<PAGE>
- ------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-13419
FALCON BUILDING PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3931893
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 906-9700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
As of July 31, 1997, Falcon Building Products, Inc. had the
following shares of its various classes of common stock
outstanding:
1,034,017 shares of Class A Common Stock
6,721,537 shares of Class B Common Stock
844,273 shares of Class C Common Stock
17,000 shares of Class D Common Stock
<PAGE>
FALCON BUILDING PRODUCTS, INC.
FORM 10-Q
JUNE 30, 1997
INDEX
PART I. Financial Information: PAGE NO.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 12
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 15
2
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41.7 $ 3.9
Accounts receivable -- --
Inventories, net 93.5 76.2
Other current assets 35.1 15.6
------ ------
Total current assets 170.3 95.7
Property, plant and equipment, net 96.7 97.4
Goodwill 58.0 59.1
Other long-term assets 32.9 9.5
------ ------
Total assets $357.9 $261.7
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt $ 1.2 $ 15.2
Accounts payable 58.0 50.1
Accrued liabilities 34.3 30.9
------ ------
Total current liabilities 93.5 96.2
Senior indebtedness 176.5 109.1
Senior subordinated notes 247.4 --
Accrued employee benefit obligations 9.3 8.7
Other long-term liabilities 19.7 19.8
------ ------
Total liabilities 546.4 233.8
------ ------
Stockholders' equity (deficit):
Preferred stock -- --
Class A Common Stock -- 0.2
Class B Common Stock 0.1 --
Class C Common Stock -- --
Class D Common Stock -- --
Common Stock -- --
Additional paid-in capital -- 18.0
Retained earnings (deficit) (186.1) 12.8
Pension liability adjustment (0.5) (0.5)
Unearned compensation -- (0.4)
Notes receivable arising from stock purchase plan (2.0) (2.2)
------ ------
Total stockholders' equity (deficit) (188.5) 27.9
------ ------
Total liabilities and stockholders' equity $357.9 $261.7
====== ======
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
3
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 195.7 $ 168.4 $ 355.9 $ 312.7
Cost of sales 158.9 136.2 290.9 253.8
---------- ---------- ---------- ----------
Gross earnings 36.8 32.2 65.0 58.9
Selling and administrative expenses 15.4 15.2 29.9 29.5
Securitization expense 1.2 1.0 2.1 1.9
Recapitalization expenses 36.3 -- 36.3 --
---------- ---------- ---------- ----------
Operating income (loss) (16.1) 16.0 (3.3) 27.5
Net interest expense 4.0 2.8 6.8 5.5
---------- ---------- ---------- ----------
Income (loss) before income taxes (20.1) 13.2 (10.1) 22.0
Provision (benefit) for income taxes (1.7) 5.1 2.2 8.5
---------- ---------- ---------- ----------
Income (loss) before extraordinary item (18.4) 8.1 (12.3) 13.5
Extraordinary item:
Early extinguishment of debt, net of income
tax benefit of $0.9 million (1.5) -- (1.5) --
---------- ---------- ---------- ----------
Net income (loss) $ (19.9) $ 8.1 $ (13.8) $ 13.5
========== ========== ========== ==========
Earnings (loss) per common share:
Income (loss) before extraordinary item $ (1.00) $ 0.40 $ (0.64) $ 0.67
Extraordinary item (0.08) -- (0.08) --
---------- ---------- ---------- ----------
Net income (loss) $ (1.08) $ 0.40 $ (0.72) $ 0.67
========== ========== ========== ==========
Weighted average shares outstanding 18,415,211 20,070,500 19,227,600 20,070,500
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
4
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (13.8) $ 13.5
Adjustments to reconcile net income (loss) to net cash from operations:
Depreciation and amortization 8.2 8.2
Accretion of debt discount on subordinated debt 0.4 --
Recapitalization expenses 36.3 --
Early extinguishment of debt 1.5 --
Cash effect of changes in other working capital balances, accrued
employee benefit obligations, and other long-term liabilities,
excluding the effects of acquisitions (32.5) (11.9)
------- -------
Net cash from operating activities 0.1 9.8
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses -- (18.8)
Capital expenditures (6.5) (8.6)
Other (1.2) (1.1)
------- -------
Net cash used in investing activities (7.7) (28.5)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior credit facilities 175.0 --
Repayment of senior credit facilities (138.8) --
Issuance of senior subordinated debt 247.0 --
Issuance of common stock 134.6 --
Retirement of common stock (337.5) --
Payment of Recapitalization fees and expenses (52.0) --
Net borrowings on debt 17.1 21.9
------- -------
Net cash from financing activities 45.4 21.9
------- -------
CHANGE IN CASH AND CASH EQUIVALENTS 37.8 3.2
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3.9 1.1
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 41.7 $ 4.3
======= =======
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The accompanying unaudited Condensed Consolidated Financial Statements of
Falcon Building Products, Inc. ("Falcon" or the "Company"), have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for a complete set of financial statements. In the opinion of
management, all adjustments considered necessary, consisting only of normal
recurring adjustments except for the effects of the recapitalization
transaction described below, are included for fair presentation. Operating
results for the quarter and six months ended June 30, 1997 are not
necessarily indicative of results that may be expected for the full year.
The unaudited Condensed Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements of the Company
for the year ended December 31, 1996.
On June 17, 1997 the Company completed a merger transaction (the "Merger"
and together with the financings described below the "Recapitalization") with
FBP Acquisition Corp. ("FBP"), a newly formed corporation organized on behalf
of INVESTCORP S.A. ("Investcorp"), certain affiliates of Investcorp and other
international investors, whereby FBP was merged with and into Falcon, with
Falcon as the surviving corporation. The Merger resulted in Investcorp,
its affiliates and certain other international investors owning approximately
88% of the capital stock of the Company. The Merger was accounted for as a
recapitalization and as such, the historical basis of the assets and
liabilities of the Company were not affected. See Notes 4 and 5 for further
discussion of the transaction and the financing arrangements entered into in
order to consummate the Recapitalization.
Certain amounts in the Company's historical financial statements have
been reclassified to be consistent with the presentation in the current
period.
(2) INVENTORIES
Inventory consists of the following (in millions):
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(UNAUDITED)
Raw materials and supplies $ 37.6 $ 30.9
Work in process 12.5 12.7
Finished goods 43.4 32.6
------ ------
$ 93.5 $ 76.2
====== ======
(3) ACCOUNTS RECEIVABLE
In connection with the Recapitalization, the Company amended its existing
receivables securitization program to increase the maximum availability from
$85 million to $100 million and to extend the program until 2002.
6
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
JUNE 30, 1997
(UNAUDITED)
(4) RECAPITALIZATION
On March 20, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with FBP. The Merger Agreement contemplated
that FBP would be merged with and into Falcon and each outstanding share of
the Company's Class A Common Stock ("Class A Stock") would be converted into
either (i) $17.75 in cash (the "Cash Price"), or (ii) at the election of the
holder of the Class A Stock, the right to retain one share of Class A Stock.
On June 17, 1997, the Merger and the adoption of the Merger Agreement were
approved by the vote of a majority of the stockholders of the Class A Stock
and FBP was merged with and into Falcon, with Falcon continuing as the
surviving corporation. At the consummation of the Merger, 19,014,258 of the
then issued and outstanding shares of Class A Stock were converted into cash
and 1,034,017 shares were retained by existing stockholders. In addition,
each person who, immediately prior to the consummation of the
Recapitalization, held an option to purchase shares of the Class A Stock
received a cash payment equal to the product of (i) the difference between
the Cash Price and the option exercise price multiplied by (ii) the number of
options held by such person. Approximately $337.5 million was paid to
holders of Class A Stock who converted their shares and approximately
$5.2 million was paid to persons holding options to purchase shares of Class A
Stock.
Pursuant to the Merger Agreement, the certificate of incorporation of FBP
became the certificate of incorporation of the Company (the "Restated
Certificate of Incorporation") upon the effective date of the Merger. The
Restated Certificate of Incorporation authorizes five classes of common
stock. Each issued and outstanding share of capital stock of FBP was
converted into a share of capital stock of Falcon upon the consummation of
the Recapitalization.
The following table summarizes the capital stock of the Company at
June 30, 1997:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
Title AUTHORIZED SHARES AT JUNE 30, 1997
- ----- ----------------- ------------------
<S> <C> <C>
Class A Common Stock, par value $0.01 per share 1,034,020 1,034,017
Class B Common Stock, par value $0.01 per share 6,900,000 6,721,537
Class C Common Stock, par value $0.01 per share 2,048,980 844,273
Class D Common Stock, par value $0.01 per share 17,000 17,000
Common Stock, par value $0.01 per share 10,000,000 0
---------- ---------
Total 20,000,000 8,616,827
========== =========
</TABLE>
Holders of the Class A Stock are entitled to one vote per share and
holders of Class D Common Stock are entitled to 446 votes for each share of
such stock held. Upon the occurrence of a sale of 100% of the outstanding
equity securities of Falcon or a public offering of any equity securities of
Falcon, each share of Class A, Class B, Class C and Class D Common Stock of
the Company will convert into one share of Common Stock of the Company. The
Restated Certificate of Incorporation no longer authorizes shares of
preferred stock.
The Recapitalization was funded by (i) $175.0 million of borrowings under
the Bank Credit Facility (as defined), (ii) $145.0 million from the offering
of the Notes (as defined), (iii) approximately $102.0 million of proceeds
from the offering of the Discount Notes (as defined) and (iv) an equity
contribution by Investcorp, its affiliates and certain other international
investors of approximately $134.6 million. The proceeds from these
financings will fund: the payment of approximately $337.5 million to holders
of Class A Stock who converted their shares; the payment of approximately
$5.2 million to option holders; the repayment of approximately $138.8 million
of outstanding indebtedness under the then existing credit facility; and the
payment of approximately $58.5 million of fees and expenses associated with
the Recapitalization.
The transaction was accounted for as a recapitalization and as such, the
historical basis of the Company's assets and liabilities was not affected.
Approximately $27.4 million of costs primarily representing financing fees
were capitalized while approximately $36.3 million of costs were expensed and
are reflected as a component of operating income in the Company's Condensed
Consolidated Statements of Income. The expensed costs represent
7
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
JUNE 30, 1997
(UNAUDITED)
investment banker fees, Investcorp merger and acquisition fees, legal and
accounting fees, transaction bonuses, payments to option holders and other
miscellaneous costs incurred in connection with the Recapitalization. In
addition, the Company recorded an extraordinary charge of $1.5 million, net
of a $0.9 million income tax benefit, in connection with the repayment of its
existing credit facility.
(5) DEBT
As part of the Recapitalization, the Company entered into a new senior
credit facility with a group of banks (the "Bank Credit Facility"), and
pursuant to indentures dated June 17, 1997 (the "Indentures"), issued $145
million of 9 1/2% Senior Subordinated Notes (the "Notes") and $170 million
aggregate principal amount of 10 1/2% Senior Subordinated Discount Notes (the
"Discount Notes" and together with the Notes, the "Securities"). Each of the
Company's subsidiaries, except the special purpose vehicle ("Securitization
SPV") which is utilized to sell the accounts receivable in the Company's
receivables securitization program, have guaranteed the Bank Credit Facility
and the Securities, such guarantee of the Securities being subordinate to the
guarantee of the Bank Credit Facility. The Securities were sold through a
confidential placement memorandum, however, the Company has agreed to file an
exchange offer registration statement or under certain circumstances a shelf
registration with respect to the Securities. The proceeds from the Bank
Credit Facility and the Securities were used to finance the conversion to
cash of the Class A Common Stock, to repay the then outstanding senior credit
facility and to pay the fees and expenses associated with the
Recapitalization.
SENIOR SUBORDINATED NOTES:
9 1/2% SENIOR SUBORDINATED NOTES:
The Company's $145 million of Notes mature on June 15, 2007. Interest on
the Notes is payable semi-annually in arrears on June 15 and December 15
commencing on December 15, 1997. The Notes are general unsecured obligations
of the Company ranking subordinate in right of payment to all existing and
future senior indebtedness of the Company. The Notes will rank PARI PASSU in
right of payment with all other indebtedness of the Company that is
subordinated to senior indebtedness of the Company.
The Notes are not redeemable at the Company's option prior to June 15,
2002. The Notes are redeemable at the Company's option at 104.750% during
the 12 months beginning June 15, 2002, 103.167% during the 12 months
beginning June 15, 2003, 101.583% during the 12 months beginning June 15,
2004 and at 100% thereafter (expressed as a percentage of principal amount).
In addition, prior to June 15, 2002, up to 35% of the Notes may be redeemed
at 109.5% of the principal amount out of the proceeds of certain equity
offerings.
10 1/2% SENIOR SUBORDINATED DISCOUNT NOTES:
The $170 million aggregate principal amount of Discount Notes mature on
June 15, 2007. The issue price of each Discount Note was $599.82 per $1,000
principal amount at maturity, which represents a yield to June 15, 2002 of
10.5% per annum. Cash interest will not accrue on the Discount Notes prior
to June 15, 2002. Cash interest is payable semi-annually in arrears on June
15 and December 15 of each year at a rate of 10.5% per annum commencing
December 15, 2002. The Discount Notes are general unsecured obligations of
the Company ranking subordinate in right of payment to all existing and
future senior indebtedness of the Company. The Discount Notes will rank PARI
PASSU in right of payment with all other indebtedness of the Company that is
subordinated to senior indebtedness of the Company.
The Discount Notes are not redeemable at the Company's option prior to
June 15, 2002. The Discount Notes are redeemable at the Company's option at
105.25% during the 12 months beginning June 15, 2002, 103.50% during the
12 months beginning June 15, 2003, 101.75% during the 12 months beginning
June 15, 2004 and at 100% thereafter (expressed as a percentage of principal
amount). In addition, prior to June 15, 2000, up to
8
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
JUNE 30, 1997
(UNAUDITED)
35% of the Discount Notes may be redeemed out of the proceeds of certain
equity offerings at 110.5% of the accreted value.
Upon a Change of Control (as defined in the Indentures) the Company has
the option prior to June 15, 2002 to redeem the Notes and/or the Discount
Notes in whole, but not in part, at 100% of the principal amount of the Notes
or 100% of the accreted value of the Discount Notes plus an applicable
premium in each case, as defined in the Indentures. If the Company does not
redeem the Securities or if the Change in Control occurs subsequent to
June 15, 2002, each holder of the Securities may require the Company to
repurchase such holders' Securities at 101% of the aggregate principal amount
of the Notes plus accrued interest, if any, and 101% of the accreted value of
the Discount Notes plus accrued interest, if any.
The Indentures contain restrictive covenants, which among other things
limit the Company's ability to incur additional indebtedness; pay dividends
or make other restricted payments; enter into transactions with affiliates;
make certain asset dispositions; and merge or consolidate with or transfer
substantially all of its assets to another person.
SENIOR INDEBTEDNESS:
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(unaudited)
(IN MILLIONS)
Bank Credit Facility
Revolver $ -- $ 39.0
Term 175.0 82.5
------ ------
Total 175.0 121.5
Other 2.7 2.8
Less: Current Portion (1.2) (15.2)
------ ------
Long-term debt $176.5 $109.1
====== ======
BANK CREDIT FACILITY:
On June 17, 1997, using a portion of the proceeds from the
Recapitalization, the Company repaid and terminated its then existing senior
credit facility. An extraordinary charge of $1.5 million, net of an income
tax benefit of $0.9 million was recorded in connection with this repayment,
representing primarily the write-off of associated deferred debt issuance
costs.
The Bank Credit Facility entered into on June 17, 1997, consists of a
$175 million term loan facility which matures in June 2005 and a $125 million
revolving credit facility which matures in June 2003. The term loan was drawn
in full as part of the Recapitalization and is due in semi-annual
installments of $0.5 million from December 1997 through June 2002, quarterly
installments of $9.5 million from December 2002 through September 2003,
quarterly installments of $15.0 million from December 2003 through September
2004, installments of $18.0 million in December 2004 and March 2005 and a
final payment at maturity of $36.0 million in June 2005. No amounts have
been drawn under the revolving portion of the Bank Credit Facility.
Borrowings under the Bank Credit Facility bear interest at alternative
floating rate structures at management's option (8.7% for the term loan at
June 30, 1997) and are secured by all the capital stock of each of the
Company's subsidiaries and substantially all of the inventory and property,
plant and equipment of the Company and its subsidiaries other than the
Securitization SPV. The Bank Credit Facility requires an annual commitment
fee of 0.5% on the average daily unused amount of the revolving portion of
the Bank Credit Facility.
9
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
JUNE 30, 1997
(UNAUDITED)
The Bank Credit Facility contains various restrictive covenants including
restrictions on additional indebtedness, mergers, asset dispositions,
dividends and other restricted payments and prepayment and amendments of
subordinated indebtedness.
(6) COMMITMENTS AND CONTINGENCIES
In May 1994, Underwriters' Laboratories of Canada ("ULC") suspended its
recognition of high temperature plastic venting ("HTPV") for gas appliances
systems, including the Ultravent-Registered Trademark- product distributed by
the Company. This action resulted from reports of problems with high
temperature plastic venting, 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") suspended
sales of HTPV in the Province of Ontario. Other provinces of Canada have
taken similar action. Pursuant to an MCCR order, appliance systems in
Ontario with HTPV have been corrected. Most gas appliance manufacturers in
Canada and the United States no longer certify HTPV for use with their
products. As a result, the Company discontinued sales of its HTPV product in
1997. Company sales of Ultravent-Registered Trademark- products in the
United States and Canada in 1995 and 1996 were minimal.
The Company is a defendant in a suit in Canada that has been filed
against 24 entities representing heating appliance manufacturers, plastic
vent manufacturers and distributors, public utilities and listing agencies
brought by the Ontario New Home Warranty Program, which is responsible for
the cost of correcting appliances equipped with HTPV in new home construction
in Ontario. This suit seeks damages of Cdn $125 million from all of the
defendants. The Company is also a defendant in two cases brought by
appliance manufacturers. In a lawsuit filed by Goodman Manufacturing Company
("Goodman") in Texas, the Company has been sued along with two other
defendants for reimbursement of costs associated with its corrective action
program. In the other lawsuit, the Company and two other defendants have
been sued in Massachusetts by seven furnace manufacturers which are seeking
damages and declaratory relief for costs expected to be incurred as a result
of corrective action programs to be conducted in connection with furnace
systems vented with HTPV. The Company has filed and served its own legal
action in Michigan against Goodman, the seven furnace manufacturers that have
filed suit against the Company in Massachusetts, and all other identifiable
appliance manufacturers that certified HTPV for use with their appliance
systems. In that suit, the Company is seeking damages for costs it has
incurred and declaratory relief for costs that may be incurred in the future
as a result of the conduct of appliance manufacturers that certified their
products for use with HTPV. The Company has also been named in a class
action lawsuit which has been filed in Tennessee regarding HTPV. In that
case, the Company is a defendant along with its principal competitor in the
HTPV business, a resin supplier and a furnace manufacturer that has been
joined as a representative of a defendant class consisting of all appliance
manufacturers. The plaintiffs seek damages on behalf of all persons in the
United States with appliance systems that are vented with HTPV.
With respect to these matters, the Company, on September 16, 1996, filed
an action in state court in Illinois against certain insurance carriers. The
Company is seeking a declaratory judgment, damages for breach of contract and
specific relief requiring the insurance carriers, pursuant to the terms of
the Company's insurance policies, to defend and reimburse the Company for
costs and legal expenses arising from Ultravent-related claims. The amount
at issue cannot be determined at this time. The insurance carriers have
denied coverage on a number of grounds, including (i) that there has been no
property damage, bodily injury or occurrence, as those terms are defined in
the insurance policies, (ii) that various exclusions in the insurance
policies apply with respect to damage to the Company's own products, the
failure of its products to perform, and product recalls, (iii) that the
Company knew or should have known of the existence of alleged problems with
Ultravent and (iv) that other insurance which should be called on prior to
the policies of these insurers is available. The insurance carriers have
filed motions to dismiss the Company's lawsuit.
The Company is engaged in ongoing discussions with the 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 HTPV and has
met with manufacturers of HTPV, 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,
10
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
JUNE 30, 1997
(UNAUDITED)
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 HTPV, that would impact heating appliance manufacturers, plastic
resin manufacturers, and HTPV manufacturers and distributors, including the
Company. Certain appliance manufacturers, the plastic resin manufacturer and
the HTPV manufacturers and distributors, including the Company, are currently
participating in a non-binding facilitative mediation process which seeks to
develop and implement a voluntary HTPV corrective action program. The CPSC
has indicated that it will delay initiating proceedings mandating a
corrective action program while these parties are involved in this mediation
process. It is not possible at this time to predict the outcome of the
mediation.
While it is impossible at this time to give a firm estimate of the
ultimate cost to the Company, management continues to believe that the
after-tax cost to the Company of resolving the Ultravent-Registered
Trademark- matter would range from a non-material amount to $20.0 million,
after considering reimbursements and insurance recoveries. 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.
11
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Following is a discussion of the results of operations of the Company and
its subsidiaries for the quarter and six months ended June 30, 1997 as
compared to the quarter and six months ended June 30, 1996 and should be read
in conjunction with the Condensed Consolidated Financial Statements included
herein and the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
The following table reflects the Company's historical results of
operations for the quarter ended June 30, 1997 compared to the results for
the comparable period of 1996.
QUARTER ENDED JUNE 30,
----------------------------------------
1997 1996
------------------- -------------------
AMOUNT % OF SALES AMOUNT % OF SALES
------ ---------- ------ ----------
(DOLLARS IN MILLIONS)
Net sales $195.7 100.0% $168.4 100.0%
Gross earnings 36.8 18.8 32.2 19.1
Operating income before
Recapitalization expenses 20.2 10.3 16.0 9.5
Operating income (loss) (16.1) (8.2) 16.0 9.5
Net sales for the quarter were $195.7 million, an increase of
$27.3 million over the second quarter of 1996. This increase was primarily due
to significant sales growth of pressure washers of $17.8 million, as well as
increased volume in other air power products of $10.8 million. These
increases were partially offset by decreased sales in plumbing fixtures of
$1.0 million due to lower volume and pricing concessions.
Gross earnings increased $4.6 million from $32.2 million in 1996 to
$36.8 million in 1997. This increase was primarily due to the increased
volume, as well as cost reduction programs primarily in air distribution
accessories, partially offset by unfavorable manufacturing costs. Gross
margin declined from 19.1% in 1996 to 18.8% in 1997 primarily as a result
of increased sales of pressure washers which yield lower margins.
The second quarter operating loss of $16.1 million reflected
$36.3 million of expenses recorded in connection with the Recapitalization.
See Note 4 to the Company's Condensed Financial Statements for a discussion of
the Recapitalization. Excluding the Recapitalization expenses of
$36.3 million, operating income increased $4.2 million. This increase was
primarily due to increased sales volume and cost reductions.
Net interest expense increased to $4.0 million from $2.8 million in 1996
primarily due to the new debt structure which resulted from the
Recapitalization in June 1997. See Note 5 to the Company's Condensed
Consolidated Financial Statements for a discussion of the Company's new debt
structure. The Company expects future interest expense to be significantly
higher than it has been in the past due to this new debt structure.
The loss before income taxes of $20.1 compares to income of $13.2 million
in the second quarter of 1996.
The net loss of $19.9 million for the quarter is primarily due to $36.3
million of pretax expenses and the extraordinary charge of $1.5 million
recorded in connection with the Recapitalization. The effective tax benefit
rate of 8.4% in 1997 is due to the non-deductibility of various expenses
recorded in connection with the Recapitalization.
12
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (Continued)
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
The following table reflects the Company's historical results of
operations for the six months ended June 30, 1997 compared to the results for
the comparable period of 1996.
SIX MONTHS ENDED JUNE 30,
----------------------------------------
1997 1996
------------------- -------------------
AMOUNT % OF SALES AMOUNT % OF SALES
------ ---------- ------ ----------
(DOLLARS IN MILLIONS)
Net sales $355.9 100.0% $312.7 100.0%
Gross earnings 65.0 18.3 58.9 18.9
Operating income before
Recapitalization expenses 33.0 9.3 27.5 8.8
Operating income (loss) (3.3) (0.9) 27.5 8.8
Year-to-date net sales were $355.9 million, an increase of $43.2 million
over 1996 comparable results. This increase was primarily due to increased
sales of pressure washers of $29.1 million, as well as increased volume in
other air power products of $11.3 million. Favorable volume variances in
plumbing fixtures of $2.8 million also contributed to this increase.
Gross earnings increased $6.1 million to $65.0 million over 1996 results,
primarily due to the increased sales volume. Gross margin declined from
18.9% in 1996 to 18.3% in 1997 due to increased sales of pressure washers
which yield lower margins.
The operating loss of $3.3 million included $36.3 million of expenses
recorded in connection with the Recapitalization. Excluding the
Recapitalization expenses, operating income was $5.5 million higher than in
the 1996 period. This increase was primarily due to increased sales volume
and favorable costs associated with the purchase of raw materials, partially
offset by increased operating costs.
Interest expense increased from $5.5 million in 1996 to $6.8 million in
1997 due to the previously discussed change in debt structure resulting from
the Recapitalization.
The loss before income taxes of $10.1 million compares to income of
$22.0 million in the first six months of 1996.
The net loss of $13.8 million for the six months ended June 30, 1997 is
primarily due to $36.3 million of pretax expenses and the extraordinary
charge of $1.5 million recorded in connection with the Recapitalization. The
effective tax rate of (21.8)% in 1997 is due to the non-deductibility of
various expenses recorded in connection with the Recapitalization.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operating activities amounted to $0.1 million in the
first six months of 1997 compared to $9.8 million in the first six months of
1996. The decrease of $9.7 million was due primarily to an increase in
working capital requirements and the effect of the stand-alone securitization
facility the Company entered into in May 1996. Due to seasonal factors, the
Company's level of receivables is typically lower at the end of the fourth
quarter when compared to the other three quarters. With the increase in
receivables sold in the first six months of 1997, the net residual interest
retained by the Company in these sold receivables increased $17.7 million
from December 31, 1996. This residual interest of $19.6 million at June 30,
1997 is reflected in other current assets in the Company's financial
statements.
13
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (Continued)
As discussed in Note 4 to the Company's Condensed Consolidated Financial
Statements, the Company consummated the Recapitalization on June 17, 1997.
The Recapitalization was funded by (i) $175.0 million of borrowings under the
Bank Credit Facility, (ii) $145.0 million from the offering of the Notes,
(iii) approximately $102.0 million of proceeds from the offering of the
Discount Notes and (iv) an equity contribution by Investcorp, its affiliates
and certain other international investors of approximately $134.6 million.
The proceeds from these financings will fund: the payment of approximately
$337.5 million to holders of Class A Stock who converted their shares; the
payment of approximately $5.2 million to option holders; the repayment of
approximately $138.8 million of outstanding indebtedness under the then
existing credit facility; and the payment of approximately $58.5 million of
fees and expenses associated with the Recapitalization.
The Company believes that operating cash flows, availability under the
Bank Credit Facility and funds available under its accounts receivable
securitization program will be sufficient to pay interest on outstanding
debt, meet current maturities, pay income taxes, fund capital expenditures
and meet other operating needs for the foreseeable future.
14
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
2.01 Agreement and Plan of Merger, dated as of March 20, 1997, between
Falcon Building Products, Inc. (the "Company") and FBP Acquisition
Corporation, Inc. ("FBP"), including exhibits thereto (incorporated by
reference to Annex I to the Proxy Statement/Prospectus contained in
the Company's Registration Statement on Form S-4, File No. 333-24625,
filed April 4, 1997, as amended).
2.02 Stockholder Voting Agreement, dated as of March 20, 1997, among
the Company, FBP and Equity Holdings Limited ("EHL") (included as
Annex II-A to the Proxy Statement/Prospectus contained in the
Company's Registration Statement on Form S-4, File No. 333-24625,
filed April 4, 1997, as amended).
2.03 Form of Stockholder Voting Agreements, dated as of March 20,
1997, among the Company, FBP and certain management stockholders
(included as Annex II-B to the Proxy Statement/Prospectus contained in
the Company's Registration Statement on Form S-4, File No. 333-24525,
filed April 4, 1997, as amended).
3.01 Restated Certificate of Incorporation of the Company as filed
with the Delaware Secretary of State on June 17, 1997.
3.02 By-laws of the Company.
4.01 Indenture between the Company, its subsidiaries DeVilbiss Air
Power Company ("DeVilbiss"), Ex-Cell Manufacturing Company, Inc.
("Ex-Cell"), Hart & Cooley, Inc. ("H&C"), Mansfield Plumbing
Products, Inc. ("Mansfield") and SWC Industries, Inc. ("Swirlway")
(collectively, the "Guarantors"), and Harris Trust and Savings Bank,
as Trustee, dated as of June 17, 1997, relating to the Company's
9 1/2% Senior Subordinated Notes due 2007 (the "Notes"), including
form of Note (incorporated by reference to Exhibit 4.1 of the Company's
Current Report on Form 8-K dated June 17, 1997.)
4.02 Indenture between the Company, the Guarantors and Harris Trust
and Savings Bank, as Trustee, dated as of June 17, 1997, relating to
the Company's 10 1/2% Senior Subordinated Discount Notes due 2007 (the
"Discount Notes"), including form of Discount Note (incorporated by
reference to Exhibit 4.2 of the Company's Current Report on Form 8-K
dated June 17, 1997).
4.03 Registration Rights Agreement, dated June 17, 1997, between the
Company, the Guarantors and Smith Barney Inc., BT Securities
Corporation, Chase Securities Inc. and Merrill Lynch, Pierce
Fenner & Smith Incorporated.
4.04 Credit Agreement, dated as of June 17, 1997, among the Company,
the several Lenders from time to time parties thereto, and The Chase
Manhattan Bank, as administrative agent for the Lenders (incorporated
by reference to Exhibit 10.1 of the Company's Current Report on Form
8-K dated June 17, 1997).
10.01 Financing Advisory Agreement, dated March 20, 1997, between
FBP and Investcorp International, Inc.
10.02 Standby Loan Commitment Letter Agreement, dated as of March 20, 1997,
between FBP and Invifin S.A. (incorporated by reference to
Annex I to the Proxy Statement/Prospectus contained in the Company's
Registration Statement on Form S-4, File No. 333-24625, filed April 4,
1997, as amended).
10.03 Agreement for Management Advisory, Strategic Planning and
Consulting Services, between FBP and Investcorp International, Inc.,
dated as of June 17, 1997.
15
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION -- (Continued)
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
10.04.1 Employment Agreement, dated May 22, 1997, between the
Company and Gus J. Athas.
10.04.2 First Amendment to the Employment Agreement between the
Company and Gus J. Athas.
10.05.1 Employment Agreement, dated May 22, 1997, between the
Company and Sam A. Cottone.
10.05.2 First Amendment to the Employment Agreement between the
Company and Sam A. Cottone.
10.06.1 Employment Agreement, dated May 22, 1997, between the
Company and William K. Hall.
10.06.2 First Amendment to the Employment Agreement between the
Company and William K. Hall.
10.07.1 Employment Agreement, dated May 22, 1997, between the
Company and Anthony J. Navitsky.
10.07.2 First Amendment to the Employment Agreement between the
Company and Anthony J. Navitsky.
10.08.1 Employment Agreement, dated May 22, 1997, between the
Company and Edward G. Finnegan, Jr.
10.08.2 First Amendment to the Employment Agreement between the
Company and Edward G. Finnegan, Jr.
10.09 Non-Competition Agreement, dated as of March 31, 1997,
between the Company and William E. Allen.
10.10 Amended and Restated Receivables Purchase Agreement, dated
as of June 17, 1997, among Falcon Receivable Program, Inc., the
Company, Market Street Funding Corporation and PNC Bank, National
Association.
10.11 Corporate Services Agreement, effective as of June 17, 1997,
between the Company and Eagle Industries, Inc.
10.12 Form of Director Indemnity Agreements, dated as of June 17,
1997, between the Company and its Directors.
10.13 1997 Senior Executive Stock Loan Plan.
10.14 Form of Stock Pledge Agreement between the Company and
certain management stockholders (schedule attached).
10.15 Form of Common Stock Option Settlement Agreement, between
the Company and certain employees (schedule attached).
10.16 Form of Restricted Shares Settlement Agreements between the Company
and certain employees (schedule attached).
10.17 Management Stock Incentive Plan.
10.18 Form of Stock Option Agreement pursuant to the Company's
Management Stock Incentive Plan between the Company and certain
employees (schedule attached).
10.19 Form of Stockholder Agreement, dated June 17, 1997, by and
among Falcon, FBP and certain management stockholders (schedule
attached).
10.20 Stockholder Rights Agreement, dated June 17, 1997, by and
among the Company, FBP and EHL.
16
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION -- (Continued)
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
10.21 Amendment to the Company's Senior Executive Stock Purchase
Plan, dated as of June 17, 1997, among the Company and certain
employees.
10.22 Casualty Insurance Indemnity Agreement, dated as of March
20, 1997, by and among the Company, DeVilbiss, Eagle Industries, Inc.,
Great American Management and Investment, Inc., H&C and Mansfield.
10.23 Tax Indemnity Agreement, dated as of March 20, 1997, by and
among the Company, DeVilbiss, Eagle Industries, Inc., Great American
Management and Investment, Inc., H&C and Mansfield.
10.24 Pension Benefits Agreement, dated as of March 20, 1997, by
and among the Company, DeVilbiss, Eagle Industries, Inc., Great
American Management and Investment, Inc., H&C and Mansfield.
27.01 Financial Data Schedule
b) Reports on Form 8-K
Current Report on Form 8-K dated July 21, 1997 regarding the
change in certifying independent accountant.
Current Report on Form 8-K dated June 17, 1997 regarding the
consummation of the merger and the related financings.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FALCON BUILDING PRODUCTS, INC.
By: /s/ Sam A. Cottone
---------------------------------------
Sam A. Cottone
Executive Vice President
and Chief Financial Officer
Dated: August 14, 1997
18
<PAGE>
EXHIBIT 3.01
RESTATED CERTIFICATE OF INCORPORATION
OF
FALCON BUILDING PRODUCTS, INC.
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.
<PAGE>
"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.
"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 June 17, 1997
of a registration statement under the Securities Act on 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.
2
<PAGE>
"NON-REDEEMABLE SHARES" means all shares of Class A Stock, 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 unincorporated
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%).
"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.
3
<PAGE>
"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.
"STOCKHOLDER AGREEMENTS" means those certain Stockholder Agreements
entered into prior to or contemporaneously with the effectiveness of this
Certificate of Incorporation among the Corporation and certain Persons who then
are or are thereby becoming Stockholders, as the same may be supplemented,
modified, amended and restated from time to time in the manner provided therein.
A copy of the Stockholder Agreements 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 Stockholder
Agreements.
"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).
4
<PAGE>
"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 B Stock redeemed in connection with the
exercise of such Warrant.
"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
5
<PAGE>
officer or director 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 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
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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
(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
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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.
(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,
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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
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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.
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").
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(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 Section 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 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 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."
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and the certificates representing shares of Class A Stock of the Corporation
held by officers and directors of the Corporation and shares of Class B and
Class C Stock of the Corporation shall bear the following additional legend:
"AS SPECIFIED IN THE CERTIFICATE OF INCORPORATION OF THE CORPORATION,
THE TRANSFERABILITY OF THESE SECURITIES IS SUBJECT TO RESTRICTION. 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."
(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."
"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.
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(d) All certificates representing shares of Stock shall bear such
additional legends as may be required pursuant to the Stockholder Agreements.
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.
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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,
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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.
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.
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EXHIBIT 3.02
BYLAWS
OF
FALCON BUILDING PRODUCTS, INC.
ARTICLE I
OFFICES
The Corporation shall continuously maintain in the State of Delaware a
registered office and a registered agent whose business office is identical with
such registered office, and may have other offices within or without the State.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders shall be
held each year at such time as the Board of Directors may designate for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by or at the request of the President or by the Secretary at the request
of a majority of the Board of Directors or the holders of not less than 25% of
all the outstanding shares of the Corporation entitled to vote, for the purpose
or purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting of stockholders.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days before the date of the meeting, or in
the case of a merger or consolidation, or sale, lease or exchange of all or
substantially all of the Corporation's assets, not less than twenty (20) nor
more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President or the Secretary to each
stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail addressed to the stockholder at his or her address as it appears on the
records of
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the Corporation, with postage thereon prepaid. When a meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining the stockholders entitled to notice of or to vote at any
meeting of stockholders, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of stockholders, such date in any case to be not
more than sixty (60) days and for a meeting of stockholders, not less than ten
(10) days, or in the case of a merger or consolidation, or sale, lease or
exchange of all or substantially all of its assets, not less than twenty (20)
days before the date of such meeting. If no record date is fixed for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section 5, such determination
shall apply to any adjournment thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer book for shares of the Corporation shall make, within ten (10) days
before any meeting of stockholders, a complete list of the stockholders entitled
to vote at such meeting, arranged in alphabetical order, with the address of and
the number of shares registered in the name of each stockholder. Such list
shall be kept on file at a place within the city where the meeting is to be held
for a period of ten (10) days prior to the meeting and shall be subject to
inspection by any stockholder, and to copying at the stockholder's expense, for
any purpose germane to the meeting, at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting.
SECTION 7. QUORUM. The holders of a majority of the outstanding shares of
the Corporation entitled to vote on a matter, represented in person or by proxy,
shall constitute a quorum for consideration of such matter at any meeting of
stockholders; provided that if less than a majority of the outstanding shares
are represented at said meeting, a majority of the shares so represented may
adjourn the meeting at any time without further notice. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
shall be the act
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of the stockholders, unless the vote of a greater number or voting by classes
is required by the General Corporation Law of the State of Delaware (as now
in effect or as amended from time to time, the "Act"), the Restated
Certificate of Incorporation or these bylaws. At any adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the original meeting. Withdrawal of stockholders
from any meeting shall not cause failure of a duly constituted quorum at that
meeting.
SECTION 8. PROXIES. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his or her duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting.
SECTION 9. VOTING OF SHARES. Unless otherwise provided in the Restated
Certificate of Incorporation, each outstanding share shall be entitled to one
(1) vote upon each matter submitted to vote at a meeting of stockholders.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the Corporation shall be
managed by or under the direction of its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the Corporation shall not be less than five (5) nor more than fifteen (15) and
shall be determined by resolution of the Board of Directors. Each director
shall hold office until the next annual meeting of stockholders and until his or
her successor has been elected and qualified or until his or her earlier
resignation or removal.
SECTION 3. REGULAR MEETINGS. An annual meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after the annual
meeting of stockholders. The Board of Directors may fix the time and place for
holding of additional regular meetings without notice.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or by the Secretary at the
request of a majority of the Board of Directors. The President may fix any
place as the place for holding any special meeting of the Board of Directors.
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SECTION 5. NOTICE. Notice of any special meeting shall be given at least
one (1) business day previous thereto by written notice or telephonically (if
confirmed promptly in writing) to each director at his or her business address.
If mailed, such notice shall be deemed to be delivered three (3) days after
deposited in the United States mail so addressed, with postage thereon prepaid.
