shares of the Class A Stock, Class B Stock or
Class C Stock upon any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient to pay in
full all preference amounts to which such holders are entitled, no distribution
shall be made on any shares of the Corporation's Class D Stock or Common Stock.
9. LEGEND.
(a) All certificates representing shares of Class A Class B and Class C
Stock in the Corporation shall, in addition to other legends that may be
required by state or federal securities laws, bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY BE REOFFERED AND SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
"AS SPECIFIED IN THE CERTIFICATE OF INCORPORATION OF THE CORPORATION, THE
TRANSFERABILITY OF THESE SECURITIES IS SUBJECT TO RESTRICTION. THESE SECURITIES
ARE SUBJECT TO MANDATORY REDEMPTION BY THE CORPORATION. THE CORPORATION WILL
FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS."
(b) All certificates representing shares of Class D Stock in the Corporation
shall, in addition to other legends that may be required by state or federal
securities laws, bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY BE REOFFERED AND SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
"AS SPECIFIED IN THE CERTIFICATE OF INCORPORATION OF THE CORPORATION, THE
TRANSFERABILITY OF THESE SECURITIES IS SUBJECT TO RESTRICTION. THE CORPORATION
WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS."
(c) All certificates representing shares of Common Stock in the Corporation
shall, in addition to other legends that may be required by state or federal
securities laws, bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY BE REOFFERED AND SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
9
<PAGE>
"THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS."
PROVIDED THAT, as specified in Section 3(b) hereof, following the Initial
Public Offering, such certificates shall bear the first legend set forth in this
Section 9(c) above or another legend similar to it only if, in the opinion of
counsel to the Corporation, the imposition of such legend is required under the
Securities Act or other applicable law and, to the extent applicable, the second
and third legends.
(d) All certificates representing shares of Stock shall bear such additional
legends as may be required pursuant to the Stockholders' Agreement.
10. RECORD HOLDERS. The Corporation shall be entitled to recognize the
exclusive right of a person registered in its records as the holder of shares of
Class A, Class B, Class C, Class D or Common Stock and such record holders shall
be deemed the holders of such shares for all purposes.
ARTICLE V -- MANAGEMENT OF BUSINESS AND AFFAIRS
For the management of the business and for the conduct of the affairs of the
Corporation, and in further definition, limitation and regulation of the powers
of the Corporation and of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws. The phrase "whole Board" and the phrase "total
number of directors" shall be deemed to have the same meaning, to wit, the total
number of directors which the Corporation would have if there were no vacancies.
No election of directors need be by written ballot.
2. After the original or other Bylaws of the Corporation have been adopted,
amended, or repealed, as the case may be, in accordance with the provisions of
Section 109 of the DGCL, and, after the Corporation has received any payment for
any of its stock, the power to adopt, amend, or repeal the Bylaws of the
Corporation may be exercised by the Board of Directors of the Corporation.
ARTICLE VI -- DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that (except as set forth below) this Article does not
eliminate or limit any such liability imposed by law: (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL hereafter is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the Corporation
shall be further eliminated or limited pursuant to this Article to the fullest
extent permitted by the DGCL as so amended. Unless applicable law requires
otherwise, any repeal of this Article by the stockholders of the Corporation,
and any modification to this Article (other than one further eliminating or
limiting director personal liability) shall be prospective only and shall not
adversely affect any elimination of, or limitation on, the personal liability of
a director of the Corporation existing at the time of such repeal or
modification.
10
<PAGE>
ARTICLE VII -- INDEMNIFICATION
1. INDEMNIFICATION. To the fullest extent from time to time permitted by
Section 145 of the DGCL, the Corporation shall indemnify each Authorized
Representative who was or is a party or who was or is threatened to be made a
party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding (including, without limitation, one by or in the
right of the Corporation to procure a judgment in its favor), whether civil,
criminal, administrative or investigative (hereinafter a "Proceeding"), by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent or another corporation, partnership,
joint venture, trust, limited liability company or other enterprise, including
service with respect to employee benefit plans, from and against any and all
expenses (including, without limitation, attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such Authorized
Representative or on such Authorized Representative's behalf in connection with
such Proceeding. The Corporation shall make such indemnification to the
Authorized Representative within 30 days after receipt by the Corporation of the
written request of the Authorized Representative for such indemnification
unless, within that time, the Corporation (by resolution of its directors or
stockholders or the written opinion of its counsel) has determined that the
Authorized Representative is not entitled to such indemnification.
2. ADVANCEMENT OF EXPENSES. Expenses (including attorneys' fees) incurred
by an Authorized Representative or on such Authorized Representative's behalf in
defending any such Proceeding shall be paid by the Corporation in advance of the
final disposition of such Proceeding, within 10 days after receipt by the
Corporation of the written request of the Authorized Representative for such
advance. The Corporation may condition such advance upon the receipt of the
written undertaking of such Authorized Representative or on such Authorized
Representative's behalf to repay such amount if it shall ultimately be
determined that the Authorized Representative is not entitled to be indemnified
by the Corporation. Such undertaking shall not be required to be guarantied by
any other person or collateralized, and shall be accepted by the Corporation
without regard to the financial ability of the person providing such undertaking
to make such repayment.
3. PRESUMPTIONS. For all purposes of this Article and to the fullest extent
permitted by applicable law, there shall be a rebuttable presumption in favor of
the Authorized Representative that all requested indemnifications and
advancements of expenses are reasonable and that all conditions to
indemnification or expense advancements, whether required under this Article or
the DGCL, have been satisfied.
4. DEFINITIONS, ETC. As used in this Article, "Authorized Representative"
means, collectively: (i) any person who is or was an officer or director of the
Corporation; and (ii) any other person who may be designated by the Board from
time to time as an "authorized representative" for purposes of this Article. The
provisions of Section 145(h), (i) and (j) of the DGCL shall apply to this
Article.
5. INSURANCE. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust, limited liability
company or other enterprise against expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the DGCL or this Article.
6. ARTICLE NOT EXCLUSIVE. The rights to indemnification and to the
advancement of expenses conferred in this Article shall not be exclusive of any
other right which any Authorized Representative may have or hereafter acquire
under any statute, this Certificate of Incorporation, any by-law, agreement,
vote of stockholders or disinterested directors or otherwise. Nothing in this
Article shall affect the right of the Corporation to grant rights of
indemnification, and the advancement of expenses, to any other person or in any
other circumstance.
11
<PAGE>
7. RELIANCE. Each Authorized Representative shall be deemed to have acted
in reliance upon the rights to indemnification and advancement of expenses
established in this Article. Unless applicable law requires otherwise, any
repeal or modification of this Article (other than a modification expanding the
right to indemnification and expense advancement in favor of Authorized
Representatives) shall be prospective only and shall not adversely affect any
right or benefit of an Authorized Representative to indemnification or expense
advancement at the time of such repeal or modification.
8. SEVERABILITY. If any portion of this Article shall be held to be
illegal, invalid or otherwise unenforceable by any court having appropriate
jurisdiction, then the Corporation nevertheless shall indemnify and advance
expenses to each Authorized Representative to the fullest extent permitted by
the applicable portions of this Article not so held to be illegal, invalid,
unenforceable, and otherwise to the fullest extent permitted by law.