The attendance of a director at any meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
SECTION 6. QUORUM. Unless otherwise provided in the Restated Certificate
of Incorporation, a majority of the number of directors fixed by these bylaws
shall constitute a quorum for transaction of business at any meeting of the
Board of Directors, provided that if less than a majority of such number of
directors are present at such meeting, a majority of the directors present may
adjourn the meeting at any time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by the Act, the
Restated Certificate of Incorporation or these bylaws.
SECTION 8. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his or her dissent shall be entered in the minutes of the meeting
or unless he or she shall file his or her written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered or certified mail to the Secretary
of the Corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
SECTION 9. RESIGNATION OF DIRECTORS. A director may resign at any time
upon written notice to the Board of Directors, its chairman, if any, or to the
President or Secretary.
SECTION 10. VACANCIES. Unless otherwise provided in the Restated
Certificate of Incorporation, any vacancy on the Board of Directors and any
directorship to be filled by reason of an increase in the number of directors
may be filled by election at the next annual or special meeting of stockholders
or by a majority of the Board of Directors prior to such annual or special
meeting of stockholders.
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SECTION 11. REMOVAL OF DIRECTORS. One or more of the directors may be
removed, with or without cause, at a meeting of stockholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of directors, except that no director shall be removed at a
meeting of stockholders unless the notice of such meeting shall state that a
purpose of the meeting is to vote upon the removal of one or more directors
named in the notice, and then only the named director or directors may be
removed at such meeting. If a director has been elected by a class or series of
shares, he or she may be removed only by the stockholders of that class or
series.
SECTION 12. TELEPHONE MEETINGS. Members of the Board of Directors or of
any committee of the Board of Directors may participate in and act at any
meeting of the Board or such committee through the use of a conference telephone
or other communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in such meeting shall constitute
attendance and presence in person at the meeting of the person or persons so
participating.
SECTION 13. INFORMAL ACTION BY DIRECTORS. Any action required to be taken
at a meeting of the Board of Directors, or any other action which may be taken
at a meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee, as the case may
be. Any such consent signed by all the directors or all the members of the
committee shall have the same effect as a unanimous vote, and may be stated as
such in any document filed with the Secretary of State or with anyone else.
SECTION 14. COMMITTEES. A majority of the Board of Directors may by
resolution create one or more committees and appoint members of the Board to
serve on any one or more of
such committees. Each committee shall have two or more members who shall serve
at the pleasure of the Board. A majority of any committee shall constitute a
quorum and a majority of a quorum shall be necessary for committee action. Each
committee, to the extent provided by the Board of Directors in such resolution,
shall have and exercise all of the authority of the Board of Directors in the
management of the Corporation, subject to any restriction contained in the Act.
Vacancies in the membership of any committee shall be filled by the Board of
Directors. Each committee shall keep regular minutes of its proceedings and
report the same to the Board when requested. A committee may act by unanimous
consent in writing without a meeting and, subject to action by the Board of
Directors, each
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committee, by a majority vote of its members, shall determine the time and
place of meetings and the notice therefor.
SECTION 15. COMPENSATION. The Board of Directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers or otherwise, notwithstanding any director conflict of interest. By
resolution of the Board of Directors, the directors may be paid their expenses,
if any, of attendance at each meeting of the Board. No such payment previously
mentioned in this Section 15 shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a President,
one or more Vice-Presidents, a Treasurer, a Secretary, and such Assistant
Treasurers, Assistant Secretaries and other officers as may be elected or
appointed by the Board of Directors. Any two or more offices may be held by the
same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected or appointed annually by the Board of Directors at the annual
meeting of the Board of Directors. Vacancies may be filled or new offices
created and filled at any meeting of the Board of Directors. Each officer shall
hold office until his successor has been duly elected and qualified or until his
or her earlier resignation or removal. Election of an officer shall not of
itself create contract rights. Any officer may resign at any time by giving
notice to the Board of Directors or to the President or the Secretary. A
resignation of an officer need not be accepted in order to be effective.
SECTION 3. REMOVAL. Any officer elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interest of the Corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
SECTION 4. PRESIDENT. The President shall be the principal executive
officer of the Corporation. Subject to the direction and control of the Board
of Directors, he/she shall, in general: supervise and control the business
and affairs of the Corporation; see that the resolutions and directions of
the Board of Directors are carried into effect except in those instances in
which that responsibility is specifically assigned to some other person by
the
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Board of Directors; and discharge all duties incident to the office of
President and such other duties as may be prescribed by the Board of
Directors from time to time. He/she shall preside at all meetings of the
stockholders and of the Board of Directors if no Chairman of the Board is
elected by the Board of Directors. Except in those instances in which the
authority to execute is expressly delegated to another officer or agent of
the Corporation or a different mode of execution is expressly prescribed by
the Board of Directors or these bylaws, he/she may execute for the
Corporation certificates for its shares, and any contracts, deeds, mortgages,
bonds, or other instruments which the Board of Directors has authorized to be
executed, and he/she may accomplish such execution either under or without
the seal of the Corporation and either individually or with the Secretary,
any Assistant Secretary, or any other officer thereunto authorized by the
Board of Directors, according to the requirements of the form of the
instrument. He/she may vote all securities which the Corporation is entitled
to vote except as and to the extent such authority shall be vested in a
different officer or agent of the Corporation by the Board of Directors.
SECTION 5. VICE PRESIDENT. The Vice President (or in the event there be
more than one Vice President, each of the Vice Presidents) shall assist the
President in the discharge of his/her duties as the President may direct and
shall perform such other duties as from time to time may be assigned to him/her
by the President or by the Board of Directors. In the absence of the President
or in the event of his/her inability or refusal to act, the Vice President (or
in the event there be more than one Vice President, the Vice Presidents in the
order designated by the Board of Directors, or by the President if the Board of
Directors has not made such a designation, or in the absence of any designation,
then in the order of seniority of tenure as Vice President) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Except in those instances
in which the authority to execute is expressly delegated to another officer or
agent of the Corporation or a different mode of execution is expressly
prescribed by the Board of Directors or these bylaws, the Vice President (or
each of them if there are more than one) may execute for the Corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or other
instruments which the Board of Directors has authorized to be executed, and
he/she may accomplish such execution either under or without the seal of the
Corporation and either individually or with the Secretary, any Assistant
Secretary, or any other officer thereunto authorized by the Board of Directors,
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the Board of Directors or
these bylaws.
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SECTION 6. THE TREASURER. The Treasurer shall: (a) have charge of and be
responsible for the maintenance of adequate books of account for the
Corporation; (b) have charge and custody of all funds and securities of the
Corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the Board of Directors may
determine.
SECTION 7. THE SECRETARY. The Secretary shall: (a) record the minutes of
the stockholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these bylaws; (c) be custodian of the corporate records
and of the seal of the Corporation; (d) keep a register of the post-office
address of each stockholder which shall be furnished to the Secretary by such
stockholder; (e) sign, with the President or a Vice President or any other
officer thereunto authorized by the Board of Directors, certificates for shares
of the Corporation, the issue of which shall have been authorized by the Board
of Directors, and any contracts, deeds, mortgages, bonds or other instruments
which the Board of Directors has authorized to be executed, according to the
requirements of the form of the instrument, except when a different mode of
execution is expressly prescribed by the Board of Directors or these bylaws; (f)
have general charge of the stock transfer books of the Corporation; (g) have
authority to certify the bylaws, resolutions of the stockholders and Board of
Directors and committees thereof, and other documents of the Corporation as true
and correct copies thereof; and (h) perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him/her
by the President or by the Board of Directors.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers and Assistant Secretaries shall perform such duties as shall be
assigned to them by the Treasurer or the Secretary, respectively, or by the
President or the Board of Directors. The Assistant Secretaries may sign with
the President, a Vice President or any other officer thereunto authorized by the
Board of Directors certificates for shares of the Corporation the issue of which
shall have been authorized by the Board of Directors, and any contracts, deeds,
mortgages, bonds or other instruments which the Board of Directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the Board of Directors or these bylaws. The Assistant Treasurers shall, if
required by the Board of Directors,
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give bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine.
SECTION 9. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a director of
the Corporation.
ARTICLE V
NOMINATION OF DIRECTORS AND PRESENTATION
OF BUSINESS AT STOCKHOLDER MEETINGS
SECTION 1. GENERAL. Only such persons who are nominated in accordance
with the procedures set forth in this Article V shall be eligible to serve as
directors and only such business as shall have been brought before the meeting
in accordance with the procedures set forth in this Article V shall be conducted
at a meeting of stockholders.
SECTION 2. NOMINATIONS AND PROPOSALS AT STOCKHOLDER MEETINGS.
Nominations of persons for election to the Board of Directors and the
proposal of business to be considered by the stockholders may be made at a
meeting of stockholders (a) by or at the direction of the Board of Directors
or (b) by any stockholder who is a stockholder of record at the time of the
giving of notice provided for in this Article V, who is entitled to vote at
the meeting of stockholders and who complies with the notice procedures set
forth in Section 3.
SECTION 3. NOTICE PROCEDURES
(a) For nominations or other business to be properly brought by a
stockholder before an annual meeting of stockholders pursuant to subsection (b)
of Section 2 of this Article V, the stockholder must have given timely notice
thereof in writing to the Secretary. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not less than 120 days nor more than 150 days prior to the date of
the Corporation's proxy statement regarding the preceding year's annual meeting;
PROVIDED, HOWEVER, that in the event that the date of the annual meeting is
advanced or delayed by more than 30 days from the date of the preceding year's
annual meeting, notice by the stockholder must be so delivered not less than 120
days nor more than 150 days prior to the date of the current year's annual
meeting.
(b) For nominations to be properly brought by a stockholder before a
special meeting of stockholders pursuant to subsection (b) of Section 2 of this
Article V, the stockholder must have given
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timely notice thereof in writing to the Secretary. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not earlier than the 90th day prior to
such special meeting and not later than the close of business on the later of
(i) the 60th day prior to such special meeting or (ii) the 10th day following
the day on which public announcement is first made of the date of the special
meeting.
(c) For purposes of this Article V, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(d) Each stockholder's notice shall set forth, (1) as to each person whom
the stockholder proposes to nominate for election or reelection as a director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Exchange Act (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; (iii) as to the stockholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination or proposal is made, (1) the name and
address of such stockholder as they appear on the Corporation's books, and of
such beneficial owner, and (2) the class and number of shares of stock of the
Corporation that are owned beneficially and of record by such stockholder and
such beneficial owner.
SECTION 4. DETERMINATION OF COMPLIANCE. The Chairman of the meeting of
stockholders shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Article V and, if any proposed nomination
or business is not in compliance with this Article V, to declare that such
defective nominations or proposal shall be disregarded.
SECTION 5. LIMITATIONS. Notwithstanding the foregoing provisions of this
Article V, (a) if any class or series of stock has the right, voting separately
by class or series, to elect directors at an annual or special meeting of
stockholders, such directors shall be nominated and elected in accordance with
the provisions of this Article V and pursuant to the terms of such
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class or series of stock; and (b) a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Article V. Nothing
in this Article V shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act.
ARTICLE VI
INDEMNIFICATION
Each person who at any time is or shall have been a director, officer,
employee or agent of this Corporation, or is or shall have been serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Corporation and shall be entitled to advancement of expenses
by the Corporation in accordance with and to the full extent permitted by the
Act. The foregoing right of indemnification and advancement of expenses shall
not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise. If authorized by the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of any
person to the full extent permitted by the Act.
ARTICLE VII
SHARES AND THEIR TRANSFER
SECTION 1. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED
SHARES. The issued shares of the Corporation shall be represented by
certificates or shall be uncertificated shares.
Certificates representing shares of the Corporation shall be signed by
the appropriate officers and may be sealed with the seal or a facsimile of
the seal of the Corporation. If a certificate is countersigned by a transfer
agent or registrar, other than the Corporation or its employee, any other
signatures may be facsimile. Each certificate representing shares shall be
consecutively numbered or otherwise identified, and shall also state the name
of the person to whom issued, the number and class of shares (with
designation of series, if any), the date of issue, and that the Corporation
is organized under Delaware law. If the Corporation is authorized to issue
shares of more than one class or of series within a class, the certificate
shall also contain such information or statement as may be required by the
Act.
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Unless prohibited by the Restated Certificate of Incorporation, the Board
of Directors may provide by resolution that some or all of any class or series
of shares shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until the certificate has been
surrendered to the Corporation. Within a reasonable time after the issuance or
transfer of uncertificated shares, the Corporation shall send the registered
owner thereof a written notice of all information that would appear on a
certificate. Except as otherwise expressly provided by law, the rights and
obligations of the holders of uncertificated shares shall be as identical to
those of the holders of certificates representing shares of the same class and
series.
The name and address of each stockholder, the number and class of shares
held and the date on which the shares were issued shall be entered on the books
of the Corporation. The person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be recorded on the books of the Corporation. Transfer of shares
represented by a certificate, except in the case of a lost or destroyed
certificate, shall be made upon surrender for cancellation of the certificate
for such shares. A certificate presented for transfer must be duly endorsed and
accompanied by proper guaranty of signature and other appropriate assurances
that the endorsement is effective. Transfer of an uncertificated share shall be
made on receipt by the Corporation of an instruction from the registered owner
or other appropriate person. The instruction shall be in writing or a
communication in such form as may be agreed upon in writing by the Corporation.
SECTION 3. REPLACEMENT. In case of the loss, destruction, mutilation or
theft of a certificate for any stock of the Corporation, a new certificate of
stock or uncertificated shares in place of any certificate therefor issued by
the Corporation may be issued upon satisfactory proof of such loss, destruction,
mutilation or theft and upon such terms as the Board of Directors may prescribe.
The Board of Directors may in its discretion require the owner of the lost,
destroyed, mutilated or stolen certificate, or his legal representative, to give
the Corporation a bond, in such sum and in such form and with such surety or
sureties as it may direct, and/or to indemnify the Corporation against any claim
that may be made against it with respect to the certificate alleged to have been
lost, destroyed, mutilated or stolen.
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ARTICLE VIII
GENERAL
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 2. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal
may be used by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced, provided that the affixing of the
corporate seal to an instrument shall not give the instrument additional
force or effect or change the construction thereof, and the use of the
corporate seal is not mandatory.
SECTION 3. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 4. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the Act, the Restated Certificate of Incorporation or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Attendance at any meeting
shall constitute waiver of notice thereof unless the person at the meeting
objects to the holding of the meeting because proper notice was not given.
ARTICLE IX
AMENDMENTS
Unless otherwise provided in the Restated Certificate of Incorporation,
these bylaws may be made, altered, amended or repealed by the stockholders or
the Board of Directors, but no bylaw adopted by the stockholders may be altered,
amended or repealed by the Board of Directors.
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EXHIBIT 4.03
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 17, 1997
by and among
FALCON BUILDING PRODUCTS, INC.
HART & COOLEY, INC.
MANSFIELD PLUMBING PRODUCTS, INC.
DEVILBISS AIR POWER COMPANY
SWC INDUSTRIES, INC.
and
EX-CELL MANUFACTURING COMPANY, INC.
and
SMITH BARNEY INC.
BT SECURITIES CORPORATION
CHASE SECURITIES INC.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of June 17, 1997, by and among Falcon Building Products, Inc., a
Delaware corporation (the "COMPANY"), Hart & Cooley, Inc., Mansfield Plumbing
Products, Inc., DeVilbiss Air Power Company, SWC Industries, Inc. and Ex-Cell
Manufacturing Company, Inc. (each a "GUARANTOR" and, collectively, the
"GUARANTORS"), and Smith Barney Inc., BT Securities Corporation, Chase
Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the
initial purchasers (each a "PURCHASER" and, collectively, the "PURCHASERS"),
each of whom has agreed, severally and not jointly, to purchase the Company's
9 1/2% Senior Subordinated Notes due 2007 (the "SERIES A SUBORDINATED NOTES")
and 10 1/2% Senior Subordinated Discount Notes due 2007 (the "SERIES A
SUBORDINATED DISCOUNT NOTES" and, together with the Subordinated Notes, the
"SERIES A SECURITIES") pursuant to and subject to the terms and conditions of
a certain Purchase Agreement, dated June 6, 1997 (the "PURCHASE AGREEMENT"),
by and among the Company, the Guarantors and the Purchasers. In order to
induce the Purchasers to purchase the Series A Securities, the Company and the
Guarantors have agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Purchasers set forth in Section 2 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BROKER-DEALER TRANSFER RESTRICTED SECURITIES: Series B Securities that
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A
Securities that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A
Securities acquired directly from the Company or any of its affiliates).
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the corporate trust office of either of the
Trustees, on which banks are authorized to close.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Securities to be issued in the Exchange Offer, (ii)
maintaining such Registration Statement continuously effective and the keeping
of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar(s) under the Indentures of Series B Securities and the
Guarantees thereof by the Guarantors in the same aggregate principal amount as
the aggregate principal amount of Series A Securities that were tendered by
Holders thereof pursuant to the Exchange Offer.
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DAMAGES PAYMENT DATE: With respect to the Series A Securities, each
Interest Payment Date.
DISCOUNT NOTE INDENTURE: The Indenture, dated as of June 17, 1997, among
the Company, the Guarantors and Harris Trust and Savings Bank, as trustee (the
"DISCOUNT NOTE TRUSTEE"), pursuant to which the Senior Subordinated Discount
Notes and the Guarantees thereof are to be issued, as such Indenture is amended
or supplemented from time to time in accordance with the terms thereof.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Securities and the Guarantees thereof by the Guarantors pursuant to a
Registration Statement under which the Company and the Guarantors shall offer
the Holders of all outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Transfer Restricted Securities held by such
Holders for Series B Securities in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Purchasers propose to sell
the Series A Securities to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and
(7) of Regulation D under the Act ("ACCREDITED INSTITUTIONS").
GUARANTEE: The joint and several Guarantee by the Guarantors of the
obligations of the Company pursuant to the Securities.
HOLDERS: As defined in Section 2(b) hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURES: The Note Indenture and the Discount Note Indenture.
INTEREST PAYMENT DATE: As defined in the Indenture and the Securities.
MANAGEMENT AFFILIATE: Each of William Hall, Gus Athas, Sam Cottone,
Anthony Navitsky and James Knox.
NASD: National Association of Securities Dealers, Inc.
NOTE INDENTURE: The Indenture, dated as of June 17, 1997, among the
Company, the Guarantors and Harris Trust and Savings Bank, as trustee (the "NOTE
TRUSTEE"), pursuant to which the Senior Subordinated Notes and the Guarantees
thereof are to be issued, as such Indenture is amended or supplemented from time
to time in accordance with the terms thereof.
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PARTICIPATING BROKER-DEALER: Any Broker-Dealer that (i) holds Series A
Securities that are Transfer-Restricted Securities and that were acquired for
its own account as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly from the
Company) that intends to participate in the Exchange Offer or (ii) holds Series
B Securities acquired in the Exchange Offer.
PERSON: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
PURCHASER: As defined in the preamble hereto.
RECORD HOLDER: With respect to any Damages Payment Date relating to
Securities, each Person who is a Holder of Securities on the record date with
respect to the Interest Payment Date on which such Damages Payment Date shall
occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Securities and the Guarantees thereof by
the Guarantors pursuant to an Exchange Offer or (b) the registration for resale
of Transfer Restricted Securities pursuant to the Shelf Registration Statement,
which is filed pursuant to the provisions of this Agreement, in each case,
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
SECURITIES: The Series A Securities and the Series B Securities.
SERIES B SENIOR SUBORDINATED NOTES: The Company's 9 1/2% Series B Senior
Subordinated Notes due 2007 to be issued pursuant to the Note Indenture in the
Exchange Offer.
SERIES B SENIOR SUBORDINATED DISCOUNT NOTES: The Company's 10 1/2% Series
B Senior Subordinated Discount Notes due 2007 to be issued pursuant to the
Discount Note Indenture in the Exchange Offer.
SERIES B SECURITIES: The Series B Senior Subordinated Notes and the
Series B Senior Subordinated Discount Notes.
SENIOR SUBORDINATED DISCOUNT NOTES: The Series A Senior Subordinated
Discount Notes and the Series B Senior Subordinated Discount Notes.
SENIOR SUBORDINATED NOTES: The Series A Senior Subordinated Notes and the
Series B Senior Subordinated Notes.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
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SHELF REGISTRATION: The shelf registration filed by the Company pursuant
to Rule 415 under the Act pursuant to Section 4 hereof which provides for
resales of all Transfer Restricted Securities (other than Transfer Restricted
Securities held by Management Affiliates).
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Security, including the Guarantees
thereof, until the earliest to occur of (a) the date on which such Security is
exchanged in the Exchange Offer and entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Security, including the Guarantees thereof,
has been effectively registered under the Act and disposed of in accordance with
a Shelf Registration Statement and (c) the date on which such Security is
distributed to the public pursuant to Rule 144 under the Act or by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein).
TRUSTEES: The Discount Note Trustee and the Note Trustee.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Company shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date, a Registration Statement under the Act
relating to the Series B Securities and the Exchange Offer, (ii) use its best
efforts to cause such Registration Statement to become effective at the earliest
possible time, but in no event later than 180 days after the Closing Date, (iii)
in connection with the foregoing, (A) file all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such Registration
Statement to become effective, (B) file, if applicable, a post-effective
amendment to such Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings in connection with the registration and
qualification of the Series B Securities to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Registration Statement, commence
the Exchange Offer. The Exchange Offer shall be on the
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appropriate form permitting registration of the Series B Securities,
including the Guarantees thereof, to be offered in exchange for the Transfer
Restricted Securities and to permit resales of Securities held by
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20
Business Days. The Company and the Guarantors shall cause the Exchange Offer
to comply with all applicable federal and state securities laws. No
securities other than the Securities, including the Guarantees thereof, shall
be included in the Exchange Offer Registration Statement. The Company and
the Guarantors shall use their best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Company and the Guarantors shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in the Exchange
Offer Registration Statement that any Participating Broker-Dealer may exchange
Series A Securities held by it pursuant to the Exchange Offer; however, such
Participating Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any resales of the Series B
Securities received by such Participating Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Participating Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such resales by Participating
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Participating Broker-Dealer or disclose the amount of Securities held by any
such Participating Broker-Dealer except to the extent required by the Commission
as a result of a change in policy after the date of this Agreement.
The Company and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Securities, including
the Guarantees thereof, acquired by Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities, and to ensure
that it conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer
Registration Statement is declared effective.
The Company and the Guarantors shall provide sufficient copies of the
latest version of such Prospectus to Broker-Dealers promptly upon request at any
time during such one-year period in order to facilitate such resales.
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SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company and the Guarantors are not
required to file an Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities
(other than a Management Affiliate of the Company) shall notify the Company
within 20 Business Days of the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from participating
in the Exchange Offer, or (B) that such Holder may not resell the Series B
Securities acquired by it in the Exchange Offer to the public without delivering
a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Securities
acquired directly from the Company or one of its affiliates, then the Company
and the Guarantors shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange
Offer Registration Statement (in either event, the "SHELF
REGISTRATION STATEMENT") on or prior to the earliest to occur of (1)
the 90th day after the date on which the Company determines that it is
not required to file the Exchange Offer Registration Statement, (2) the
90th day after the date on which the Company receives notice from a Holder
of Transfer Restricted Securities as contemplated by clause (ii) above,
and (3) the 90th day after the Closing Date (such earliest date being the
"SHELF FILING DEADLINE"), which Shelf Registration Statement shall provide
for resales of all Transfer Restricted Securities (other than Transfer
Restricted Securities held by Management Affiliates) the Holders of which
shall have provided the information required pursuant to Section 4(b)
hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before
the 45th day after the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Securities, including
the Guarantees thereof, by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years following the Closing Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 Business Days after receipt of a request
therefor, such information as the Company may reasonably request, including, but
not limited to, information specified by Regulation S-K or otherwise required by
the Commission (such information, "REQUIRED INFORMATION") for use in connection
with any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all Required Information and used its best efforts to
provide all other reasonably requested information. Each Holder as to which any
Shelf Registration Statement is being effected agrees to furnish promptly to the
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Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded, as soon as reasonably
practicable, but in no case more than 15 Business Days, by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective during such period (each such event referred to in
clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Company and the
Guarantors hereby jointly and severally agree to pay liquidated damages to each
Holder of Transfer Restricted Securities with respect to the first 90-day period
immediately following the occurrence of such Registration Default, in an amount
equal to $.05 per week per $1,000 principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.20 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued liquidated damages shall be paid to Record
Holders by the Company by wire transfer of immediately available funds or by
federal funds check on each Damages Payment Date, as provided in the Indentures.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease. If more than one
Registration Default has occurred, is continuing, and is applicable to the same
Transfer Restricted Security, at any time, the Holder of such Transfer
Restricted Security shall only be entitled to receive liquidated damages with
respect to one such Registration Default.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the opinion of counsel to the Company there is a material
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the
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Commission allowing the Company and the Guarantors to Consummate an
Exchange Offer for such Series A Securities. The Company and the
Guarantors hereby agree to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The Company
and the Guarantors hereby agree, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursue a resolution (which need not
be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company or the Guarantors, (B) it is not engaged in, and
does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Series B Securities to
be issued in the Exchange Offer and (C) it is acquiring the Series B
Securities in its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise cooperate in the
Company's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to
be acquired in the Exchange Offer (1) could not under Commission policy as
in effect on the date of this Agreement rely on the position of the
Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5,
1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (including any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K if the resales are of Series B
Securities obtained by such Holder in exchange for Series A Securities
acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May
13, 1988), MORGAN STANLEY AND CO., INC. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above and
(B) including a representation that neither the Company nor any of the
Guarantors have entered into any arrangement or understanding with any
Person to distribute the Series B Securities to be received in the
Exchange Offer and that, to the best of the Company's and the Guarantors'
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Securities in its ordinary course of business and
has no arrangement or understanding with any Person to participate in the
distribution of the Series B Securities received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, if any, the Company and the Guarantors shall comply with
all the provisions of Section 6(c) below and shall use their best efforts to
effect such registration to permit the sale of the Transfer Restricted
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Securities being sold in accordance with the intended method or methods of
distribution thereof, as may be indicated in the information furnished to the
Company pursuant to Section 4(b) hereof and pursuant thereto the Company and the
Guarantors will as expeditiously as possible prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof, within the time periods and otherwise in
accordance with the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, unless otherwise
indicated herein, any Registration Statement and the related
Prospectus required to permit resales of Securities by Broker-Dealers), the
Company and the Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of any Guarantor) for the period specified in Section 3 or 4 of
this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors
shall file promptly an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use their best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the Participating Broker-Dealers and other
underwriter(s), if any, and selling Holders promptly and, if requested by
such Persons, to confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been filed,
and, with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request
by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act
or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or sale
in any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening of
any event that makes any statement of a material fact
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made in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Guarantors shall use their best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) (A) in the case of an Exchange Offer, furnish counsel for
Participating Broker-Dealers, if any, that have given at least five
Business Days' prior written or oral notification to the Company that it
will participate in the Exchange Offer and (B) in the case of a Shelf
Registration, furnish counsel for the Holders of Transfer Restricted
Securities, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of
such Holders and Participating Broker-Dealers, if any, for a period of at
least five Business Days, and the Company and the Guarantors will not file
any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Registration Statement (in
the case of a Shelf Registration Statement) or the Participating
Broker-Dealers (in the case of an Exchange Offer Registration Statement),
shall reasonably object within five Business Days after the receipt
thereof. A Participating Broker-Dealer or selling Holder shall be deemed
to have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission;
(v) (A) in the case of an Exchange Offer, furnish counsel for
Participating Broker-Dealers, if any, that have given at least five
Business Days' prior written or oral notification to the Company that it
will participate in the Exchange Offer and (B) in the case of a Shelf
Registration, furnish counsel for the Holders of Transfer Restricted
Securities, prior to the filing of any document that is to be incorporated
by reference into a Registration Statement or Prospectus included therein,
copies of such document, and, in each case, make the Company's
representatives (and representatives of the Guarantors) available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such Holders, any Participating Broker Dealers or their respective
counsel, reasonably may request;
(vi) make available at reasonable times for inspection by (A) in the
case of an Exchange Offer, Participating Broker-Dealers, if any, and any
attorney or accountant retained by such Participating Broker-Dealer and
(B) in the case of a Shelf Registration, furnish Holders of Transfer
Restricted Securities, and any attorney or accountant retained by such
Holders, all material financial and other records, pertinent corporate
documents and properties of the Company and the Guarantors and cause the
Company's and the Guarantors' officers, directors and employees to supply
all material information reasonably requested by any such Participating
Broker-Dealer, Holder, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to its
effectiveness, in each case, subject to executing a confidentiality
undertaking in customary form and with respect to confidential information
and/or proprietary information of the Company and the Guarantors;
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(vii) (A) in the case of an Exchange Offer, if requested by any
Participating Broker-Dealers, if any, or their counsel, or (B) in the case
of an Shelf Registration, if requested by any Holder of Transfer
Restricted Securities or their counsel, promptly incorporate in any
Registration Statement or Prospectus included therein, pursuant to a
supplement or post-effective amendment if necessary, such material
information as such Participating Broker-Dealers, Holders or their
respective counsel may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such Participating Broker-Dealers, the purchase price being paid
therefor and any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
(viii) furnish (A) in the case of an Exchange Offer, to any
Participating Broker-Dealer, and any other underwriter(s), if any, if
such Participating Broker-Dealer or underwriter(s) have given
prior written or oral notification to the Company that they will
participate in the Exchange Offer, or (B) in the case of an Shelf
Registration, to each selling Holder, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by reference
therein and all exhibits (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(ix) deliver to each selling Holder, each Participating
Broker-Dealer and any other underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Company and the Guarantors hereby consent to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each of the selling Holders, each of the Participating
Broker-Dealers, and each of the other underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(x) in the case of a Shelf Registration and, to the extent that
the Company is required to maintain an effective Exchange Offer
Registration Statement for any Participating Broker-Dealer, enter into
such agreements (including, subject to Section 11 hereof, an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any Registration Statement contemplated by this Agreement, all to such
extent as may be reasonably requested by any Holder of Transfer Restricted
Securities or Participating Broker-Dealer in connection with any sale or
resale pursuant to any Registration Statement contemplated by this
Agreement; PROVIDED, HOWEVER, that the Company shall not be required to
enter into any underwriting agreement which is on terms less favorable to
the Company than the Purchase Agreement; and whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company and the Guarantors shall:
(A) furnish (or in the case of paragraphs (2) and (3), use its
best efforts to furnish) to each Selling Holder of Transfer Restricted
Securities, upon the effectiveness of the Shelf Registration
Statement, and to each Participating Broker-Dealer upon five Business
Days' prior written or oral notice to the Company that it is
participating in the Exchange Offer, but in no case prior to the
Consummation of the Exchange Offer:
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(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
Chief Executive Office, President or any Vice President and (z) a
principal financial or accounting officer of the Company and the
Guarantors, confirming, as of the date thereof, the matters set
forth in paragraphs (l) and (m) of Section 7 of the Purchase
Agreement and such other matters as such parties may reasonably
request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors, covering the matters set forth in
paragraphs (d) and (e) of Section 7 of the Purchase Agreement and
such other matter as such parties may reasonably request, and in
any event including a statement to the effect that such counsel
has participated in conferences with officers and other
representatives of the Company and the Guarantors,
representatives of the independent public accountants for the
Company and the Guarantors, the Purchasers' representatives and
the Purchasers' counsel in connection with the preparation of
such Registration Statement and the related Prospectus and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to a large extent
upon facts provided to such counsel by officers and other
representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective, and, in the
case of the Exchange Offer Registration Statement, as of the date
of Consummation, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement as
of its date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 7(g) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
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<PAGE>
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
and the Guarantors pursuant to this clause (x), if any.
If at any time during, in the case of an Exchange Offer, the one-year
period contemplated in the final two paragraphs of Section 3(c) hereof,
or, in the case of a Shelf Registration, the two-year period contemplated
in the final sentence of Section 4(a) hereof, the representations and
warranties of the Company and the Guarantors contemplated in clause (A)(1)
above cease to be true and correct, the Company or the Guarantors shall so
advise the Participating Broker-Dealers, if any, and each selling Holder
promptly and, if requested by such Persons, shall confirm such advice in
writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, Participating Broker
Dealers and other underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders, Participating Broker-Dealers or
other underwriter(s) may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Shelf Registration
Statement; PROVIDED, HOWEVER, that neither the Company nor the Guarantors
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A
Securities covered by the Shelf Registration Statement, Series B
Securities, having an aggregate principal amount equal to the aggregate
principal amount of Series A Securities surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Series B
Securities to be registered in the name of such Holder or in the name of
the purchaser(s) of such Securities, as the case may be; in return, the
Series A Securities held by such Holder shall be surrendered to the
Company for cancellation;
(xiii) cooperate with the selling Holders, Participating
Broker-Dealers and other underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders, Participating Broker-Dealers or
other underwriter(s), if any, may request at least two Business Days prior
to any sale of Transfer Restricted Securities made by such person;
(xiv) use their reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above and use their reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
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(xv) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustees under the Indentures with certificates for the
Transfer Restricted Securities which are in a form eligible for deposit
with the Depositary Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any Participating Broker-Dealer or other underwriter (including any
"qualified independent underwriter") that is required to be retained in
accordance with the rules and regulations of the NASD;
(xviii) otherwise use their best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to their security holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158 under
the Act (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts Underwritten
Offering or (B) if not sold to underwriters in such an offering, beginning
with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement;
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the
Trustees and the Holders of Securities to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use their best
efforts to cause the Trustees to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner;
(xx) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company and the Guarantors are then
listed if requested by the Holders of a majority in aggregate principal
amount of Series A Securities or the managing underwriter(s), if any; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15(d) of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing (the "ADVICE") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all
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<PAGE>
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Transfer Restricted Securities that was current
at the time of receipt of such notice. In the event the Company shall give
any such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by the number of days during the period from and including
the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or any Guarantor's
performance of or compliance with this Agreement will be borne by the Company
and the Guarantors, regardless of whether a Registration Statement becomes
effective, including, without limitation: (i) all registration and filing fees
and expenses (including filings made by any Purchaser or Holder with the NASD
(and, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and regulations
of the NASD)); (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Securities to be issued in the Exchange
Offer and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company, the
Guarantors and, subject to Section 7(b) below, the Holders of Transfer
Restricted Securities; and (v) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company and the Guarantors will, in any event, bear their
respective internal expenses (including, without limitation, all salaries and
expenses of their respective officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by the Company
and the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Purchasers and the Holders of Transfer Restricted Securities
being tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION AND CONTRIBUTION
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless each Holder and each person, if any, who controls a
Holder within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, any Preliminary
Prospectus or the Prospectus or in any amendment or supplement thereto arising
out of or based upon any omission or alleged omission to state therein a
material fact required
15
<PAGE>
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating to
the Holders furnished in writing to the Company by or on behalf of the
Holders expressly for use in connection therewith. The foregoing indemnity
agreement shall be in addition to any liability which the Company may
otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Holders or any person controlling the Holders in respect of which indemnity
may be sought against the Company or any Guarantor, the Holders or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "INDEMNIFYING PARTIES"), and such
indemnifying parties shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. The Holders or
any such controlling person shall have the right to employ separate counsel
in any such action, suit or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Holders or such controlling person unless (i) the indemnifying parties
have agreed in writing to pay such fees and expenses, (ii) the indemnifying
parties have failed to assume the defense and employ counsel, or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both the Holders or such controlling person and the
indemnifying parties and the Holders or such controlling person shall have
been advised by its counsel that representation of such indemnified party and
any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
party shall not have the right to assume the defense of such action, suit or
proceeding on behalf of the Holders or such controlling person). It is
understood, however, that the indemnifying parties shall, in connection with
any one such action, suit or proceeding or separate but substantially similar
or related actions, suits or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of only one separate firm of attorneys (in
addition to any local counsel) at any time for the Holders and controlling
persons not having actual or potential differing interests with the Holders
or among themselves, which firm shall be designated in writing by a majority
of the Holders, and that all such fees and expenses shall be reimbursed on a
monthly basis to the extent provided in paragraph (a) hereof. The
indemnifying parties shall not be liable for any settlement of any such
action, suit or proceeding effected without their written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the indemnifying parties
agree to indemnify and hold harmless the Holders, to the extent provided in
paragraph (a), and any such controlling person from and against any loss,
claim, damage, liability or expense by reason of such settlement or judgment.
(c) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless the Company and the Guarantors, and their respective directors and
officers, and any person who controls the Company or any Guarantor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the indemnity from the Company and the Guarantors to the
Holders set forth in paragraph (a) hereof, but only with respect to information
relating to the Holders furnished in writing by or on behalf of the Holders
expressly for use in any Registration Statement, any Preliminary Prospectus or
the Prospectus or in any amendment or supplement thereto. If any action, suit
or proceeding shall be brought against the Company or any Guarantor, any of
their respective directors or officers, or any such controlling person based on
any Registration Statement, any Preliminary Prospectus or the Prospectus or in
any amendment or supplement thereto, and in respect of which indemnity may be
sought against the Holders pursuant to this paragraph (c), the Holders shall
have the rights and duties given to the Company and the Guarantors by paragraph
(b)
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above (except that if the Company and the Guarantors shall have assumed the
defense thereof the Holders shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the Holders' expense), and the Company
and the Guarantors, their respective directors and officers, and any such
controlling person shall have the rights and duties given to the Holders by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which the Holders may otherwise have.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Holders on the other hand from the offering of
the Series B Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Holders on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Holders on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total proceeds received by such
Holder upon its sale of Transfer Restricted Securities which otherwise would
give rise to the indemnification obligation. The relative fault of the Company
on the one hand and the Holders on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the Holders
on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company, the Guarantors and the Holders agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above.
The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating any claim or defending any
such action, suit or proceeding. Notwithstanding the provisions of this
Section 8, no Holder shall be required to contribute any amount in excess of
the amount by which the total proceeds received by such Holder with respect
to the sale of its Securities, giving rise to its obligations hereunder,
exceeds the sum of (A) the amount paid by such Holders for such Securities,
plus (B) the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Guarantors set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of the Holders or any
17
<PAGE>
person controlling the Holders, the Company, the Guarantors, their respective
directors or officers or any person controlling the Company or any Guarantor,
(ii) acceptance of any Securities in the Exchange Offer or otherwise, and
(iii) any termination of this Agreement. A successor to a Holder or any
person controlling a Holder, or to the Company, the Guarantors, their
respective directors or officers or any person controlling the Company or any
Guarantor, shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 8.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
SECTION 9. RULE 144A
The Company and the Guarantors hereby agree with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make available
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected, subject to the consent of the Company,
which consent shall not be unreasonably withheld, by the Holders of a majority
in aggregate principal amount of the Transfer Restricted Securities included in
such offering.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. The Company and the Guarantors agree that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
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(b) NO INCONSISTENT AGREEMENTS. The Company and the Guarantors will
not on or after the date of this Agreement enter into any agreement with respect
to their respective securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to their respective securities to
any Person. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's or the Guarantor's securities under any agreement in effect on the
date hereof.
(c) ADJUSTMENTS AFFECTING THE SECURITIES. The Company and the
Guarantors will not take any action, or permit any change to occur, with respect
to the Securities or the Guarantees that would materially and adversely affect
the ability of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer (or registered in a Shelf Registration) and that does not affect directly
or indirectly the rights of other Holders whose securities are not being
tendered pursuant to such Exchange Offer (or registered in such Shelf
Registration) may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or any Guarantor:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Telecopier No.: (312) 906-8402
Attention: Gus Athas
With a copy to:
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, NY 10166-0193
Telecopier No.: (212) 351-4035
Attention: Charles K. Marquis
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All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the applicable Trustee
at the address specified in the applicable Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company and the
Guarantors with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FALCON BUILDING PRODUCTS, INC.
By: /s/ Gus J. Athas
--------------------------------
Name:
Title:
HART & COOLEY, INC.
By: /s/ Gus J. Athas
--------------------------------
Name:
Title:
MANSFIELD PLUMBING PRODUCTS, INC.
By: /s/ Gus J. Athas
--------------------------------
Name:
Title:
DEVILBISS AIR POWER COMPANY
By: /s/ Gus J. Athas
--------------------------------
Name:
Title:
SWC INDUSTRIES, INC.
By: /s/ Gus J. Athas
--------------------------------
Name:
Title:
EX-CELL MANUFACTURING COMPANY, INC.
By: /s/ Gus J. Athas
--------------------------------
Name:
Title:
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SMITH BARNEY INC.
BT SECURITIES CORPORATION
CHASE SECURITIES INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: Smith Barney Inc.
By: /s/ Michael Klein
--------------------------
Name: Michael Klein
Title: Managing Director
22
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EXHIBIT 10.01
FINANCING ADVISORY AGREEMENT
This Agreement is made effective as of the 20th day of March, 1997, by
and between Investcorp International, Inc., a Delaware corporation ("III") and
FBP Acquisition Corp., Inc. a Delaware corporation ("FBP").
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of March
20, 1997, by and between FBP and Falcon Building Products, Inc., a Delaware
corporation ("Falcon"), FBP will merge with and into Falcon (the "Merger"), with
Falcon surviving;
WHEREAS, FBP intends to arrange borrowing facilities with one or more
financial institutions unaffiliated with III in the aggregate amount of
approximately $300 million (the "Financing");
WHEREAS, III and its officers, employees, agents and affiliates are
experienced in the field of obtaining debt financing and are willing to act as a
financial advisor to FBP; and
WHEREAS, FBP is desirous to avail itself of the assistance and
expertise of III in arranging the Financing;
NOW, THEREFORE, the parties do hereby agree as follows:
1. SERVICES OF III. III shall assist FBP in arranging the
Financing. In connection therewith, III may, solely in its discretion and on
behalf of FBP:
(a) seek out financial institutions that may provide the
Financing;
(b) enter into negotiations with banks and other financial
institutions regarding the terms and conditions upon which the
Financing is to be provided;
(c) advise, conduct and participate in the negotiation and
drafting of any agreements, contracts, or other documents relating to
the placement of the Financing; and
(d) take all such other actions as it may deem necessary to
arrange for the Financing.
2. FEES. In consideration of the services contemplated by Section 1
hereof, FBP shall pay to III a fee
<PAGE>
in the amount of $4,200,000, payable on the closing of the Merger.
3. REIMBURSEMENT. FBP shall pay directly any commitment fees,
arrangement fees, or other actual out-of-pocket expenses incurred in connection
with the performance of III's services under this Agreement, including, but not
limited to, fees and disbursements of III's legal counsel.
4. COOPERATION AND INFORMATION. FBP shall cooperate with III in the
performance of its obligations hereunder and shall furnish III with such
information as III may request (all such information so furnished hereinafter
referred to as the "Information"). FBP recognizes and confirms that III:
(a) will use and rely primarily on the Information and on
information available from generally recognized public sources in
performing the services contemplated by this Agreement without having
independently verified the same;
(b) does not assume responsibility for the accuracy or
completeness of the Information; and
(c) will not make an appraisal of any of the assets of FBP or of
Falcon.
All information so furnished to III will be kept confidential by III, except
such information as is in the public domain or as FBP agrees may be disclosed or
as III is required by law to disclose; PROVIDED, HOWEVER, that III may provide
such Information as it deems necessary or appropriate to financial institutions
in connection with obtaining, negotiating or arranging the Financing in
accordance with the terms of this Agreement.
5. TERMINATION. Subject to the provisions of Paragraph 6 hereof,
which shall survive any termination of this Agreement, this Agreement shall
terminate if the Merger is not consummated on or before September 17, 1997,
unless extended by the parties' mutual consent.
6. INDEMNIFICATION. FBP shall:
(a) indemnify III and hold it harmless against any losses,
claims, damages or liabilities to which III may become subject
arising in any manner out of or in connection with the rendering of
services by III
2
<PAGE>
hereunder, unless it is finally judicially determined
that such losses, claims, damages or liabilities arose primarily out
of the gross negligence or bad faith of III; and
(b) reimburse III immediately for any legal or other expenses
reasonably incurred by it in connection with investigating, preparing
to defend or defending any lawsuits or other proceedings arising in
any manner out of or in connection with the rendering of services by
III hereunder; PROVIDED, HOWEVER, that in the event a final judicial
determination is made to the effect specified in subparagraph 6(a)
above, III will remit to FBP any amounts reimbursed under this
subparagraph 6(b). FBP agrees that (i) the indemnification and
reimbursement commitments set forth in this paragraph shall apply
whether or not III is a formal party to any such lawsuits, claims or
other proceedings, (ii) III is entitled to retain separate counsel of
its choice at the expense of FBP in connection with any of the matters
to which such commitments relate, and (iii) such commitments shall
extend upon the terms set forth in this paragraph to any controlling
person, director, officer, employee or agent of III; PROVIDED,
HOWEVER, that to the extent that III retains separate counsel in
connection with any matters set forth in this subparagraph 6(b), such
counsel shall coordinate its efforts with counsel to FBP.
7. AMENDMENTS. No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall be effective unless the same shall be in writing and signed by the parties
to this Agreement and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
8. NOTICES. All notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when mailed, if the same shall be
sent by registered or certified mail, return receipt requested, and the mailing
date shall be deemed the date from which all time periods pertaining to a date
of notice shall run. Notices shall be addressed to the parties at the following
addresses:
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If to III, to:
Investcorp International, Inc.
280 Park Avenue
37th Floor
New York, New York 10017
Attention: President
with a copy to:
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, NW
Washington, D.C. 20036
Attention: Peter L. Baumbusch, Esq.
If to FBP, to:
FBP Acquisition Corp.
c/o Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: E. Michael Greaney
9. ENTIRE AGREEMENT. This Agreement shall constitute the entire
Agreement between the parties with respect to the subject matter hereof, and
shall supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating thereto.
10. APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of New York and shall inure to the
benefit of, and be binding upon, III and FBP and their respective successors and
assigns.
[This space intentionally left blank]
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IN WITNESS WHEREOF, each of the parties has caused this Financing
Advisory Agreement to be executed and delivered by its duly authorized officer
or agent as set forth below.
INVESTCORP INTERNATIONAL, INC.
By: /s/ Jon P. Hedley
------------------------------
Name:
Title:
FBP ACQUISITION CORP., INC.
By: /s/ Christopher J. Stadler
------------------------------
Name:
Title:
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EXHIBIT 10.03
AGREEMENT FOR MANAGEMENT ADVISORY,
STRATEGIC PLANNING AND
CONSULTING SERVICES
THIS AGREEMENT is made effective as of the 17th day of June, 1997, by
and between Investcorp International, Inc., a Delaware corporation ("III"), and
FBP Acquisition Corp., Inc., a Delaware corporation ("FBP").
WHEREAS, III, by and through its officers, employees, agents and
affiliates has developed in connection with the conduct of its business and
affairs various areas of expertise in the fields of management, finance,
marketing, and strategic planning; and
WHEREAS, FBP desires to avail itself of the expertise of III in those
areas hereinabove enumerated and in which III is acknowledged to have expertise,
for a period of five (5) years from the effective date hereof, said 5-year
period being referred to as the "Term";
NOW, THEREFORE, the parties do hereby agree as follows:
1. APPOINTMENT. FBP hereby appoints III to render management
advisory, strategic planning and consulting services to FBP on an exclusive
basis during the Term as herein contemplated.
2. III. During the Term, III shall render to FBP, by and through
such of its officers, employees, agents and affiliates as III, in its sole
discretion, shall designate from time to time, management advisory, strategic
planning and consulting services. Said services shall consist of advice
concerning management, finance, marketing, strategic planning, and such other
services as shall be requested from time to time by the Board of Directors of
FBP. FBP acknowledges and agrees that the services to be provided by III
hereunder do not encompass services that would be required in connection with
an acquisition, restructuring or initial public offering by FBP, or a private
sale of the stock or assets of FBP. Should FBP desire to engage III to
provide financial advisory services in connection with any such type of
transaction, such engagement shall be subject to the negotiation of mutually
acceptable fee arrangements for such additional services, albeit the
indemnification obligations of FBP as set forth in paragraph 7 of this
Agreement shall apply to any such additional services performed by III.
<PAGE>
3. FEES. In consideration of III's performance of the
above-described services, FBP shall pay to III, in cash, consulting services
fees at the rate of $1,000,000 per year for the duration of the Term
(collectively, the "Fee"). It is recognized that the services provided under
this Agreement will not be evenly distributed over time and that a significant
portion of such services will be performed early in the period of time covered
by this Agreement. It is also recognized that, subject to the terms of this
Agreement, FBP is committed to pay the full amount payable hereunder, and the
Fee, once paid, is non-refundable. The full amount of the Fee for the entire
Term shall be paid on its Effective Date.
4. REIMBURSEMENTS. Within 15 calendar days of delivery of III's
invoice, FBP shall reimburse III for its actual out-of-pocket expenses incurred
in connection with the performance of services pursuant to this Agreement.
5. DEFAULT. In the event that FBP fails to pay any part of the Fee
as set forth in Paragraph 3 above when and as due, and FBP does not cure such
failure prior to the 10th day of the month in which such payment is due, then
FBP shall be in default under this Agreement and III shall be entitled to
receive payment in full of the unpaid portion of the Fee upon making written
demand upon FBP for such payment. Upon delivery of such written demand, III
shall be excused from rendering any further services pursuant to this Agreement.
The aforesaid right and privilege of III to withhold services is intended to be
in addition to any and all other remedies available because of FBP's default,
including III's right to payment of all fees set forth herein. Further, in the
event of a default by FBP, FBP agrees to reimburse III for any and all costs and
expenses incurred by III, including, without limitation, reasonable counsel fees
and expenses, in connection with such default and any litigation or other
proceedings instituted for the collection of payments due hereunder.
6. PERMISSIBLE ACTIVITIES. Nothing herein shall in any way preclude
III from engaging in any business activities or from performing services for its
own account or for the account of others.
7. INDEMNIFICATION. FBP shall indemnify and hold harmless III and
its directors, officers, employees, agents and controlling persons (each
being an "Indemnified Party") from and against any and all losses, claims,
damages and liabilities, joint or several, to which such Indemnified Party
may become subject under any applicable federal or state law, or otherwise,
relating to or arising out of the management, strategic planning and
consulting services contemplated by, this Agreement. FBP shall reimburse any
Indemnified Party for
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<PAGE>
all costs and expenses (including reasonable counsel fees and expenses)
incurred in connection with the investigation of, preparation for or defense
of any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party. FBP shall not
be liable under the foregoing indemnification provision to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by
a court of competent jurisdiction to have resulted primarily from the bad
faith or gross negligence of III.
8. AMENDMENTS. No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in writing and signed
by the parties to this Agreement and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
9. NOTICES. Any and all notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when mailed, if the same shall be
sent by registered or certified mail, return receipt requested, and the mailing
date shall be deemed the date from which all time periods pertaining to a date
of notice shall run. Notices shall be addressed to the parties at the following
addresses:
If to III, to:
Investcorp International, Inc.
280 Park Avenue
37th Floor
New York, New York 10017
Attention: President
with a copy to:
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: Peter L. Baumbusch, Esq.
If to FBP, to:
FBP Acquisition Corp., Inc.
c/o Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: E. Michael Greaney
10. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties with
3
<PAGE>
respect to the subject matter hereof, and shall supersede all previous oral
and written (and all contemporaneous oral) negotiations, commitments,
agreements and understandings relating hereto.
11. ASSIGNMENT. This Agreement shall be assignable by either party
hereto provided that the non-assigning party consents in writing to such
assignment.
12. APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of Delaware and shall inure to the benefit of, and
be binding upon, III and FBP and their respective successors and assigns.
13. NO CONTINUING WAIVER. The waiver by any party of any breach of
this Agreement shall not operate or be construed to be a waiver of any
subsequent breach.
IN WITNESS WHEREOF, each of the parties has caused this Agreement for
Management Advisory, Strategic Planning and Consulting Services to be executed
and delivered by its duly authorized officer or agent as set forth below.
INVESTCORP INTERNATIONAL, INC.
By: /S/ JON P. HEDLEY
----------------------------
Name:
Title:
FBP ACQUISITION CORP., INC.
By: /S/ CHRISTOPHER J. STADLER
----------------------------
Name:
Title:
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<PAGE>
EXHIBIT 10.04.1
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made effective as of the 22nd day of May, 1997, the
"Effective Date," by and between Falcon Building Products, Inc. (the "Company"),
and Gus J. Athas, an individual residing at 1240 Hawthorne Lane, Downers Grove,
Illinois 60515 (the "Employee").
WHEREAS, as a condition to an Agreement and Plan of Merger between the
Company and FBP Acquisition Corp., Inc. (the "Merger Agreement"), the Employee
has agreed to be employed by the Company on and after the date as of which such
merger is effective (the "Merger Date"); and
WHEREAS, the Company wants to employ the Employee and the Employee wants to
be employed by the Company on and after the Effective Date in accordance with
the terms of this Employment Agreement, which Employment Agreement supersedes
and replaces any and all other employment agreements between Employee and the
Company;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby agrees to employ the Employee
as an Executive Vice President and its General Counsel and Secretary and the
Employee hereby agrees to serve the Company in such capacity, subject to the
terms and conditions hereof for the period commencing on the Merger Date and
continuing until terminated as provided in Section 5 (the "Termination Date").
The Employee is being engaged on a full time basis to perform services
consistent with the titles of Executive Vice President, General Counsel and
Secretary. Prior to the Merger Date, Employee will be compensated in accordance
with the terms of his employment as in effect immediately prior to the Effective
Date.
2. COMPENSATION. The Employee shall be paid for the performance of his
duties under this Agreement during the term of his employment with the Company
in accordance with the following:
(a) BASE COMPENSATION. The Company shall pay the Employee base
compensation, which on and after the Merger Date shall be at the rate of not
less than $330,000 per year ("Base Compensation"). The Employee's Base
Compensation shall be payable semi-monthly, shall not be decreased and shall be
subject to annual or periodic review beginning June 1, 1998 in accordance with
the Company's customary practices for its other executives and be increased in
the sole discretion of the Company's Board of Directors (the "Board"). In the
event the Board increases the Employee's Base Compensation, such compensation
may not be decreased thereafter.
(b) BONUS. The Company shall pay the Employee a bonus for each
fiscal year based upon target performance goals (the "Target") to be mutually
agreed upon by the Board and the Employee and measured as a percentage of the
Employee's Base Compensation. Notwithstanding the preceding sentence, if the
Target is achieved, the Employee shall be entitled to a bonus the amount of
which is no less than 60% of Base Compensation. The bonus shall be payable
as soon after the end of each fiscal year as it can be determined, but in any
event within ninety (90) days thereafter. If the employment of Employee is
terminated at other than year-end, the bonus will be prorated to reflect the
period during the year Employee was employed.
(i) For the portion of the 1997 fiscal year which ends
immediately prior to the Merger Date, the Employee shall be entitled to a
prorated bonus under the terms of the bonus plan as in effect on the
Effective Date.
(ii) For fiscal year 1997, the Target shall be based upon
the Company's earnings before interest, taxes, depreciation and
amortization from continuing operations and before corporate overhead and
Ultravent charges ("Subsidiary EBITDA"). For fiscal year 1997, Subsidiary
EBITDA is estimated to be $93.7 million and the bonus for fiscal year 1997
will be paid pro rata based upon the Subsidiary EBITDA earned after the
Merger Date.
(iii) For the portion of the 1997 fiscal year which commences
on the Merger Date, the employee shall be entitled to a bonus provided that
at least 85% of the Target is achieved. The amount of the bonus shall be
pro rated for the portion of the fiscal year following the Merger
<PAGE>
Date from an amount determined by straight line interpolation from 30% of
Base Compensation if 85% of Target is achieved to 75% of Base Compensation
if 107.5% of the Target is achieved. The Board may, in its sole and
absolute discretion, increase the bonus by an amount up to 15% of Base
Compensation.
(c) TRANSACTION BONUS. The Company shall pay the Employee a bonus
equal to $300,000 (the "Transaction Bonus"); PROVIDED, HOWEVER, that if the
Company reasonably determines that the payment of such Transaction Bonus,
together with the accelerated vesting of the Employee's stock options and
restricted stock previously granted by the Company, may result in an excise tax
under section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the amount of such Transaction Bonus shall be reduced to the extent
reasonably determined by the Company to be necessary or desirable to avoid such
excise tax, and the amount of such reduction shall be mutually agreed to by the
Company and the Employee prior to the Merger Date. The Transaction Bonus shall
be paid to the Employee in a lump sum on the Merger Date. Notwithstanding the
foregoing, the Company shall not be obligated to pay the Transaction Bonus if
the Employee is not employed by the Company on the Merger Date.
3. BENEFITS.
(a) The Employee shall be entitled to participate in and receive
benefits under any retirement plan, savings plan, related override benefit plan,
nonqualified deferred compensation plan, health plan, disability plan, life
insurance plan and any other employee benefit plan or arrangement (collectively,
"Benefit Plans") made available from time to time to executives of the Company.
The Employee shall be entitled to such other benefits, including vacation,
executive perquisites, fringe benefits and expense reimbursements as currently
in effect for executives of the Company and as the same may from time to time be
amended.
(b) The Company shall establish a funded supplemental executive
retirement plan in which the Employee participates as of the Merger Date. This
funded supplemental executive retirement plan, based on seven (7) credited years
service with the Company, shall provide for ten (10) annual payments of $200,000
each year, net-after applicable income taxes, commencing on the date the
Employee retires from the Company, with the vesting schedule, funding mechanism
and payment schedule to be mutually agreed to prior to the Merger Date. If the
Employee dies during the period he is collecting supplemental retirement
benefits, the payments provided pursuant to this section 3(b) will thereafter be
payable to his spouse or estate.
4. STOCK OWNERSHIP.
(a) STOCK OPTIONS. On the Merger Date, the Company shall grant the
Employee seven-year stock options on shares equal to no less than .60% of the
Company's then-outstanding shares of common stock. To the extent permitted by
law, such options shall constitute incentive stock options under the Internal
Revenue Code. Such options will be exercisable at a price equal to the Cash
Election Price (as defined in the Merger Agreement), subject to adjustment for
changes in capital, and will provide for seven (7) year cliff vesting with four
(4) year accelerated vesting based on meeting agreed-upon financial performance
and acquisition targets and/or cumulative performance vesting goals, with
further accelerated vesting in the event of an IPO or other exit scenarios
provided in the latter event that agreed upon IRR target levels are achieved.
Additionally, these options shall include put provisions in the event of the
Employee's death, disability or retirement, and call provisions in the event of
termination of employment -- both put and call provisions to be exercised at
fair market value. Said provisions and such other additional reasonable terms
and conditions will be set forth in a stock option plan to be adopted by the
Company before the Merger Date.
(b) OWNERSHIP. On the Merger Date, the Employee shall purchase or
retain ownership of no less than .17% of the Company's outstanding shares of
common stock on the Merger Date.
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(c) SENIOR EXECUTIVE STOCK PURCHASE PLAN. On and after the Merger
Date, the Company shall continue the loan program under the Company's Senior
Executive Stock Purchase Plan as in effect immediately prior to the Effective
Date and the change in control provision of such plan shall not take effect by
reason of the merger contemplated by the Merger Agreement.
(d) PUT/CALL RIGHTS. The Employee will have rights to put to the
Company and the Company shall have rights to call from the Employee shares of
capital stock of the Company owned or acquired by the Employee on the Merger
Date without restriction, as set forth on attached Exhibit A. The parties will
agree on a fair and reasonable valuation process no later than the Merger Date.
5. TERMINATION.
(a) This Agreement may be terminated by the Company by written
notice to the Employee only by action of a majority of the Board. The
termination will not be effective until the later of three years after the
Merger Date or two years after written notice of termination is given to the
Employee unless the termination is for "Good Cause." "Good Cause" shall mean
(i) the Employee's conviction of any embezzlement or any felony involving
fraud or breach of trust relating to the performance of the Employee's
duties, (ii) the Employee's willful engagement in gross misconduct in the
performance of his duties, (iii) the Employee's death, or (iv) permanent
disability which materially impairs the Employee's performance of his duties.
Termination for "Good Cause" shall be effective immediately.
(b) The Employee may terminate this Agreement by giving the Company
written notice of termination. The termination will be effective sixty (60)
days after written notice of termination is given to the Company. The Employee
may terminate this Agreement for "Good Reason." "Good Reason" shall exist if
(i) the Company continues a reduction in compensation or expenditures for
Benefit Plans, relocates outside the Chicago area or commits another material
breach of this Agreement for more than 30 days after being notified in writing
by the Employee of such breach provided the Employee has given such notice to
the Company within 30 days of first becoming aware of the facts constituting
such breach, (ii) the Company gives the Employee a notice of termination without
Good Cause (as defined above) PROVIDED the Employee terminates this Agreement
within 30 days of receiving such notice, (iii) a "Change of Control" occurs, and
the Employee's employment hereunder is terminated by either party for any reason
other than "Good Cause," or (iv) the Employee retires from the Company on a date
that is mutually agreed upon by the Company and the Employee. A "Change of
Control" shall occur when any person (as such term is used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, the "Exchange Act")
other than a majority shareholder on the Merger Date is or becomes the
"beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act) of
securities of the Company representing more than 35% of the combined voting
power of the Company's then outstanding voting securities; provided, however,
that no Change of Control shall be deemed to have occurred if beneficial
ownership by such person is less than 50% of the combined voting power of the
Company's then outstanding voting securities and the original investors in FBP
Acquisition Corp., Inc. who at the Merger Date received voting securities of the
Company beneficially own at least 20% of the combined voting power of the
Company's then outstanding voting securities.
(c) If the Company by written notice to the Employee elects to
terminate his employment with the Company prior to the Termination Date provided
by Section 5(a) for other than "Good Cause," or, if the Employee terminates this
Agreement and simultaneously therewith his employment by the Company and its
parent and subsidiary corporations for Good Reason, then the following shall
occur:
(i) All of the Employee's outstanding and unexercised
options to purchase stock of the Company shall, to the extent vested at the
date of notice of termination, continue to be exercisable, for a period
ending on the earlier of the date 18 months from the date of such notice
and the specific expiration date stated in the option.
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(ii) The Company for a period of two years from the date of
notice of such termination or through three years after the Merger Date
whichever is later (the "Severance Period") shall continue to provide to
the Employee (1) his Base Compensation, at the rate most recently
determined, (2) a bonus for each fiscal year (and a pro rata amount for
each partial year) in an amount equal to the latest Target bonus, (3)
health coverage, life insurance and disability insurance (subject in the
case of long-term disability to the availability of such coverage under
the Company's insurance policy), (4) suitable office space and
secretarial services, and (5) reimbursement for outplacement services. If
the Employee dies during the Severance Period, the payments provided by
(1) and (2) above shall be made to the Employee's spouse at the time of
his death as long as she is alive and if she should not survive him or
shall subsequently die, to the estate of the Employee, and the health
coverage shall be made available to his spouse and eligible dependents.
The period of health coverage provided by this Agreement shall reduce the
period of COBRA coverage which would otherwise be required.
(iii) The Employee will be fully vested in his supplemental
retirement benefits specified in section 3(b) above and all other
retirement and savings plans.
(d) The parties agree that the payments and benefits provided for in
subsection (c) of this Section shall be deemed to constitute liquidated damages
for the Company's breach or constructive breach of this Agreement and payment
for the non-competition provisions of this Agreement, and the Company agrees
that (i) the Employee shall not be required to mitigate his damages by seeking
other employment or otherwise, and (ii) the Company's payments and other
obligations under this Agreement shall not be reduced in any way by reason of
any compensation received by the Employee from sources other than the Company
and its affiliates, except as otherwise expressly provided herein.
6. ENTIRE AGREEMENT. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. NOTICE. Any Notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
If to the Company: If to the Employee:
President To the address shown at the
Falcon Building Products, Inc. beginning of this Employment
2 North Riverside Plaza Agreement
Chicago, Illinois 60606
or such other address as shall be furnished in writing by one party to the
other.
8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision had been omitted.
9. SUCCESSORS. The Company's obligations hereunder shall be binding
legal obligations of any successor to all or substantially all of the
Company's business by purchase, merger, consolidation or otherwise. The
Company may not sell or otherwise dispose of all or substantially all of its
assets or merge or consolidate with any other entity without making adequate
provision for its obligations hereunder. The Employee may not assign this
Agreement during his life, and upon his death, this Agreement shall be
binding upon and inure to the benefit of his heirs, legatees and the legal
representative of each.
10. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
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11. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
Falcon Building Products, Inc. Employee
Gus J. Athas
By: /s/ Rod Dammeyer /s/ Gus J. Athas
------------------------- -------------------------
Its: Chairman Of the Board
-------------------------
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EXHIBIT A
The provisions of the Put/Call arrangements are as follows:
- -------------------------------------------------------------------------------
CALL PROVISION CALL PRICE
- -------------------------------------------------------------------------------
WITHIN 3 YEARS AFTER 3 YEARS
- -------------------------------------------------------------------------------
Employee leaves without Good Reason Lower of Cost or FMV FMV
- -------------------------------------------------------------------------------
Employee leaves with Good Reason FMV FMV
- -------------------------------------------------------------------------------
Employee is terminated for Cause Lower of Cost or FMV Lower of Cost
or FMV
- -------------------------------------------------------------------------------
Any other reason FMV FMV
- -------------------------------------------------------------------------------
PUT PROVISION PUT PRICE
- -------------------------------------------------------------------------------
BEFORE 3 YEARS AFTER 3 YEARS
- -------------------------------------------------------------------------------
Employee is terminated without Cause Lower of Cost or FMV FMV
- -------------------------------------------------------------------------------
Resignation for Good Reason Lower of Cost or FMV FMV
- -------------------------------------------------------------------------------
Employee leaves without Good Reason
(provided employee does not go to
a competitor) None FMV
- -------------------------------------------------------------------------------
Death, Disability, Retirement FMV FMV
- -------------------------------------------------------------------------------
Cost to be grossed up by an appropriate interest rate.
<PAGE>
EXHIBIT 10.04.2
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
WHEREAS, in connection with the Agreement and Plan of Merger between Falcon
Building Products, Inc. and FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and Gus J. Athas (collectively, the "Parties") have previously
executed an employment agreement (the "Employment Agreement"); and
WHEREAS, the Parties now desire to amend the Employment Agreement;
NOW, THEREFORE, the Parties agree that the Employment Agreement is hereby
amended by adding the following Section 12 immediately following Section 11 of
the Employment Agreement:
"12. NONCOMPETITION. During the period the Employee is employed hereunder
and during any period thereafter during which the Employee is receiving payments
or other benefits pursuant to Section 5 hereof, the Employee will not, in
association with or as an officer, principal, member, advisor, agent, partner,
director, stockholder, employee or consultant of any corporation (or sub-unit,
in the case of a diversified business) or other enterprise, entity or
association, engage or otherwise participate in any business which shall compete
with any business conducted by the Company or any of its subsidiaries or work on
the acquisition or development of any individual line of business, property or
project in which the Company or any of its subsidiaries is then involved or has
a written plan to enter which plan was adopted prior to the expiration of the
Employee's termination of employment, and will not solicit or induce any person
who is or was employed by the Company or any of its subsidiaries at any time
during such term or period to interfere with the activities or businesses of any
such company or to discontinue his or her employment with such company, or
employ any such person in a business or enterprise which competes with any such
company.
The Employee understands that the provisions of this Section 12 may limit
his ability to earn a livelihood in a business similar to the business of the
Company but as an executive officer of the Company he nevertheless agrees and
hereby acknowledges that (i) such provisions do not impose a greater restraint
than is necessary to protect the goodwill or other business interests of the
Company; (ii) such provisions contain reasonable limitations as to time and
scope of activity to be restrained; and (iii) the consideration provided
hereunder is sufficient to compensate the Employee for the restrictions
contained in Section 12 hereof. In consideration of the foregoing, the Employee
agrees that he will not assert that, and it should not be considered that, any
provisions of Section 12 otherwise are void, voidable or unenforceable or should
be voided or held unenforceable."
IN WITNESS WHEREOF, the Parties have caused this First Amendment to be
executed this 17th day of June, 1997.
Gus J. Athas Falcon Building Products, Inc.
/s/ Gus J. Athas By: /s/ Anthony J. Navitsky
- -------------------- ---------------------------
Its: Vice President
---------------------------
<PAGE>
EXHIBIT 10.05.1
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 22nd day of May, 1997, the
"Effective Date," by and between Falcon Building Products, Inc. (the "Company"),
and Sam A. Cottone, an individual residing at 175 North Harbor Drive, Apartment
5107, Chicago, Illinois 60601 (the "Employee").
WHEREAS, as a condition to an Agreement and Plan of Merger between the
Company and FBP Acquisition Corp., Inc. (the "Merger Agreement"), the Employee
has agreed to be employed by the Company on and after the date as of which such
merger is effective (the "Merger Date"); and
WHEREAS, the Company wants to employ the Employee and the Employee wants to
be employed by the Company on and after the Effective Date in accordance with
the terms of this Employment Agreement, which Employment Agreement supersedes
and replaces any and all other employment agreements between Employee and the
Company;
NOW THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby agrees to employ the Employee
as an Executive Vice President and its Chief Financial Officer and the Employee
hereby agrees to serve the Company in such capacity, subject to the terms and
conditions hereof for the period commencing on the Merger Date and continuing
until terminated as provided in Section 5 (the "Termination Date"). The
Employee is being engaged on a full time basis to perform services consistent
with the titles of Executive Vice President and Chief Financial Officer. Prior
to the Merger Date, Employee will be compensated in accordance with the terms of
his employment as in effect immediately prior to the Effective Date.
2. COMPENSATION. The Employee shall be paid for the performance of his
duties under this Agreement during the term of his employment with the Company
in accordance with the following:
(a) BASE COMPENSATION. The Company shall pay the Employee base
compensation, which on and after the Merger Date shall be at the rate of
not less than $400,000 per year ("Base Compensation"). The Employee's Base
Compensation shall be payable semi-monthly, shall not be decreased and
shall be subject to annual or periodic review beginning June 1, 1998 in
accordance with the Company's customary practices for its other executives
and be increased in the sole discretion of the Company's Board of Directors
(the "Board"). In the event the Board increases the Employee's Base
Compensation, such compensation may not be decreased thereafter.
(b) BONUS. The Company shall pay the Employee a bonus for each
fiscal year based upon target performance goals (the "Target") to be
mutually agreed upon by the Board and the Employee and measured as a
percentage of the Employee's Base Compensation. Notwithstanding the
preceding sentence, if the Target is achieved, the Employee shall be
entitled to a bonus the amount of which is no less than 60% of Base
Compensation. The bonus shall be payable as soon after the end of each
fiscal year as it can be determined, but in any event within ninety (90)
days thereafter. If the employment of Employee is terminated at other
than year-end, the bonus will be pro rated to reflect the period during
the year Employee was employed.
(i) For the portion of the 1997 fiscal year which ends
immediately prior to the Merger Date, the Employee shall be entitled
to a pro rated bonus under the terms of the bonus plan as in effect on
the Effective Date.
(ii) For fiscal year 1997, the Target shall be based upon the
Company's earnings before interest, taxes, depreciation and
amortization from continuing operations and before corporate overhead
and Ultravent charges ("Subsidiary EBITDA"). For fiscal year 1997,
Subsidiary EBITDA is estimated to be $93.7 million and the bonus for
fiscal year 1997 will be paid pro rata based upon the Subsidiary
EBITDA earned after the Merger Date.
(iii) For the portion of the 1997 fiscal year which commences on
the Merger Date, the employee shall be entitled to a bonus provided
that at least 85% of the Target is achieved. The amount of the bonus
shall be pro rated for the portion of the fiscal year following the
Merger
<PAGE>
Date from an amount determined by straight line interpolation
from 30% of Base Compensation if 85% of Target is achieved to 80% of
Base Compensation if 107.5% of the Target is achieved. The Board may,
in its sole and absolute discretion, increase the bonus by an amount
up to 20% of Base Compensation.
(c) TRANSACTION BONUS. The Company shall pay the Employee a bonus
equal to $300,000 (the "Transaction Bonus"); provided, however, that if the
Company reasonably determines that the payment of such Transaction Bonus,
together with the accelerated vesting of the Employee's stock options and
restricted stock previously granted by the Company, may result in an excise
tax under section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the amount of such Transaction Bonus shall be reduced to the
extent reasonably determined by the Company to be necessary or desirable to
avoid such excise tax, and the amount of such reduction shall be mutually
agreed to by the Company and the Employee prior to the Merger Date. The
Transaction Bonus shall be paid to the Employee in a lump sum on the Merger
Date. Notwithstanding the foregoing, the Company shall not be obligated to
pay the Transaction Bonus if the Employee is not employed by the Company on
the Merger Date.
3. BENEFITS.
(a) The Employee shall be entitled to participate in and receive
benefits under any retirement plan, savings plan, related override benefit
plan, nonqualified deferred compensation plan, health plan, disability
plan, life insurance plan and any other employee benefit plan or
arrangement (collectively, "Benefit Plans") made available from time to
time to executives of the Company. The Employee shall be entitled to such
other benefits, including vacation, executive perquisites, fringe benefits
and expense reimbursements as currently in effect for executives of the
Company and as the same may be from time to time be amended.
(b) The Company shall establish a funded supplemental executive
retirement plan in which the Employee participates as of the Merger Date.
This funded supplemental executive retirement plan, based on seven (7)
credited years service with the Company, commencing on the Merger Date
shall provide for ten (10) annual payments of $200,000 each year, net-after
applicable income taxes, commencing on the date the Employee retires from
the Company, with the vesting schedule, funding mechanism and payment
schedule to be mutually agreed to prior to the Merger Date. If the
Employee dies during the period he is collecting supplemental retirement
benefits, the payments provided pursuant to this section 3(b) will
thereafter be payable to his spouse or estate.
4. STOCK OWNERSHIP.
(a) STOCK OPTIONS. On the Merger Date, the Company shall grant the
Employee seven-year stock options on shares equal to no less than .75% of
the Company's then-outstanding shares of common stock. To the extent
permitted by law, such options shall constitute incentive stock options
under the Internal Revenue Code. Such options will be exercisable at a
price equal to the Cash Election Price (as defined in the Merger
Agreement), subject to adjustment for changes in capital, and will provide
for seven (7) year cliff vesting with four (4) year accelerated vesting
based on meeting agreed-upon financial performance and acquisition targets
and/or cumulative performance vesting goals, with further accelerated
vesting in the event of an IPO or other exit scenarios provided in the
latter event that agreed upon IRR target levels are achieved.
Additionally, these options shall include put provisions in the event of
the Employee's death, disability or retirement, and call provisions in the
event of termination of employment - both put and call provisions to be
exercised at fair market value. Said provisions and such other additional
reasonable terms and conditions will be set forth in a stock option plan to
be adopted by the Company before the Merger Date.
(b) OWNERSHIP. ON the Merger Date, the Employee shall purchase or
retain ownership of no less than .17% of the Company's outstanding shares
of common stock on the Merger Date.
2
<PAGE>
(c) SENIOR EXECUTIVE STOCK PURCHASE PLAN. On and after the Merger
Date, the Company shall continue the loan program under the Company's
Senior Executive Stock Purchase Plan as in effect immediately prior to the
Effective Date and the change in control provision of such plan shall not
take effect by reason of the merger contemplated by the Merger Agreement.
(d) PUT/CALL RIGHTS. The Employee will have rights to put to the
Company and the Company shall have rights to call from the Employee shares
of capital stock of the Company owned or acquired by the Employee on the
Merger Date without restriction, as set forth on attached Exhibit A. The
parties will agree on a fair and reasonable valuation process no later than
the Merger Date.
5. TERMINATION.
(a) This Agreement may be terminated by the Company by written notice
to the Employee only by action of a majority of the Board. The termination
will not be effective until the later of three years after the Merger Date
or two years after written notice of termination is given to the Employee
unless the termination is for "Good Cause." "Good Cause" shall mean (i)
the Employee's conviction of any embezzlement or any felony involving fraud
or breach of trust relating to the performance of the Employee's duties,
(ii) the Employee's willful engagement in gross misconduct in the
performance of his duties, (iii) the Employee's death, or (iv) permanent
disability which materially impairs the Employee's performance of his
duties. Termination for "Good Cause" shall be effective immediately.
(b) The Employee may terminate this Agreement by giving the Company
written notice of termination. The termination will be effective sixty
(60) days after written notice of termination is given to the Company.
The Employee may terminate this Agreement for "Good Reason." "Good
Reason" shall exist if (i) the Company continues a reduction in
compensation or expenditures for Benefit Plans, relocates outside the
Chicago area or commits another material breach of this Agreement for
more than 30 days after being notified in writing by the Employee of such
breach PROVIDED the Employee has given such notice to the Company within
30 days of first becoming aware of the facts constituting such breach,
(ii) the Company gives the Employee a notice of termination without Good
Cause (as defined above) PROVIDED the Employee terminates this Agreement
within 30 days of receiving such notice, (iii) a "Change of Control"
occurs, and the Employee's employment hereunder is terminated by either
party for any reason other than "Good Cause," or (iv) the Employee
retires from the Company on a date that is mutually agreed upon by the
Company and the Employee. A "Change of Control" shall occur when any
person (as such term is used in section 13(d) and 14(d) of the Securities
Exchange Act, of 1934 as amended, the "Exchange Act") other than a
majority shareholder on the Merger Date is or becomes the "beneficial
owner" (as defined in Rule 13(d)-3 under the Exchange Act), of securities
of the Company representing more than 35% of the combined voting power of
the Company's then outstanding voting securities; provided, however, that
no Change of Control shall be deemed to have occurred if beneficial
ownership by such person is less than 50% of the combined voting power of
the Company's then outstanding voting securities and the original
investors in FBP Acquisition Corp., Inc. who at the Merger Date received
voting securities of the Company beneficially own at least 20% of the
combined voting power of the Company's then outstanding voting securities.
(c) If the Company by written notice to the Employee elects to
terminate his employment with the Company prior to the Termination Date
provided by Section 5(a) for other than "Good Cause," or, if the Employee
terminates this Agreement and simultaneously therewith his employment by
the Company and its parent and subsidiary corporations for Good Reason,
then the following shall occur:
(i) All of the Employee's outstanding and unexercised options to
purchase stock of the Company shall, to the extent vested at the date
of notice of termination, continue to be exercisable for a period
ending on the earlier of the date 18 months from the date of such
notice and the specific expiration date stated in the option.