ARTICLE VIII -- AMENDMENTS
Subject to the provisions of Section 7(c) of Article IV, from time to time
any of the provisions of this certificate of incorporation may be amended,
altered or repealed, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted in the manner and at the
time prescribed by said laws, and all rights at any time conferred upon the
stockholders of the Corporation by this certificate of incorporation are granted
subject to the provisions of this Article.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates, integrates and amends the provisions of the Certificate of
Incorporation of the Corporation, as heretofore in effect, and which has been
duly adopted in accordance with the provisions of Section 242 and 245 of the
General Corporation Law of the State of Delaware, has been executed by its duly
authorized officer this th day of , 1997.
<TABLE>
<S> <C>
FBP ACQUISITION CORP., INC
By: ----------------------------------------
Name: --------------------------------------
Title:
---------------------------------------
</TABLE>
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
for, among other things:
a. permissive indemnification for expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by designated persons, including directors and officers of a corporation, in the
event such persons are parties to litigation other than stockholder derivative
actions if certain conditions are met;
b. permissive indemnification for expenses (including attorneys' fees)
actually and reasonably incurred by designated persons, including directors and
officers of a corporation, in the event such persons are parties to stockholder
derivative actions if certain conditions are met;
c. mandatory indemnification for expenses (including attorneys' fees)
actually and reasonably incurred by designated persons, including directors and
officers of a corporation, in the event such persons are successful on the
merits or otherwise in defense of litigation covered by a. and b. above; and
d. that the indemnification provided for by Section 145 is not deemed
exclusive of any other rights which may be provided under any by-law, agreement,
stockholder or disinterested director vote, or otherwise.
In addition to the indemnification provisions of the DGCL as described
above, the Registrant's restated certificate of incorporation (the "Restated
Certificate of Incorporation") authorizes indemnification of the Registrant's
officers and directors, subject to a case-by-case determination that they acted
in good faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the Company, and in the case of any criminal
proceeding, they had no reasonable cause to believe their conduct was unlawful.
In the event that a Change in Control (as defined in the Restated Certificate of
Incorporation) shall have occurred, the proposed indemnitee director or officer
may require that the determination of whether he met the standard of conduct be
made by special legal counsel selected by him. In addition, whereas the DGCL
would require court-ordered indemnification, if any, in cases in which a person
has been adjudged to be liable to the Registrant, the Restated Certificate of
Incorporation also permits indemnification in such cases if and to the extent
that the Reviewing Party determines that such indemnity is fair and reasonable
under the circumstances.
The Restated Certificate of Incorporation requires the advancement of
expenses to an officer or director (without a determination as to his conduct)
in advance of the final disposition of a Proceeding if such person furnishes a
written affirmation of his good faith belief that he has met the applicable
standard of conduct and furnishes a written undertaking to repay any advances if
it is ultimately determined that he is not entitled to indemnification. In
connection with Proceedings by or in the right of the Registrant, the Restated
Certificate of Incorporation provides that indemnification shall include not
only reasonable expenses, but also penalties, fines and amounts paid in
settlement. Unless ordered by a court, such indemnification shall not include
judgments. Under the Restated Certificate of Incorporation, no officer or
director is entitled to indemnification or advancement of expenses with respect
to a Proceeding brought by him against the Registrant other than a Proceeding
seeking or defending such officer's or director's right to indemnification or
advancement of expenses. Finally, the Restated Certificate of Incorporation
provides that the Company may, subject to authorization on a case by case basis,
indemnity and advance expenses to employees or agents to the same extent as a
director or to a lesser extent (or greater, as permitted by law) as determined
by the Board of Directors.
The Restated Certificate of Incorporation purports to confer upon officers
and directors contractual rights to indemnification and advancement of expenses
as provided therein. In addition, as permitted by
II-1
<PAGE>
the DGCL, the Registrant has entered into Indemnity Agreements with its
directors and selected officers that provide contract rights substantially
identical to the rights to indemnification and advancement of expenses set forth
in the Certificate of Incorporation, as described above.
The Restated Certificate of Incorporation limits the personal liability of
directors to the Registrant or its stockholders for monetary damages for breach
of the duty as a director, other than liability as a director (i) for breach of
duty of loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL (certain illegal
distributions), or (iv) for any transaction for which the director derived an
improper personal benefit.
The Registrant maintains officers' and directors' insurance covering certain
liabilities that may be incurred by officers and directors in the performance of
their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereto, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration with respect to reofferings by persons
who may be deemed to be underwriters, in addition to the information called for
by the other Items of the applicable form. The Registrant undertakes that every
prospectus (i) that is filed pursuant to the immediately preceding undertaking
or (ii) that purports to meet
II-2
<PAGE>
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Chicago, State of
Illinois, on April 4, 1997.
FALCON BUILDING PRODUCTS, INC.
By: /s/ WILLIAM K. HALL
------------------------------------------
William K. Hall
PRESIDENT AND CHIEF EXECUTIVE OFFICER
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gus J. Athas and Sam A. Cottone, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents 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 and to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------------
<C> <S> <C>
/s/ WILLIAM K. HALL Director, President and Chief
------------------------------------- Executive Officer (Principal April 2, 1997
William K. Hall Executive Officer)
/s/ GUS J. ATHAS Senior Vice President, General
------------------------------------- Counsel and Secretary April 2, 1997
Gus J. Athas
Senior Vice
/s/ SAM A. COTTONE President--Finance,
------------------------------------- Treasurer and Chief April 2, 1997
Sam A. Cottone Financial Officer (Principal
Accounting Officer)
/s/ ROD F. DAMMEYER Director and Chairman of the
------------------------------------- Board of Directors April 2, 1997
Rod F. Dammeyer
/s/ BRADBURY DYER III
------------------------------------- Director April 3, 1997
Bradbury Dyer III
/s/ PHILIP C. KANTZ
------------------------------------- Director April 3, 1997
Philip C. Kantz
/s/ SHELI Z. ROSENBERG
------------------------------------- Director April 3, 1997
Sheli Z. Rosenberg
/s/ RICHARD G. SIM
------------------------------------- Director April 3, 1997
Richard G. Sim
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------------
<C> <S> <C>
/s/ ROBERT L. SMIALEK
------------------------------------- Director April 3, 1997
Robert L. Smialek
/s/ B. JOSEPH WHITE
------------------------------------- Director April 3, 1997
B. Joseph White
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of March 20, 1997, between Falcon Building Products, Inc. and FBP
Acquisition Corporation, Inc., including the principal exhibits thereto (included as Annex I to the
Proxy Statement). Schedules to Agreement and Plan of Merger are not filed, but will be provided
supplementally to the Commission upon request. (contained in Annex I)
2.2 Voting Agreement, dated as of March 20, 1997, among FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and Equity Holdings Limited (included as Annex II-A to the Proxy Statement/Prospectus).
(contained in Annex II-A)
2.3 Form of Voting Agreements, dated as of March 20, 1997, among FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and certain management stockholders (included as Annex II-B to the Proxy Statement).