3
<PAGE>
(ii) The Company for a period of two years from the date of
notice of such termination or through three years after the Merger
Date whichever is later (the "Severance Period") shall continue to
provide to the Employee (1) his Base Compensation, at the rate most
recently determined, (2) a bonus for each fiscal year (and a pro rata
amount for each partial year) in an amount equal to the latest Target
bonus, (3) health coverage, life insurance and disability insurance
(subject in the case of long-term disability to the availability of
such coverage under the Company's insurance policy), (4) suitable
office space and secretarial services, and (5) reimbursement for
outplacement services. If the Employee dies during the Severance
Period, the payments provided by (1) and (2) above shall be made to
the Employee's spouse at the time of his death as long as she is alive
and if she should not survive him or shall subsequently die, to the
estate of the Employee, and the health coverage shall be made
available to his spouse and eligible dependents. The period of health
coverage provided by this Agreement shall reduce the period of COBRA
coverage which would otherwise be required.
(iii) The Employee will be fully vested in his supplemental
retirement benefits specified in section 3(b) above and all other
retirement and savings plans.
(d) The parties agree that the payments and benefits provided for
in subsection (c) of this Section shall be deemed to constitute
liquidated damages for the Company's breach or constructive breach of
this Agreement and payment for the non-competition provisions of this
Agreement, and the Company agrees that (i) the Employee shall not be
required to mitigate his damages by seeking other employment or
otherwise, and (ii) the Company's payments and other obligations under
this Agreement shall not be reduced in any way by reason of any
compensation received by the Employee from sources other than the Company
and its affiliates, except as otherwise expressly provided herein.
6. ENTIRE AGREEMENT. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. NOTICE. Any Notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
If to the Company: If to the Employee:
President To the address shown at
Falcon Building Products, Inc. the begriming of this
2 North Riverside Plaza Employment Agreement
Chicago, Illinois 60606
or such other address as shall be furnished in writing by one party to the
other.
8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision had been omitted.
9. SUCCESSORS. The Company's obligation hereunder shall be binding legal
obligations of any successor to all or substantially all of the Company's
business by purchase, merger, consolidation or otherwise. The Company may not
sell or otherwise dispose of all or substantially all of its assets or merge or
consolidate with any other entity without making adequate provision for its
obligations hereunder. The Employee may not assign this Agreement during his
life, and upon his death, this Agreement shall be binding upon and inure to the
benefit of his heirs, legatees and the legal representative of each.
10. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
4
<PAGE>
11. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
Falcon Building Products, Inc. Employee
By /s/ Rod Dammeyer
------------------------- Sam A. Cottone
Its: Chairman of the Board
------------------------- /s/ Sam Cottone
-------------------------
5
<PAGE>
Exhibit A
The provisions of the Put/Call arrangements are as follows:
- --------------------------------------------------------------------------------
CALL PROVISION CALL PRICE
- --------------------------------------------------------------------------------
WITHIN 3 YEARS AFTER 3 YEARS
Employee leaves without Good Reason Lower of Cost or FMV FMV
Employee leaves with Good Reason FMV FMV
Employee is terminated for Cause Lower of Cost or FMV Lower of Cost or FMV
Any other reason FMV FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUT PROVISION PUT PRICE
- --------------------------------------------------------------------------------
BEFORE 3 YEARS AFTER 3 YEARS
Employee is terminated without Cause Lower of Cost or FMV FMV
Resignation for Good Reason Lower of Cost or FMV FMV
Employee leaves without Good Reason
(provided employee does not go to a
competitor) None FMV
Death, Disability, Retirement FMV FMV
- --------------------------------------------------------------------------------
Cost to be grossed up by an appropriate interest rate.
6
<PAGE>
EXHIBIT 10.05.2
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
WHEREAS, in connection with the Agreement and Plan of Merger between Falcon
Building Products, Inc. and FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and Sam A. Cottone (collectively, the "Parties") have previously
executed an employment agreement (the "Employment Agreement"); and
WHEREAS, the Parties now desire to amend the Employment Agreement;
NOW, THEREFORE, the Parties agree that the Employment Agreement is hereby
amended by adding the following Section 12 immediately following Section 11 of
the Employment Agreement:
"12. NONCOMPETITION. During the period the Employee is employed
hereunder and during any period thereafter during which the Employee is
receiving payments or other benefits pursuant to Section 5 hereof, the
Employee will not, in association with or as an officer, principal, member,
advisor, agent, partner, director, stockholder, employee or consultant of
any corporation (or sub-unit, in the case of a diversified business) or
other enterprise, entity or association, engage or otherwise participate in
any business which shall compete with any business conducted by the Company
or any of its subsidiaries or work on the acquisition or development of any
individual line of business, property or project in which the Company or
any of its subsidiaries is then involved or has a written plan to enter
which plan was adopted prior to the expiration of the Employee's
termination of employment, and will not solicit or induce any person who is
or was employed by the Company or any of its subsidiaries at any time
during such term or period to interfere with the activities or businesses
of any such company or to discontinue his or her employment with such
company, or employ any such person in a business or enterprise which
competes with any such company.
The Employee understands that the provisions of this Section 12 may
limit his ability to earn a livelihood in a business similar to the
business of the Company but as an executive officer of the Company he
nevertheless agrees and hereby acknowledges that (i) such provisions do not
impose a greater restraint than is necessary to protect the goodwill or
other business interests of the Company; (ii) such provisions contain
reasonable limitations as to time and scope of activity to be restrained;
and (iii) the consideration provided hereunder is sufficient to compensate
the Employee for the restrictions contained in Section 12 hereof. In
consideration of the foregoing, the Employee agrees that he will not assert
that, and it should not be considered that, any provisions of Section 12
otherwise are void, voidable or unenforceable or should be voided or held
unenforceable."
IN WITNESS WHEREOF, the Parties have caused this First Amendment to be
executed this 17th day of June, 1997.
Sam A. Cottone Falcon Building Products, Inc.
/s/ Sam Cottone By: /s/ Gus J. Athas
- -------------------------- ------------------------------
Its: Executive Vice-President
-----------------------------
7
<PAGE>
EXHIBIT 10.06.1
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 22d day of May, 1997, the
"Effective Date," by and between Falcon Building Products, Inc. (the "Company"),
and William K. Hall, an individual residing at 855 Lamson Drive, Winnetka,
Illinois 60093 (the "Employee").
WHEREAS, as a condition to an Agreement and Plan of Merger between the
Company and FBP Acquisition Corp., Inc. (the "Merger Agreement"), the Employee
has agreed to be employed by the Company on and after the date as of which such
merger is effective (the "Merger Date"); and
WHEREAS, the Company wants to employ the Employee and the Employee wants to
be employed by the Company on and after the Effective Date in accordance with
the terms of this Employment Agreement, which Employment Agreement supersedes
and replaces any and all other employment agreements between Employee and the
Company;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company hereby agrees to employ the Employee as its Chairman,
President and Chief Executive Officer and the Employee hereby agrees to serve
the Company in such capacity, subject to the terms and conditions hereof for the
period commencing on the Merger Date and continuing until terminated as provided
in Section 5 (the "Termination Date"). The Employee is being engaged on a full
time basis to perform services consistent with the titles of Chairman, President
and Chief Executive Officer. Prior to the Merger Date, Employee will be
compensated in accordance with the terms of his employment as in effect
immediately prior to the Effective Date.
(b) Notwithstanding the provisions of subsection (a) above, during
his employment, the Employee may devote reasonable time to activities other than
those required under this Employment Agreement, including serving on the Board
of Directors of GenCorp., A.M. Castle and, subject to the approval of the Board
of Directors of the Company (the "Board"), other similar companies and
institutions, to the extent that such activities do not inhibit or prohibit the
performance of the Employee's duties under this Employment Agreement, or
conflict in any material way with the business of the Company.
2. COMPENSATION. The Employee shall be paid for the performance of his
duties under this Agreement during the term of his employment with the Company
in accordance with the following:
(a) BASE COMPENSATION. The Company shall pay the Employee base
compensation, which on and after the Merger Date shall be at the rate of not
less than $600,000 per year ("Base Compensation"). The Employee's Base
Compensation shall be payable semi-monthly, shall not be decreased and shall
be subject to annual or periodic review beginning June 1, 1998 in accordance
with the Company's customary practices for its other executives and be
increased in the sole discretion of the Board. In the event the Board
increases the Employee's Base Compensation, such compensation may not be
decreased thereafter.
(b) BONUS. The Company shall pay the Employee a bonus for each
fiscal year based upon target performance goals (the "Target") to be mutually
agreed upon by the Board and the Employee and measured as a percentage of the
Employee's Base Compensation. Notwithstanding the preceding sentence, if the
Target is achieved, the Employee shall be entitled to a bonus the amount of
which is no less than 90% of Base Compensation. The bonus shall be payable as
soon after the end of each fiscal year as it can be determined, but in any event
within ninety (90) days thereafter. If the employment of Employee is terminated
at other than year-end, the bonus will be prorated to reflect the period during
the year Employee was employed.
(i) For the portion of the 1997 fiscal year which ends
immediately prior to the Merger Date, the Employee shall be entitled to a
prorated bonus under the terms of the bonus plan as in effect on the
Effective Date.
1
<PAGE>
(ii) For fiscal year 1997, the Target shall be based upon the
Company's earnings before interest, taxes, depreciation and amortization
from continuing operations and before corporate overhead and Ultravent
charges ("Subsidiary EBITDA"). For fiscal year 1997, Subsidiary EBITDA is
estimated to be $93.7 million and the bonus for fiscal year 1997 will be
paid pro rata based upon the Subsidiary EBITDA earned after the Merger
Date.
(iii) For the portion of the 1997 fiscal year which commences
on the Merger Date, the employee shall be entitled to a bonus provided that
at least 85% of the Target is achieved. The amount of the bonus shall be
pro rated for the portion of the fiscal year following the Merger Date from
an amount determined by straight line interpolation from 45% of Base
Compensation if 85% of Target is achieved to 112.5% of Base Compensation if
107.5% of the Target is achieved. The Board may, in its sole and absolute
discretion, increase the bonus by an amount up to 22.5% of Base
Compensation.
(c) TRANSACTION BONUS. The Company shall pay the Employee a bonus
equal to $700,000 (the "Transaction Bonus"); PROVIDED, HOWEVER, that if the
Company reasonably determines that the payment of such Transaction Bonus,
together with the accelerated vesting of the Employee's stock options and
restricted stock previously granted by the Company, may result in an excise tax
under section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the amount of such Transaction Bonus shall be reduced to the extent
reasonably determined by the Company to be necessary or desirable to avoid such
excise tax, and the amount of such reduction shall be mutually agreed to by the
Company and the Employee prior to the Merger Date. The Transaction Bonus shall
be paid to the Employee in a lump sum on the Merger Date. Notwithstanding the
foregoing, the Company shall not be obligated to pay the Transaction Bonus if
the Employee is not employed by the Company on the Merger Date.
3. BENEFITS. The Employee shall be entitled to participate in and
receive benefits under any retirement plan, savings plan, related override
benefit plan, nonqualified deferred compensation plan, health plan, disability
plan, life insurance plan and any other employee benefit plan or arrangement
(collectively, "Benefit Plans") made available from time to time to executives
of the Company. The Employee shall be entitled to such other benefits,
including vacation, executive perquisites, fringe benefits and expense
reimbursements as currently in effect for executives of the Company and as the
same may from time to time be amended.
4. STOCK OWNERSHIP.
(a) BASE STOCK OPTIONS. On the Merger Date, the Company shall grant
the Employee seven-year stock options on shares equal to no less than 2.0% of
the Company's then-outstanding shares of common stock. To the extent permitted
by law, such options shall constitute incentive stock options under the Internal
Revenue Code. Such options will be exercisable at a price equal to the Cash
Election Price (as defined in the Merger Agreement), subject to adjustment for
changes in capital, and will provide for seven (7) year cliff vesting with four
(4) year accelerated vesting based on meeting agreed-upon financial performance
and acquisition targets and/or cumulative performance vesting goals, with
further accelerated vesting in the event of an IPO or other exit scenarios
provided in the latter event that agreed upon IRR target levels are achieved.
Additionally, these options shall include put provisions in the event of the
Employee's death, disability or retirement, and call provisions in the event of
termination of employment -- both put and call provisions to be exercised at
fair market value. Said provisions and such other additional reasonable terms
and conditions will be set forth in a stock option plan to be adopted by the
Company before the Merger Date.
(b) SUPPLEMENTAL STOCK OPTIONS. On the Merger Date, in lieu of a
funded supplemental executive retirement plan, the Company shall grant to the
Employee options to purchase an additional amount of the capital stock of the
Company to be agreed upon prior to the Merger Date at the Cash Election Price.
2
<PAGE>
(c) OWNERSHIP. On the Merger Date, the Employee shall purchase or
retain ownership of no less than 1% of the Company's outstanding shares of
common stock on the Merger Date.
(d) SENIOR EXECUTIVE STOCK PURCHASE PLAN. On and after the Merger
Date, the Company shall continue the loan program under the Company's Senior
Executive Stock Purchase Plan as in effect immediately prior to the Effective
Date and the change in control provision of such plan shall not take effect by
reason of the merger contemplated by the Merger Agreement.
(e) PUT/CALL RIGHTS. The Employee will have rights to put to the
Company and the Company shall have rights to call from the Employee shares of
capital stock of the Company owned or acquired by the Employee on the Merger
Date without restriction, as set forth on attached Exhibit A. The parties will
agree on a fair and reasonable valuation process, no later than the Merger Date.
5. TERMINATION.
(a) This Agreement may be terminated by the Company by written notice
to the Employee only by action of a majority of the Board. The termination will
not be effective until the later of three years after the Merger Date or two
years after written notice of termination is given to the Employee unless the
termination is for "Good Cause." "Good Cause" shall mean (i) the Employee's
conviction of any embezzlement or any felony involving fraud or breach of trust
relating to the performance of the Employee's duties, (ii) the Employee's
willful engagement in gross misconduct in the performance of his duties,
(iii) the Employee's death, or (iv) permanent disability which materially
impairs the Employee's performance of his duties. Termination for "Good Cause"
shall be effective immediately.
(b) The Employee may terminate this Agreement by giving the Company
written notice of termination. The termination will be effective sixty (60)
days after written notice of termination is given to the Company. The Employee
may terminate this Agreement for "Good Reason." "Good Reason" shall exist if
(i) the Company continues a reduction in compensation or expenditures for
Benefit Plans, relocates outside the Chicago area or commits another material
breach of this Agreement for more than 30 days after being notified in writing
by the Employee of such breach PROVIDED the Employee has given such notice to
the Company within 30 days of first becoming aware of the facts constituting
such breach, (ii) the Company gives the Employee a notice of termination without
Good Cause (as defined above) PROVIDED the Employee terminates this Agreement
within 30 days of receiving such notice, (iii) a "Change of Control" occurs, and
the Employee's employment hereunder is terminated by either party for any reason
other than "Good Cause," or (iv) the Employee retires from the Company on a date
that is mutually agreed upon by the Company and the Employee. A "Change of
Control" shall occur when any person (as such term is used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, the "Exchange Act")
other than a majority shareholder on the Merger Date is or becomes the
"beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act) of
securities of the Company representing more than 35% of the combined voting
power of the Company's then outstanding voting securities; PROVIDED, HOWEVER,
that no Change of Control shall be deemed to have occurred if beneficial
ownership by such person is less than 50% of the combined voting power of the
Company's then outstanding voting securities and the original investors in FBP
Acquisition Corp., Inc., who at the Merger Date received voting securities of
the Company beneficially own at least 20% of the combined voting power of the
Company's then outstanding voting securities.
(c) If the Company by written notice to the Employee elects to
terminate his employment with the Company prior to the Termination Date provided
by Section 5(a) for other than "Good Cause" or, if the Employee terminates this
Agreement and simultaneously therewith his employment by the Company and its
parent and subsidiary corporations for Good Reason, then the following shall
occur:
(i) All of the Employee's outstanding and unexercised options
to purchase stock of the Company shall, to the extent vested at the date of
notice of termination, continue to be
3
<PAGE>
exercisable for a period ending on the earlier of the date 18 months from
the date of such notice and the specific expiration date stated in the
option.
(ii) The Company for a period of two years from the date of
notice of such termination or through three years after the Merger Date
whichever is later (the "Severance Period") shall continue to provide to
the Employee (1) his Base Compensation, at the rate most recently
determined, (2) a bonus for each fiscal year (and a pro rata amount for
each partial year) in an amount equal to the latest Target bonus,
(3) health coverage, life insurance and disability insurance (subject in
the case of long-term disability to the availability of such coverage under
the Company's insurance policy), (4) suitable office space and secretarial
services, and (5) reimbursement for outplacement services. If the Employee
dies during the Severance Period, the payments provided by (1) and (2)
above shall be made to the Employee's spouse at the time of his death as
long as she is alive and if she should not survive him or shall
subsequently die, to the estate of the Employee, and the health coverage
shall be made available to his spouse and eligible dependents. The period
of health coverage provided by this Agreement shall reduce the period of
COBRA coverage which would otherwise be required.
(iii) The Employee will be fully vested in all retirement and
savings plans.
(d) The parties agree that the payments and benefits provided for in
subsection (c) of this Section shall be deemed to constitute liquidated damages
for the Company's breach or constructive breach of this Agreement and payment
for the non-competition provisions of this Agreement, and the Company agrees
that (i) the Employee shall not be required to mitigate his damages by seeking
other employment or otherwise, and (ii) the Company's payments and other
obligations under this Agreement shall not be reduced in any way by reason of
any compensation received by the Employee from sources other than the Company
and its affiliates, except as otherwise expressly provided herein.
6. ENTIRE AGREEMENT. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. NOTICE. Any Notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
If to the Company: If to the Employee:
President To the address shown at the
Falcon Building Products, Inc. beginning of this Employment
2 North Riverside Plaza Agreement
Chicago, Illinois 60606
or such other address as shall be furnished in writing by one party to the
other.
8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision had been omitted.
9. SUCCESSORS. The Company's obligations hereunder shall be binding
legal obligations of any successor to all or substantially all of the Company's
business by purchase, merger, consolidation or otherwise. The Company may not
sell or otherwise dispose of all or substantially all of its assets or merge or
consolidate with any other entity without making adequate provision for its
obligations hereunder. The Employee may not assign this Agreement during his
life, and upon his death, this Agreement shall be binding upon and inure to the
benefit of his heirs, legatees and the legal representative of each.
10. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
4
<PAGE>
11. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
Falcon Building Products, Inc. Employee
William K. Hall
By: /s/ Rod Dammeyer /s/ William K. Hall
------------------------------- ---------------------------
Its: Chairman of the Board
-------------------------------
5
<PAGE>
EXHIBIT A
The provisions of the Put/Call arrangements are as follows:
- -------------------------------------------------------------------------------
CALL PROVISION CALL PRICE
- -------------------------------------------------------------------------------
WITHIN 3 YEARS AFTER 3 YEARS
- -------------------------------------------------------------------------------
Employee leaves without Good Reason Lower of Cost or FMV FMV
- -------------------------------------------------------------------------------
Employee leaves with Good Reason FMV FMV
- -------------------------------------------------------------------------------
Employee is terminated for Cause Lower of Cost or FMV Lower of Cost or FMV
- -------------------------------------------------------------------------------
Any other reason FMV FMV
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PUT PROVISION PUT PRICE
- -------------------------------------------------------------------------------
BEFORE 3 YEARS AFTER 3 YEARS
- -------------------------------------------------------------------------------
Employee is terminated without Cause Lower of Cost or FMV FMV
- -------------------------------------------------------------------------------
Resignation for Good Reason Lower of Cost or FMV FMV
- -------------------------------------------------------------------------------
Employee leaves without Good Reason
(provided employee does not go to a
competitor) None FMV
- -------------------------------------------------------------------------------
Death, Disability, Retirement FMV FMV
- -------------------------------------------------------------------------------
Cost to be grossed up by an appropriate interest rate.
<PAGE>
EXHIBIT 10.06.2
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
WHEREAS, in connection with the Agreement and Plan of Merger between Falcon
Building Products, Inc. and FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and William K. Hall (collectively, the "Parties") have previously
executed an employment agreement (the "Employment Agreement"); and
WHEREAS, the Parties now desire to amend the Employment Agreement;
NOW, THEREFORE, the Parties agree that the Employment Agreement is hereby
amended by adding the following Section 12 immediately following Section 11 of
the Employment Agreement:
"12. NONCOMPETITION. During the period the Employee is employed
hereunder and during any period thereafter during which the Employee is
receiving payments or other benefits pursuant to Section 5 hereof, the
Employee will not, in association with or as an officer, principal, member,
advisor, agent, partner, director, stockholder, employee or consultant of
any corporation (or sub-unit, in the case of a diversified business) or
other enterprise, entity or association, engage or otherwise participate in
any business which shall compete with any business conducted by the Company
or any of its subsidiaries or work on the acquisition or development of any
individual line of business, property or project in which the Company or
any of its subsidiaries is then involved or has a written plan to enter
which plan was adopted prior to the expiration of the Employee's
termination of employment, and will not solicit or induce any person who is
or was employed by the Company or any of its subsidiaries at any time
during such term or period to interfere with the activities or businesses
of any such company or to discontinue his or her employment with such
company, or employ any such person in a business or enterprise which
competes with any such company.
The Employee understands that the provisions of this Section 12 may
limit his ability to earn a livelihood in a business similar to the
business of the Company but as an executive officer of the Company he
nevertheless agrees and hereby acknowledges that (i) such provisions do not
impose a greater restraint than is necessary to protect the goodwill or
other business interests of the Company; (ii) such provisions contain
reasonable limitations as to time and scope of activity to be restrained;
and (iii) the consideration provided hereunder is sufficient to compensate
the Employee for the restrictions contained in Section 12 hereof. In
consideration of the foregoing, the Employee agrees that he will not assert
that, and it should not be considered that, any provisions of Section 12
otherwise are void, voidable or unenforceable or should be voided or held
unenforceable."
IN WITNESS WHEREOF, the Parties have caused this First Amendment to be
executed this 17th day of June, 1997.
William K. Hall Falcon Building Products, Inc.
/s/ William K. Hall By: /s/ Gus J. Athas
- ----------------------------------- ------------------------------
Its: Executive Vice-President
------------------------------
<PAGE>
EXHIBIT 10.07.1
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 11th day of June, 1997, the
"Effective Date," by and between Falcon Building Products, Inc. (the "Company"),
and Anthony J. Navitsky, an individual residing at 243 Monson Court, Schaumburg,
Illinois 60173 ("Employee").
WHEREAS, as a condition to an Agreement and Plan of Merger between the
Company and FBP Acquisition Corp., Inc. (the "Merger Agreement"), the Employee
has agreed to be employed by the Company on and after the date as of which such
merger is effective (the "Merger Date"); and
WHEREAS, the Company wants to employ the Employee and the Employee wants to
be employed by the Company on and after the Effective Date in accordance with
the terms of this Employment Agreement, which Employment Agreement supersedes
and replaces any and all other employment agreements or arrangements between
Employee and the Company including, but not limited to, that certain employment
agreement dated March 20, 1997;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby agrees to employ the Employee
as the Vice President - Finance and its Treasurer and the Employee hereby agrees
to serve the Company in such capacity, subject to the terms and conditions
hereof for the period commencing on the Merger Date and continuing until
terminated as provided in Section 5 (the "Termination Date"). The Employee is
being engaged on a full time basis to perform services consistent with the
titles of Vice President - Finance and Treasurer. Prior to the Merger Date,
Employee will be compensated in accordance with the terms of his employment as
in effect immediately prior to the Effective Date.
2. COMPENSATION. The Employee shall be paid for the performance of his
duties under this Agreement during the term of his employment with the Company
in accordance with the following:
(a) BASE COMPENSATION. The Company shall pay the Employee base
compensation, which on and after the Merger Date shall be at the rate of not
less than $180,000 per year ("Base Compensation"). The Employee's Base
Compensation shall be payable semi-monthly, shall not be decreased and shall be
subject to annual or periodic review beginning June 1, 1998 in accordance with
the Company's customary practices for its other executives and be increased in
the sole discretion of the Company's Board of Directors (the "Board"). In the
event the Board increases the Employee's Base Compensation, such compensation
may not be decreased thereafter.
(b) BONUS. The Company shall pay the Employee a bonus for each
fiscal year based upon target performance goals (the "Target") to be mutually
agreed upon by the Board and the Employee and measured as a percentage of the
Employee's Base Compensation. Notwithstanding the preceding sentence, if the
Target is achieved, the Employee shall be entitled to a bonus the amount of
which is no less than 40% of Base Compensation. The bonus shall be payable
as soon after the end of each fiscal year as it can be determined, but in any
event within ninety (90) days thereafter. If the
<PAGE>
employment of Employee is terminated at other than year-end, the bonus will
be prorated to reflect the period during the year Employee was employed.
(i) For the portion of the 1997 fiscal year which ends
immediately prior to the Merger Date, the Employee shall be entitled to a
prorated bonus under the terms of the bonus plan as in effect on the
Effective Date.
(ii) For fiscal year 1997, the Target shall be based upon
the Company's earnings before interest, taxes, depreciation and
amortization from continuing operations and before corporate overhead and
Ultravent charges ("Subsidiary EBITDA"). For fiscal year 1997, Subsidiary
EBITDA is estimated to be $93.7 million and the bonus for fiscal year 1997
will be paid pro rata based upon the Subsidiary EBITDA earned after the
Merger Date.
(iii) For the portion of the 1997 fiscal year which commences
on the Merger Date, the Employee shall be entitled to a bonus provided that
at least 85% of the Target is achieved. The amount of the bonus shall be
prorated for the portion of the fiscal year following the Merger Date from
an amount determined by straight line interpolation from 20% of Base
Compensation if 85% of Target is achieved to 50% of Base Compensation if
107.5% of the Target is achieved. The Board may, in its sole and absolute
discretion, increase the bonus by an amount up to 10% of Base Compensation.
3. BENEFITS. The Employee shall be entitled to participate in and
receive benefits under any retirement plan, savings plan, related override
benefit plan, nonqualified deferred compensation plan, health plan, disability
plan, life insurance plan and any other employee benefit plan or arrangement
(collectively, "Benefit Plans") made available from time to time to executives
of the Company. The Employee shall be entitled to such other benefits,
including vacation, executive perquisites, fringe benefits and expense
reimbursements as currently in effect for executives of the Company and as the
same may from time to time be amended.
4. STOCK OWNERSHIP.
(a) STOCK OPTIONS. On the Merger Date, the Company shall grant the
Employee stock options on shares equal to no less than .60% of the Company's
then outstanding shares of common stock. To the extent permitted by law,
such options shall constitute incentive stock options under the Internal
Revenue Code. Such options will be exercisable at a price equal to the Cash
Election Price (as defined in the Merger Agreement), subject to adjustment
for changes in capital, and will provide for seven (7) year cliff vesting
with four (4) year accelerated vesting based on meeting agreed-upon fmancial
performance and acquisition targets and/or cumulative performance vesting
goals, with further accelerated vesting in the event of an IPO or other exit
scenarios provided in the latter event that agreed upon IRR target levels are
achieved. Additionally, these options shall include put provisions in the
event of the Employee's death, disability or retirement, and call provisions
in the event of termination of employment -- both put and call provisions to
be exercised at either cost or fair market value depending on the
circumstances. Said provisions and such other additional reasonable terms
and conditions will be set forth in a stock option plan to be adopted by the
Company before the Merger Date.
2
<PAGE>
(b) OWNERSHIP. On the Merger Date, the Employee shall purchase or
retain ownership of no less than .05% of the Company's outstanding shares of
common stock on the Merger Date.
(c) SENIOR EXECUTIVE STOCK LOAN PLAN. As soon as practicable after
the Merger Date, the Company shall establish the Senior Executive Stock Loan
Plan to incent management to purchase additional shares of capital stock of the
Company.
(d) PUT/CALL RIGHTS. The Employee will have rights to put to the
Company and the Company shall have rights to call from the Employee shares of
capital stock of the Company owned or acquired by the Employee on the Merger
Date without restriction, as set forth on attached Exhibit A. The parties will
agree on a fair and reasonable valuation process no later than the Merger Date.
5. TERMINATION.
(a) This Agreement may be terminated by the Company by written notice
to the Employee only by action of a majority of the Board. The termination will
not be effective until the later of three years after the Merger Date or two
years after written notice of termination is given to the Employee unless the
termination is for "Good Cause." "Good Cause" shall mean (i) the Employee's
conviction of any embezzlement or any felony involving fraud or breach of trust
relating to the performance of the Employee's duties, (ii) the Employee's
willful engagement in gross misconduct in the performance of his duties,
(iii) the Employee's death, or (iv) permanent disability which materially
impairs the Employee's performance of his duties. Termination for "Good Cause"
shall be effective immediately.
(b) The Employee may terminate this Agreement by giving the Company
written notice of termination. The termination will be effective sixty (60)
days after written notice of termination is given to the Company. The
Employee may terminate this Agreement for "Good Reason." "Good Reason" shall
exist if (i) the Company continues a reduction in compensation or
expenditures for Benefit Plans, relocates outside the Chicago area or commits
another material breach of this Agreement for more than 30 days after being
notified in writing by the Employee of such breach PROVIDED the Employee has
given such notice to the Company within 30 days of first becoming aware of
the facts constituting such breach, (ii) the Company gives the Employee a
notice of termination without Good Cause (as defined above) PROVIDED the
Employee terminates this Agreement within 30 days of receiving such notice,
(iii) a "Change of Control" occurs, and the Employee's employment hereunder
is terminated by either party for any reason other than "Good Cause," or (iv)
the Employee retires from the Company on a date that is mutually agreed upon
by the Company and the Employee. A "Change of Control" shall occur when any
person (as such term is used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended, the "Exchange Act") other than a majority
shareholder on the Merger Date is or becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Exchange Act) of securities of the Company
representing more than 35% of the combined voting power of the Company's then
outstanding voting securities; provided, however, that no Change of Control
shall be deemed to have occurred if beneficial ownership by such person is
less than 50% of the combined voting power of the Company's then outstanding
voting securities and the original investors in FBP Acquisition Corp., Inc.
who at the Merger Date received voting securities
3
<PAGE>
of the Company beneficially own at least 20% of the combined voting
power of the Company's then outstanding voting securities.
(c) If the Company by written notice to the Employee elects to
terminate his employment with the Company prior to the Termination Date provided
by Section 5(a) for other than Good Cause or, if the Employee terminates this
Agreement and simultaneously therewith his employment by the Company and its
parent and subsidiary corporations for Good Reason, then the following shall
occur:
(i) All of the Employee's outstanding and unexercised options to
purchase stock of the Company shall, to the extent vested at the date of
notice of termination, continue to be exercisable, for a period ending on
the earlier of the date 18 months from the date of such notice and the
specific expiration date stated in the option.
(ii) The Company for a period of two years from the date of
notice of such termination or through three years after the Merger Date
whichever is later (the "Severance Period") shall continue to provide to
the Employee (1) his Base Compensation, at the rate most recently
determined, (2) a bonus for each fiscal year (and a pro rata amount for
each partial year) in an amount equal to the latest Target bonus,
(3) health coverage, life insurance and disability insurance (subject in
the case of long-term disability to the availability of such coverage under
the Company's insurance policy), (4) suitable office space and secretarial
services, and (5) reimbursement for outplacement services. If the Employee
dies during the Severance Period, the payments provided by (1) and
(2) above shall be made to the Employee's spouse at the time of his death
as long as she is alive and if she should not survive him or shall
subsequently die, to the estate of the Employee, and the health coverage
shall be made available to his spouse and eligible dependents. The period
of health coverage provided by this Agreement shall reduce the period of
COBRA coverage which would otherwise be required.
(iii) The Employee will be fully vested in all retirement and
savings plans.
(d) The parties agree that the payments and benefits provided for in
subsection (c) of this Section shall be deemed to constitute liquidated damages
for the Company's breach or constructive breach of this Agreement and payment
for the non-competition provisions of this Agreement, and the Company agrees
that (i) the Employee shall not be required to mitigate his damages by seeking
other employment or otherwise, and (ii) the Company's payments and other
obligations under this Agreement shall not be reduced in any way by reason of
any compensation received by the Employee from sources other than the Company
and its affiliates, except as otherwise expressly provided herein.
6. ENTIRE AGREEMENT. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. NOTICE. Any Notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
4
<PAGE>
If to the Company: If to the Employee:
President To the address shown at the
Falcon Building Products, Inc. beginning of this Employment
2 North Riverside Plaza Agreement
Chicago, Illinois 60606
or such other address as shall be furnished in writing by one party to the
other.
8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision had been omitted.
9. SUCCESSORS. The Company's obligations hereunder shall be binding
legal obligations of any successor to all or substantially all of the Company's
business by purchase, merger, consolidation or otherwise. The Company may not
sell or otherwise dispose of all or substantially all of its assets or merge or
consolidate with any other entity without making adequate provision for its
obligations hereunder. The Employee may not assign this Agreement during his
life, and upon his death, this Agreement shall be binding upon and inure to the
benefit of his heirs, legatees and the legal representative of each.
10. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
11. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
Falcon Building Products, Inc. Employee
Anthony J. Navitsky
By: /s/ William K. Hall /s/ Anthony J. Navitsky
------------------------- -----------------------------
Its: President
-------------------------
5
<PAGE>
EXHIBIT A
The provisions of the Put/Call arrangements are as follows:
- --------------------------------------------------------------------------------
CALL PROVISION CALL PRICE
- --------------------------------------------------------------------------------
WITHIN 3 YEARS AFTER 3 YEARS
- --------------------------------------------------------------------------------
Employee leaves without Good Reason Lower of Cost or FMV FMV
- --------------------------------------------------------------------------------
Employee leaves with Good Reason FMV FMV
- --------------------------------------------------------------------------------
Employee is terminated for Cause Lower of Cost or FMV Lower of Cost
or FMV
- --------------------------------------------------------------------------------
Any other reason FMV FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUT PROVISION PUT PRICE
- --------------------------------------------------------------------------------
BEFORE 3 YEARS AFTER 3 YEARS
- --------------------------------------------------------------------------------
Employee is terminated without Cause Lower of Cost or FMV FMV
- --------------------------------------------------------------------------------
Resignation for Good Reason Lower of Cost or FMV FMV
- --------------------------------------------------------------------------------
Employee leaves without Good Reason
(provided employee does not go to a
competitor) None FMV
- --------------------------------------------------------------------------------
Death, Disability, Retirement FMV FMV
- --------------------------------------------------------------------------------
Cost to be grossed up by an appropriate interest rate.
6
<PAGE>
EXHIBIT 10.07.2
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
WHEREAS, in connection with the Agreement and Plan of Merger between Falcon
Building Products, Inc. and FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and Anthony J. Navitsky (collectively, the "Parties") have
previously executed an employment agreement (the "Employment Agreement"); and
WHEREAS, the Parties now desire to amend the Employment Agreement;
NOW, THEREFORE, the Parties agree that the Employment Agreement is hereby
amended by adding the following Section 12 immediately following Section 11 of
the Employment Agreement:
"12. NONCOMPETITION. During the period the Employee is employed
hereunder and during any period thereafter during which the Employee is
receiving payments or other benefits pursuant to Section 5 hereof, the
Employee will not, in association with or as an officer, principal, member,
advisor, agent, partner, director, stockholder, employee or consultant of
any corporation (or sub-unit, in the case of a diversified business) or
other enterprise, entity or association, engage or otherwise participate in
any business which shall compete with any business conducted by the Company
or any of its subsidiaries or work on the acquisition or development of any
individual line of business, property or project in which the Company or
any of its subsidiaries is then involved or has a written plan to enter
which plan was adopted prior to the expiration of the Employee's
termination of employment, and will not solicit or induce any person who is
or was employed by the Company or any of its subsidiaries at any time
during such term or period to interfere with the activities or businesses
of any such company or to discontinue his or her employment with such
company, or employ any such person in a business or enterprise which
competes with any such company.
The Employee understands that the provisions of this Section 12 may
limit his ability to earn a livelihood in a business similar to the
business of the Company but as an executive officer of the Company he
nevertheless agrees and hereby acknowledges that (i) such provisions do not
impose a greater restraint than is necessary to protect the goodwill or
other business interests of the Company; (ii) such provisions contain
reasonable limitations as to time and scope of activity to be restrained;
and (iii) the consideration provided hereunder is sufficient to compensate
the Employee for the restrictions contained in Section 12 hereof. In
consideration of the foregoing, the Employee agrees that he will not assert
that, and it should not be considered that, any provisions of Section 12
otherwise are void, voidable or unenforceable or should be voided or held
unenforceable."
IN WITNESS WHEREOF, the Parties have caused this First Amendment to be
executed this 17th day of June, 1997.
Anthony J. Navitsky Falcon Building Products, Inc.
/s/ Anthony J. Navitsky By: /s/ Gus J. Athas
- ------------------------------ ------------------------------
Its: Executive Vice President
------------------------------
<PAGE>
EXHIBIT 10.08.1
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 17th day of June, 1997, the
"Effective Date," by and between Falcon Building Products, Inc. (the "Company"),
and Edward G. Finnegan, Jr., an individual residing at 1936 Birchwood Avenue,
Wilmette, Illinois 60091 (the "Employee").
WHEREAS, as a condition to an Agreement and Plan of Merger between the
Company and FBP Acquisition Corp., Inc. (the "Merger Agreement"), the Employee
has agreed to be employed by the Company on and after the date as of which such
merger is effective (the "Merger Date"); and
WHEREAS, the Company wants to employ the Employee and the Employee wants to
be employed by the Company on and after the Effective Date in accordance with
the terms of this Employment Agreement, which Employment Agreement supersedes
and replaces any and all other employment agreements or arrangements between
Employee and the Company;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. The Company hereby agrees to employ the Employee
as the Vice President - Operations, Planning and Development and the Employee
hereby agrees to serve the Company in such capacity, subject to the terms and
conditions hereof for the period commencing on the Merger Date and continuing
until terminated as provided in Section 5 (the "Termination Date"). The
Employee is being engaged on a full time basis to perform services consistent
with the title of Vice President - Operations, Planning and Development. Prior
to the Merger Date, Employee will be compensated in accordance with the terms of
his employment as in effect immediately prior to the Effective Date.
2. COMPENSATION. The Employee shall be paid for the performance of his
duties under this Agreement during the term of his employment with the Company
in accordance with the following:
(a) BASE COMPENSATION. The Company shall pay the Employee base
compensation, which on and after the Merger Date shall be at the rate of not
less than $225,000 per year ("Base Compensation"). The Employee's Base
Compensation shall be payable semi-monthly, shall not be decreased and shall be
subject to annual or periodic review beginning June 1, 1998 in accordance with
the Company's customary practices for its other executives and be increased in
the sole discretion of the Company's Board of Directors (the "Board"). In the
event the Board increases the Employee's Base Compensation, such compensation
may not be decreased thereafter.
(b) BONUS. The Company shall pay the Employee a bonus for each
fiscal year based upon target performance goals (the "Target") to be mutually
agreed upon by the Board and the Employee and measured as a percentage of the
Employee's Base Compensation. Notwithstanding the preceding sentence, if the
Target is achieved, the Employee shall be entitled to a bonus the amount of
which is no less than 50% of Base Compensation. The bonus shall be payable
as soon after the end of each fiscal year as it can be determined, but in any
event within ninety (90) days thereafter. If the
<PAGE>
employment of Employee is terminated at other than year-end, the bonus will
be prorated to reflect the period during the year Employee was employed.
(i) For the portion of the 1997 fiscal year which ends
immediately prior to the Merger Date, the Employee shall be entitled to a
prorated bonus under the terms of the bonus plan as in effect on the
Effective Date.
(ii) For fiscal year 1997, the Target shall be based upon the
Company's earnings before interest, taxes, depreciation and amortization
from continuing operations and before corporate overhead and Ultravent
charges ("Subsidiary EBITDA"). For fiscal year 1997, Subsidiary EBITDA is
estimated to be $93.7 million and the bonus for fiscal year 1997 will be
paid pro rata based upon the Subsidiary EBITDA earned after the Merger
Date.
(iii) For the portion of the 1997 fiscal year which commences
on the Merger Date, the Employee shall be entitled to a bonus provided that
at least 85% of the Target is achieved. The amount of the bonus shall be
prorated for the portion of the fiscal year following the Merger Date from
an amount determined by straight line interpolation from 25% of Base
Compensation if 85% of Target is achieved to 75% of Base Compensation if
107.5% of the Target is achieved. The Board may, in its sole and absolute
discretion, increase the bonus by an amount up to 25% of Base Compensation.
3. BENEFITS. The Employee shall be entitled to participate in and
receive benefits under any retirement plan, savings plan, related override
benefit plan, nonqualified deferred compensation plan, health plan, disability
plan, life insurance plan and any other employee benefit plan or arrangement
(collectively, "Benefit Plans") made available from time to time to executives
of the Company. The Employee shall be entitled to such other benefits,
including vacation, executive perquisites, fringe benefits and expense
reimbursements as currently in effect for executives of the Company and as the
same may from time to time be amended.
4. STOCK OWNERSHIP.
(a) STOCK OPTIONS. On the Merger Date, the Company shall grant the
Employee stock options on shares equal to no less than 1.00% of the Company's
then outstanding shares of common stock. To the extent permitted by law,
such options shall constitute incentive stock options under the Internal
Revenue Code. Such options will be exercisable at a price equal to the Cash
Election Price (as defined in the Merger Agreement), subject to adjustment
for changes in capital, and will provide for seven (7) year cliff vesting
with four (4) year accelerated vesting based on meeting agreed-upon financial
performance and acquisition targets and/or cumulative performance vesting
goals, with further accelerated vesting in the event of an IPO or other exit
scenarios provided in the latter event that agreed upon IRR target levels are
achieved. Additionally, these options shall include put provisions in the
event of the Employee's death, disability or retirement, and call provisions
in the event of termination of employment -- both put and call provisions to
be exercised at either cost or fair market value depending on the
circumstances. Said provisions and such other additional reasonable terms
and conditions will be set forth in a stock option plan to be adopted by the
Company before the Merger Date.
2
<PAGE>
(b) OWNERSHIP. On the Merger Date, the Employee shall purchase or
retain ownership of not less than .17% of the Company's outstanding shares of
common stock on the Merger Date.
(c) SENIOR EXECUTIVE STOCK LOAN PLAN. As soon as practicable after
the Merger Date, the Company shall establish the Senior Executive Stock Loan
Plan to incent management to purchase additional shares of capital stock of the
Company.
(d) PUT/CALL RIGHTS. The Employee will have rights to put to the
Company and the Company shall have rights to call from the Employee shares of
capital stock of the Company owned or acquired by the Employee on the Merger
Date without restriction as set forth on attached Exhibit A. The parties will
agree on a fair and reasonable valuation process no later than the Merger Date.
5. TERMINATION.
(a) This Agreement may be terminated by the Company by written notice
to the Employee only by action of a majority of the Board. The termination will
not be effective until the later of three years after the Merger Date or two
years after written notice of termination is given to the Employee unless the
termination is for "Good Cause." "Good Cause" shall mean (i) the Employee's
conviction of any embezzlement or any felony involving fraud or breach of trust
relating to the performance of the Employee's duties, (ii) the Employee's
willful engagement in gross misconduct in the performance of his duties,
(iii) the Employee's death, or (iv) permanent disability which materially
impairs the Employee's performance of his duties. Termination for "Good Cause"
shall be effective immediately.
(b) The Employee may terminate this Agreement by giving the Company
written notice of termination. The termination will be effective sixty (60)
days after written notice of termination is given to the Company. The
Employee may terminate this Agreement for "Good Reason." "Good Reason" shall
exist if (i) the Company continues a reduction in compensation or
expenditures for Benefit Plans, relocates outside the Chicago area or commits
another material breach of this Agreement for more than 30 days after being
notified in writing by the Employee of such breach PROVIDED the Employee has
given such notice to the Company within 30 days of first becoming aware of
the facts constituting such breach, (ii) the Company gives the Employee a
notice of termination without Good Cause (as defined above) PROVIDED the
Employee terminates this Agreement within 30 days of receiving such notice,
(iii) a "Change of Control" occurs, and the Employee's employment hereunder
is terminated by either party for any reason other than "Good Cause," (iv)
the Employee retires from the Company on a date that is mutually agreed upon
by the Company and the Employee, or (v) before January 1, 2000, the Employee
has not been offered a mutually acceptable operating position with the
Company. A "Change of Control" shall occur when any person (as such term is
used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, the "Exchange Act") other than a majority shareholder on the Merger
Date is or becomes the "beneficial owner" (as defined in Rule 13(d)-3 under
the Exchange Act) of securities of the Company representing more than 35% of
the combined voting power of the Company's then outstanding voting
securities; provided, however, that no Change of Control shall be deemed to
have occurred if beneficial ownership by such person is less than 50% of the
combined voting power of the Company's then outstanding voting securities and
the original investors in FBP Acquisition Corp.,
3
<PAGE>
Inc. who at the Merger Date received voting securities of the Company
beneficially own at least 20% of the combined voting power of the Company's
then outstanding voting securities.
(c) If the Company by written notice to the Employee elects to
terminate his employment with the Company prior to the Termination Date provided
by Section 5(a) for other than Good Cause or, if the Employee terminates this
Agreement and simultaneously therewith his employment by the Company and its
parent and subsidiary corporations for Good Reason, then the following shall
occur:
(i) All of the Employee's outstanding and unexercised options
to purchase stock of the Company shall, to the extent vested at the date of
notice of termination, continue to be exercisable for a period ending on
the earlier of the date 18 months from the date of such notice and the
specific expiration date stated in the option.
(ii) The Company for a period of two years from the date of
notice of such termination or through three years after the Merger Date
whichever is later (the "Severance Period") shall continue to provide to
the Employee (1) his Base Compensation, at the rate most recently
determined, (2) a bonus for each fiscal year (and a pro rata amount for
each partial year) in an amount equal to the latest Target bonus,
(3) health coverage, life insurance and disability insurance (subject in
the case of long-term disability to the availability of such coverage under
the Company's insurance policy), (4) suitable office space and secretarial
services, and (5) reimbursement for outplacement services. If the Employee
dies during the Severance Period, the payments provided by (1) and
(2) above shall be made to the Employee's spouse at the time of his death
as long as she is alive and if she should not survive him or shall
subsequently die, to the estate of the Employee, and the health coverage
shall be made available to his spouse and eligible dependents. The period
of health coverage provided by this Agreement shall reduce the period of
COBRA coverage which would otherwise be required.
(iii) The Employee will be fully vested in all retirement and
savings plans.
(d) The parties agree that the payments and benefits provided for in
subsection (c) of this Section shall be deemed to constitute liquidated damages
for the Company's breach or constructive breach of this Agreement and payment
for the non-competition provisions of this Agreement, and the Company agrees
that (i) the Employee shall not be required to mitigate his damages by seeking
other employment or otherwise, and (ii) the Company's payments and other
obligations under this Agreement shall not be reduced in any way by reason of
any compensation received by the Employee from sources other than the Company
and its affiliates, except as otherwise expressly provided herein.
6. ENTIRE AGREEMENT. The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations or agreements with respect to
the subject matter hereof.
7. NOTICE. Any Notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
4
<PAGE>
If to the Company: If to the Employee:
President To the address shown at
Falcon Building Products, Inc. the beginning of this Employment
2 North Riverside Plaza Agreement
Chicago, Illinois 60606
or such other address as shall be furnished in writing by one party to the
other.
8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision had been omitted.
9. SUCCESSORS. The Company's obligation hereunder shall be binding legal
obligations of any successor to all or substantially all of the Company's
business by purchase, merger, consolidation or otherwise. The Company may not
sell or otherwise dispose of all or substantially all of its assets or merge or
consolidate with any other entity without making adequate provision for its
obligations hereunder. The Employee may not assign this Agreement during his
life, and upon his death, this Agreement shall be binding upon and inure to the
benefit of his heirs, legatees and the legal representative of each.
10. APPLICABLE LAW. This Agreement shall be construed and interpreted
pursuant to the laws of Illinois.
11. AMENDMENT. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
Falcon Building Products, Inc. Employee
Edward G. Finnegan, Jr.
By: /s/ William K. Hall /s/ Edward G. Finnegan, Jr.
------------------------------ -----------------------------------
Its: President
------------------------------
5
<PAGE>
EXHIBIT A
The provisions of the Put/Call arrangements are as follows:
- --------------------------------------------------------------------------------
CALL PROVISION CALL PRICE
- --------------------------------------------------------------------------------
WITHIN 3 YEARS AFTER 3 YEARS
- --------------------------------------------------------------------------------
Employee leaves without Good Reason Lower of Cost or FMV FMV
- --------------------------------------------------------------------------------
Employee leaves with Good Reason FMV FMV
- --------------------------------------------------------------------------------
Employee is terminated for Cause Lower of Cost or FMV Lower of Cost or FMV
- --------------------------------------------------------------------------------
Any other reason FMV FMV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUT PROVISION PUT PRICE
- --------------------------------------------------------------------------------
BEFORE 3 YEARS AFTER 3 YEARS
- --------------------------------------------------------------------------------
Employee is terminated without Cause Lower of Cost or FMV FMV
- --------------------------------------------------------------------------------
Resignation for Good Reason Lower of Cost or FMV FMV
- --------------------------------------------------------------------------------
Employee leaves without Good Reason
(provided employee does not go to a
competitor) None FMV
- --------------------------------------------------------------------------------
Death, Disability, Retirement FMV FMV
- --------------------------------------------------------------------------------
Cost to be grossed up by an appropriate interest rate.
6
<PAGE>
EXHIBIT 10.08.2
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
WHEREAS, in connection with the Agreement and Plan of Merger between Falcon
Building Products, Inc. and FBP Acquisition Corp., Inc., Falcon Building
Products, Inc. and William K. Hall (collectively, the "Parties") have previously
executed an employment agreement (the "Employment Agreement"); and
WHEREAS, the Parties now desire to amend the Employment Agreement;
NOW, THEREFORE, the Parties agree that the Employment Agreement is hereby
amended by adding the following Section 12 immediately following Section 11 of
the Employment Agreement:
"12. NONCOMPETITION. During the period the Employee is employed
hereunder and during any period thereafter during which the Employee is
receiving payments or other benefits pursuant to Section 5 hereof, the
Employee will not, in association with or as an officer, principal, member,
advisor, agent, partner, director, stockholder, employee or consultant of
any corporation (or sub-unit, in the case of a diversified business) or
other enterprise, entity or association, engage or otherwise participate in
any business which shall compete with any business conducted by the Company
or any of its subsidiaries or work on the acquisition or development of any
individual line of business, property or project in which the Company or
any of its subsidiaries is then involved or has a written plan to enter
which plan was adopted prior to the expiration of the Employee's
termination of employment, and will not solicit or induce any person who is
or was employed by the Company or any of its subsidiaries at any time
during such term or period to interfere with the activities or businesses
of any such company or to discontinue his or her employment with such
company, or employ any such person in a business or enterprise which
competes with any such company.
The Employee understands that the provisions of this Section 12 may
limit his ability to earn a livelihood in a business similar to the
business of the Company but as an executive officer of the Company he
nevertheless agrees and hereby acknowledges that (i) such provisions do not
impose a greater restraint than is necessary to protect the goodwill or
other business interests of the Company; (ii) such provisions contain
reasonable limitations as to time and scope of activity to be restrained;
and (iii) the consideration provided hereunder is sufficient to compensate
the Employee for the restrictions contained in Section 12 hereof. In
consideration of the foregoing, the Employee agrees that he will not assert
that, and it should not be considered that, any provisions of Section 12
otherwise are void, voidable or unenforceable or should be voided or held
unenforceable."
IN WITNESS WHEREOF, the Parties have caused this First Amendment to be
executed this 17th day of June, 1997.
Edward G. Finnegan, Jr. Falcon Building Products, Inc.
/s/ Edward G. Finnegan, Jr. By: /s/ Gus J. Athas
- ------------------------------ -----------------------------
Its: Executive Vice President
-----------------------------
2
<PAGE>
EXHIBIT 10.09
NON-COMPETITION AGREEMENT
THIS AGREEMENT, by and between Falcon Building Products, Inc. (the
"Company") and William E. Allen (the "Shareholder/Employee") effective as of
March 31, 1997 (the "Effective Date"),
WITNESSETH THAT:
WHEREAS, the Shareholder/Employee is an officer and shareholder of the
Company; and
WHEREAS, as a condition and inducement to an Agreement and Plan of Merger
between the Company and [Merger Co.] (the "Merger Agreement") and as a condition
to the Employment Agreement entered into on this date between the Company and
the Shareholder/Employee the Company and the Shareholder/Employee desire to
enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and agreements set forth
herein and for other good and valuable consideration the receipt of which is
hereby acknowledged, it is agreed by the Shareholder/Employee and Company as
follows:
1. PAYMENT BY COMPANY. The Company hereby agrees to pay the
Shareholder/Employee $275,000 on the date as of which the merger is effective
under the terms of the Merger Agreement (the "Merger Date").
2. NONCOMPETITION. Until the later of three years after the Merger Date
or one year after the date on which the Shareholder/Employee's employment with
the Company and its affiliates is terminated for any reason, the
Shareholder/Employee covenants and agrees that, except to the extent agreed to
in writing by the Company, he will not, directly or indirectly, engage in,
assist, perform services for, plan for, establish or open, or have any financial
interest (other than (i) ownership of 1% or less of the outstanding stock of
any corporation listed on the New York or American Stock Exchange or included in
the National Association of Securities Dealers Automated Quotation System or
(ii) ownership of securities in any entity affiliated with the Company) in any
person, firm, corporation, or business entity (whether as an owner, joint
venturer, employee, officer, director, consultant or otherwise) that engages in
an activity which is materially competitive with any business engaged in by the
Company during the period of the Employee/Shareholder's employment with the
Company.
3. CONFIDENTIAL INFORMATION. Except as may be required by the lawful
order of a court or agency of competent jurisdiction, or except to the extent
that the Shareholder/Employee has express authorization from the Company, the
<PAGE>
Shareholder/Employee agrees to keep secret and confidential
indefinitely all non-public information concerning the Company or any
affiliate of the Company which was acquired by or disclosed to the
Shareholder/Employee during the course of his employment with the Company or
its affiliates, including but not limited to customer lists, price lists,
customer services requirements, costs of providing services, supplier
information, and other data of or pertaining to the Company or to any
affiliate of the Company which are not a matter of public knowledge, and not
to disclose such confidential information, either directly or indirectly, to
any other person, firm or business entity or to use it in any way.
Shareholder/Employee agrees that promptly upon termination of his employment
with the Company for any reason, he shall deliver to the Company all papers,
documents and materials containing confidential information regarding the
Company and its affiliates in whatever form, including computer-readable
storage devices, and wherever located, obtained by him during the course of
employment by the Company or its affiliates.
4. NONSOLICITATION. Until the later of three years after the Merger Date
or one year after the date on which the Shareholder/Employee's employment with
the Company and its affiliates terminates for any reason, the
Shareholder/Employee covenants and agrees that he will not, whether for himself
or for any other person, business, partnership, association, firm, company or
corporation, directly or indirectly, call upon, solicit, divert or take away or
attempt to solicit, divert or take away, any of the employees of the Company.
5. REMEDIES. The Shareholder/Employee acknowledges that the Company
would be irreparably injured by a violation of paragraph 2, 3 or 4, and he
agrees that the Company, in addition to any other remedies available to it for
such breach or threatened breach, shall be entitled to an injunction, temporary
restraining order or other equivalent relief, restraining Shareholder/Employee
from any actual or threatened breach of any such paragraph, without any bond or
other security being required.
6. SEVERABILITY AND ENTIRE AGREEMENT. The invalidity or unenforceability
of any provision of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement, and this Agreement will
be construed as if such invalid or unenforceable provision were omitted (but
only to the extent that such provision cannot be appropriately reformed or
modified). The Agreement is intended to be the entire agreement between the
parties regarding the subject matter hereof and shall supersede any prior
agreements to the contrary.
7. APPLICABLE LAW. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
8. SUCCESSORS. This Agreement shall be binding upon, and operate for the
benefit of, the Company and its successors and assigns.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FALCON BUILDING PRODUCTS, INC. SHAREHOLDER/EMPLOYEE
By: /s/ Gus Athas /s/ William E. Allen
--------------------------- -------------------------------
Senior Vice-President
<PAGE>
EXHIBIT 10.10
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
dated as of June 17, 1997
among
FALCON RECEIVABLE PROGRAM, INC.,
FALCON BUILDING PRODUCTS, INC.,
MARKET STREET FUNDING CORPORATION
and
PNC BANK, NATIONAL ASSOCIATION
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Making Purchases . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Purchased Interest Computation . . . . . . . . . . . . . . 3
Section 1.4. Settlement Procedures. . . . . . . . . . . . . . . . . . . 3
Section 1.5. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.6. Payments and Computations, Etc.. . . . . . . . . . . . . . 8
Section 1.7. Dividing or Combining Portions of the
Capital of the Purchased Interest. . . . . . . . . . . . 9
Section 1.8. Increased Costs. . . . . . . . . . . . . . . . . . . . . . 9
Section 1.9. Requirements of Law. . . . . . . . . . . . . . . . . . . .10
Section 1.10. Inability to Determine Eurodollar Rate . . . . . . . . . .11
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. . . . . . . . .12
Section 2.2. Termination Events . . . . . . . . . . . . . . . . . . . .12
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. . . . . . . . . . . . . . . . .12
Section 3.2. Indemnities by the Servicer. . . . . . . . . . . . . . . .14
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. . . . . . . . . . . . . . . .15
Section 4.2. Duties of the Servicer . . . . . . . . . . . . . . . . . .16
Section 4.3. Lock-Box Arrangements. . . . . . . . . . . . . . . . . . .17
Section 4.4. Enforcement Rights . . . . . . . . . . . . . . . . . . . .18
Section 4.5. Responsibilities of the Seller . . . . . . . . . . . . . .19
Section 4.6. Servicing Fee. . . . . . . . . . . . . . . . . . . . . . .19
Section 4.7. Letter of Credit . . . . . . . . . . . . . . . . . . . . .20
ii
<PAGE>
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . .21
Section 5.2. Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . .21
Section 5.3. Assignability. . . . . . . . . . . . . . . . . . . . . . .21
Section 5.4. Costs, Expenses and Taxes. . . . . . . . . . . . . . . . .22
Section 5.5. No Proceedings; Limitation on Payments . . . . . . . . . .23
Section 5.6. Confidentiality. . . . . . . . . . . . . . . . . . . . . .23
Section 5.7. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . .24
Section 5.8. Execution in Counterparts. . . . . . . . . . . . . . . . .24
Section 5.9. Survival of Termination. . . . . . . . . . . . . . . . . .24
Section 5.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .25
Section 5.11. Entire Agreement . . . . . . . . . . . . . . . . . . . . .25
Section 5.12. Headings . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 5.13. Issuer's Liabilities . . . . . . . . . . . . . . . . . . .25
EXHIBIT I DEFINITIONS
EXHIBIT II CONDITIONS OF PURCHASES
EXHIBIT III REPRESENTATIONS AND WARRANTIES
EXHIBIT IV COVENANTS
EXHIBIT V TERMINATION EVENTS
iii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "AGREEMENT") is
entered into as of June 17, 1997 among FALCON RECEIVABLE PROGRAM, INC., a
Delaware corporation, as seller (previously known as Centrally Held Eagle
Receivables Program, Inc., the "SELLER"), FALCON BUILDING PRODUCTS, INC., a
Delaware corporation ("FALCON"), as initial servicer (in such capacity, together
with its successors and permitted assigns in such capacity, the "SERVICER"),
MARKET STREET FUNDING CORPORATION, a Delaware corporation (together with its
successors and permitted assigns, the "ISSUER"), and PNC BANK, NATIONAL
ASSOCIATION, a national banking association ("PNC"), as administrator (in such
capacity, together with its successors and assigns in such capacity, the
"ADMINISTRATOR"), and as issuer of Letters of Credit (in such capacity, together
with its successors and assigns in such capacity, the "LETTER OF CREDIT
ISSUER").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in EXHIBIT I to this Agreement.
References in the Exhibits hereto to "the Agreement" refer to this Agreement, as
amended, modified or supplemented from time to time.
The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Issuer desires to acquire
such undivided variable percentage interest, as such percentage interest shall
be adjusted from time to time based upon, in part, reinvestment payments that
are made by the Issuer and additional incremental payments made to the Seller.
The parties hereto have entered into a Receivables Purchase Agreement (Non-
Designated Receivables), dated as of May 2, 1996 (the "ORIGINAL RPA"), which
agreement the parties wish to amend and restate hereby.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree that the Original RPA is hereby
amended and restated as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. PURCHASE FACILITY. (a) On the terms and conditions
hereinafter set forth, the Issuer hereby agrees to purchase, and make
reinvestments of, undivided percentage ownership interests with regard to the
Purchased Interest from the Seller from time to time from the date hereof to the
Facility Termination Date. Under no circumstances shall the Issuer make
<PAGE>
any such purchase or reinvestment if, after giving effect to such purchase or
reinvestment, the aggregate outstanding Capital of the Purchased Interest would
exceed the Purchase Limit.
(b) The Seller may, upon at least 30 days' written notice to the
Administrator, terminate the purchase facility provided in this SECTION 1.1 in
whole or, from time to time, irrevocably reduce in part the unused portion of
the Purchase Limit; PROVIDED, that each partial reduction shall be in the amount
of at least $5,000,000, or an integral multiple of $1,000,000 in excess thereof,
and that, unless terminated in whole, the Purchase Limit shall in no event be
reduced below $20,000,000.
Section 1.2. MAKING PURCHASES. (a) Each purchase (but not reinvestment)
of undivided percentage ownership interests with regard to the Purchased
Interest hereunder shall be made upon the Seller's irrevocable written notice
delivered to the Administrator in accordance with SECTION 5.2 (which notice must
be received by the Administrator before 11:00 a.m., New York City time): (i) at
least three Business Days before the requested purchase date, in the case of a
purchase to be funded at the Alternate Rate and based upon the Eurodollar Rate,
(ii) at least two Business Days before the requested purchase date, in the case
of a purchase to be funded at the Alternate Rate and based upon the Base Rate,
and (iii) at least two Business Days before the requested purchase date, in the
case of a purchase to be funded at the CP Rate, which notice shall specify: (A)
the amount requested to be paid to the Seller (such amount, which shall not be
less than $5,000,000, being the Capital relating to the undivided percentage
ownership interest then being purchased), (B) the date of such purchase (which
shall be a Business Day) and (C) the desired funding basis for such purchase
(which shall be based upon the Eurodollar Rate, the Base Rate or the CP Rate).
If the Seller has requested that the purchase be funded at the CP Rate, the
Administrator shall promptly thereafter notify the Seller whether the Issuer has
exercised its discretion not to fund such purchase with the issuance of Notes
because such purchase with the issuance of Notes would be economically
inadvisable to the Issuer, the Administrator, the Seller or any other similarly
situated Person, or otherwise not permitted, in which case the Seller shall be
deemed to have requested that the purchase be funded at the Alternate Rate and
based upon the Base Rate.
(b) On the date of each purchase (but not reinvestment) of undivided
percentage ownership interests with regard to the Purchased Interest hereunder,
the Issuer shall, upon satisfaction of the applicable conditions set forth in
EXHIBIT II hereto, make available to the Seller in same day funds, at Harris
Trust and Savings Bank, account # 207-190-0, ABA # 071-000-288, an amount equal
to the Capital relating to the undivided percentage ownership interest then
being purchased.
2
<PAGE>
(c) Effective on the date of each purchase pursuant to this SECTION
1.2 and each reinvestment pursuant to SECTION 1.4, the Seller hereby sells and
assigns to the Issuer an undivided percentage ownership interest in: (i) each
Pool Receivable then existing, (ii) all Related Security with respect to such
Pool Receivables, and (iii) all Collections with respect to, and other proceeds
of, such Pool Receivables and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Issuer on its
own behalf and as agent, a security interest in all of the Seller's right, title
and interest (including any undivided interest of the Seller) in, to and under
all of the following, whether now or hereafter owned, existing or arising: (i)
all Pool Receivables, (ii) all Related Security with respect to such Pool
Receivables, (iii) all Collections with respect to such Pool Receivables, (iv)
the Lock-Box Accounts and all amounts on deposit therein, and all certificates
and instruments, if any, from time to time evidencing such Lock-Box Accounts and
amounts on deposit therein, (v) all rights (but none of the obligations) of the
Seller under its Sale Agreement with Falcon (including the rights of Falcon
against the Originators under the other Sale Agreement), and (vi) all proceeds
of, and all amounts received or receivable under any or all of, the foregoing
(collectively, the "POOL ASSETS"). The Issuer shall have, with respect to the
Pool Assets, and in addition to all the other rights and remedies available to
the Issuer, all the rights and remedies of a secured party under any applicable
UCC.
Section 1.3. PURCHASED INTEREST COMPUTATION. The Purchased Interest shall
be initially computed on the date of the initial purchase hereunder.
Thereafter, until the Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other
than a Termination Day. The Purchased Interest as computed (or deemed
recomputed) as of the day before the Termination Date shall thereafter remain
constant. The Purchased Interest shall become zero when the Capital thereof and
Discount thereon shall have been paid in full, all the amounts owed by the
Seller and the Servicer hereunder to the Issuer, the Administrator and any other
Indemnified Party or Affected Person are paid in full, and the Servicer shall
have received the accrued Servicing Fee thereon.
Section 1.4. SETTLEMENT PROCEDURES. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the occurrence
of any Termination Day and current computations of the Purchased Interest.
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(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or the Servicer:
(i) set aside and hold in trust (and, at the request of the
Administrator, segregate in a separate account approved by the
Administrator if, at the time of such request, there exists an Unmatured
Termination Event or a Termination Event or if the failure to so segregate
reasonably could be expected to cause a Material Adverse Effect) for the
Issuer, out of the Issuer's Share of such Collections, FIRST, an amount
equal to the Discount accrued through such day for each Portion of Capital
and not previously set aside, SECOND, an amount equal to the fees set forth
in the Fee Letter accrued and unpaid through such day, and THIRD, to the
extent funds are available therefor, an amount equal to the Issuer's Share
of the Servicing Fee accrued through such day and not previously set aside;
(ii) subject to SECTION 1.4(f), if such day is not a Termination
Day, remit to the Seller, on behalf of the Issuer, the remainder of the
Issuer's Share of such Collections; such remainder shall be automatically
reinvested in Pool Receivables, and in the Related Security, Collections
and other proceeds with respect thereto; PROVIDED, HOWEVER, that if the
Purchased Interest would exceed 100%, then the Servicer shall not reinvest,
but shall set aside and hold in trust for the Issuer (and shall, at the
request of the Administrator, segregate in a separate account approved by
the Administrator if, at the time of such request, there exists an
Unmatured Termination Event or a Termination Event or if the failure to so
segregate reasonably could be expected to cause a Material Adverse Effect)
a portion of such Collections that, together with the other Collections set
aside pursuant to this CLAUSE (ii), shall equal the amount necessary to
reduce the Purchased Interest to 100%; AND PROVIDED FURTHER, that any
Collections received from a Letter of Credit Obligor for which
disbursements have been made under a Letter of Credit shall be reimbursed
to the Letter of Credit Issuer pursuant to SECTION 4.7(b);
(iii) if such day is a Termination Day, set aside, segregate
and hold in trust for the Issuer the entire remainder of the Issuer's Share
of the Collections; PROVIDED, that if amounts are set aside and held in
trust on any Termination Day of the type described in clause (a) of the
definition of "Termination Day" and, thereafter, the conditions set forth
in Section 2 of EXHIBIT II are satisfied or waived by the Administrator,
such previously set aside amounts shall be reinvested in accordance with
CLAUSE (ii) above on the day of such subsequent satisfaction or waiver of
conditions; AND PROVIDED FURTHER, that any Collections received from a
Letter of Credit Obligor for
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which disbursements have been made under a Letter of Credit shall be
reimbursed to the Letter of Credit Issuer pursuant to SECTION 4.7(b); and
(iv) subject to the Issuer's security interest under SECTION
1.2(d), release to the Seller (subject to SECTION 1.4(f)) for its own
account any Collections in excess of: (x) amounts required to be
reinvested in accordance with CLAUSE (ii) or the first proviso to CLAUSE
(iii) PLUS (y) the amounts that are required to be set aside pursuant to
CLAUSE (i), the first proviso to CLAUSE (ii) and CLAUSE (iii) PLUS (z) the
Seller's Share of the Servicing Fee accrued and unpaid through such day and
all reasonable and appropriate out-of-pocket costs and expenses of the
Servicer for servicing, collecting and administering the Pool Receivables
PLUS (aa) amounts required to be reimbursed to the issuer of a Letter of
Credit in accordance with the second proviso to CLAUSE (ii) and/or the
second proviso to CLAUSE (iii) PLUS (bb) any amounts reimbursable by the
Seller to the issuer of a Letter of Credit pursuant to SECTION 4.7(b).
(c) The Servicer shall deposit into the Administration Account (or
such other account designated by the Administrator), on the last day of each
Settlement Period (or on the Alternative Settlement Date, if applicable)
relating to a Portion of Capital, Collections held for the Issuer pursuant to
SECTION 1.4(b)(i) or SECTION 1.4(f) with respect to such Portion of Capital PLUS
the lesser of: (i) the amount of Collections then held for the Issuer pursuant
to SECTION 1.4(b)(ii) and SECTION 1.4(b)(iii) and (ii) such Portion of Capital;
PROVIDED, that if Falcon is the Servicer and the Administrator has not notified
Falcon that such right is revoked, Falcon may retain the portion of the
Collections set aside pursuant to SECTION 1.4(b)(i) that represents the Issuer's
Share of the Servicing Fee. On the last day of each Settlement Period (or on
the Alternative Settlement Date, if applicable) relating to a Portion of
Capital, the Administrator will notify the Servicer by facsimile of the amount
of Discount accrued with respect to such Portion of Capital during such
Settlement Period or portion thereof.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to SECTION 1.4(c), the Administrator shall cause such funds to be
distributed as follows:
(i) if such distribution occurs on a day that is not a
Termination Day and the Purchased Interest does not exceed 100%, FIRST to
the Issuer in payment in full of all accrued Discount and fees (other than
Servicing Fees) with respect to such Portion of Capital, and SECOND, if the
Servicer has set aside amounts in respect of the Servicing Fee pursuant to
SECTION 1.4(b)(i) and has not retained such amounts pursuant to SECTION
1.4(c), to the Servicer (payable
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in arrears on the last day of each Settlement Period) in payment in full of
the Issuer's Share of accrued Servicing Fees so set aside with respect to
such Portion of Capital; and
(ii) if such distribution occurs on a Termination Day or on a
day when the Purchased Interest exceeds 100%, FIRST to the Issuer in payment
in full of all accrued Discount with respect to such Portion of Capital,
SECOND to the Issuer in payment in full of such Portion of Capital (or, if
such day is not a Termination Day, the amount necessary to reduce the
Purchased Interest to 100%), THIRD, if Falcon or an Affiliate thereof is
not the Servicer, to the Servicer in payment in full of all accrued
Servicing Fees with respect to such Portion of Capital, FOURTH, if the
Capital and accrued Discount with respect to each Portion of Capital have
been reduced to zero, and all accrued Servicing Fees payable to the
Servicer (if other than Falcon or an Affiliate thereof) have been paid in
full, to the Issuer, the Administrator and any other Indemnified Party or
Affected Person in payment in full of any other amounts owed thereto by the
Seller hereunder and, FIFTH, unless such amount has been retained by the
Servicer pursuant to SECTION 1.4(c), then to the Servicer (if the Servicer
is Falcon or an Affiliate thereof) in payment in full of the Issuer's Share
of all accrued Servicing Fees.
Notwithstanding the foregoing, if the Seller has elected to reduce a Portion of
the Capital as of an Alternative Settlement Date pursuant to SECTION 1.4(f), on
such Alternative Settlement Date the Servicer shall deposit into the
Administration Account (or such other account designated by the Administrator)
the portion of the Collections set aside pursuant to SECTION 1.4(f), and such
amount shall be distributed to the Issuer in reduction of a Portion of the
Capital, as selected by the Issuer. After the Capital, Discount, fees payable
pursuant to the Fee Letter and Servicing Fees with respect to the Purchased
Interest, and any other amounts payable by the Seller and the Servicer to the
Issuer, the Administrator or any other Indemnified Party or Affected Person
hereunder, have been paid in full, all additional Collections with respect to
the Purchased Interest shall be paid to the Seller for its own account.
(e) For the purposes of this SECTION 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective, rejected,
returned, repossessed or foreclosed goods or services, or any revision,
cancellation, allowance, discount or other adjustment made by the Seller or
any Affiliate of the Seller, or any setoff or dispute between the Seller or
any Affiliate of the Seller and an Obligor, or the Seller shall have
received a Deemed Collection under the Sale Agreements (in each case, other
than in respect of any
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Special Program Allowances), the Seller shall be deemed to have received on
such day a Collection of such Pool Receivable in the amount of such
reduction, adjustment or Deemed Collection;
(ii) if on any day any of the representations or warranties in
Section 1(h) or (o) of EXHIBIT III is not true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
(iii) except as provided in CLAUSE (i) or (ii) above, or as
otherwise required by applicable law or the relevant Contract, all
Collections received from an Obligor of any Receivable shall be applied to
the Receivables of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, unless such Obligor
designates in writing its payment for application to specific Receivables;
(iv) if and to the extent the Administrator or the Issuer shall
be required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding) any
amount received by it hereunder, such amount shall be deemed not to have
been so received by the Administrator or the Issuer but rather to have been
retained by the Seller and, accordingly, the Administrator or the Issuer,
as the case may be, shall have a claim against the Seller for such amount,
payable when and to the extent that any distribution from or on behalf of
such Obligor is made in respect thereof; and
(v) on the Termination Date, the Seller shall be deemed to have
received on such day Collections of Pool Receivables equal to: (A) the
aggregate amount by which the Pool Receivables relating to the Special
Program Allowances have been discounted, adjusted or otherwise reduced as
noted in CLAUSE (i) MINUS (b) the Special Program Allowances.
(f) If at any time the Seller shall wish to cause the reduction of a
Portion of Capital (but not to commence the liquidation, or reduction to zero,
of the entire Capital of the Purchased Interest), the Seller may do so as
follows:
(i) the Seller shall give the Administrator and the Servicer at
least two Business Days' prior written notice thereof (or at least three
Business Days with regard to an Alternative Settlement Date) (including the
amount of such proposed reduction and the proposed date on which such
reduction will commence),
(ii) on the proposed date of commencement of such reduction and
on each day thereafter, the Servicer shall cause Collections with respect
to such Portion of Capital
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not to be reinvested until the amount thereof not so reinvested shall equal
the desired amount of reduction, and
(iii) the Servicer shall hold such Collections in trust for
the Issuer, for payment to the Administrator on the last day of the current
Settlement Period relating to such Portion of Capital or on the next
Alternative Settlement Date (as specified by the Seller), and the
applicable Portion of Capital shall be deemed reduced in the amount to be
paid to the Administrator only when in fact finally so paid;
PROVIDED, that:
A. the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $250,000, and the entire
Capital of the Purchased Interest after giving effect to such reduction
shall be not less than $20,000,000 and shall be in an integral multiple of
$250,000,
B. the Seller shall choose a reduction amount, and the date of
commencement thereof, so that to the extent practicable such reduction
shall commence and conclude in the same Settlement Period, and
C. if two or more Portions of Capital are outstanding at the time of
any proposed reduction, such proposed reduction shall be applied, unless
the Seller shall otherwise specify in the notice given pursuant to CLAUSE
(f)(i), to the Portion of Capital with the shortest remaining Settlement
Period (or, if all such Portions of Capital have the same Settlement
Period, pro rata).
Section 1.5. FEES. The Seller shall pay to the Administrator certain fees
in the amounts and on the dates set forth in a letter, dated the date hereof,
among Falcon, the Seller and the Administrator (as such letter agreement may be
amended, supplemented or otherwise modified from time to time, the "FEE
LETTER").
Section 1.6. PAYMENTS AND COMPUTATIONS, ETC. (a) All amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be paid or deposited
no later than noon (New York City time) on the day when due in same day funds to
the Administration Account. All amounts received after noon (New York City
time) will be deemed to have been received on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by the
Seller or the Servicer, as the case may be, when due hereunder, at an interest
rate equal to 2.0% PER ANNUM above the Base Rate, payable on demand.
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(c) All computations of interest under SUBSECTION (b) and all
computations of Discount, fees and other amounts hereunder shall be made on the
basis of a year of 360 (or 365 or 366, as applicable, with respect to Discount
calculated by reference to the Base Rate) days for the actual number of days
elapsed. Whenever any payment or deposit to be made hereunder shall be due on a
day other than a Business Day, such payment or deposit shall be made on the next
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
Section 1.7. DIVIDING OR COMBINING PORTIONS OF THE CAPITAL OF THE
PURCHASED INTEREST. The Seller may, on the last day of any Settlement Period,
pursuant to written notice delivered to the Administrator in accordance with
SECTION 5.2: (a) at least three Business Days before such last day in the case
of a Portion of Capital to be funded based upon the Eurodollar Rate and (b) at
least two Business Days before such last day in all other cases, either: (i)
divide the Capital of the Purchased Interest into two or more portions (each, a
"PORTION OF CAPITAL"), which Portions of Capital may accrue Discount by
reference to different rates, equal, in aggregate, to the Capital of the
Purchased Interest; PROVIDED, that after giving effect to such division the
amount of each such Portion of Capital shall be not less than $1,000,000 and
shall be an integral multiple of $250,000, or (ii) combine any two or more
Portions of Capital outstanding on such last day and having Settlement Periods
ending on such last day into a single Portion of Capital equal to the aggregate
of the Capital of such Portions of Capital.