(contained in Annex II-B)
3.1 Form of Restated Certificate of Incorporation of FBP Acquisition Corp., Inc. (to become effective upon
consummation of the Merger). (contained in Annex V)
5.1 Opinion of Mayer, Brown & Platt.*
8.1 Opinion of Mayer, Brown & Platt as to certain tax matters. (contained in Exhibit 5.1)*
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Mayer, Brown & Platt (contained in Exhibit 5.1).*
24.1 Powers of Attorney (SEE Page II-5 of this Registration Statement).
99.1 Form of Proxy Card for Special Meeting of Stockholders.
99.2 Form of Non-Cash Election Form to be used in connection with the Merger.
99.3 Form of Letter of Transmittal to be used in connection with the Merger.
99.4 Consent of William K. Hall.
99.5 Consent of Christopher J. O'Brien.
99.6 Consent of Sam A. Cottone.
99.7 Consent of Charles J. Philippin.
99.8 Consent of Christopher J. Stadler.
99.9 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.10 Consent of Smith Barney Inc.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report incorporated by reference and to all references to our Firm included
in or made a part of this Form S-4 registration statement. It should be noted
that we have not audited any financial statements of Falcon Building
Products, Inc. subsequent to December 31, 1996, or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 4, 1997
<PAGE>
FALCON BUILDING PRODUCTS, INC.
CHICAGO, ILLINOIS
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS ON THE DAY OF , 1997
The undersigned hereby appoints Gus J. Athas and Sam A. Cottone and each of
them, each with the power to appoint his or her substitute, attorneys successors
and assigns with the powers the undersigned would possess if personally present
to vote all of the Class A Stock of Falcon Building Products, Inc. (hereinafter
"Falcon") held of record by the undersigned on May 5, 1997, at the Special
Meeting of the Stockholders to be held on the day of , 1997 at
a.m. local time, at the Conference Center, Two North Franklin, Chicago,
Illinois, and at any adjournments or postponements thereof, upon the matters set
forth herein and, in their discretion, upon all other matters which may come
before the meeting. Without otherwise limiting the general authorization hereby
given, said attorneys are instructed to vote as follows on the matters set forth
below:
Management and the Board of Directors recommend a vote FOR the following
Proposal.
(1) To consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of March 20, 1997 (the "Merger Agreement"),
between Falcon and FBP Acquisition Corp., Inc. ("FBP") and the transactions
contemplated thereby, including the Merger (as defined below). The Merger
Agreement provides, among other things, for the merger of FBP with and into
Falcon (the "Merger") pursuant to which each share of Falcon Class A Stock,
$.01 par value per share ("Falcon Class A Stock") (other than (i) shares of
Falcon Class A Stock held by Falcon, its subsidiaries, FBP or any of its
affiliates, which will be cancelled and retired, and (ii) shares of Falcon
Class A Stock subject to dissenters' rights), will be converted into either
(a) the right to receive $17.75 in cash or (b) the right to retain one
fully paid and nonassessable share of Falcon Class A Stock, which upon
consummation of the Merger will have the rights, powers, privileges and
restrictions as described in the Proxy Statement/Prospectus (the "Merger
Proposal"). Because the certain stockholders have committed to elect to
retain 1,034,020 shares of Falcon Class A Stock, all stockholders who do
not elect to retain Falcon Class A Stock will be assured that they will
receive $17.75 in cash for each share held by such stockholders, and all
stockholders who elect to retain Falcon Class A Stock will experience
proration of such shares, resulting in their retaining only a portion of
the shares of Falcon Class A Stock they elect to retain and receiving
$17.75 per share in cash for each of their other shares of Falcon Class A
Stock.
FOR: / / AGAINST: / / ABSTAIN: / /
<PAGE>
THE PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, FOR THE
MERGER PROPOSAL AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
Please mark, sign, date and return this proxy in the enclosed envelope as
soon as possible, even though you plan to attend this meeting.
To help our preparation for the meeting, please check here if you plan to
attend. / /
SIGN HERE EXACTLY AS NAME(S)
APPEAR(S) ABOVE
______________________________ Date: _________________
______________________________ Date: _________________
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
trustee or guardian, please give
full title as such. If a
corporation, please sign in full
corporate name by president or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
If your address has changed, please
note new address:
________________________ Zip
Code: _____________
<PAGE>
NON-CASH ELECTION FORM
This Form is to accompany the certificates for shares of Class A stock, par
value $.01 per share ("Falcon Class A Stock"), of Falcon Building Products, Inc.
("Falcon" or the "Company") if such certificates are submitted pursuant to an
election (a "Non-Cash Election") to retain shares of Falcon Class A Stock
("Non-Cash Election Shares") in connection with the proposed merger (the
"Merger") of FBP Acquisition Corp., Inc. with and into Falcon.
HOLDERS OF FALCON CLASS A STOCK WHO DO NOT WISH TO MAKE A NON-CASH ELECTION
(ANY SUCH HOLDER, A "NON-ELECTING HOLDER") NEED NOT SUBMIT THIS FORM. EACH SHARE
OF FALCON CLASS A STOCK OWNED BY ANY SUCH NON-ELECTING HOLDER WILL AUTOMATICALLY
BE CONVERTED INTO THE RIGHT TO RECEIVE AN AMOUNT EQUAL TO $17.75 IN CASH FROM
FALCON FOLLOWING THE MERGER.
To: The Bank of New York, Exchange Agent
BY MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT
COURIER:
CONFIRM BY TELEPHONE TO:
INFORMATION AGENT:
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A
TELECOPY FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A
VALID DELIVERY.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
BOX I
SHARES SUBMITTED
(ATTACH ADDITIONAL LIST IF NECESSARY)
Total Number of
Shares
Name and Address of Certificate Represented by Number of Shares
Registered Holder Number Certificate(s) Submitted
Total Shares
*Only certificates registered in a single form may be deposited with this Form
of Election. If certificates are registered in different forms (e.g., John R.
Doe and J.R. Doe), it will be necessary to fill in, sign and submit as many
separate Forms of Election as there are different registrations of
certificates.
**Unless otherwise indicated, it will be assumed that all shares submitted are
to be treated as having a made a Non-Cash Election.
/ / Check here if you cannot locate certificates. Upon receipt of this Form the
Agent will contact you directly with replacement instructions.
<PAGE>
Ladies and Gentlemen:
In connection with the merger (the "Merger") of FBP Acquisition Corp., Inc.
with and into Falcon Building Products, Inc. ("Falcon" or the "Company"), the
undersigned hereby submits the certificate(s) for shares of Class A stock, par
value $.01 per share, of Falcon ("Falcon Class A Stock") listed below and
elects, subject as set forth below, to have all or a portion of the shares of
Falcon Class A Stock represented by such certificates as set forth below
converted into the right to retain shares of Falcon Class A Stock following the
Merger ("Non-Cash Election Shares").
It is understood that the following election is subject to (i) the terms,
conditions and limitations set forth in the Proxy/ Prospectus Statement, dated
, 1997 relating to the Merger (the "Proxy/Prospectus Statement"),
receipt of which is acknowledged by the undersigned, (ii) the terms of the
Agreement and Plan of Merger, dated as of March 20, 1997, as may be amended from
time to time (the "Merger Agreement"), a conformed copy of which appears as
Annex I to the Proxy Statement, and (iii) the accompanying Instructions.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
such certificates of Falcon Class A Stock to the Company and to receive on
behalf of the undersigned, in exchange for the shares of Falcon Class A Stock
represented thereby, any certificate for Non-Cash Election Shares or any check
for cash issuable in the Merger pursuant to the Merger Agreement. If
certificates of Falcon Class A Stock are not delivered herewith, there is
furnished below a guarantee of delivery of such certificates representing shares
of Falcon Class A Stock from a member of a national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office in the United States.