Section 1.8. INCREASED COSTS. (a) If the Administrator, the Issuer, any
Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "AFFECTED PERSON") reasonably determines that the existence
of or compliance with: (i) any law or regulation or any change therein or in
the interpretation or application thereof, in each case adopted, issued or
occurring after the date hereof, or (ii) any request, guideline or directive
from any central bank or other Governmental Authority (whether or not having the
force of law) issued or occurring after the date of this Agreement, affects or
would affect the amount of capital required or expected to be maintained by such
Affected Person, and such Affected Person determines that the amount of such
capital is increased by or based upon the existence of any commitment to make
purchases of (or otherwise to maintain the investment in) Pool Receivables
related to this Agreement or any related liquidity facility, credit enhancement
facility and other commitments of the same type, then, upon demand by such
Affected Person (with a copy to the Administrator), the Seller shall immediately
pay to the Administrator, for the account of such Affected Person, from time to
time as specified by such Affected Person, additional amounts sufficient to
compensate such Affected Person in the light of such circumstances, to the
extent that such Affected Person reasonably determines such increase in capital
to be allocable to
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the existence of any of such commitments. A certificate as to such amounts
submitted to the Seller and the Administrator by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, due to either: (i) the introduction of or any change in or
in the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of, the Purchased Interest in respect of which
Discount is computed by reference to the Eurodollar Rate, then, upon demand by
such Affected Person, the Seller shall immediately pay to such Affected Person,
from time to time as specified by such Affected Person, additional amounts
sufficient to compensate such Affected Person for such increased costs. A
certificate as to such amounts submitted to the Seller and the Administrator by
such Affected Person shall be conclusive and binding for all purposes, absent
manifest error.
(c) If such increased costs affect the related Affected Person's
portfolio of financing transactions, such Affected Person shall use reasonable
averaging and attribution methods to allocate such increased costs to the
transactions contemplated by this Agreement.
Section 1.9. REQUIREMENTS OF LAW. If any Affected Person reasonably
determines that the existence of or compliance with: (i) any law or regulation
or any change therein or in the interpretation or application thereof, in each
case adopted, issued or occurring after the date hereof, or (ii) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement:
(a) does or shall subject such Affected Person to any tax of any kind
whatsoever with respect to this Agreement, any increase in the Purchased
Interest or in the amount of Capital relating thereto, or does or shall
change the basis of taxation of payments to such Affected Person on account
of Collections, Discount or any other amounts payable hereunder (excluding
taxes imposed on the overall pre-tax net income of such Affected Person,
and franchise taxes imposed on such Affected Person, by the jurisdiction
under the laws of which such Affected Person is organized or a political
subdivision thereof);
(b) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, purchases,
advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of such Affected Person
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that are not otherwise included in the determination of the Eurodollar Rate
or the Base Rate hereunder; or
(c) does or shall impose on such Affected Person any other condition;
and the result of any of the foregoing is: (x) to increase the cost to such
Affected Person of acting as Administrator, or of agreeing to purchase or
purchasing or maintaining the ownership of undivided percentage ownership
interests with regard to the Purchased Interest (or interests therein) or any
Portion of Capital, or (y) to reduce any amount receivable hereunder (whether
directly or indirectly), then, in any such case, upon demand by such Affected
Person, the Seller shall immediately pay to such Affected Person additional
amounts necessary to compensate such Affected Person for such additional cost or
reduced amount receivable. All such amounts shall be payable as incurred. A
certificate from such Affected Person to the Seller and the Administrator
certifying, in reasonably specific detail, the basis for, calculation of, and
amount of such additional costs or reduced amount receivable shall be conclusive
and binding for all purposes, absent manifest error; PROVIDED, HOWEVER, that no
Affected Person shall be required to disclose any confidential or tax planning
information in any such certificate.
Section 1.10. INABILITY TO DETERMINE EURODOLLAR RATE. If the
Administrator shall have determined before the first day of any Settlement
Period (which determination shall be conclusive and binding upon the parties
hereto), by reason of circumstances affecting the interbank Eurodollar market,
either that: (a) dollar deposits in the relevant amounts and for the relevant
Settlement Period are not available, (b) adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for such Settlement Period or (c) the
Eurodollar Rate determined pursuant hereto does not accurately reflect the cost
to the Issuer (as conclusively determined by the Administrator) of maintaining
any Portion of Capital during such Settlement Period, the Administrator shall
promptly give telephonic notice of such determination, confirmed in writing, to
the Seller before the first day of such Settlement Period. Upon delivery of
such notice: (i) no Portion of Capital shall be funded thereafter at the
Alternate Rate determined by reference to the Eurodollar Rate unless and until
the Administrator shall have given notice to the Seller that the circumstances
giving rise to such determination no longer exist, and (ii) with respect to any
outstanding Portions of Capital then funded at the Alternate Rate determined by
reference to the Eurodollar Rate, such Alternate Rate shall automatically be
converted to the Alternate Rate determined by reference to the Base Rate at the
respective last days of the then-current Settlement Periods relating to such
Portions of Capital.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TERMINATION EVENTS
Section 2.1. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the
Seller, Falcon and the Servicer hereby makes the representations and warranties,
and hereby agrees to perform and observe the covenants, applicable to it set
forth in EXHIBITS III and IV, respectively.
Section 2.2. TERMINATION EVENTS. If any of the Termination Events set
forth in EXHIBIT V shall occur, the Administrator may (at the direction of, or
with the consent of, the Majority Purchasers under the Liquidity Facility;
PROVIDED, that no such direction or consent shall be necessary if there are no
outstanding purchases under the Liquidity Facility), by notice to the Seller,
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred); PROVIDED, that
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (f)(i) of
EXHIBIT V, the Facility Termination Date shall occur. Upon any such
declaration, occurrence or deemed occurrence of the Facility Termination Date,
the Issuer and the Administrator shall have, in addition to the rights and
remedies that they may have under this Agreement, all other rights and remedies
provided after default under the UCC and under other applicable law, which
rights and remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. INDEMNITIES BY THE SELLER. Without limiting any other rights
that the Administrator, the Issuer, the Letter of Credit Issuer, any Program
Support Provider or any of their respective Affiliates, employees, agents,
successors, transferees or assigns (each, an "INDEMNIFIED PARTY") may have
hereunder or under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses, losses
and liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "INDEMNIFIED AMOUNTS") arising out of or resulting
from this Agreement (whether directly or indirectly), the use of proceeds of
purchases or reinvestments, the ownership of the Purchased Interest, or any
interest therein, or in respect of any Receivable, Related Security or Contract,
excluding, however: (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party, (b)
recourse (except as otherwise specifically provided in this Agreement) for
Receivables that are uncollectible due to the inability of the Obligor to pay,
or (c) any overall net income taxes or franchise taxes imposed on such
Indemnified Party by the jurisdiction under the laws of which such Indemnified
Party is
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organized or any political subdivision thereof. Without limiting or being
limited by the foregoing, and subject to the exclusions set forth in the
preceding sentence, the Seller shall pay on demand (which demand shall be
accompanied by documentation of the Indemnified Amounts, in reasonable detail)
to each Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:
(i) the failure of any Receivable included in the calculation of the
Net Receivables Pool Balance as an Eligible Receivable to be an Eligible
Receivable, the failure of any information contained in an Information
Package to be true and correct, or the failure of any other information
provided to the Issuer or the Administrator with respect to Receivables or
this Agreement to be true and correct;
(ii) the failure of any representation, warranty or statement made or
deemed made by the Seller (or any of its officers) under or in connection
with this Agreement to have been true and correct in all respects when
made;
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract, or the failure of any Pool Receivable or the related Contract to
conform to any such applicable law, rule or regulation;
(iv) the failure to vest in the Issuer a valid and enforceable: (A)
perfected undivided percentage ownership interest, to the extent of the
Purchased Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the other Pool Assets, and (B) first priority
perfected security interest in the Pool Assets, in each case, free and
clear of any Adverse Claim;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pool and the other
Pool Assets, whether at the time of any purchase or reinvestment or at any
subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
in, or purporting to be in, the Receivables Pool (including a defense based
on such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the goods or
services related to such Receivable or the furnishing or failure to furnish
such
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goods or services or relating to collection activities with respect to such
Receivable (if such collection activities were performed by the Seller or
any of its Affiliates acting as Servicer or by any agent or independent
contractor retained by the Seller or any of its Affiliates);
(vii) any failure of the Seller (or any of its Affiliates acting
as the Servicer) to perform its duties or obligations in accordance with
the provisions hereof or under the Contracts;
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with merchandise,
insurance or services that are the subject of any Contract;
(ix) the commingling of Collections at any time with other funds;
(x) the use of proceeds of purchases or reinvestments; or
(xi) any reduction in Capital as a result of the distribution of
Collections pursuant to SECTION 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be returned
for any reason.
Section 3.2. INDEMNITIES BY THE SERVICER. Without limiting any other
rights that the Administrator, the Issuer or any other Indemnified Party may
have hereunder or under applicable law, the Servicer hereby agrees to indemnify
each Indemnified Party from and against any and all Indemnified Amounts arising
out of or resulting from (whether directly or indirectly): (a) the failure of
any information contained in an Information Package to be true and correct, or
the failure of any other information provided to the Issuer or the Administrator
by, or on behalf of, the Servicer to be true and correct, (b) the failure of any
representation, warranty or statement made or deemed made by the Servicer (or
any of its officers) under or in connection with this Agreement to have been
true and correct in all respects when made, (c) the failure by the Servicer to
comply with any applicable law, rule or regulation with respect to any Pool
Receivable or the related Contract, (d) any dispute, claim, offset or defense of
the Obligor to the payment of any Receivable in, or purporting to be in, the
Receivables Pool resulting from or related to the collection activities with
respect to such Receivable, or (e) any failure of the Servicer to perform its
duties or obligations in accordance with the provisions hereof.
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ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. APPOINTMENT OF THE SERVICER. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by the
Person so designated from time to time as the Servicer in accordance with this
Section. Until the Administrator gives notice to Falcon (in accordance with
this Section) of the designation of a new Servicer, Falcon is hereby designated
as, and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof. Upon the occurrence of a Termination Event, the
Administrator may designate as Servicer any Person (including itself) to succeed
Falcon or any successor Servicer, on the condition in each case that any such
Person so designated shall agree to perform the duties and obligations of the
Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in
CLAUSE (a), Falcon agrees that it will terminate its activities as Servicer
hereunder in a manner that the Administrator determines will facilitate the
transition of the performance of such activities to the new Servicer, and Falcon
shall cooperate with and assist such new Servicer. Such cooperation shall
include access to and transfer of records and use by the new Servicer of all
licenses, hardware or software necessary or desirable to collect the Pool
Receivables and the Related Security.
(c) Falcon acknowledges that, in making their decision to execute and
deliver this Agreement, the Administrator and the Issuer have relied on Falcon's
agreement to act as Servicer hereunder. Accordingly, Falcon agrees that it will
not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each, a "SUB-SERVICER"); PROVIDED, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable for the performance of the duties and obligations
so delegated, (iii) the Seller, the Administrator and the Issuer shall have the
right to look solely to the Servicer for performance and (iv) the terms of any
agreement with any Sub-Servicer shall provide that the Administrator may
terminate such agreement upon the termination of the Servicer hereunder by
giving notice of its desire to terminate such agreement to the Servicer (and the
Servicer shall provide appropriate notice to each such Sub-Servicer); PROVIDED,
HOWEVER, that if any such delegation is to any Person other than an Originator,
the Administrator shall have consented in writing in advance to such delegation.
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Section 4.2. DUTIES OF THE SERVICER. (a) The Servicer shall take or cause
to be taken all such action as may be necessary or advisable to administer and
collect each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policies. The
Servicer shall set aside for the accounts of the Seller and the Issuer the
amount of the Collections to which each is entitled in accordance with ARTICLE
II. The Servicer may, in accordance with the applicable Credit and Collection
Policy, extend the maturity of any Pool Receivable (but not beyond 30 days) and
extend the maturity or adjust the Outstanding Balance of any Defaulted
Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; PROVIDED, HOWEVER, that: (i) such extension or adjustment
shall not alter the status of such Pool Receivable as a Delinquent Receivable or
a Defaulted Receivable or limit the rights of the Issuer or the Administrator
under this Agreement and (ii) if a Termination Event has occurred and Falcon or
an Affiliate thereof is serving as the Servicer, Falcon or such Affiliate may
make such extension or adjustment only upon the prior written approval of the
Administrator. The Seller shall deliver to the Servicer and the Servicer shall
hold for the benefit of the Seller and the Administrator (for the benefit of the
Issuer and individually), in accordance with their respective interests, all
records and documents (including computer tapes or disks) with respect to each
Pool Receivable. Notwithstanding anything to the contrary contained herein, the
Administrator may direct the Servicer (whether the Servicer is Falcon or any
other Person) to commence or settle any legal action to enforce collection of
any Pool Receivable or to foreclose upon or repossess any Related Security;
PROVIDED, HOWEVER, that no such direction may be given unless either: (x) a
Termination Event has occurred or (y) the Administrator believes in good faith
that failure to commence, settle or effect such legal action, foreclosure or
repossession could adversely affect Receivables constituting a material portion
of the Pool Receivables.
(b) The Servicer shall, as soon as practicable following actual
receipt of collected funds, turn over to the Seller the collections of any
indebtedness that is not a Pool Receivable, less, if Falcon or an Affiliate
thereof is not the Servicer, all reasonable and appropriate out-of-pocket costs
and expenses of such Servicer of servicing, collecting and administering such
collections; PROVIDED, HOWEVER, if Falcon or an Affiliate thereof is not the
Servicer, the Servicer shall not be under any obligation to remit any such funds
to the Seller unless and until the Servicer has received from the Seller
evidence satisfactory to the Administrator and the Servicer that the Seller is
entitled to such funds hereunder and under applicable law. The Servicer, if
other than Falcon or an Affiliate thereof, shall, as soon as practicable upon
demand, deliver to the Seller all records in its possession that evidence or
relate to any indebtedness that is not a Pool Receivable, and
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copies of records in its possession that evidence or relate to any indebtedness
that is a Pool Receivable.
(c) Notwithstanding anything to the contrary contained in this
Article, the Servicer, if not Falcon or an Affiliate thereof, shall have no
obligation to collect, enforce or take any other action described in this
Article with respect to any indebtedness that is not a Pool Receivable other
than to deliver to the Seller the collections and documents with respect to any
such indebtedness as described in CLAUSE (b). It is expressly understood and
agreed by the parties that such Servicer's duties in respect of any indebtedness
that is not a Pool Receivable are set forth in this Section in their entirety.
Upon delivery by such Servicer to the Seller of funds or records relating to any
indebtedness that is not a Pool Receivable, such Servicer shall have discharged
in full all of its responsibilities to make any such delivery.
(d) The Servicer's obligations hereunder shall terminate on the later
of: (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other Indemnified
Party or Affected Person hereunder shall have been paid in full.
After such termination, if Falcon or an Affiliate thereof was not the
Servicer on the date of such termination, the Servicer shall promptly deliver to
the Seller all books, records and related materials that the Seller previously
provided to the Servicer, or that have been obtained by the Servicer, in
connection with this Agreement.
Section 4.3. LOCK-BOX ARRANGEMENTS. Before the initial purchase
hereunder, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver original counterparts thereof to the Administrator.
Upon the occurrence of a Termination Event, the Administrator may at any time
thereafter give notice to each Lock-Box Bank that the Administrator is
exercising its rights under the Lock-Box Agreements to do any or all of the
following: (a) to have the exclusive ownership and control of the Lock-Box
Accounts transferred to the Administrator and to exercise exclusive dominion and
control over the funds deposited therein, (b) to have the proceeds that are sent
to the respective Lock-Box Accounts be redirected pursuant to the
Administrator's instructions rather than deposited in the applicable Lock-Box
Account, and (c) to take any or all other actions permitted under the applicable
Lock-Box Agreement. The Seller hereby agrees that if the Administrator at any
time takes any action set forth in the preceding sentence, the Administrator
shall have exclusive control of the proceeds (including Collections) of all Pool
Receivables and the Seller hereby further agrees to take any other action that
the Administrator may reasonably request to transfer such control. Any proceeds
of Pool Receivables received by the Seller or the Servicer thereafter shall be
sent
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immediately to the Administrator. The parties hereto hereby acknowledge that if
at any time the Administrator takes control of any Lock-Box Account, the
Administrator shall not have any rights to the funds therein in excess of the
unpaid amounts due to the Administrator, the Issuer or any other Person
hereunder and the Administrator shall distribute or cause to be distributed such
funds in accordance with SECTION 4.2(b) (including the proviso thereto) and
ARTICLE II (in each case as if such funds were held by the Servicer thereunder).
Section 4.4. ENFORCEMENT RIGHTS. (a) At any time following the occurrence
of a Termination Event:
(i) the Administrator may direct the Obligors that payment of
all amounts payable under any Pool Receivable is to be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct the Seller or the Servicer
to give notice of the Issuer's interest in Pool Receivables to each Obligor,
which notice shall direct that payments be made directly to the
Administrator or its designee, and the Seller or the Servicer, as the case
may be, shall give such notice at the expense of the Seller or the
Servicer, as the case may be; PROVIDED, that if the Seller or the Servicer,
as the case may be, fails to so notify each Obligor, the Administrator (at
the Seller's or the Servicer's, as the case may be, expense) may so notify
the Obligors; and
(iii) the Administrator may request the Servicer to, and upon
such request the Servicer shall: (A) assemble all of the records necessary
or desirable to collect the Pool Receivables and the Related Security, and
transfer or license to a successor Servicer the use of all software
necessary or desirable to collect the Pool Receivables and the Related
Security, and make the same available to the Administrator or its designee
at a place selected by the Administrator, and (B) segregate all cash,
checks and other instruments received by it from time to time constituting
Collections in a manner acceptable to the Administrator and, promptly upon
receipt, remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to the Administrator or its
designee.
(b) The Seller hereby authorizes the Administrator, and irrevocably
appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller, which
appointment is coupled with an interest, to take any and all steps in the name
of the Seller and on behalf of the Seller necessary or desirable, in the
determination of the Administrator, after the occurrence of a Termination Event,
to collect any and all amounts or portions thereof due under any and all Pool
Assets, including endorsing
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the name of the Seller on checks and other instruments representing Collections
and enforcing such Pool Assets. Notwithstanding anything to the contrary
contained in this subsection, none of the powers conferred upon such
attorney-in-fact pursuant to the preceding sentence shall subject such
attorney-in-fact to any liability if any action taken by it shall prove to be
inadequate or invalid, nor shall they confer any obligations upon such
attorney-in-fact in any manner whatsoever.
Section 4.5. RESPONSIBILITIES OF THE SELLER. (a) Anything herein to the
contrary notwithstanding, the Seller shall: (i) perform all of its obligations
under the Contracts related to the Pool Receivables to the same extent as if
interests in such Pool Receivables had not been transferred hereunder, and the
exercise by the Administrator or the Issuer of their respective rights hereunder
shall not relieve the Seller from such obligations, and (ii) pay when due any
taxes, including any sales taxes payable in connection with the Pool Receivables
and their creation and satisfaction. The Administrator and the Issuer shall not
have any obligation or liability with respect to any Pool Asset, nor shall
either of them be obligated to perform any of the obligations of the Seller,
Falcon or the Originators thereunder.
(b) Falcon hereby irrevocably agrees that if at any time it shall
cease to be the Servicer hereunder, it shall act (if the then-current Servicer
so requests) as the data-processing agent of the Servicer and, in such capacity,
Falcon shall conduct the data-processing functions of the administration of the
Receivables and the Collections thereon in substantially the same way that
Falcon conducted such data-processing functions while it acted as the Servicer.
Section 4.6. SERVICING FEE. (a) Subject to CLAUSE (b), the Servicer shall
be paid a fee equal to 0.25% PER ANNUM of the average aggregate Outstanding
Balance of the Pool Receivables. The Issuer's Share of such fee shall be paid
through the distributions contemplated by SECTION 1.4(d), and the Seller's Share
of such fee shall be paid by the Seller.
(b) If the Servicer ceases to be Falcon or an Affiliate thereof, the
servicing fee shall be the greater of: (i) the amount calculated pursuant to
CLAUSE (a) and (ii) an alternative amount specified by the successor Servicer
not to exceed 110% of the aggregate reasonable costs and expenses incurred by
such successor Servicer in connection with the performance of its obligations as
Servicer.
Section 4.7. LETTER OF CREDIT. (a) Pursuant to each Letter of Credit, the
Issuer may, in certain circumstances, request disbursements thereunder with
respect to the Defaulted Receivables of the applicable Letter of Credit Obligor.
Such disbursements shall be deemed to be Collections with respect to
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such Defaulted Receivables and shall be applied in accordance with the
allocation provisions of SECTION 1.4(d)(ii).
(b) Upon the receipt of any Collections with respect to such
Defaulted Receivables after any disbursements under a Letter of Credit have been
made, such Collections shall be reimbursed to the Letter of Credit Issuer until
the Letter of Credit Issuer has received an amount equal to the aggregate amount
of all disbursements. Should such amounts prove to be insufficient to reimburse
the Letter of Credit Issuer in full, the Letter of Credit Issuer shall be
reimbursed for any such shortfall by the Servicer (on behalf of the Seller) from
the amounts, if any, payable to the Seller pursuant to SECTION 1.4(b)(iv).
(c) The Seller shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. The payment of
drafts under any Letter of Credit shall be made in accordance with the terms of
such Letter of Credit and, in that connection, the Letter of Credit Issuer shall
be entitled to honor any drafts and accept any documents presented to it by the
beneficiary of such Letter of Credit in accordance with the terms of such Letter
of Credit and believed by the Letter of Credit Issuer in good faith to be
genuine. The Letter of Credit Issuer shall not have any duty to inquire as to
the accuracy or authenticity of any draft or other drawing documents which may
be presented to it, but shall be responsible only to determine that the
documents delivered in connection with a drawing under such Letter of Credit
comply on their face with the requirements of that Letter of Credit. In
furtherance and extension and not in limitation or derogation of any of the
foregoing, any action taken or omitted to be taken by the Letter of Credit
Issuer in good faith in connection with the foregoing shall not put the Letter
of Credit Issuer under any resulting liability to the Seller or any other
Person.
(d) Notwithstanding anything in this Agreement to the contrary, upon
any payment made by the Letter of Credit Issuer under any Letter of Credit
honoring a demand for payment made by the beneficiary thereof, the Letter of
Credit Issuer shall not be liable to any other Person for or in respect of any
amounts paid or disbursed for any reason whatsoever, including, without
limitation, the failure of such Person to receive or any delay by such Person in
receiving all or any part of the amount so paid or disbursed, or any non-
application or misapplication by such beneficiary of the proceeds of such
payment or disbursement.
ARTICLE V.
MISCELLANEOUS
Section 5.1. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement or any other Transaction Document, or consent to any departure by
the Seller or the
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Servicer therefrom, shall be effective unless in a writing signed by the
Administrator, and, in the case of any amendment, by the other parties thereto;
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such amendment shall be effective until both Moody's and
Standard & Poor's have notified the Servicer and the Administrator in writing
that such action will not result in a reduction or withdrawal of the rating of
any Notes. No failure on the part of the Issuer or the Administrator to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
Section 5.2. NOTICES, ETC. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication) and be sent or delivered to each party hereto at its
address set forth under its name on the signature pages hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto. Notices and communications by facsimile shall be effective when
sent (and shall be followed by hard copy sent by first class mail), and notices
and communications sent by other means shall be effective when received.
Section 5.3. ASSIGNABILITY. (a) This Agreement and the Issuer's rights
and obligations herein (including ownership of the Purchased Interest or an
interest therein) shall be assignable, in whole or in part, by the Issuer and
its successors and assigns with the prior written consent of the Seller;
PROVIDED, HOWEVER, that such consent shall not be unreasonably withheld; AND
PROVIDED FURTHER, that no such consent shall be required if the assignment is
made to PNC, any Affiliate of PNC (other than a director or officer of PNC), any
Purchaser or other Program Support Provider or any Person that is: (i) in the
business of issuing Notes and (ii) associated with or administered by PNC or any
Affiliate of PNC. Each assignor may, in connection with the assignment,
disclose to the applicable assignee (that shall have agreed to be bound by
SECTION 5.6) any information relating to the Servicer, the Seller or the Pool
Receivables furnished to such assignor by or on behalf of the Servicer, the
Seller, the Issuer or the Administrator.
(b) The Issuer may at any time grant to one or more banks or other
institutions (each a "PURCHASER") party to the Liquidity Agreement, or to any
other Program Support Provider, participating interests in the Purchased
Interest. In the event of any such grant by the Issuer of a participating
interest to a Purchaser or other Program Support Provider, the Issuer shall
remain responsible for the performance of its obligations hereunder. The Seller
agrees that each Purchaser or other
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Program Support Provider shall be entitled to the benefits of SECTIONS 1.8 and
1.9.
(c) This Agreement and the rights and obligations of the
Administrator hereunder shall be assignable, in whole or in part, by the
Administrator and its successors and assigns; PROVIDED, that, unless: (i) such
assignment is to an Affiliate of PNC, (ii) it becomes unlawful for PNC to serve
as the Administrator or (iii) a Termination Event exists, the Seller has
consented to such assignment, which consent shall not be unreasonably withheld.
(d) Except as provided in SECTION 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Administrator.
(e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or by its
agents.
(f) Notwithstanding the other provisions of this Section, no assignee
pursuant to CLAUSE (a) or grantee pursuant to CLAUSE (b) (other than, in either
case, any Affiliate of PNC, any Purchaser that was party to the Liquidity
Agreement on the date hereof or any other Person as to which the Seller has
provided its consent pursuant to CLAUSE (a)) shall be entitled to receive any
greater amount pursuant to SECTIONS 1.8 or 1.9 than the assignor or grantor, as
applicable, would have been entitled to receive in respect of the Purchased
Interest or rights and obligations herein.
Section 5.4. COSTS, EXPENSES AND TAXES. (a) In addition to the rights of
indemnification granted under SECTION 3.1, and subject to the Engagement Letter
and the Fee Letter, the Seller agrees to pay on demand (which demand shall be
accompanied by documentation thereof in reasonable detail) all costs and
expenses in connection with the preparation, execution, delivery and
administration (including periodic internal audits by the Administrator of Pool
Receivables) of this Agreement, the other Transaction Documents and the other
documents and agreements to be delivered hereunder (and all costs and expenses
in connection with any amendment, waiver or modification of any thereof),
including: (i) Attorney Costs for the Administrator, the Issuer and their
respective Affiliates and agents with respect thereto and with respect to
advising the Administrator, the Issuer and their respective Affiliates and
agents as to their rights and remedies under this Agreement and the other
Transaction Documents, and (ii) all costs and expenses (including Attorney
Costs), if any, of the Administrator, the Issuer and their respective Affiliates
and agents in connection with the enforcement of this Agreement and the other
Transaction Documents; PROVIDED, HOWEVER, that the Seller shall not be
responsible for the costs and expenses (including Attorney Costs)
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of Purchasers (in their capacities as such) under the Liquidity Agreement other
than such costs and expenses in connection with the enforcement of this
Agreement or any other Transaction Document.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party harmless from and
against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
Section 5.5. NO PROCEEDINGS; LIMITATION ON PAYMENTS. Each of the Seller,
the Servicer, the Administrator, the Letter of Credit Issuer, each assignee of
the Purchased Interest or any interest therein, and each Person that enters into
a commitment to purchase the Purchased Interest or interests therein, hereby
covenants and agrees that it will not institute against, or join any other
Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
latest maturing Note issued by the Issuer is paid in full.
Section 5.6. CONFIDENTIALITY. Unless otherwise required by applicable
law, each of the Seller and the Servicer agrees to maintain the confidentiality
of this Agreement and the other Transaction Documents (and all drafts thereof)
in communications with third parties and otherwise; PROVIDED, that this
Agreement may be disclosed to: (a) third parties to the extent such disclosure
is made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the Administrator, (b) the Seller's legal counsel and
auditors if they agree to hold it confidential and (c) third parties to the
extent such disclosure is required by the Credit Facility. Unless otherwise
required by applicable law, each of the Administrator and the Issuer agrees to
maintain the confidentiality of non-public financial information regarding
Falcon and its Subsidiaries and other non-public information marked as
confidential by the Servicer or the Seller; PROVIDED, that such information may
be disclosed to: (i) third parties to the extent such disclosure is made
pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to Falcon, (ii) legal counsel and auditors of the Issuer
or the Administrator if they agree to hold it confidential, (iii) the rating
agencies rating the Notes, (iv) any Program Support Provider or potential
Program Support Provider, (v) any placement agent placing the Notes and (vi) any
regulatory authorities having jurisdiction over PNC, the Issuer, any Program
Support Provider or any Purchaser.
Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
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THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF
PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF THE ISSUER IN THE POOL ASSETS
IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
Section 5.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which when taken together shall constitute one and the
same agreement.
Section 5.9. SURVIVAL OF TERMINATION. The provisions of SECTIONS 1.8,
1.9, 3.1, 3.2, 4.7(b), 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any
termination of this Agreement.
Section 5.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES
HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES
HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 5.11. ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents embody the entire agreement and understanding between the parties
hereto, and supersede all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof, except for any prior arrangements made with respect to
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the payment by the Issuer of (or any indemnification for) any fees, costs or
expenses payable to or incurred (or to be incurred) by or on behalf of the
Seller, the Servicer and the Administrator.
Section 5.12. HEADINGS. The captions and headings of this Agreement and
in any Exhibit, Schedule or Annex hereto are for convenience of reference only
and shall not affect the interpretation hereof or thereof.
Section 5.13. ISSUER'S LIABILITIES. The obligations of the Issuer under
the Transaction Documents are solely the corporate obligations of the Issuer.
No recourse shall be had for any obligation or claim arising out of or based
upon any Transaction Document against any stockholder, employee, officer,
director or incorporator of the Issuer; PROVIDED, HOWEVER, that this Section
shall not relieve any such Person of any liability it might otherwise have for
its own gross negligence or willful misconduct.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
FALCON RECEIVABLE PROGRAM, INC.
By: /s/ Anthony Navitsky
-----------------------------------
Name: Anthony Navitsky
Title: Vice President
Address:
Falcon Receivable Program, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attention: Anthony Navitsky
Telephone No.: (312) 906-6830
Facsimile No.: (312) 906-8372
FALCON BUILDING PRODUCTS, INC.
By: /s/ Gus J. Athas
-----------------------------------
Name: Gus J. Athas
Title: Senior Vice President
Address:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attention: Anthony Navitsky
Telephone No.: (312) 906-6830
Facsimile No.: (312) 906-8372
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MARKET STREET FUNDING CORPORATION
By: /s/ Douglas K. Johnson
-----------------------------------
Name: Douglas K. Johnson
-----------------------------
Title: President
-----------------------------
Address:
Market Street Funding Corporation
c/o AMACAR Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas K. Johnson
Telephone No.: (704) 365-0569
Facsimile No.: (704) 365-1362
With a copy to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Robert O. Finley, Jr.
Telephone No.: (412) 762-2047
Facsimile No.: (412) 762-9184
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By: /s/ Richard J. Hendrix
-----------------------------------
Name: Richard J. Hendrix
Title: Attorney-in-Fact
Address:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Robert O. Finley, Jr.
Telephone No.: (412) 762-2047
Facsimile No.: (412) 762-9184
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EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules
and Annexes), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit
and Schedule references in this Exhibit are to Sections of and Annexes,
Exhibits and Schedules to the Agreement.
"ADMINISTRATION ACCOUNT" means the account (account number
1002422076) of the Administrator maintained at the office of PNC at One PNC
Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15220-2707, or such other
account as may be so designated in writing by the Administrator to the
Servicer.
"ADMINISTRATOR" has the meaning set forth in the preamble to
the Agreement.
"ADVERSE CLAIM" means a lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement; it
being understood that any thereof in favor of the Issuer or the Administrator
(for the benefit of the Issuer) shall not constitute an Adverse Claim.
"AFFECTED PERSON" has the meaning set forth in Section 1.8 of
the Agreement.
"AFFILIATE" means, as to any Person: (a) any Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person, or (b) who is a director or officer: (i) of such
Person or (ii) of any Person described in CLAUSE (a), except that with
respect to the Issuer, Affiliate shall mean the holder(s) of its capital
stock. For purposes of this definition, control of a Person shall mean the
power, direct or indirect: (x) to vote 25% or more of the securities having
ordinary voting power for the election of directors of such Person or (y) to
direct or cause the direction of the management and policies of such Person,
in either case whether by ownership of securities, contract, proxy or
otherwise.
"AGREEMENT" has the meaning set forth in the preamble to the
Agreement.
"ALTERNATE RATE" for any Settlement Period for any Portion of
Capital of the Purchased Interest means an interest rate PER ANNUM equal to,
at the Seller's option: (a) 1.50% PER ANNUM above the Eurodollar Rate for
such Settlement Period, or (b) the Base Rate for such Settlement Period;
PROVIDED, HOWEVER, that in the case of:
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-1
<PAGE>
(i) any Settlement Period on or before the first
day of which the Administrator shall have been notified by the
Issuer, a Purchaser or any other Program Support Provider that
the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank or
other Governmental Authority asserts that it is unlawful, for
the Issuer, such Purchaser or other Program Support Provider, as
applicable, to fund any Portion of Capital based on the
Eurodollar Rate (and the Issuer, such Purchaser or other Program
Support Provider shall not have subsequently notified the
Administrator that such circumstances no longer exist),
(ii) any Settlement Period of one to (and including)
15 days,
(iii) any Settlement Period as to which: (A) the
Administrator does not receive notice before noon (New York City
time) on: (1) the second Business Day preceding the first day
of such Settlement Period that the Seller desires that the
related Portion of Capital be funded at the CP Rate or (2)
the third Business Day preceding the first day of such
Settlement Period that the Seller desires that the related
Portion of Capital be funded at the Alternate Rate and based
on the Eurodollar Rate, or (B) the Seller has given the notice
contemplated by CLAUSE (A)(1) and the Administrator shall have
notified the Seller that funding the related Portion of Capital
at the CP Rate is (in the Administrator's sole discretion)
economically inadvisable to the Issuer, the Administrator,
the Seller or any similarly situated Person or the Issuer is not
permitted to issue Notes to fund the Purchased Interest
hereunder, or
(iv) any Settlement Period relating to a Portion of
Capital that is less than $5,000,000,
the "ALTERNATE RATE" for each such Settlement Period shall be an interest
rate PER ANNUM equal to the Base Rate in effect on each day of such
Settlement Period. The "ALTERNATE RATE" for any day while a Termination
Event or Unmatured Termination Event exists shall be an interest rate equal
to 2% PER ANNUM above the Base Rate in effect on such day.
"ALTERNATIVE SETTLEMENT DATE" means the last Business Day of a
Fiscal Month.
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated cost
of internal legal services and all disbursements of internal counsel.
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act
of 1978 (11 U.S.C. Section 101, ET SEQ.), as amended from time to time.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-2
<PAGE>
"BASE RATE" means for any day, a fluctuating interest rate PER
ANNUM as shall be in effect from time to time, which rate shall be at all
times equal to the higher of:
(a) the rate of interest in effect for such day as
publicly announced from time to time by PNC in Pittsburgh,
Pennsylvania as its "prime rate." Such "prime rate" is set
by PNC based upon various factors, including PNC's costs and
desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which
may be priced at, above or below such announced rate; and
(b) 0.50% PER ANNUM above the latest Federal Funds Rate.
"BENEFIT PLAN" means any employee benefit pension plan as
defined in Section 3(2) of ERISA in respect of which the Seller, any
Originator, Falcon or any ERISA Affiliate is, or at any time during the
immediately preceding six years was, an "employer" as defined in Section 3(5)
of ERISA.
"BUSINESS DAY" means any day (other than a Saturday or Sunday)
on which: (a) banks are not authorized or required to close in New York City,
New York or Pittsburgh, Pennsylvania, and (b) if this definition of "Business
Day" is utilized in connection with the Eurodollar Rate, dealings are carried
out in the London interbank market.
"BUYER NOTE" has the meaning set forth in the Sale Agreement
between the Seller and Falcon.
"CAPITAL" means the amount paid to the Seller in respect of
the Purchased Interest by the Issuer pursuant to the Agreement, or such
amount divided or combined in accordance with Section 1.7 of the Agreement,
in each case reduced from time to time by Collections distributed and applied
on account of such Capital pursuant to Section 1.4(d) of the Agreement;
PROVIDED, that if such Capital shall have been reduced by any distribution
and thereafter all or a portion of such distribution is rescinded or must
otherwise be returned for any reason, such Capital shall be increased by the
amount of such rescinded or returned distribution as though it had not been
made.
"CHANGE IN CONTROL" means that:
(a) Falcon ceases to own, directly or indirectly, 100% of
the capital stock of the Seller, or a majority of the capital
stock of any Originator, free and clear of all Adverse Claims,
(b) at any time before an IPO by Falcon, the Investors or
any of their Affiliates (PROVIDED, that, for purposes of this
definition only, the reference to 25% in the definition
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-3
<PAGE>
of Affiliate shall be deemed to be 51%) shall cease to own,
directly or indirectly, in the aggregate, at least 51% of the
issued and outstanding voting stock of Falcon, free and clear
of all Liens,
(c) at any time after an IPO of Falcon, if any Person
(other than the Investors, any of their Affiliates, any Person
that is a member of senior management of Falcon, any entity the
majority of the equity ownership interests of which is owned by
such senior management of Falcon or any Person acting in the
capacity of an underwriter), whether singly or in concert with
one or more Persons, shall, directly or indirectly, have
acquired: (i) 30% or more, on a fully diluted basis, of the
outstanding common stock of Falcon, or (ii) by voting power,
contract or otherwise: (A) the power to vote or direct the
voting of 30% or more, on a fully diluted basis, of the
outstanding common stock of Falcon or (B) the power to elect or
designate for election a majority of the Board of Directors
of Falcon,
(d) Falcon shall directly or indirectly transfer, assign,
convey or lease, whether in one transaction or in a series of
transactions, all or substantially all of its assets (whether
now owned or hereafter acquired) to any other Person(s), or
(e) Falcon shall be a party to any merger or consolidation
in which Falcon is not a surviving entity.
"COLLECTIONS" means, with respect to any Pool Receivable:
(a) all funds that are received by any Originator, Falcon, the
Seller or the Servicer in payment of any amounts owed in respect
of such Receivable (including purchase price, finance charges,
interest and all other charges), or applied to amounts owed in
respect of such Receivable (including insurance payments and net
proceeds of the sale or other disposition of repossessed goods
or other collateral or property of the related Obligor or any
other Person directly or indirectly liable for the payment of
such Pool Receivable and available to be applied thereon), (b)
all Collections deemed to have been received pursuant to
Section 1.4(e) of the Agreement and (c) all other proceeds of
such Pool Receivable.
"CONCENTRATION PERCENTAGE" means: (a) for any Group A
Obligor, 100%, (b) for any Group B Obligor, 10%, except for Sears, Roebuck &
Co., whose Concentration Percentage shall be 20% so long as Sears, Roebuck &
Co. qualifies as a Group B Obligor, and Lowe's Companies, Inc., whose
Concentration Percentage shall be 20% so long as Lowe's Companies, Inc.
qualifies as a Group B Obligor; (c) for any Group C Obligor, 7% and (d) for
any Group D Obligor, 5%.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-4
<PAGE>
"CONCENTRATION RESERVE" means, at any time: (a) the aggregate
Capital at such time MULTIPLIED BY (b) (i) the Concentration Reserve
Percentage DIVIDED BY (ii) 100% MINUS the Concentration Reserve Percentage.
"CONCENTRATION RESERVE PERCENTAGE" means, at any time, the
largest of: (a) the sum of the four largest Group D Obligor Percentages, (b)
the sum of the two largest Group C Obligor Percentages and (c) the largest
Group B Obligor Percentage.
"CONSOLIDATED ORIGINATOR" means a group of Originators, which
may consist of one Originator, comprised of all those Originators that are
consolidated together for the purposes of one of such Originator's financial
statements.
"CONTRACT" means, with respect to any Receivable, any and all
contracts, understandings, instruments, agreements, leases, invoices, notes
or other writings pursuant to which such Receivable arises or that evidence
such Receivable or under which an Obligor becomes or is obligated to make
payment in respect of such Receivable.
"CP RATE" for any Settlement Period for any Portion of Capital
means a rate PER ANNUM calculated by the Administrator equal to: (a) the
rate (or if more than one rate, the weighted average of the rates) at which
Notes of the Issuer on each day during such period have been sold by any
placement agent or commercial paper dealer selected by the Administrator on
behalf of the Issuer; PROVIDED, that if such rate(s) is a discount rate(s),
then the CP Rate shall be the rate (or if more than one rate, the weighted
average of the rates) resulting from converting such discount rate(s) to an
interest-bearing equivalent rate PER ANNUM, PLUS (b) the commissions and
charges charged by such placement agent or commercial paper dealer with
respect to such Notes, expressed as a percentage of the face amount of such
Notes and converted to an interest-bearing equivalent rate PER ANNUM. The
"CP RATE" for any day while a Termination Event or Unmatured Termination
Event exists shall be an interest rate equal to 2% PER ANNUM above the Base
Rate in effect on such day.
"CREDIT AND COLLECTION POLICY" means, as the context may
require, those receivables credit and collection policies and practices of
each Originator in effect on the date of the Agreement and described in
Schedule I to the Agreement, as modified in compliance with the Agreement.
"CREDIT FACILITY" means the Credit Agreement, dated as of June
17, 1997, among Falcon, as Borrower, the lenders from time to time party
thereto, Chase Securities, Inc., as Arranger, Bankers Trust Company, as
Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-5
<PAGE>
"DAYS' SALES OUTSTANDING" means, for any Settlement Period:
(a) the Outstanding Balance of all Pool Receivables at the end of such
Settlement Period DIVIDED BY (b) (i) the aggregate credit sales made by all
the Originators during the three Fiscal Months ended on or before the last
day of such Settlement Period DIVIDED BY (ii) the number of days in such
three-month period.
"DEBT" means: (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations to pay the deferred purchase price of property
or services, (d) obligations as lessee under leases that shall have been or
should be, in accordance with generally accepted accounting principles,
recorded as capital leases, (e) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to
in CLAUSES (a) through (d), and (f) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA.
"DEEMED COLLECTION" has the meaning assigned thereto in the Sale
Agreements.
"DEFAULT RATIO" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%, with 5/1000 of 1% rounded upward) computed
as of the last day of each Fiscal Month by dividing: (a) the aggregate
Outstanding Balance of all Pool Receivables that became Defaulted Receivables
during such month PLUS, without double counting, the aggregate Outstanding
Balance of all Pool Receivables as to which a payment, or part thereof,
remained unpaid for less than 91 days from the original due date for such
payment and that was written off as uncollectible during such month, by
(b) the aggregate credit sales made by all the Originators during the month
that is five Fiscal Months before such month. For purposes of calculating the
Loss Reserve Percentage (Originator) for any Consolidated Originator, the
Default Ratio will be calculated as if such Consolidated Originator were the
only Originator hereunder.
"DEFAULTED RECEIVABLE" means a Receivable:
(a) as to which any payment, or part thereof, remains
unpaid for more than 90 days from the original due date for such
payment; or
(b) as to which the Obligor thereof or any other Person
obligated thereon or owning any Related Security in respect
thereof has taken any action, or suffered any event to occur, of
the type described in paragraph (f) of Exhibit V to the
Agreement and that, consistent with the applicable Credit and
Collection Policy, would be written off the Seller's books as
uncollectible.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-6
<PAGE>
"DELINQUENCY RATIO" means the ratio (expressed as a percentage
and rounded to the nearest 1/100 of 1%, with 5/1000 of 1% rounded upward)
computed as of the last day of each Fiscal Month by dividing: (a) the
aggregate Outstanding Balance of all Pool Receivables that were Delinquent
Receivables on such day by (b) the aggregate Outstanding Balance of all Pool
Receivables on such day.
"DELINQUENT RECEIVABLE" means a Pool Receivable as to which
any payment, or part thereof, remains unpaid for more than 60 days from the
original due date for such payment.
"DILUTION HORIZON" means, for any Fiscal Month, the ratio
(expressed as a percentage and rounded to the nearest 1/100th of 1%, with
5/1000 of 1% rounded upward) of: (a) the aggregate credit sales made by all
the Originators during the most recent Fiscal Month and the preceding 15 days
to (b) the aggregate Outstanding Balance of the Eligible Receivables at the
last day of such Fiscal Month.
"DILUTION RATIO" means, for any Fiscal Month, the ratio
(expressed as a percentage and rounded to the nearest 1/100th of 1%, with
5/1000 of 1% rounded upward) of: (a) the aggregate amount of payments made or
owed by the Seller pursuant to Section 1.4 (e)(i) of the Agreement during such
Fiscal Month to (b) the aggregate credit sales made by all the Originators
during the prior Fiscal Month. For purposes of calculating the Dilution
Reserve Percentage (Originator) and the Spike Factor for any Consolidated
Originator, the Dilution Ratio will be calculated as if such Consolidated
Originator were the only Originator hereunder.
"DILUTION RESERVE" means, on any day, an amount equal to: (a)
the Capital at the close of business of the Servicer on such date MULTIPLIED
BY (b) (i) the Dilution Reserve Percentage on such date DIVIDED BY (ii) 100%
MINUS the Dilution Reserve Percentage on such date.
"DILUTION RESERVE PERCENTAGE" means, as of any date, the
greater of: (a) 5% and (b) the Dilution Horizon TIMES the sum of: (i) the
weighted average of each Consolidated Originator's Dilution Reserve
Percentage (Originator) and (ii) the weighted average of each Consolidated
Originator's Spike Factor, both calculated based upon the ratio of each
Consolidated Originator's originated Pool Receivables to the total Pool
Receivables.
"DILUTION RESERVE PERCENTAGE (ORIGINATOR)" means a percentage
(calculated for each Consolidated Originator as of the end of each Fiscal
Month) equal to: (a) 2 TIMES (b) the rolling average Dilution Ratio
(calculated as if such Consolidated Originator were the only Originator
hereunder) for the twelve Fiscal Months then ended.
"DISCOUNT" means:
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-7
<PAGE>
(a) for the Portion of Capital for any Settlement Period
to the extent the Issuer will be funding such Portion of Capital
on the first day of such Settlement Period through the issuance
of Notes,
CPR x C x ED/360 + TF
(b) for the Portion of Capital for any Settlement Period
to the extent the Issuer will not be funding such Portion of
Capital on the first day of such Settlement Period through the
issuance of Notes:
AR x C x ED/Year + TF
where:
AR = the Alternate Rate for the Portion of Capital for
such Settlement Period,
C = the Portion of Capital during such Settlement
Period,
CPR = the CP Rate for the Portion of Capital for such
Settlement Period,
ED = the actual number of days during such Settlement
Period,
Year = if such Portion of Capital is funded based upon:
(i) the Eurodollar Rate, 360 days, and (ii) the
Base Rate, 365 or 366 days, as applicable, and
TF = the Termination Fee, if any, for the Portion of
Capital for such Settlement Period;
PROVIDED, that no provision of the Agreement shall require the payment or permit
the collection of Discount in excess of the maximum permitted by applicable law;
AND PROVIDED FURTHER, that Discount for the Portion of Capital shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
"EBITDA" means, with respect to Falcon and its consolidated
Subsidiaries for any period: (a) consolidated net income for such period
(excluding undistributed earnings in Persons that are 50% or less owned,
directly or indirectly, by Falcon, the effect of any extraordinary or
non-recurring gains or losses and any gains or losses from the sale of
assets) PLUS (b) to the extent reflected in the consolidated income statement
of Falcon for such period, without duplication, the sum of: (i) Net Interest
Expense, (ii) federal, state and local income and franchise taxes, (iii)
depreciation expense, (iv) amortization expense
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-8
<PAGE>
(including amortization of prepaid management fees), (v) all transaction fees
and expenses incurred in connection with effecting any merger or acquisition
permitted by the Transaction Documents and (vi) any other noncash items that had
the effect of reducing consolidated net income for such period (but MINUS any
noncash items that had the effect of increasing consolidated net income for such
period).
"ELIGIBLE RECEIVABLE" means, at any time, a Pool Receivable:
(a) the Obligor of which is: (i) a United States
resident or a resident of such other jurisdiction as has been
approved in writing by the Administrator; PROVIDED, HOWEVER,
that if the Obligor of such Receivable is a resident of a
jurisdiction other than the United States, the Outstanding
Balance of such Receivable when added to the Outstanding
Balance of all other Receivables of Obligors that are not
residents of the United States shall not exceed 2.5% of the
Net Receivables Pool Balance, (ii) not a government or a
governmental subdivision or agency and (iii) not subject to
any action of the type described in paragraph (f) of Exhibit V
to the Agreement;
(b) that is denominated and payable only in U.S. dollars
in the United States;
(c) that has a stated maturity that is not more than 60
days after the original due date of such Receivable; PROVIDED,
HOWEVER, that, if permitted pursuant to the applicable Credit
and Collection Policy, a Receivable may have a stated maturity
of up to 120 days after the original due date of such
Receivable so long as the Outstanding Balance of such
Receivable, when added to the Outstanding Balance of all other
Receivables with a stated maturity of greater than 60 days
from the original due date of such Receivable, shall not
exceed 3% of the Net Receivables Pool Balance.
(d) that arises from the sale and delivery of goods and
services in the ordinary course of an Originator's business;
(e) that arises under a duly authorized Contract that is
in full force and effect and that is a legal, valid and
binding obligation of the related Obligor, enforceable against
such Obligor in accordance with its terms;
(f) that conforms in all material respects with all
applicable laws, rulings and regulations in effect;
(g) that is not the subject of any asserted dispute,
offset, hold back defense, Adverse Claim or other claim;
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-9
<PAGE>
(h) that satisfies all applicable requirements of the
applicable Credit and Collection Policy;
(i) that has not been modified, waived or restructured
since its creation, except as permitted pursuant to Section 4.2
of the Agreement;
(j) in which the Seller owns good and marketable title
and that is freely assignable by the Seller;
(k) for which the Issuer shall have a valid and
enforceable undivided percentage ownership interest, to the
extent of the Purchased Interest, and a valid and enforceable
first priority perfected security interest therein and in the
Related Security and Collections with respect thereto, in each
case free and clear of any Adverse Claim;
(l) that constitutes an account as defined in the UCC, and
that is not evidenced by instruments or chattel paper;
(m) that is not a Defaulted Receivable or a Delinquent
Receivable;
(n) for which neither the Originator thereof, the Seller
nor the Servicer has established any offset arrangements with
the related Obligor;
(o) for which Defaulted Receivables of the related Obligor
do not exceed 25% of the Outstanding Balance of all such
Obligor's Receivables; and
(p) that represents amounts earned and payable by the
Obligor that are not subject to the performance of additional
services by the Originator thereof.
"ENGAGEMENT LETTER" means the Engagement Letter, dated April 18,
1997, between PNC Capital Markets, Inc. and Falcon relating to the transactions
contemplated herein.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute of similar
import, together with the regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA also refer to any successor
sections.
"ERISA AFFILIATE" means: (a) any corporation that is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Internal Revenue Code) as the Seller, any Originator or Falcon,
(b) a trade or business (whether or not incorporated) under common control
(within the meaning of Section 414(c) of the Internal Revenue Code) with the
Seller, any Originator or Falcon, (c) a member of the same affiliated service
group (within the meaning of Section 414(m) of
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-10
<PAGE>
the Internal Revenue Code) as the Seller, any Originator, Falcon, any
corporation described in CLAUSE (a) or any trade or business described in CLAUSE
(b), or (d) as to the Seller or any of its Affiliates, Eagle Industrial Products
Corporation and all other Person(s) that are members of Eagle Industrial
Products Corporation's controlled group or under common control therewith
(within the meaning of Sections 414(b) and (c) of the Internal Revenue Code),
but only until the termination of the Agreement dated as of October 24, 1994
among the Pension Benefit Guaranty Corporation, Falcon and certain of its
Affiliates.
"EURODOLLAR RATE" means, for any Settlement Period, an interest
rate PER ANNUM (rounded upward to the nearest 1/16th of 1%) determined pursuant
to the following formula:
LIBOR
-----------------------------------------
100% - Eurodollar Rate Reserve Percentage
where "EURODOLLAR RATE RESERVE PERCENTAGE" means, for any Settlement Period, the
maximum reserve percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%) in effect on the date LIBOR for such Settlement Period is
determined under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
"Eurocurrency" funding (currently referred to as "Eurocurrency liabilities")
having a term comparable to such Settlement Period.
"EXCESS CONCENTRATION" means, for each Obligor, the aggregate
amount by which the Outstanding Balance of Eligible Receivables of such
Obligor then in the Receivables Pool exceeds: (a) the Concentration
Percentage for such Obligor MULTIPLIED BY (b) the Outstanding Balance of all
Eligible Receivables then in the Receivables Pool.
"EXISTING SHAREHOLDERS" shall mean the shareholders and
management of Falcon existing immediately before the recapitalization/merger
referenced in clause 1(iv) of Exhibit II to the Agreement.
"FACILITY TERMINATION DATE" means the earliest to occur of:
(a) June 17, 2002, (b) the date determined pursuant to Section 2.2 of the
Agreement and (c) the date the Purchase Limit reduces to zero pursuant to
Section 1.1(b) of the Agreement.
"FALCON" has the meaning set forth in the preamble to the
Agreement.
"FEDERAL FUNDS RATE" means, for any day, the PER ANNUM rate
set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor, "H.15(519)") for
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-11
<PAGE>
such day opposite the caption "Federal Funds (Effective)." If on any relevant
day such rate is not yet published in H.15(519), the rate for such day will be
the rate set forth in the daily statistical release designated as the Composite
3:30 p.m. Quotations for U.S. Government Securities, or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, the "COMPOSITE 3:30 P.M. QUOTATIONS") for such day under the
caption "Federal Funds Effective Rate." If on any relevant day the appropriate
rate is not yet published in either H.15(519) or the Composite 3:30 p.m.
Quotations, the rate for such day will be the arithmetic mean as determined by
the Administrator of the rates for the last transaction in overnight Federal
funds arranged before 9:00 a.m. (New York time) on that day by each of three
leading brokers of Federal funds transactions in New York City selected by the
Administrator.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System, or any entity succeeding to any of its principal
functions.
"FEE LETTER" has the meaning set forth in Section 1.5 of the
Agreement.
"FISCAL MONTH" means those periods described on Schedule IV to
the Agreement.
"FORM S-4" means the Registration Statement on Form S-4
[AMENDMENT NO. 2, DATED MAY 21, 1997], filed by Falcon with the Securities
and Exchange Commission.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any body or entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, including any court, and any Person owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"GROUP A OBLIGOR" shall mean either Wal-Mart or Home Depot
provided such Obligor maintains a short-term rating of: (a) "A-1" by
Standard & Poor's, or if such Obligor does not have a short-term rating from
Standard & Poor's, a rating of "A+" or better by Standard & Poor's on its
long-term senior unsecured debt securities, and (b) "P-1" by Moody's, or if
such Obligor does not have a short-term rating from Moody's, "A1" or better
by Moody's on its long-term senior unsecured debt securities PROVIDED, that
if the ratings for any Obligor are split between the definition of "Group A
Obligor" and "Group B Obligor," such Obligor shall be considered a Group B
Obligor.
"GROUP B OBLIGOR" means an Obligor, not a Group A Obligor,
with a short-term rating of at least: (a) "A-2" by Standard & Poor's, or if
such Obligor does not have a short-term rating from
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-12
<PAGE>
Standard & Poor's, a rating of "BBB+" to "A" by Standard & Poor's on its
long-term senior unsecured debt securities, and (b) "P-2" by Moody's, or if
such Obligor does not have a short-term rating from Moody's, "Baa1" to "A2"
by Moody's on its long-term senior unsecured debt securities; PROVIDED, that
if the ratings for any Obligor are split between the definition of "Group B
Obligor" and "Group C Obligor," such Obligor shall be considered a Group C
Obligor.
"GROUP B OBLIGOR PERCENTAGE" means, at any time, for each
Group B Obligor, the percentage equivalent of: (a) the total Eligible
Receivables of such Group B Obligor less any Excess Concentrations of such
Obligor; PROVIDED, that, with respect to any Group B Obligor that is a Letter
of Credit Obligor, the lesser of: (i) the amount of the Letter of Credit
issued for such Letter of Credit Obligor and (ii) the total Eligible
Receivables of such Letter of Credit Obligor, shall not be included, DIVIDED
BY (b) the aggregate Eligible Receivables at such time.
"GROUP C OBLIGOR" means an Obligor with a short-term rating of
at least: (a) "A-3" by Standard & Poor's, or if such Obligor does not have a
short-term rating from Standard & Poor's, a rating of "BBB-" to "BBB" by
Standard & Poor's on its long-term senior unsecured debt securities, and (b)
"P-3" by Moody's, or if such Obligor does not have a short-term rating from
Moody's, "Baa3" to "Baa2" by Moody's on its long-term senior unsecured debt
securities; PROVIDED, that if the ratings for any Obligor are split between
the definition of "Group C Obligor" and "Group D Obligor," such Obligor shall
be considered a Group D Obligor.
"GROUP C OBLIGOR PERCENTAGE" means, at any time, for each
Group C Obligor, the percentage equivalent of: (a) the total Eligible
Receivables of such Group C Obligor less any Excess Concentrations of such
Obligor; PROVIDED, that, with respect to any Group C Obligor that is a Letter
of Credit Obligor, the lesser of: (i) the amount of the Letter of Credit
issued for such Letter of Credit Obligor and (ii) the total Eligible
Receivables of such Letter of Credit Obligor, shall not be included, DIVIDED
BY (b) the aggregate Eligible Receivables at such time.
"GROUP D OBLIGOR" means an Obligor whose long-term senior
unsecured debt securities either are not Investment Grade or are not rated by
either Standard & Poor's or Moody's.
"GROUP D OBLIGOR PERCENTAGE" means, at any time, for each
Group D Obligor: (a) the total Eligible Receivables of such Group D Obligor
less any Excess Concentrations of such Obligor; PROVIDED, that, with respect
to any Group D Obligor that is a Letter of Credit Obligor, the lesser of:
(i)the amount of the Letter of Credit issued for such Letter of Credit
Obligor and (ii)the total Eligible Receivables of such Letter of Credit
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-13
<PAGE>
Obligor, shall not be included, DIVIDED BY (b) the aggregate Eligible
Receivables at such time.
"INDEMNIFIED AMOUNTS" has the meaning set forth in Section3.1
of the Agreement.
"INDEPENDENT DIRECTOR" has the meaning set forth in
paragraph 3(c) of ExhibitIV to the Agreement.
"INFORMATION PACKAGE" means a report, in substantially the
form of Annex B to the Agreement, furnished to the Administrator pursuant to
the Agreement.
"INSOLVENCY PROCEEDING" means: (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidations, receivership,
dissolution, winding-up or relief of debtors, or (b) any general assignment
for the benefit of creditors, composition, marshaling of assets for
creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; in each case
undertaken under U.S. Federal, state or foreign law, including the Bankruptcy
Code.
"INTEREST COVERAGE RATIO" means, with respect to Falcon and
its consolidated Subsidiaries for any period, the ratio of: (a) EBITDA for
such period to (b) Net Cash Interest Expense for such period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended from time to time, and any successor statute of similar
import, together with the regulations thereunder, in each case as in effect
from time to time. References to sections of the Internal Revenue Code also
refer to any successor sections.
"INVESTMENT GRADE" means, with respect to any Person, a rating
on its long-term senior unsecured debt securities of: (a) at least "BBB-",
or, if such Person's long-term senior unsecured debt securities are not rated
by Standard & Poor's, a short-term rating of at least "A-3" by Standard &
Poor's, and (b) at least "Baa3" by Moody's, or, if such Person's long-term
senior unsecured debt securities are not rated by Moody's, a short-term
rating of at least "P-3" by Moody's. However, if only one of Standard &
Poor's and Moody's maintains a rating on such Person's securities, such
rating shall be no lower than the ratings applied for the purposes of
CLAUSES (a) and (b).
"INVESTORS" shall mean Investcorp, S.A., certain affiliated
entities and the other initial investors in FBP Acquisition Corp., Inc.
"IPO" means any sale by Falcon through a public offering of
its common (or other voting) stock pursuant to an effective registration
statement (other than a registration statement on
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-14
<PAGE>
any of Forms S-4, S-8 or any successor or similar form) filed under the
Securities Act of 1933, as amended.
"ISSUER" has the meaning set forth in the preamble to the
Agreement.
"ISSUER'S SHARE" of any amount means such amount TIMES the
Purchased Interest at the time of determination.
"LETTER OF CREDIT" means: (a) the letter of credit number
A-309206 dated June 17, 1997, issued by PNC Bank, National Association, at
the request of the Seller and for the benefit of the Issuer, in connection
with certain Defaulted Receivables of the Letter of Credit Obligor identified
therein, or (b) any future letter of credit issued in connection with other
Letter of Credit Obligors.
"LETTER OF CREDIT OBLIGOR" means any Obligor for which draws
under a Letter of Credit are permitted, under certain circumstances, in
connection with such Obligor's Defaulted Receivables.
"LIBOR" means the rate of interest PER ANNUM determined by the
Administrator to be the arithmetic mean (rounded upward to the nearest 1/16th
of 1%) of the rates of interest PER ANNUM notified to the Administrator by
each Reference Bank as the rate of interest at which dollar deposits in the
approximate amount of the Capital associated with such Settlement Period
would be offered by major banks in the London interbank market to such
Reference Bank at its request at or about 11:00 a.m. (London time) on the
second Business Day before the commencement of such Settlement Period.
"LIQUIDITY AGENT" means PNC in its capacity as the Liquidity
Agent pursuant to the Liquidity Agreement.
"LIQUIDITY AGREEMENT" means the Liquidity Asset Purchase
Agreement, dated as of May 2, 1996 (and as amended by Amendment No. 1 to
Liquidity Agreement, dated as of the date hereof), between the purchasers
from time to time party thereto, the Issuer and PNC, as Administrator and
Liquidity Agent, as the same may be further amended, supplemented or
otherwise modified from time to time.
"LOCK-BOX ACCOUNT" means an account maintained at a bank or
other financial institution for the purpose of receiving Collections.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the
form of Annex A to the Agreement, among the Seller, the Servicer and a
Lock-Box Bank.
"LOCK-BOX BANK" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-15
<PAGE>
"LOSS RESERVE" means, on any date, an amount equal to: (a) the
Capital at the close of business of the Servicer on such date MULTIPLIED BY
(b)(i) the Loss Reserve Percentage on such date DIVIDED BY (ii) 100% MINUS the
Loss Reserve Percentage on such date.
"LOSS RESERVE PERCENTAGE" means, on any date, the greater of:
(a) 4% or (b) the weighted average (calculated based upon the ratio of each
Consolidated Originator's originated Pool Receivables to the total Pool
Receivables) of each Consolidated Originator's Loss Reserve Percentage
(Originator).
"LOSS RESERVE PERCENTAGE (ORIGINATOR)" means a percentage
(calculated for each Consolidated Originator as of the end of each Fiscal
Month) equal to: (a) 2 TIMES (b) the highest average of the Default Ratios for
any three consecutive Fiscal Months during the twelve Fiscal Months then
ended TIMES (c) the aggregate credit sales made during the four Fiscal Months
then ended DIVIDED BY (d) the aggregate Outstanding Balance of Eligible
Receivables as of such date; all calculated as if such Consolidated
Originator were the only Originator hereunder.
"MATERIAL ADVERSE EFFECT" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the assets, operations, business or financial
condition of the Seller, the Originators (taken together) or
the Servicer, in each case on a consolidated basis;
(b) the ability of any of the Seller, the Originators
(taken together) or the Servicer, in each case on a
consolidated basis, to perform its obligations under this
Agreement or any other Transaction Document to which it is a
party;
(c) the validity or enforceability of this Agreement or
any other Transaction Document, or the validity,
enforceability or collectibility of a material portion of the
Pool Receivables; or
(d) the status, perfection, enforceability or priority
of the Issuer's or the Seller's interest in the Pool Assets;
PROVIDED, that the occurrence or resolution of any event or circumstance that
has been specifically disclosed in the Form S-4 or the 1996 Form 10-K shall not
constitute a Material Adverse Effect.
"MONTHLY SETTLEMENT DATE" means the twelfth Business Day after
each Fiscal Month.
"MOODY'S" means Moody's Investors Service, Inc.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-16
<PAGE>
"NET CASH INTEREST EXPENSE" means: (a) interest paid in cash
in such period MINUS (b) interest received in cash in the United States during
such period.
"NET INTEREST EXPENSE" means: (a) interest expense for such
period (excluding the amortization of all fees payable in connection with the
incurrence of Debt) PLUS (b) capitalized interest paid during such period
MINUS (c) interest received in cash in the United States during such period.
"NET RECEIVABLES POOL BALANCE" means, at any time: (a) the
Outstanding Balance of Eligible Receivables then in the Receivables Pool
MINUS (b) the Excess Concentration MINUS (c) the aggregate amount of Special
Program Allowances for all Originators at such time.
"1996 FORM 10-K" means Falcon's annual report filed on Form
10-K with the Securities and Exchange Commission on March 20, 1997.
"NOTES" means short-term promissory notes issued or to be
issued by the Issuer to fund its investments in accounts receivable or other
financial assets.
"OBLIGOR" means, with respect to any Receivable, the Person
obligated to make payments pursuant to the Contract relating to such
Receivable.
"ORIGINATOR" has the meaning set forth in the Sale Agreements.
"OUTSTANDING BALANCE" of any Receivable at any time means the
then outstanding principal balance thereof.
"PERMITTED DEBT" has the meaning set forth in Section 1(o) of
Exhibit IV to the Agreement.
"PERSON" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"PNC" has the meaning set forth in the preamble to the
Agreement.
"POOL ASSETS" has the meaning set forth in Section 1.2(d) of
the Agreement.
"POOL RECEIVABLE" means a Receivable in the Receivables Pool.
"PORTION OF CAPITAL" has the meaning set forth in Section 1.7
of the Agreement. In addition, at any time when the
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-17
<PAGE>
Capital of the Purchased Interest is not divided into two or more such
portions, "Portion of Capital" means 100% of the Capital.
"PROGRAM SUPPORT AGREEMENT" means and includes the Liquidity
Agreement and any other agreement entered into by any Program Support
Provider providing for: (a) the issuance of one or more letters of credit for
the account of the Issuer, (b) the issuance of one or more surety bonds for
which the Issuer is obligated to reimburse the applicable Program Support
Provider for any drawings thereunder, (c) the sale by the Issuer to any
Program Support Provider of the Purchased Interest (or portions thereof)
and/or (d) the making of loans and/or other extensions of credit to the Issuer
in connection with the Issuer's Receivables-securitization program
contemplated in the Agreement, together with any letter of credit, surety
bond or other instrument issued thereunder (but excluding any discretionary
advance facility provided by the Administrator).
"PROGRAM SUPPORT PROVIDER" means and includes any Purchaser
and any other Person (other than any customer of the Issuer) now or hereafter
extending credit or having a commitment to extend credit to or for the
account of, or to make purchases from, the Issuer, or issuing a letter of
credit, surety bond or other instrument to support any obligations arising
under or in connection with the Issuer's securitization program.
"PURCHASE LIMIT" means $100,000,000, as such amount may be
reduced pursuant to Section 1.1(b) of the Agreement. References to the unused
portion of the Purchase Limit shall mean, at any time, the Purchase Limit
MINUS the then outstanding Capital.
"PURCHASED INTEREST" means, at any time, the undivided
percentage ownership interest in: (a) each and every Pool Receivable now
existing or hereafter arising, other than any Pool Receivable that arises on
or after the Facility Termination Date, (b) all Related Security with respect
to such Pool Receivables, and (c) all Collections with respect to, and other
proceeds of, such Pool Receivables and Related Security. Such undivided
percentage interest shall be computed as:
Capital + Total Reserves
--------------------------------
Net Receivables Pool Balance
The Purchased Interest shall be determined from time to time pursuant
to Section 1.3 of the Agreement.
"PURCHASER" has the meaning set forth in Section 5.3(b) of the
Agreement.
"PURCHASER'S YIELD" means, for any Settlement Period, the
Discount PLUS all Fees payable under the Fee Letter accrued or to accrue
during such Settlement Period, expressed as a percentage
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-18
<PAGE>
of Capital and converted to an interest-bearing equivalent rate PER ANNUM.
"RECEIVABLE" means any indebtedness and other obligations owed
to the Seller, Falcon or any Originator by, or any right of the Seller,
Falcon or any Originator to payment from or on behalf of, an Obligor, whether
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods or the rendering of services by
an Originator, and includes the obligation to pay any finance charges, fees
and other charges with respect thereto. Indebtedness and other obligations
arising from any one transaction, including indebtedness and other
obligations represented by an individual invoice or agreement, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other obligations arising from any other transaction.
"RECEIVABLES POOL" means, at any time, all of the then
outstanding Receivables purchased by the Seller pursuant to the Sale
Agreement between the Seller and Falcon.
"REFERENCE BANK" means PNC.
"RELATED SECURITY" means, with respect to any Receivable:
(a) all of the Seller's, Falcon's and the Originator
thereof's interest in any goods (including returned goods),
and documentation of title evidencing the shipment or storage
of any goods (including returned goods), relating to any sale
giving rise to such Receivable;
(b) all other security interests or liens and property
subject thereto from time to time purporting to secure payment
of such Receivable, whether pursuant to the Contract related
to such Receivable or otherwise, together with all UCC
financing statements or similar filings relating thereto; and
(c) all of the Seller's, Falcon's and any Originator's
rights, interests and claims under the Contracts and all
guaranties, indemnities, insurance and other agreements
(including the related Contract) or arrangements of whatever
character from time to time supporting or securing payment of
such Receivable or otherwise relating to such Receivable,
whether pursuant to the Contract related to such Receivable or
otherwise.
"SALE AGREEMENT" means any of: (a) the Contribution and Sale
Agreement, dated as of May 2, 1996, between the Seller and Falcon, and (b) the
Receivables Sale and Servicing Agreement, dated as of May 2, 1996, between
Falcon and the Originators, as either such agreement may be amended, amended
and restated, supplemented or otherwise modified from time to time.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-19
<PAGE>
"SELLER" has the meaning set forth in the preamble to the
Agreement.
"SELLER'S SHARE" of any amount means the greater of: (a) $0
and (b) such amount MINUS the Issuer's Share.
"SERVICER" has the meaning set forth in the preamble to the
Agreement.
"SERVICING FEE" shall mean the fee referred to in Section 4.6
of the Agreement.
"SETTLEMENT PERIOD" for each Portion of Capital means:
(a) before the Termination Date: (i) initially the period commencing on the
date of a purchase pursuant to Section 1.2 of the Agreement and ending on (but
not including) the next Monthly Settlement Date (or Alternative Settlement
Date, if applicable), and (ii) thereafter, each period commencing on such
Monthly Settlement Date (or Alternative Settlement Date, if applicable) and
ending on (but not including) the next Monthly Settlement Date, and (b) on and
after the Termination Date, such period (including a period of one day) as
shall be selected from time to time by the Administrator or, in the absence
of any such selection, each period of 30 days from the last day of the
preceding Settlement Period.
"SPECIAL PROGRAM ALLOWANCE" means, with respect to the Pool
Receivables originated by any Originator at any time, the aggregate amount of
such Pool Receivables attributable to cash discounts, volume rebates or
advertising allowances permitted to be set-off against payments due in
respect of such Pool Receivables as reflected in the books and records of
such Originator at such time.
"SPIKE FACTOR" means, for any Fiscal Month for each
Consolidated Originator, the positive difference, if any, between: (a) the
highest average Dilution Ratio for any two consecutive Fiscal Months during
the twelve previous Fiscal Months and (b) the average Dilution Ratio for such
twelve months, both calculated as if such Consolidated Originator were the
only Originator hereunder.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc.
"SUBSIDIARY" means, as to any Person, a corporation,
partnership, limited liability company or other entity of which shares of
stock of each class or other interests having ordinary voting power (other
than stock or other interests having such power only by reason of the
happening of a contingency) to elect a majority of the Board of Directors or
other managers of such entity are at the time owned, or management of which
is otherwise controlled: (a) by such Person, (b) by one or more Subsidiaries
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-20
<PAGE>
of such Person or (c) by such Person and one or more Subsidiaries of such
Person.
"TERMINATION DATE" means the earlier of: (a) the Business Day
that the Seller so designates by written notice to the Administrator pursuant
to Section 1.1 (b) of the Agreement and (b) the Facility Termination Date.
"TERMINATION DAY" means: (a) each day on which the conditions
set forth in Section 2 of Exhibit II to the Agreement are not satisfied or
(b) each day that occurs on or after the Termination Date.
"TERMINATION EVENT" has the meaning specified in Exhibit V to
the Agreement.
"TERMINATION FEE" means, for any Settlement Period during
which a Termination Day occurs, the amount, if any, by which: (a) the
additional Discount (calculated without taking into account any Termination
Fee or any shortened duration of such Settlement Period pursuant to the
definition thereof) that would have accrued during such Settlement Period on
the reductions of Capital relating to such Settlement Period had such
reductions not been made, exceeds (b) the income, if any, received by the
Issuer from investing the proceeds of such reductions of Capital, as
determined by the Administrator, which determination shall be binding and
conclusive for all purposes, absent manifest error.
"TOTAL RESERVES" means, at any time: (a) the Yield Reserve at
such time PLUS (b) the greater of: (i) the Loss Reserve at such time PLUS the
Dilution Reserve at such time and (ii) the Concentration Reserve.
"TRANSACTION DOCUMENTS" means the Agreement, the Letters of
Credit, the Lock-Box Agreements, the Liquidity Agreement, the Fee Letter, the
Engagement Letter, the Sale Agreements and all other certificates,
instruments, UCC financing statements, reports, notices, agreements and
documents executed or delivered under or in connection with the Agreement, in
each case as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the applicable jurisdiction.
"UNMATURED TERMINATION EVENT" means an event that, with the
giving of notice or lapse of time, or both, would constitute a Termination
Event (it being understood that any nonpayment, event or condition of the
type described in paragraph (j) of EXHIBITV that permits the acceleration of
the maturity of any Permitted Debt, which acceleration has not been required,
shall constitute an Unmatured Termination Event).
"YIELD RESERVE" means, at any time:
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-21
<PAGE>
(PY/360 x 2(DSO) x Capital) + SF
where:
PY = the Purchaser's Yield computed for the most
recent Settlement Period,
DSO = the most recent Days' Sales Outstanding, and
SF = the accrued and unpaid Servicing Fee.
OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York,
and not specifically defined herein, are used herein as defined in such
Article 9. Unless the context otherwise requires, "or" means "and/or," and
"including" (and with correlative meaning "include" and "includes") means
including without limiting the generality of any description preceding such
term.
RECEIVABLES PURCHASE AGREEMENT
Exhibit I-22
<PAGE>
EXHIBIT II
CONDITIONS OF PURCHASES
1. CONDITIONS PRECEDENT TO EFFECTIVENESS. The effectiveness
of the Agreement is subject to the conditions precedent that:
(i) the Credit Facility shall be in full force and effect
and shall be in form and substance reasonably satisfactory to
PNC,
(ii) Falcon shall have received:
(A) at least $134,600,000 in gross cash proceeds
from the sale to the Investors of newly issued common stock
of FBP Acquisition Corp., Inc., and
(B) at least $245,000,000 in gross cash
proceeds from an issuance by Falcon of: (1) subordinated
unsecured loans, (2) at least $145,000,000 in gross cash
proceeds of senior subordinated notes and at least
$100,000,000 in gross cash proceeds of senior subordinated
discount notes or (3) such other amounts of such senior
subordinated indebtedness, in each case on terms and
conditions reasonably satisfactory to PNC,
(iii) the value of: (A) the common stock of Falcon
held by Existing Shareholders (valued at a price per share
equal to the price at which the Investors purchased their
common stock) PLUS (B) the amount referred to in CLAUSE (ii)(a)
shall equal at least $152,900,000,
(iv) the recapitalization of Falcon and its Subsidiaries
shall have been consummated in accordance with applicable law
and pursuant to the Agreement and Plan of Merger, dated as of
March 20, 1997, between Falcon and FBP Acquisition Corp, Inc.
shall have been consummated, and no provision of such
agreement shall have been waived, amended, supplemented or
otherwise modified in any material respect without the consent
of PNC,
(v) all of the existing indebtedness of Falcon and its
Subsidiaries (except for certain industrial revenue bonds and
capitalized leases in an amount not to exceed $4,000,000 and
intra-company debt in connection with the Transaction
Documents) shall have been repaid on satisfactory terms,
(vi) the aggregate amount (exclusive of fees and
expenses): (A) expended by the Investors to purchase shares of
Falcon's common stock from Existing Shareholders and to
RECEIVABLES PURCHASE AGREEMENT
Exhibit II-1
<PAGE>
refinance existing indebtedness (including in connection with
the Transaction Documents) and (B) represented by the value
attributable to the common stock of Falcon retained by the
Existing Shareholders (as calculated pursuant to
CLAUSE (iii)(A)), shall not have been greater than $585,000,000,
(vii) Falcon shall have expended (or be obligated to
expend) no more than $60,000,000 in respect of fees and
expenses related to the merger/recapitalization referenced in
CLAUSE(iv) and the financings and other transactions related
thereto (including the amendments to the Transaction
Documents),
(viii) the Investors shall have acquired approximately
85% of Falcon's voting stock (after giving effect to the
merger of FBP Acquisition Corp, Inc. and Falcon),
(ix) the corporate and capital structure of Falcon and
each of its Subsidiaries (including the organization documents
and capitalization for each of them, and the ownership profile
of each of them (but excluding the identity and amount of
equity contribution of any Investor)) after the
merger/recapitalization referenced in CLAUSE (iv) shall be
reasonably satisfactory to PNC in all respects,
(x) PNC shall have received unaudited interim
consolidated financial statements for Falcon for the month of
April 1997 and the quarter ended March 1997,
(xi) PNC shall have received a satisfactory PRO FORMA
consolidated balance sheet for Falcon as at the end of April
1997 after giving effect to the financings and other
transactions contemplated thereby (including the amendments to
the Transaction Documents),
(xii) no litigation, inquiry, injunction or
restraining order shall be pending, entered or threatened,
other than what has been disclosed in the Form S-4 or the 1996
Form 10-K, copies of which shall have been provided to PNC:
(1) with respect to the merger/recapitalization
referenced in CLAUSE (iv) and the financing arrangements
and the other transactions contemplated thereby (including
the amendments to the Transaction Documents), or
(2) that, if there is a probability of an adverse
determination, is reasonably likely to have a Material
Adverse Effect,
RECEIVABLES PURCHASE AGREEMENT
Exhibit II-2
<PAGE>
(xiii) there shall not have been any change,
development or event since December 31, 1996 that has had, or
could reasonably be expected to have, a Material Adverse
Effect,
(xiv) PNC shall be reasonably satisfied with the
status of all employee benefit and environmental matters
involving Falcon and/or its Subsidiaries, and
(xv) PNC shall have received an opinion of
Murray, Devine & Co., in form and substance reasonably
satisfactory to PNC, which shall document the solvency of
Falcon and its Subsidiaries after giving effect to the
consummation of the merger/recapitalization referenced in
CLAUSE (iv) and the financings and other transactions
contemplated thereby (including the amendments to the
Transaction Documents), and
the Administrator shall have received on or before the date of such purchase
the following, each in form and substance (including the date thereof)
satisfactory to the Administrator:
(a) A counterpart of the Agreement duly executed by the
Seller and the Servicer, and, except to the extent already
delivered in connection with the Original RPA, a counterpart
of the Sale Agreements duly executed by the Seller, Falcon and
the Originators, as applicable.