Unless otherwise indicated under Special Payment Instructions below, please
issue any certificate for Non-Cash Election Shares and/or any check issuable in
exchange for the shares of Falcon Class A Stock represented by the certificates
submitted hereby in the name of the registered holder(s) of such Falcon Class A
Stock. Similarly, unless otherwise indicated under Special Delivery
Instructions, please mail any certificate for shares of Falcon Class A Stock
and/or any check for cash issuable in exchange for the shares of Falcon Class A
Stock represented by the certificates submitted hereby to the registered
holder(s) of the Falcon Class A Stock at the address or addresses shown above.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
BOX II BOX III
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS D(6) AND D(7)) (SEE INSTRUCTION D(8))
To be completed ONLY if the To be completed ONLY if the
certificates for Non-Cash Election certificates for Non-Cash Election
Shares are to be registered in the name Shares are to be registered in the name
of, or the checks are to be made paya- of, or the checks are to be made paya-
ble to, someone other than the ble to, the registered holder(s) of
registered holder(s) of shares of shares of Falcon Class A Stock, but are
Falcon Class A Stock. to be sent to someone other than the
registered holder(s) or to an address
other than the address of the
registered holder(s) set forth above.
Name Name
------------------------------------
- -----------------------------------
(Please Print) (Please Print)
Address Address
-----------------------------------
---------------------------------- (Please Print)
(Please Print)
-----------------------------------
- ----------------------------------
(Including Zip Code) (Including Zip Code)
- ----------------------------------
(Tax Identification or Social
Security Number)
<PAGE>
BOX IV
SIGN HERE AND HAVE SIGNATURES GUARANTEED
(SEE INSTRUCTIONS D(1) AND D(7) CONCERNING SIGNATURE GUARANTEE)
Name(s):
---------------------------------------------------------------
(PLEASE PRINT)
Name(s):
---------------------------------------------------------------
(PLEASE PRINT)
-------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
-------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
-------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
-------------------------------------------------------------------------
GUARANTEED
Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer of a corporation, attorney-in-fact or
any other person acting in a fiduciary capacity, set forth full title in such
capacity and see Instruction D(3).
Dated: ----------------------------------------------------------- , 1997
BOX V
GUARANTEE OF DELIVERY
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED HEREWITH)*
The undersigned is a member of a national securities exchange, a member of
the National Association of Securities Dealers, Inc., or a commercial bank or
trust company in the United States; and guarantees to deliver to the Exchange
Agent the certificates for shares of Falcon Class A Stock to which this Form
relates, duly endorsed in blank or otherwise in form acceptable for transfer on
the books of Falcon, no later than 5:00 P.M. New York City time on the third
NYSE trading day after the date of execution of this guarantee of delivery.
-------------------------------------------------------------------------
(Firm--Please Print)
-------------------------------------------------------------------------
(Authorized Signature)
-------------------------------------------------------------------------
(Address)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Area Code and Telephone Number)
-------------------------------------------------------------------------
(Contact Name)
<PAGE>
(DO NOT WRITE IN SPACES BELOW)
SHARES
NON-CASH CONVERTED
SHARES SHARES ELECTION CERTIFICATE BLOCK INTO CHECK AMOUNT
SURRENDERED ACCEPTED SHARES NO. NO. CASH NO. OF CHECK
DELIVERY PREPARED BY -- CHECKED BY -----------------
DATE
-------------------------------------
<PAGE>
INSTRUCTIONS
A. SPECIAL CONDITIONS.
1. TIME IN WHICH TO ELECT. To be effective, an election pursuant to the
terms and conditions set forth herein (an "Election") on this Form or a
facsimile hereof, accompanied by the above-described certificates representing
shares of Falcon Class A Stock or a proper guarantee of delivery thereof, must
be received by the Exchange Agent, at the address set forth above, no later than
5:00 P.M., New York City time, on , 1997 (the "Election Date").
Holders of Falcon Class A Stock whose stock certificates are not immediately
available may also make an effective Election by completing this form or
facsimile hereof, having the Guarantee of Delivery box (BOX V) properly
completed and duly executed (subject to the condition that the certificates for
which delivery is thereby guaranteed are in fact delivered to the Exchange
Agent, duly endorsed in blank or otherwise in form acceptable for transfer on
the books of Falcon, no later than 5:00 P.M., New York City time, on the third
NYSE trading day after the date of execution of such guarantee of delivery).
Each share of Falcon Class A Stock with respect to which the Exchange Agent
shall have not received an effective Election prior to the Election Date, or
with respect to which the proration procedures set forth in the Proxy Statement
pertain, outstanding at the Effective Time of the Merger will be converted into
the right to receive an amount equal to $17.75 in cash from the Company
following the Merger. See Instruction C.
2. REVOCATION OF ELECTION. Any Election may be revoked by the person who
submitted this Form to the Exchange Agent and the certificate(s) for shares
withdrawn by written notice duly executed and received by the Exchange Agent
prior to the Election Date. Such notice must specify the person in whose name
the shares of Falcon Class A Stock to be withdrawn had been deposited, the
number of shares to be withdrawn, the name of the registered holder thereof, and
the serial numbers shown on the certificate(s) representing the shares to be
withdrawn. If an Election is revoked, and the certificate(s) for shares
withdrawn, the Falcon Class A Stock certificate(s) submitted therewith will be
promptly returned by the Exchange Agent to the person who submitted such
certificate(s).
3. TERMINATION OF RIGHT TO ELECT. If for any reason the Merger is not
consummated or is abandoned, all Forms will be void and of no effect.
Certificate(s) for Falcon Class A Stock previously received by the Exchange
Agent will be returned promptly by the Exchange Agent to the person who
submitted such stock certificate(s).
B. ELECTION AND PRORATION PROCEDURES.
A description of the election and proration procedures is set forth in the
Proxy Statement under "THE MERGER-- Non-cash Election" and "THE MERGER--Non-cash
Election Procedure." A full statement of the election and proration procedures
is contained in the Merger Agreement and all Elections are subject to compliance
with such procedures. IN CONNECTION WITH MAKING ANY ELECTION, A HOLDER OF FALCON
CLASS A STOCK SHOULD READ CAREFULLY, AMONG OTHER MATTERS, THE AFORESAID
DESCRIPTION AND STATEMENT AND THE INFORMATION CONTAINED IN THE PROXY STATEMENT
UNDER "THE MERGER--FEDERAL INCOME TAX CONSEQUENCES." SEE ALSO "RISK
FACTORS--NON-CASH ELECTION AND PRORATION INTO CASH" IN THE PROXY STATEMENT FOR A
DISCUSSION OF THE POSSIBILITY THAT THE RECEIPT OF CASH AS A RESULT OF PRORATION
BY A HOLDER WHO HAS MADE A NON-CASH ELECTION MAY BE TREATED AS A DIVIDEND AS
OPPOSED TO A CAPITAL GAIN.
AS A RESULT OF THE PRORATION PROCEDURES, HOLDERS OF FALCON CLASS A STOCK MAY
RECEIVE NON-CASH ELECTION SHARES OR CASH IN AMOUNTS WHICH VARY FROM THE AMOUNTS
SUCH HOLDERS ELECT TO RECEIVE. SUCH HOLDERS WILL NOT BE ABLE TO CHANGE THE
NUMBER OF NON-CASH ELECTION SHARES OR THE AMOUNT OF CASH ALLOCATED TO THEM
PURSUANT TO SUCH PROCEDURES.
C. RECEIPT OF NON-CASH ELECTION SHARES OR CHECKS.
After the Effective Time of the Merger and after the Election Date, the
Exchange Agent will mail certificate(s) for Non-Cash Election Shares and/or cash
payments by check to the holders of Falcon Class A Stock with respect to each
share of Falcon Class A Stock which is included in any effective Election.
Holders of Falcon Class A Stock who declined to make an Election, or failed to
make an effective Election, with respect to any or all of their shares will
receive, for each such share, the right to receive an amount equal to $17.75 in
cash as soon as practicable after the certificate(s) representing such share or
shares have been submitted.
No fractional shares will be issued in connection with the Merger. In lieu
thereof, the Exchange Agent, as agent for the holders of Falcon Class A Stock
who become entitled to a fraction of a Non-Cash Election Share, shall promptly
sell the aggregate of the fractional share interests of such holders and remit
the net proceeds thereof (after commissions, costs and expenses incurred in
connection with such sale) to such holders according to their respective
interests therein.
D. GENERAL.
1. EXECUTION AND DELIVERY. This Form or a facsimile hereof must be
properly filled in, dated and signed in BOX IV, and must be delivered (together
with stock certificates representing the shares of Falcon Class A Stock as to
which the Election is made or with a duly signed guarantee of delivery of such
certificates) to the Exchange Agent at any of the addresses set forth above.
THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE OPTION AND RISK OF THE
STOCKHOLDER, BUT IF SENT BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS SUGGESTED.
<PAGE>
2. INADEQUATE SPACE. If there is insufficient space on this Form to list
all your stock certificates being submitted to the Exchange Agent, please attach
a separate list.
3. SIGNATURES. The signature (or signatures, in the case of certificates
owned by two or more joint holders) on this Form should correspond exactly with
the name(s) as written on the face of the certificate(s) submitted unless the
shares of Falcon Class A Stock described on this Form have been assigned by the
registered holder(s), in which event this Form should be signed in exactly the
same form as the name of the last transferee indicated on the transfers attached
to or endorsed on the certificates.
If this Form is signed by a person or persons other than the registered
owners of the certificates listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered owner(s) appear on the certificates.
If this Form or any stock certificate(s) or stock power(s) are signed by a
trustee, executor, administrator, guardian, officer of a corporation,
attorney-in-fact or any other person acting in a representative or fiduciary
capacity, the person signing must give such person's full title in such capacity
and appropriate evidence of authority to act in such capacity must be forwarded
with this Form.
4. PARTIAL EXCHANGES. If fewer than all the shares represented by any
certificate delivered to the Exchange Agent are to be submitted for exchange,
fill in the number of shares which are to be submitted in the box entitled
"Shares Submitted". In such case, a new certificate for the remainder of the
shares represented by the old certificate will be sent to the registered owners
as soon as practicable following the Election Date. All shares represented by
certificates submitted hereunder will be deemed to have been submitted unless
otherwise indicated.
5. LOST OR DESTROYED CERTIFICATES. If your stock certificate(s) has been
either lost or destroyed, please check the box on the front of this Form below
your name and address and the appropriate forms for replacement will be sent to
you. You will then be instructed as to the steps you must take in order to
receive a stock certificate(s) representing Non-Cash Election Shares and/or any
checks in accordance with the Merger Agreement.
6. NEW CERTIFICATES AND CHECKS IN SAME NAME. If any stock certificate(s)
representing Non-Cash Election Shares or any check(s) in respect of Non-Cash
Election Shares are to be registered in, or payable to the order of, exactly the
same name(s) that appears on the certificate(s) representing shares of Falcon
Class A Stock submitted with this Form, no endorsement of certificate(s) or
separate stock power(s) are required.
7. NEW CERTIFICATES AND CHECKS IN DIFFERENT NAME. If any stock
certificate(s) representing Non-Cash Election Shares or any check(s) in respect
of Non-Cash Election Shares are to be registered in, or payable to the order of,
other than exactly the name that appears on the certificate(s) representing
shares of Falcon Class A Stock submitted for exchange herewith, such exchange
shall not be made by the Exchange Agent unless the certificates submitted are
endorsed, BOX II is completed, and the signature is guaranteed in BOX IV by a
member of a national securities exchange, a member of the National Association
of Securities Dealers, Inc. or a commercial bank (not a savings bank or a
savings & loan association) or trust company in the United States which is a
member in good standing of the Agent's Medallion Program.
8. SPECIAL DELIVERY INSTRUCTIONS. If the checks are to be payable to the
order of, or the certificates for Non-Cash Election Shares are to be registered
in, the name of the registered holder(s) of shares of Falcon Class A Stock, but
are to be sent to someone other than the registered holder(s) or to an address
other than the address of the registered holder, it will be necessary to
indicate such person or address in BOX III.
9. MISCELLANEOUS. A single check and/or a single stock certificate
representing Non-Cash Election Shares will be issued.
All questions with respect to this Form and the Elections (including,
without limitation, questions relating to the timeliness or effectiveness of
revocation or any Election and computations as to proration) will be determined
by Falcon and , which determination shall be conclusive and
binding.
10. 31% BACKUP WITHHOLDING. Under Federal income tax law, a holder who
receives a cash payment pursuant to the Merger may be required to provide the
Exchange Agent (as payer) with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the holder is an individual, the
TIN is his or her social security number. If the Exchange Agent is not provided
with the correct TIN, payments that are made to such holder or other payee with
respect to the Merger may be subject to 31% backup withholding.
Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the holder must submit a Form W-8, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any such payments made to the holder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld, provided that the
required information is given to the Internal Revenue Service. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
<PAGE>
The box in Part 3 of the Substitute Form W-9 may be checked if the
submitting holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. However, such amounts will be refunded to such
holder if a TIN is provided to the Exchange Agent within 60 days.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the record owner of the
shares of Falcon Class A Stock or of the last transferee appearing on the
transfers attached to, or endorsed on, the shares of Falcon Class A Stock. If
the shares of Falcon Class A Stock are in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
11. WITHHOLDING ON FOREIGN STOCKHOLDERS. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the Exchange
Agent will withhold federal income taxes equal to 30% of the gross cash payments
payable to a foreign stockholder or his agent unless the Exchange Agent
determines that such payment is exempt from withholding (or entitled to a
reduced rate of withholding). See "THE MERGER--Federal Income Tax
Consequences--Withholding for Non-U.S. Stockholders" in the Proxy Statement for
a more complete discussion of the 30% withholding tax and obtaining an exemption
therefrom. Foreign stockholders are urged to consult their tax advisors
regarding the application of federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and refund procedures.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Falcon Class A Stock to be deemed invalidly delivered, but may require the
Exchange Agent to withhold 31% of the amount of any payments made pursuant to
the Merger. Backup withholding is not an additional Federal income tax. Rather,
the Federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
Additional copies of this Form may be obtained from
(whose telephone number is (800) ).
PAYER:
SUBSTITUTE
PART 1--PLEASE PROVIDE SOCIAL SECURITY NUMBER
YOUR TIN IN THE OR
BOX AT RIGHT AND CERTIFY EMPLOYER IDENTIFICATION
BY SIGNING NUMBER
AND DATING BELOW.
FORM W-9
PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT
TAXPAYER IDENTIFICATION NUMBER (OR I AM WAITING FOR
A NUMBER TO BE ISSUED TO ME) AND
DEPARTMENT OF THE (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
TREASURY BECAUSE: (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR
INTERNAL REVENUE SERVICE (B) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL
REVENUE SERVICE (THE "IRS") THAT I AM SUBJECT
TO BACKUP WITHHOLDING AS A RESULT OF A
PAYER'S REQUEST FOR FAILURE TO REPORT ALL INTEREST OR DIVIDENDS,
TAXPAYER IDENTIFICATION OR (C) THE IRS HAS NOTIFIED ME THAT I AM NO
NUMBER (TIN) LONGER SUBJECT TO BACKUP WITHHOLDING.
CERTIFICATION PART 3--
INSTRUCTIONS--YOU MUST
CROSS OUT ITEM (2) ABOVE AWAITING TIN / /
IF YOU HAVE BEEN NOTIFIED
BY THE IRS THAT YOU ARE
CURRENTLY SUBJECT TO
BACKUP WITHHOLDING
BECAUSE OF UNDERREPORTING
INTEREST OR DIVIDENDS ON
YOUR TAX RETURN. HOWEVER,
IF AFTER BEING NOTIFIED
BY THE IRS THAT YOU ARE
SUBJECT TO BACKUP
WITHHOLDING, YOU RECEIVED
ANOTHER NOTIFICATION FROM
THE IRS STATING THAT YOU
ARE NO LONGER SUBJECT TO
BACKUP WITHHOLDING, DO
NOT CROSS OUT ITEM (2).
SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION
NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number by the time of
payment, 31% of all reportable payments made to me will be withheld, but that
such amounts will be refunded to me if I then provide a Taxpayer Identification
Number within sixty (60) days.
Signature Date
Questions and requests for assistance or additional copies of the Proxy
Statement/Prospectus or this Form of Election may be directed to the
Solicitation Agent at the address set forth below:
THE SOLICITATION AGENT IS:
[LOGO]
(Call Collect)
or
Call Toll-Free ( )
<PAGE>
LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATE(S) FOR SHARES OF CLASS A STOCK
OF
FALCON BUILDING PRODUCTS, INC.
SURRENDERED IN CONNECTION WITH THE MERGER
OF
FBP AQUISITION CORP., INC.
WITH AND INTO
FALCON BUILDING PRODUCTS, INC.
This Letter of Transmittal is to accompany certificates for shares of Class
A stock, par value $.01 per share ("Falcon Class A Stock"), of Falcon Building
Products, Inc. ("Falcon" or the "Company") if such certificates have NOT been
submitted pursuant to an effective election (a "Non-Cash Election") to retain
shares of Falcon Class A Stock ("Non-Cash Election Shares") in connection with
the proposed merger (the "Merger") of FBP Acquisition Corp., Inc. ("FBP") with
and into Falcon. Holders of Falcon Building Products, Inc. Stock who have
previously made an effective Non-Cash Election (any such holder, an "Electing
Holder") need not submit this Form with respect to the shares covered by such
Non-Cash Election. Each share of Falcon Class A Stock subject to such Non-Cash
Election will automatically, subject to proration as described in the Proxy
Statement (as defined below), be converted into the right to retain Non-Cash
Election Shares.
By delivering certificates for shares of Falcon Class A Common Stock, the
registered holder of such certificates releases the Company, FBP and their
respective affiliates, directors, officers, employees, partners, agents,
advisors and representatives, and their respective successors and assigns, from
any and all claims arising from or in connection with the purchase or ownership
of such Falcon Class A Stock or the exchange of such Falcon Class A Stock
pursuant to the Merger Agreement (as defined herein).
To: , Exchange Agent
1-(800)-
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT
COURIER:
CONFIRM BY TELEPHONE TO:
(201) 296-4209 OR
(201) 296-4381
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
BOX I
SHARES SUBMITTED
(ATTACH ADDITIONAL LIST IF NECESSARY)
Total Number of
Shares
Name and Address of Certificate(s) Represented by
Registered Holder* Number Certificate(s)
Total Shares
*Only certificates registered in a single form may be deposited with this
Letter of Transmittal. If certificates are registered in different forms (e.g.,
John R. Doe and J.R. Doe), it will be necessary to fill in, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
/ / Check here if you cannot locate your certificates. Upon receipt of this
Letter of Transmittal, the Agent will contact you directly with replacement
instructions.
<PAGE>
Ladies and Gentlemen:
In connection with the Merger, the undersigned hereby submits the
certificate(s) for shares of Class A stock, par value $.01 per share, of Falcon
("Falcon Class A Stock") listed in BOX I. Delivery of the enclosed certificates
shall be effected, and risk of loss of and title to such certificates shall
pass, only upon delivery thereof to you.
It is understood that this Letter of Transmittal is subject to (i) the
terms, conditions and limitations set forth in the Proxy Statement/Prospectus,
dated , 1997, relating to the Merger (including all annexes thereto,
and as it may be amended or supplemented from time to time, the "Proxy
Statement"), receipt of which is acknowledged by the undersigned, (ii) the terms
of the Agreement and Plan of Merger, dated as of March 20, 1997, as the same may
be amended or supplemented from time to time (the "Merger Agreement"), a
conformed copy of which appears as Annex I to the Proxy Statement, and (iii) the
accompanying Instructions.
By delivering certificates for shares of Falcon Class A Stock, the
registered holder of such certificates releases the Company, FBP and their
respective affiliates, directors, officers, employees, partners, agents,
advisors and representatives, and their respective successors and assigns, from
any and all claims arising from or in connection with the purchase or ownership
of such Falcon Class A Stock or the exchange of such Falcon Class A Stock
pursuant to the Merger Agreement.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
such certificates of Falcon Class A Stock to the Company and to receive on
behalf of the undersigned, in exchange for the shares of Falcon Class A Stock
represented thereby, any check for cash or, in the event of proration,
certificate for Non-Cash Election Shares issuable in the Merger.
Unless otherwise indicated under Special Payment Instructions below, please
issue any check and/or any certificate for Non-Cash Election Shares issuable in
exchange for the shares of Falcon Class A Stock represented by the certificates
submitted hereby in the name of the registered holder(s) of such Falcon Class A
Stock. Similarly, unless otherwise indicated under Special Delivery
Instructions, please mail any check and/or any certificate for Non-Cash Election
Shares issuable in exchange for the shares of Falcon Class A Stock represented
by the certificates submitted hereby to the registered holder(s) of Falcon Class
A Stock at the address or addresses shown above.
<TABLE>
<S> <C>
BOX II BOX III
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS C(5) AND C(6))] (SEE INSTRUCTION C(7))
To be completed ONLY if the checks are to be made To be completed ONLY if the checks are to be made
payable to someone other than the registered payable to the registered holder(s) of shares of
holder(s) of shares of Falcon Class A Stock. Falcon Class A Stock, but are to be sent to someone
other than the registered holder(s) or to an address
other than the address of the registered holder(s)
set forth above.
Name Name
------------------------------------ -------------------------------------
(Please Print) (Please Print)
------------------------------------ -------------------------------------
(Please Print) (Please Print)
Address Address
---------------------------------- -----------------------------------
---------------------------------- -----------------------------------
(Including Zip Code) (Including Zip Code)
- ----------------------------------------------------
(Tax Identification or Social Security
Number)
</TABLE>
<PAGE>
BOX IV
SIGN HERE AND HAVE SIGNATURES GUARANTEED
(SEE INSTRUCTIONS C(1) AND C(6) CONCERNING SIGNATURE GUARANTEE)
Name(s):
---------------------------------------------------------------
(PLEASE PRINT)
Name(s):
---------------------------------------------------------------
(PLEASE PRINT)
Name(s):
---------------------------------------------------------------
(PLEASE PRINT)
Signature(s) of Owner(s)
Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer of a corporation, attorney-in-fact or
any other person acting in a fiduciary capacity, set forth full title in such
capacity and see Instruction C(3).
-----------------------------------------------------------------
-----------------------------------------------------------------
(Area Code and Telephone Number(s))
-----------------------------------------------------------------
-----------------------------------------------------------------
(Tax Identification or Social Security Number(s))
SIGNATURE(S)
GUARANTEED: DATED 1997.
- ------------------------ ------------------------
(See Instruction C(6))
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
(DO NOT WRITE IN SPACES BELOW)
NON-CASH SHARES
SHARES SHARES ELECTION CERTIFICATE CONVERTED AMOUNT OF
SURRENDERED ACCEPTED SHARES NO. BLOCK NO. INTO CASH CHECK NO. CHECK
DELIVERY PREPARED BY -- CHECKED BY -----------------
DATE -------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
A. SPECIAL CONDITIONS; PRORATION PROCEDURES
Subject to the proration procedures described in the Proxy
Statement/Prospectus, holders of Falcon Class A Stock who (i) declined to make a
Non-Cash Election, (ii) failed to make an effective Non-Cash Election or (iii)
made an effective Non-Cash Election but who will not receive Non-Cash Election
Shares due to proration, in each case with respect to any or all of their
shares, will receive in exchange for each share of Falcon Class A Stock, the
right to receive $17.75 in cash. See Instruction B.
A description of the proration procedures is set forth in the Proxy
Statement under "THE MERGER---Non-Cash Election" and "THE MERGER--Non-Cash
Election Procedure." A full statement of the proration procedures is contained
in the Merger Agreement and any receipt of cash is subject to compliance with
such procedures.
AS A RESULT OF THE PRORATION PROCEDURES, HOLDERS OF FALCON CLASS A STOCK MAY
RECEIVE NON-CASH ELECTION SHARES OR CASH IN AMOUNTS WHICH VARY FROM THE AMOUNTS
SUCH HOLDERS ELECT TO RECEIVE. SUCH HOLDERS WILL NOT BE ABLE TO CHANGE THE
NUMBER OF NON-CASH ELECTION SHARES OR THE AMOUNT OF CASH ALLOCATED TO THEM
PURSUANT TO SUCH PROCEDURES.
B. RECEIPT OF CHECKS AND/OR CERTIFICATES IN EXCHANGE FOR FALCON CLASS A STOCK.
As soon as practicable after the Effective Time, the Exchange Agent will
mail to the registered holder listed in BOX I (or his or her designee listed in
BOX II OR III), a check from Falcon for an amount equal to $17.75 in cash with
respect to each share of Falcon Class A Stock which is submitted with any Letter
of Transmittal, subject to the proration procedures described in the Proxy
Statement.
As a result of proration, a holder of Falcon Class A Stock may receive
Non-Cash Election Shares instead of cash. No fractional Non-Cash Election Shares
will be issued in connection with the Merger. In lieu thereof, the Exchange
Agent, as agent for the holders of Falcon Class A Stock who become entitled to a
fraction of a Non-Cash Election Share, shall promptly sell the aggregate of the
fractional share interests of such holders and remit the net proceeds thereof
(after commissions, costs and expenses incurred in connection with such sale) to
such holders according to their respective interests therein.
C. GENERAL.
1. EXECUTION AND DELIVERY. This Letter of Transmittal must be properly
filled in, dated and signed in BOX IV, and must be delivered (together with
stock certificates representing the shares of Falcon Class A Stock being
submitted) to the Exchange Agent at either of the addresses set forth above.
THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE OPTION AND RISK OF THE
STOCKHOLDER, BUT IF SENT BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS SUGGESTED.
2. INADEQUATE SPACE. If there is insufficient space on this Form to list
all your stock certificates being submitted to Exchange Agent, please attach a
separate list.
3. SIGNATURES. The signature (or signatures, in the case of certificates
owned by two or more joint holders) on this Letter of Transmittal should
correspond exactly with the name(s) as written on the face of the certificate(s)
submitted, unless shares of Falcon Class A Stock described on this Letter of
Transmittal have been assigned by the registered holder(s), in which event this
Letter of Transmittal should be signed in exactly the same form as the name of
the last transferee indicated on the transfers attached to or endorsed on the
certificates.
If this Letter of Transmittal is signed by a person or persons other than
the registered owners of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered owner(s) appear on the certificates.
If this Letter of Transmittal or any stock certificate(s) or stock power(s)
are signed by a trustee, executor, administrator, guardian, officer of a
corporation, attorney-in-fact or any other person acting in a representative or
fiduciary capacity, the person signing must give such person's full title in
such capacity and appropriate evidence of authority to act in such capacity must
be forwarded with this Letter of Transmittal.
4. LOST OR DESTROYED CERTIFICATES. If your stock certificate(s) has been
either lost or destroyed, please check the box on the front of this Letter of
Transmittal below your name and address and the appropriate forms for
replacement will be sent to you. You will then be instructed as to the steps you
must take in order to receive any checks and/or a stock certificate(s)
representing Non-Cash Election Shares in accordance with the Merger Agreement.
5. CHECKS AND/OR NEW STOCK CERTIFICATES IN SAME NAME. If any checks or
stock certificate(s) representing Non-Cash Election Shares are to be registered
in, or made payable to the order of, exactly the same name(s) that appears on
the certificate(s) representing shares of Falcon Class A Stock submitted with
this Letter of Transmittal, no endorsement of certificate(s) or separate stock
power(s) is required.
6. CHECKS AND/OR NEW CERTIFICATES IN DIFFERENT NAME. If any checks or
stock certificate(s) representing Non-Cash Election Shares are to be registered
in, or made payable to the order of, other than exactly the name that appears on
the certificate(s) representing shares of Falcon Class A Stock submitted for
exchange herewith, such exchange shall not be made
<PAGE>
by the Exchange Agent unless the certificates submitted are endorsed, BOX II is
completed, and the signature is guaranteed in BOX IV by a member of a national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank (not a savings bank or a savings & loan association)
or trust company in the United States which is a member in good standing of the
Agent's Medallion Program.
7. SPECIAL DELIVERY INSTRUCTIONS. If the checks are to be made payable to
the order of, or the certificates for Non-Cash Election Shares are to be
registered in, the name of the registered holder(s) of shares of Falcon Class A
Stock, but are to be sent to someone other than the registered holder(s) or to
an address other than the address of the registered holder, it will be necessary
to indicate such person or address in BOX III.
8. MISCELLANEOUS. A single check and/or a single stock certificate
representing Non-Cash Election Shares will be issued in exchange for shares of
Falcon Class A Stock submitted herewith.
All questions with respect to this Letter of Transmittal will be determined
by Falcon and , which determination shall be conclusive and
binding.
9. 31% BACKUP WITHHOLDING. Under Federal income tax law, a holder who
receives a cash payment pursuant to the Merger may be required to provide the
Exchange Agent (as payer) with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the holder is an individual, the
TIN is his or her social security number. If the Exchange Agent is not provided
with the correct TIN, payments that are made to such holder or other payee with
respect to the Merger may be subject to 31% backup withholding.
Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the holder must submit a Form W-8, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more information.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any such payments made to the holder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld, provided that the
required information is given to the Internal Revenue Service. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
submitting holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. However, such amounts will be refunded to such
holder if a TIN is provided to the Exchange Agent within 60 days.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the record owner of the
shares of Falcon Class A Stock or of the last transferee appearing on the
transfers attached to, or endorsed on, the shares of Falcon Class A Stock. If
the shares of Falcon Class A Stock are in more than one name or are not the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
10. WITHHOLDING ON FOREIGN STOCKHOLDERS. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the Exchange
Agent will withhold federal income taxes equal to 30% of the gross cash payments
payable to a foreign stockholder or his agent unless the Exchange Agent
determines that such payment is exempt from withholding (or entitled to a
reduced rate of withholding). See "THE MERGER--Federal Income Tax
Consequences--Withholding for Non-U.S. Stockholders" in the Proxy Statement for
a more complete discussion of the 30% withholding tax and obtaining an exemption
therefrom. Foreign stockholders are urged to consult their tax advisors
regarding the application of federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and refund procedures.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Falcon Class A Stock to be deemed invalidly tendered, but may require the
Exchange Agent to withhold 31% of the amount of any payments made pursuant to
the Merger. Backup withholding is not an additional Federal income tax. Rather,
the Federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an payment
of taxes, a refund may be obtained.
Additional copies of this Letter may be obtained from
(whose telephone number is (800) 777-3674).
Payer:
<PAGE>
<TABLE>
<S> <C> <C>
PART 1--PLEASE PROVIDE YOUR TIN Social Security Number OR
IN THE BOX AT THE RIGHT AND Employer Identification Number
CERTIFY BY SIGNING AND DATING
BELOW.
SUBSTITUTE
Form W-9 PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
Department of the Treasury (1) The number shown on this form is my correct Taxpayer Identification
Internal Revenue Service Number (or I am waiting for a number to be issued to me), and
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you are subject
to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item
(2).
DATE---------------------------,
SIGNATURE 1997
---------------------------------
PART 3--AWAITING TIN / /
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
SIGNATURE
- ------------------------------------------- DATE
- --------------------------------------
<PAGE>
EX-99.4
Consent
April 3, 1997
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Ladies and Gentlemen:
I hereby consent to the references to my continuing as a director of
Falcon Building Products, Inc. ("Falcon") in the Registration Statement on
Form S-4 of Falcon relating to the proxy statement of Falcon, the preliminary
copy of which was initially filed on April 4, 1997 with the Securities and
Exchange Commission.
Sincerely yours,
/s/ William K. Hall
----------------------------
William K. Hall
<PAGE>
EX-99.5
Consent
April 3, 1997
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Ladies and Gentlemen:
I hereby consent to the references to my becoming a director of Falcon
Building Products, Inc. ("Falcon") in the Registration Statement on Form S-4 of
Falcon relating to the proxy statement of Falcon, the preliminary copy of which
was initially filed on April 4, 1997 with the Securities and Exchange
Commission.
Sincerely yours,
/s/ Christopher J. O'Brien
----------------------------
Christopher J. O'Brien
<PAGE>
EX-99.6
Consent
April 3, 1997
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Ladies and Gentlemen:
I hereby consent to the references to my becoming a director of Falcon
Building Products, Inc. ("Falcon") in the Registration Statement on Form S-4 of
Falcon relating to the proxy statement of Falcon, the preliminary copy of which
was initially filed on April 4, 1997 with the Securities and Exchange
Commission.
Sincerely yours,
/s/ Sam A. Cottone
----------------------------
Sam A. Cottone
<PAGE>
EX-99.7
Consent
April 3, 1997
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Ladies and Gentlemen:
I hereby consent to the references to my becoming a director of Falcon
Building Products, Inc. ("Falcon") in the Registration Statement on Form S-4 of
Falcon relating to the proxy statement of Falcon, the preliminary copy of which
was initially filed on April 4, 1997 with the Securities and Exchange
Commission.
Sincerely yours,
/s/ Charles J. Philippin
----------------------------
Charles J. Philippin
<PAGE>
EX-99.8
Consent
April 3, 1997
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Ladies and Gentlemen:
I hereby consent to the references to my becoming a director of Falcon
Building Products, Inc. ("Falcon") in the Registration Statement on Form S-4 of
Falcon relating to the proxy statement of Falcon, the preliminary copy of which
was initially filed on April 4, 1997 with the Securities and Exchange
Commission.
Sincerely yours,
/s/ Christopher J. Stadler
----------------------------
Christopher J. Stadler
<PAGE>
[MERRILL LYNCH LETTERHEAD]
We hereby consent to the use of our opinion letter dated March 20, 1997
to the Board of Directors of Falcon Building Products, Inc. included as
Annex III-A to the Proxy Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of FBP
Acquisition Corp., Inc., a Delaware corporation organized by Investcorp S.A.,
with and into Falcon Building Products, Inc. and to the references to such
opinion in such Proxy Statement/Prospectus. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Dan Dickinson
--------------------------
Managing Director
Investment Banking Group
April 3, 1997
<PAGE>
Exhibit 99.10
CONSENT
OF
SMITH BARNEY INC.
The Board of Directors
Falcon Building Products, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Members of the Board:
We hereby consent to (I) the inclusion of our opinion letter to the
Board of Directors of Falcon Building Products, Inc. (the "Company") as Annex
III-B to the Proxy Statement/Prospectus of the Company relating to the
proposed merger transaction involving the Company and (II) references made to
our firm and such opinion in the Proxy Statement/Prospectus under the
captions "THE MERGER -- Background of the Merger," "--Recommendation of the
Board of Directors; Reasons for the Merger" and "-- Opinions of the Company's
Financial Advisors -- Opinion of Smith Barney." In giving such consent, we
do not admit that we come within the category of persons whose consent is
required under, and we do not admit that we are "experts" for purposes of,
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
By: /s/ Smith Barney Inc.
------------------------------------
SMITH BARNEY INC.
New York, New York
April 4, 1997