(b) Certified copies of: (i) the resolutions of the
Board of Directors of each of the Seller, the Originators
(except to the extent already delivered in connection with the
Original RPA) and Falcon authorizing the execution, delivery
and performance by the Seller, such Originator and Falcon, as
the case may be, of the Agreement and the other Transaction
Documents to which it is a party, (ii) all documents evidencing
other necessary corporate action and governmental approvals,
if any, with respect to the Agreement and the other
Transaction Documents and (iii) except to the extent already
delivered in connection with the Original RPA (unless since
modified) the certificate of incorporation and by-laws of each
of the Seller, each Originator and Falcon.
(c) Except to the extent already delivered in connection
with the Original RPA, a certificate of the Secretary or
Assistant Secretary of each of the Seller, the Originators and
Falcon certifying the names and true signatures of its
officers who are authorized to sign the Agreement and the
other Transaction Documents. Until the Administrator receives
a subsequent incumbency certificate from the Seller, an
Originator or Falcon, as the case may be, the Administrator
shall be entitled to rely on the last such certificate
delivered to it by the Seller, an Originator or Falcon, as the
case may be.
RECEIVABLES PURCHASE AGREEMENT
Exhibit II-3
<PAGE>
(d) Except to the extent already delivered in connection
with the Original RPA, acknowledgment copies, or time stamped
receipt copies, of proper financing statements, duly filed on
or before the date of such initial purchase under the UCC of
all jurisdictions that the Administrator may deem necessary or
desirable in order to perfect the interests of the Seller,
Falcon and the Issuer contemplated by the Agreement and the
Sale Agreements, including amendments to certain UCC financing
statements filed in connection with the Original RPA, which
amendments (including to reflect the change in the Seller's
name from Centrally Held Eagle Receivables Program, Inc. to
Falcon Receivable Program, Inc.) to such UCC financing
statements shall have been executed by the applicable Persons
and delivered to the Administrator or its representative for
filing.
(e) Acknowledgment copies, or time-stamped receipt
copies, of proper financing statements, if any, necessary to
release all security interests and other rights of any Person
in the Receivables, Contracts or Related Security previously
granted by the Originators, Falcon or the Seller, including
terminations of certain UCC financing statements filed in
connection with the Receivables Purchase Agreement (Designated
Receivables) entered into concurrently with the Original RPA,
which terminations to such UCC financing statements shall have
been executed by the applicable Persons and delivered to the
Administrator or its representative for filing.
(f) (i) Except to the extent already delivered in
connection with the Original RPA, completed UCC search
reports, dated on or shortly before the date of the initial
purchase under the Original RPA, listing the financing
statements referred to in SUBSECTION (e) above (other than with
respect to the termination statements to be filed in
connection with the Receivables Purchase Agreement (Designated
Receivables) referred to in SUBSECTION (e) above) and all other
effective financing statements filed in the jurisdictions
referred to in SUBSECTION (e) above that name the Originators,
Falcon or the Seller as debtor, together with copies of such
other financing statements, and similar search reports with
respect to judgment liens, federal tax liens and liens of the
Pension Benefit Guaranty Corporation in such jurisdictions, as
the Administrator may request, showing no Adverse Claims on
any Pool Assets.
(ii) Completed UCC search reports, dated on or
shortly before the date of effectiveness of this Agreement,
listing all effective financing statements filed in all
applicable jurisdictions that name the Seller as debtor,
together with copies of such other financing statements, and
similar search reports with respect to judgment liens, federal
tax liens and liens of the Pension Benefit Guaranty
RECEIVABLES PURCHASE AGREEMENT
Exhibit II-4
<PAGE>
Corporation in such jurisdictions, as the Administrator may
request, showing no Adverse Claims on any Pool Assets.
(g) Except to the extent already delivered in connection
with the Original RPA, copies of executed Lock-Box Agreements
with the Lock-Box Banks.
(h) Favorable opinions, in form and substance reasonably
satisfactory to the Administrator, of: (i) Gibson, Dunn &
Crutcher, counsel for the Seller and the Servicer, and
(ii) Gus J. Athas, General Counsel for the Seller and the
Servicer.
(i) Except to the extent already completed in connection
with the Original RPA (except to the extent further review or
audit is determined to be necessary by the Administrator in
connection herewith), satisfactory results of a review and
audit (performed by representatives of the Administrator) of
the Servicer's collection, operating and reporting systems,
the Credit and Collection Policy of each Originator,
historical receivables data and accounts, including
satisfactory results of a review of the Servicer's operating
location(s) and satisfactory review and approval of the
Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
(j) A pro forma Information Package representing the
performance of the Receivables Pool for the Fiscal Month
before closing.
(k) Evidence of payment by the Seller of all accrued and
unpaid fees (including those contemplated by the Fee Letter),
costs and expenses to the extent then due and payable on the
date thereof, including any such costs, fees and expenses
arising under or referenced in Section 5.4 of the Agreement
and, in each case, payable in accordance with the Engagement
Letter and the Fee Letter.
(l) The Fee Letter duly executed by the Seller and the
Servicer.
(m) Good standing certificates with respect to each of
the Seller, the Originators and the Servicer issued by the
Secretaries of State (or similar official) of the states of
each such Person's organization and principal place of
business.
(n) Letters from each of the rating agencies then rating
the Notes confirming the rating of such Notes after giving
effect to the transaction contemplated by the Agreement.
(o) Except to the extent already delivered in connection
with the Original RPA, the Liquidity Agreement
RECEIVABLES PURCHASE AGREEMENT
Exhibit II-5
<PAGE>
and all other Transaction Documents duly executed by the
parties thereto, including the amendments to the Liquidity
Agreement and the Sale Agreements to be entered into
concurrently herewith.
(p) The Letter of Credit for Sears, Roebuck & Co. shall
have been issued and be in full force and effect, and Letter
of Credit Issuer, in connection with its issuance of such
Letter of Credit, shall have received a legal, valid and
enforceable security interest in certain Defaulted Receivables
of such Letter of Credit Obligor.
(q) Such other approvals, opinions or documents as the
Administrator or Issuer may reasonably request.
2. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS.
Each purchase (except as to CLAUSE (a), including the initial purchase) and each
reinvestment shall be subject to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall
have delivered to the Administrator on or before such
purchase, in form and substance satisfactory to the
Administrator, a completed pro forma Information Package to
reflect the level of Capital and related reserves after such
subsequent purchase;
(b) on the date of such purchase or reinvestment the
following statements shall be true (and acceptance of the
proceeds of such purchase or reinvestment shall be deemed a
representation and warranty by the Seller that such statements
are then true):
(i) the representations and warranties contained in
ExhibitIII to the Agreement are true and correct in all
material respects on and as of the date of such purchase or
reinvestment as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would
result from such purchase or reinvestment, that constitutes a
Termination Event or an Unmatured Termination Event;
PROVIDED, HOWEVER, that the existence of an Unmatured Termination Event (other
than an Unmatured Termination Event of the type described in clause (i) of
Exhibit V to the Agreement or resulting from the failure of the Seller or the
Servicer to deliver any Information Package when due) shall not prohibit any
reinvestment or purchase on any day that does not cause the Capital, after
giving effect to such reinvestment or purchase, to exceed the Capital as of the
opening of business on such day.
RECEIVABLES PURCHASE AGREEMENT
Exhibit II-6
<PAGE>
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as follows:
(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified to do business, and is in good standing, as a
foreign corporation in every jurisdiction where the nature of its business
requires it to be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect.
(b) The execution, delivery and performance by the
Seller of the Agreement and the other Transaction Documents to which it is a
party, including the Seller's use of the proceeds of purchases and
reinvestments: (i) are within the Seller's corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) do not contravene or
result in a default under or conflict with: (1)the Seller's charter or
by-laws, (2) any law, rule or regulation applicable to the Seller, (3) any
contractual restriction binding on or affecting the Seller or its property or
(4) any order, writ, judgment, award, injunction or decree binding on or
affecting the Seller or its property, and (iv) do not result in or require the
creation of any Adverse Claim upon or with respect to any of its properties.
The Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and
no notice to or filing with, any Governmental Authority or other Person is
required for the due execution, delivery and performance by the Seller of the
Agreement or any other Transaction Document to which it is a party, other
than the Uniform Commercial Code filings referred to in ExhibitII to the
Agreement, all of which shall have been filed on or before the date of the
first purchase hereunder, and the approval of the Administrative Agent under
the Credit Facility, which approval has been obtained and continues in full
force and effect.
(d) Each of the Agreement and the other Transaction
Documents to which it is a party constitutes the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws from time to time in effect affecting
the enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
RECEIVABLES PURCHASE AGREEMENT
Exhibit III-1
<PAGE>
(e) The balance sheets of the Seller as at December 31,
1996, and the related statements of income and retained earnings of the
Seller for the fiscal year then ended, copies of which have been furnished to
the Administrator, fairly present the financial condition of the Seller as at
such date and the results of the operations of the Seller for the period
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and since December 31, 1996 there has been
no Material Adverse Effect.
(f) There is no pending or, to the best knowledge of the
Seller, threatened action or proceeding affecting the Seller before any
Governmental Authority or arbitrator.
(g) No proceeds of any purchase or reinvestment will be
used to acquire any equity security of a class that is registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
(h) The Seller is the legal and beneficial owner of the
Pool Receivables and Related Security, free and clear of any Adverse Claim.
Upon each purchase or reinvestment, the Issuer shall acquire a valid and
enforceable perfected undivided percentage ownership interest, to the extent
of the Purchased Interest, in each Pool Receivable then existing or
thereafter arising and in the Related Security, Collections and other
proceeds with respect thereto, free and clear of any Adverse Claim. The
Agreement creates a security interest in favor of the Issuer in the Pool
Assets, and the Issuer has a first priority perfected security interest in
the Pool Assets, free and clear of any Adverse Claims. No effective
financing statement or other instrument similar in effect covering any Pool
Asset is on file in any recording office, except those filed in favor of the
Seller and Falcon pursuant to the Sale Agreements and the Issuer relating to
the Agreement.
(i) Each Information Package (if prepared by the Seller
or one of its Affiliates, or to the extent that information contained therein
is supplied by the Seller or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished at
any time by or on behalf of the Seller to the Administrator in connection
with the Agreement or any other Transaction Document to which it is a party
is or will be complete and accurate in all material respects as of its date
or (except as otherwise disclosed to the Administrator at such time) as of
the date so furnished.
(j) The principal place of business and chief executive
office (as such terms are used in the UCC) of the Seller and the office where
the Seller keeps its records concerning the Receivables are located at the
address referred to in Sections 1(b) and 2(b) of Exhibit IV to the Agreement.
RECEIVABLES PURCHASE AGREEMENT
Exhibit III-2
<PAGE>
(k) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks, are specified in Schedule II to the Agreement (or at such other
Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified
to the Administrator in accordance with the Agreement) and all Lock-Box
Accounts are subject to Lock-Box Agreements.
(l) The Seller is not in violation of any order of any
court, arbitrator or Governmental Authority.
(m) Neither the Seller nor any Affiliate of the Seller
has any direct or indirect ownership or other financial interest in the
Issuer.
(n) No proceeds of any purchase or reinvestment will be
used for any purpose that violates any applicable law, rule or regulation,
including Regulations G or U of the Federal Reserve Board.
(o) Each Pool Receivable included as an Eligible
Receivable in the calculation of the Net Receivables Pool Balance is an
Eligible Receivable.
(p) No event has occurred and is continuing, or would
result from a purchase in respect of, or reinvestment in respect of, the
Purchased Interest or from the application of the proceeds therefrom, that
constitutes a Termination Event or an Unmatured Termination Event.
(q) The Seller has accounted for each sale of undivided
percentage ownership interests in Receivables in its books and financial
statements as sales, consistent with generally accepted accounting principles.
(r) The Seller has complied in all material respects
with the Credit and Collection Policy of each Originator with regard to each
Receivable originated by such Originator.
(s) The Seller has complied in all material respects
with all of the terms, covenants and agreements contained in the Agreement
and the other Transaction Documents that are applicable to it.
(t) The Seller's complete corporate name is set forth in
the preamble to the Agreement, and the Seller does not use and has not during
the last six years used any other corporate name, trade name, doing-business
name or fictitious name, except as set forth on Schedule III to the Agreement
and except for names first used after the date of the Agreement and set forth
in a notice delivered to the Administrator pursuant to Section 1(l)(v) of
Exhibit IV to the Agreement.
RECEIVABLES PURCHASE AGREEMENT
Exhibit III-3
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer represents and warrants as follows:
(a) The Servicer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified to do business, and is in good standing, as a
foreign corporation in every jurisdiction where the nature of its business
requires it to be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect.
(b) The execution, delivery and performance by the
Servicer of the Agreement and the other Transaction Documents to which it is
a party, including the Servicer's use of the proceeds of purchases and
reinvestments: (i) are within the Servicer's corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) do not contravene or
result in a default under or conflict with: (1) the Servicer's charter or
by-laws, (2) any law, rule or regulation applicable to the Servicer, (3) any
contractual restriction binding on or affecting the Servicer or its property
or (4) any order, writ, judgment, award, injunction or decree binding on or
affecting the Servicer or its property, and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its
properties. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Servicer.
(c) No authorization, approval or other action by, and
no notice to or filing with, any Governmental Authority or other Person is
required for the due execution, delivery and performance by the Servicer of
the Agreement or any other Transaction Document to which it is a party.
(d) Each of the Agreement and the other Transaction
Documents to which it is a party constitutes the legal, valid and binding
obligation of the Servicer enforceable against the Servicer in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(e) The balance sheets of the Servicer and its
consolidated Subsidiaries as at December 31, 1996, and the related statements
of income and retained earnings of the Servicer and its consolidated
Subsidiaries for the fiscal year then ended, copies of which have been
furnished to the Administrator, fairly present the financial condition of the
Servicer and its consolidated Subsidiaries as at such date and the results of
the operations of the Servicer and its Subsidiaries for the period ended on
such date, all in accordance with generally accepted accounting principles
consistently
RECEIVABLES PURCHASE AGREEMENT
Exhibit III-4
<PAGE>
applied, and since December 31, 1996 there has been no Material Adverse
Effect.
(f) Except as disclosed in the most recent audited
financial statements of Falcon furnished to the Administrator, there is no
pending or, to the best knowledge of the Servicer, threatened action or
proceeding affecting the Servicer or any of its Subsidiaries before any
Governmental Authority or arbitrator that could have a Material Adverse
Effect.
(g) No proceeds of any purchase or reinvestment will be
used to acquire any equity security of a class that is registered pursuant to
Section12 of the Securities Exchange Act of 1934.
(h) Each Information Package (if prepared by the
Servicer or one of its Affiliates, or to the extent that information
contained therein is supplied by the Servicer or an Affiliate), information,
exhibit, financial statement, document, book, record or report furnished or
to be furnished at any time by or on behalf of the Servicer to the
Administrator in connection with the Agreement is or will be complete and
accurate in all material respects as of its date or (except as otherwise
disclosed to the Administrator at such time) as of the date so furnished.
(i) The principal place of business and chief executive
office (as such terms are used in the UCC) of the Servicer and the office
where the Servicer keeps its records concerning the Receivables are located
at the address referred to in Section 2(b) of Exhibit IV to the Agreement.
(j) The Servicer is not in violation of any order of any
court, arbitrator or Governmental Authority.
(k) Neither the Servicer nor any Affiliate of the
Servicer has any direct or indirect ownership or other financial interest in
the Issuer.
(l) The Servicer has complied in all material respects
with the Credit and Collection Policy of each Originator with regard to each
Receivable originated by such Originator.
(m) The Servicer has complied in all material respects
with all of the terms, covenants and agreements contained in the Agreement
and the other Transaction Documents that are applicable to it.
RECEIVABLES PURCHASE AGREEMENT
Exhibit III-5
<PAGE>
EXHIBIT IV
COVENANTS
1. COVENANTS OF THE SELLER. Until the latest of the
Facility Termination Date, the date on which no Capital of or Discount in
respect of the Purchased Interest shall be outstanding or the date all other
amounts owed by the Seller under the Agreement to the Issuer, the
Administrator and any other Indemnified Party or Affected Person shall be
paid in full:
(a) COMPLIANCE WITH LAWS, ETC. The Seller shall comply
in all material respects with all applicable laws, rules, regulations and
orders, and preserve and maintain its corporate existence, rights,
franchises, qualifications and privileges, except to the extent that the
failure so to comply with such laws, rules and regulations or the failure so
to preserve and maintain such rights, franchises, qualifications and
privileges would not have a Material Adverse Effect.
(b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. The
Seller: (i) shall keep its principal place of business and chief executive
office (as such terms or similar terms are used in the UCC) and the office
where it keeps its records concerning the Receivables at the address of the
Seller set forth under its name on the signature page to the Agreement or,
pursuant to CLAUSE (l)(v) below, at any other locations in jurisdictions where
all actions reasonably requested by the Administrator to protect and perfect
the interest of the Issuer in the Receivables and related items (including
the Pool Assets) have been taken and completed and (ii) shall provide the
Administrator with at least 30 days' written notice before making any change
in the Seller's name or making any other change in the Seller's identity or
corporate structure (including a Change in Control) that could render any UCC
financing statement filed in connection with this Agreement "seriously
misleading" as such term (or similar term) is used in the UCC; each notice to
the Administrator pursuant to this sentence shall set forth the applicable
change and the effective date thereof. The Seller also will maintain and
implement (or cause the Servicer to maintain and implement) administrative
and operating procedures (including an ability to recreate records evidencing
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain (or cause the Servicer to keep and
maintain) all documents, books, records, computer tapes and disks and other
information reasonably necessary or advisable for the collection of all
Receivables (including records adequate to permit the daily identification of
each Receivable and all Collections of and adjustments to each existing
Receivable). Notwithstanding the above, in no event shall the Seller have or
maintain, or be a partner in any partnership that has or maintains, its
jurisdiction of organization, principal place of business
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-1
<PAGE>
or principal assets in any of the states of Colorado, Kansas, New Mexico,
Oklahoma, Utah or Wyoming.
(c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT
AND COLLECTION POLICY. The Seller shall (and shall cause the Servicer to),
at its expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under
the Contracts related to the Receivables, and timely and fully comply in all
material respects with the applicable Credit and Collection Policies with
regard to each Receivable and the related Contract.
(d) OWNERSHIP INTEREST, ETC. The Seller shall (and
shall cause the Servicer to), at its expense, take all action necessary or
desirable to establish and maintain a valid and enforceable undivided
percentage ownership interest, to the extent of the Purchased Interest, in
the Pool Receivables, the Related Security and Collections with respect
thereto, and a first priority perfected security interest in the Pool Assets,
in each case free and clear of any Adverse Claim, in favor of the Issuer,
including taking such action to perfect, protect or more fully evidence the
interest of the Issuer as the Issuer, through the Administrator, may
reasonably request.
(e) SALES, LIENS, ETC. The Seller shall not sell,
assign (by operation of law or otherwise) or otherwise dispose of, or create
or suffer to exist any Adverse Claim upon or with respect to, any or all of
its right, title or interest in, to or under any Pool Assets (including the
Seller's undivided interest in any Receivable, Related Security or
Collections, or upon or with respect to any account to which any Collections
of any Receivables are sent), or assign any right to receive income in
respect of any items contemplated by this paragraph.
(f) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
provided in the Agreement, the Seller shall not, and shall not permit the
Servicer to, extend the maturity or adjust the Outstanding Balance or
otherwise modify the terms of any Pool Receivable, or amend, modify or waive
any term or condition of any related Contract.
(g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY.
The Seller shall not make (or permit any Originator to make) any material
change in the character of its business or in any Credit and Collection
Policy, or any change in any Credit and Collection Policy that would have a
Material Adverse Effect. The Seller shall not make (or permit any Originator
to make) any other change in any Credit and Collection Policy without giving
prior written notice thereof to the Administrator.
(h) AUDITS. The Seller shall (and shall cause Falcon
and each Originator to), from time to time during regular business hours as
reasonably requested in advance (unless a Termination Event or Unmatured
Termination Event exists) by the
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-2
<PAGE>
Administrator, permit the Administrator, or its agents or representatives:
(i) to examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in the possession or under the
control of the Seller (or Falcon or any such Originator) relating to
Receivables and the Related Security, including the related Contracts, and
(ii) to visit the offices and properties of the Seller, Falcon or the
Originators for the purpose of examining such materials described in
CLAUSE (i) above, and to discuss matters relating to Receivables and the
Related Security or the Seller's, Falcon's or the Originators' performance
hereunder or under the Contracts with any of the officers, employees, agents
or contractors of the Seller, Falcon or the Originators having knowledge of
such matters.
(i) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND
PAYMENT INSTRUCTIONS TO OBLIGORS. The Seller shall not, and shall not permit
the Servicer, Falcon (if not the Servicer) or any Originator to, add or
terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account
from those listed in ScheduleII to the Agreement, or make any change in its
instructions to Obligors regarding payments to be made to the Seller, the
Originators, the Servicer or any Lock-Box Account (or related post office
box), unless the Administrator shall have consented thereto in writing and
the Administrator shall have received copies of all agreements and documents
(including Lock-Box Agreements) that it may request in connection therewith.
(j) DEPOSITS TO LOCK-BOX ACCOUNTS. The Seller shall (or
shall cause the Servicer to): (i) instruct all Obligors (other than Obligors
on a Receivable originated by Ex-Cell Manufacturing Company, Inc.) to make
payments of all Receivables to one or more Lock-Box Accounts or to post
office boxes to which only Lock-Box Banks have access (and shall instruct the
Lock-Box Banks to cause all items and amounts relating to such Receivables
received in such post office boxes to be removed and deposited into a
Lock-Box Account on a daily basis), and (ii) deposit, or cause to be
deposited, any Collections received by it, the Servicer or any Originator
into Lock-Box Accounts not later than one Business Day after receipt thereof.
Each Lock-Box Account (other than the Lock-Box Account to which Collections
are deposited by Ex-Cell Manufacturing Company, Inc.) shall at all times be
subject to a Lock-Box Agreement. The Seller will not (and will not permit
the Servicer to) deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Account cash or cash proceeds other
than Collections.
(k) MARKING OF RECORDS. At its expense, the Seller
shall: (i) mark (or cause the Servicer to mark) its master data processing
records relating to Pool Receivables and related Contracts, including with a
legend evidencing that the undivided percentage ownership interests with
regard to the Purchased Interest related to such Receivables and related
Contracts have been sold in accordance with the Agreement, and (ii) cause
Falcon
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-3
<PAGE>
and each Originator so to mark their master data processing records pursuant
to the Sale Agreements.
(l) REPORTING REQUIREMENTS. The Seller will provide to
the Administrator (in multiple copies, if requested by the Administrator) the
following:
(i) as soon as available and in any event within 105
days after the end of each fiscal year of the Seller, a copy
of the annual report for such year for the Seller, containing
unaudited financial statements for such year certified as to
accuracy by the Chief Financial Officer or Treasurer of the
Seller;
(ii) as soon as possible and in any event within five
days after the occurrence of each Termination Event or
Unmatured Termination Event, a statement of the chief
financial officer of the Seller setting forth details of such
Termination Event or Unmatured Termination Event and the
action that the Seller has taken and proposes to take with
respect thereto;
(iii) promptly after the sending or filing thereof,
copies of all reports that the Seller sends to any of its
security holders, and copies of all reports and registration
statements that the Seller or any Subsidiary files with the
Securities and Exchange Commission or any national securities
exchange;
(iv) promptly after the filing or receiving thereof,
copies of all reports and notices that the Seller or any
Affiliate files under ERISA with the Internal Revenue Service,
the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or that the Seller or any Affiliate
receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to
which the Seller or any of its Affiliates is or was, within
the preceding five years, a contributing employer, in each
case in respect of the assessment of withdrawal liability or
an event or condition that could, in the aggregate, result in
the imposition of liability on the Seller and/or any such
Affiliate;
(v) at least thirty days before any change in the
Seller's name or any other change requiring the amendment of
UCC financing statements, a notice setting forth such changes
and the effective date thereof;
(vi) promptly after the Seller obtains knowledge thereof,
notice of any: (A) litigation, investigation or proceeding
that may exist at any time between the Seller and any Person
or (B) litigation or proceeding relating to any Transaction
Document;
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-4
<PAGE>
(vii) promptly after the occurrence thereof, notice
of a material adverse change in the business, operations,
property or financial or other condition of the Seller, the
Servicer or any Originator; and
(viii) such other information respecting the
Receivables or the condition or operations, financial or
otherwise, of the Seller or any of its Affiliates as the
Administrator may from time to time reasonably request;
(m) CERTAIN AGREEMENTS. Without the prior written
consent of the Administrator, the Seller will not (and will not permit Falcon
or any Originator to) amend, modify, waive, revoke or terminate any
Transaction Document to which it is a party or any provision of its
certificate of incorporation or by-laws.
(n) RESTRICTED PAYMENTS. (i) Except pursuant to
CLAUSE(ii) below, the Seller will not: (A) purchase or redeem
any shares of its capital stock, (B) declare or pay any
dividend or set aside any funds for any such purpose,
(C) prepay, purchase or redeem any Debt, (D) lend or advance any
funds or (E) repay any loans or advances to, for or from any of
its Affiliates (the amounts described in CLAUSES (A) through
(E) being referred to as "RESTRICTED PAYMENTS").
(ii) Subject to the limitations set forth in CLAUSE (iii)
below, the Seller may make Restricted Payments so long as such
Restricted Payments are made only in one or more of the
following ways: (A) the Seller may make cash payments
(including prepayments) on the Buyer Note in accordance with
its terms, and (B) if no amounts are then outstanding under the
Buyer Note, the Seller may declare and pay dividends.
(iii) The Seller may make Restricted Payments only
out of the funds it receives pursuant to Sections 1.4(b)(ii)
and (iv) of the Agreement. Furthermore, the Seller shall not
pay, make or declare: (A) any dividend if, after giving effect
thereto, the Seller's tangible net worth would be less than
$5,000,000, or (B) any Restricted Payment (including any
dividend) if, after giving effect thereto, any Termination
Event or Unmatured Termination Event shall have occurred and
be continuing.
(o) OTHER BUSINESS. The Seller will not: (i) engage in
any business other than the transactions contemplated by the Transaction
Documents, (ii) create, incur or permit to exist any Debt of any kind (or
cause or permit to be issued for its account any letters of credit or
bankers' acceptances) other than pursuant to this Agreement or the Sale
Agreement between the Seller and Falcon (the "PERMITTED DEBT"), or (iii) form
any Subsidiary or make any investments in any other Person; PROVIDED,
HOWEVER, that the Seller shall be permitted to incur minimal obligations to
the extent necessary for the day-to-day operations
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-5
<PAGE>
of the Seller (such as expenses for stationery, audits, maintenance of legal
status, etc.).
(p) USE OF SELLER'S SHARE OF COLLECTIONS. The Seller
shall apply the Seller's Share of Collections to make payments in the
following order of priority: (i) the payment of its expenses (including all
obligations payable to the Issuer and the Administrator under the Agreement
and under the Fee Letter), (ii) the payment of accrued and unpaid interest on
the Buyer Note and (iii) other legal and valid corporate purposes.
(q) PURCHASED INTEREST. Both before and after each
purchase or reinvestment pursuant to the Agreement, the Purchased Interest
will not be greater than 100%.
(r) TANGIBLE NET WORTH. The Seller will not permit its
tangible net worth, at any time, to be less than $5,000,000.
(s) INTEREST COVERAGE RATIO. Falcon will not permit the
Interest Coverage Ratio calculated at the end of each fiscal quarter
beginning on the fiscal quarter ended during September 1997 (as calculated
for the four fiscal quarters then ended) to be less than 2.0 to 1.0;
PROVIDED, that with respect to the first three such quarters ending in
September 1997, December 1997 and March 1998, such determination shall be
made as calculated for the one, two or three fiscal quarters then ended,
respectively.
2. COVENANTS OF THE SERVICER AND FALCON. Until the latest
of the Facility Termination Date, the date on which no Capital of or Discount
in respect of the Purchased Interest shall be outstanding or the date all
other amounts owed by the Seller under the Agreement to the Issuer, the
Administrator and any other Indemnified Party or Affected Person shall be
paid in full:
(a) COMPLIANCE WITH LAWS, ETC. The Servicer and, to the
extent that it ceases to be the Servicer, Falcon shall comply (and shall
cause each Originator to comply) in all material respects with all applicable
laws, rules, regulations and orders, and preserve and maintain its corporate
existence, rights, franchises, qualifications and privileges, except to the
extent that the failure so to comply with such laws, rules and regulations or
the failure so to preserve and maintain such existence, rights, franchises,
qualifications and privileges would not have a Material Adverse Effect.
(b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. The
Servicer and, to the extent that it ceases to be the Servicer, Falcon shall
keep (and shall cause each Originator to keep) its principal place of
business and chief executive office (as such terms or similar terms are used
in the UCC) and the office where it keeps its records concerning the
Receivables at the address of the Servicer set forth under its name on the
signature page to the Agreement or, upon at least 30 days' prior written
notice of a proposed change to the Administrator, at any other locations in
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-6
<PAGE>
jurisdictions where all actions reasonably requested by the Administrator to
protect and perfect the interest of the Issuer in the Receivables and related
items (including the Pool Assets) have been taken and completed. The
Servicer and, to the extent that it ceases to be the Servicer, Falcon also
will (and will cause each Originator to) maintain and implement
administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records, computer tapes and disks and other information reasonably
necessary or advisable for the collection of all Receivables (including
records adequate to permit the daily identification of each Receivable and
all Collections of and adjustments to each existing Receivable).
(c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT
AND COLLECTION POLICY. The Servicer and, to the extent that it ceases to be
the Servicer, Falcon shall (and shall cause each Originator to), at its
expense, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under the
Contracts related to the Receivables, and timely and fully comply in all
material respects with the Credit and Collection Policy with regard to each
Receivable and the related Contract.
(d) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
provided in the Agreement, the Servicer and, to the extent that it ceases to
be the Servicer, Falcon shall not extend (and shall not permit any Originator
to extend) the maturity or adjust the Outstanding Balance or otherwise modify
the terms of any Pool Receivable, or amend, modify or waive any term or
condition of any related Contract.
(e) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY.
The Servicer and, to the extent that it ceases to be the Servicer, Falcon
shall not make (and shall not permit any Originator to make) any material
change in the character of its business or in any Credit and Collection
Policy, or any change in any Credit and Collection Policy that would have a
Material Adverse Effect. The Servicer and, to the extent that it ceases to
be the Servicer, Falcon shall not make (and shall not permit any Originator
to make) any other change in any Credit and Collection Policy without giving
prior written notice thereof to the Administrator.
(f) AUDITS. The Servicer and, to the extent that it
ceases to be the Servicer, Falcon shall (and shall cause each Originator to),
from time to time during regular business hours as reasonably requested in
advance (unless a Termination Event or Unmatured Termination Event exists) by
the Administrator, permit the Administrator, or its agents or
representatives: (i) to examine and make copies of and abstracts from all
books, records and documents (including computer tapes and disks) in its
possession or under its control relating to Receivables and the
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-7
<PAGE>
Related Security, including the related Contracts, and (ii) to visit its
offices and properties for the purpose of examining such materials described
in CLAUSE(i) above, and to discuss matters relating to Receivables and the
Related Security or its performance hereunder or under the Contracts with any
of its officers, employees, agents or contractors having knowledge of such
matters.
(g) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND
PAYMENT INSTRUCTIONS TO OBLIGORS. The Servicer and, to the extent that it
ceases to be the Servicer, Falcon shall not (and shall not permit any
Originator to) add or terminate any bank as a Lock-Box Bank or any account as
a Lock-Box Account from those listed in ScheduleII to the Agreement, or make
any change in its instructions to Obligors regarding payments to be made to
the Servicer or any Lock-Box Account (or related post office box), unless the
Administrator shall have consented thereto in writing and the Administrator
shall have received copies of all agreements and documents (including
Lock-Box Agreements) that it may request in connection therewith.
(h) DEPOSITS TO LOCK-BOX ACCOUNTS. The Servicer shall:
(i) instruct all Obligors (other than Obligors on a Receivable originated by
Ex-Cell Manufacturing Company, Inc.) to make payments of all Receivables to
one or more Lock-Box Accounts or to post office boxes to which only Lock-Box
Banks have access (and shall instruct the Lock-Box Banks to cause all items
and amounts relating to such Receivables received in such post office boxes
to be removed and deposited into a Lock-Box Account on a daily basis), and
(ii) deposit, or cause to be deposited, any Collections received by it into
Lock-Box Accounts not later than one Business Day after receipt thereof.
Each Lock-Box Account (other than the Lock-Box Account to which Collections
are deposited by Ex-Cell Manufacturing Company, Inc.) shall at all times be
subject to a Lock-Box Agreement. The Servicer will not deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections.
(i) MARKING OF RECORDS. At its expense, the Servicer
shall mark its master data processing records relating to Pool Receivables
and related Contracts, including with a legend evidencing that the undivided
percentage ownership interests with regard to the Purchased Interest related
to such Receivables and related Contracts have been sold in accordance with
the Agreement.
(j) REPORTING REQUIREMENTS. The Servicer and, to the
extent that it ceases to be the Servicer, Falcon will provide to the
Administrator (in multiple copies, if requested by the Administrator) the
following:
(i) as soon as available and in any event within 50 days
after the end of the first three quarters of each
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-8
<PAGE>
fiscal year of such Person, balance sheets of such Person and
its consolidated Subsidiaries as of the end of such quarter
and statements of income and retained earnings of such Person
and its consolidated Subsidiaries for the period commencing at
the end of the previous fiscal year and ending with the end of
such quarter, certified by the chief financial officer of such
Person (which financial statements the Administrator will
furnish to Moody's);
(ii) as soon as available and in any event within 105
days after the end of each fiscal year of such Person, a copy
of the annual report for such year for such Person and its
consolidated Subsidiaries, containing financial statements for
such year audited by independent certified public accountants
of nationally recognized standing;
(iii) as to the Servicer only, as soon as available and
in any event not later than the twelfth Business Day after the
last day of each Fiscal Month, an Information Package as of
the last day of such month; within six Business Days of a
request by the Administrator, an Information Package for such
period as is specified by the Administrator (but in no event
more frequently then weekly);
(iv) as soon as possible and in any event within five
days after the occurrence of each Termination Event or
Unmatured Termination Event, a statement of the chief
financial officer of such Person setting forth details of such
Termination Event or Unmatured Termination Event and the
action that such Person has taken and proposes to take with
respect thereto;
(v) promptly after the sending or filing thereof,
copies of all reports that such Person sends to any of its
security holders, and copies of all reports and registration
statements that such Person or any Subsidiary files with the
Securities and Exchange Commission or any national securities
exchange; PROVIDED, that any filings with the Securities and
Exchange Commission that have been granted "confidential"
treatment shall be provided promptly after such filings have
become publicly available;
(vi) promptly after the filing or receiving thereof,
copies of all reports and notices that such Person or any of
its Affiliate files under ERISA with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or that such Person or any of its
Affiliate receives from any of the foregoing or from any
multiemployer plan (within the meaning of Section 4001(a)(3) of
ERISA) to which such Person or any of its Affiliate is or was,
within the preceding five years, a contributing employer, in
each case in respect of the assessment of withdrawal liability
or an event or condition that could, in
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-9
<PAGE>
the aggregate, result in the imposition of liability on such
Person and/or any such Affiliate;
(vii) at least thirty days before any change in such
Person's or any Originator's name or any other change
requiring the amendment of UCC financing statements, a notice
setting forth such changes and the effective date thereof;
(viii) promptly after such Person obtains knowledge
thereof, notice of any: (A) litigation, investigation or
proceeding that may exist at any time between such Person or
any of its Subsidiaries and any Governmental Authority that,
if not cured or if adversely determined, as the case may be,
would have a Material Adverse Effect, (B) litigation or
proceeding adversely affecting such Person or any of its
Subsidiaries in which the amount involved is $5,000,000 or
more and not covered by insurance or in which injunctive or
similar relief is sought, or (C) litigation or proceeding
relating to any Transaction Document;
(ix) promptly after the occurrence thereof, notice
of a material adverse change in the business, operations,
property or financial or other condition of such Person or any
of its Subsidiaries;
(x) promptly after the occurrence thereof, notice
of any default under the Credit Facility (which notice Falcon
will furnish to Moody's); and
(xi) such other information respecting the
Receivables or the condition or operations, financial or
otherwise, of such Person or any of its Affiliates as the
Administrator may from time to time reasonably request.
3. SEPARATE EXISTENCE. Each of the Seller and Falcon hereby
acknowledges that the Purchasers, the Issuer and the Administrator are
entering into the transactions contemplated by this Agreement and the other
Transaction Documents in reliance upon the Seller's identity as a legal
entity separate from Falcon. Therefore, from and after the date hereof, each
of the Seller and Falcon shall take all steps specifically required by the
Agreement or reasonably required by the Administrator to continue the
Seller's identity as a separate legal entity and to make it apparent to third
Persons that the Seller is an entity with assets and liabilities distinct
from those of Falcon and any other Person, and is not a division of Falcon or
any other Person. Without limiting the generality of the foregoing and in
addition to and consistent with the other covenants set forth herein, each of
the Seller and Falcon shall take such actions as shall be required in order
that:
(a) The Seller will be a limited purpose corporation whose
primary activities are restricted in its certificate
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-10
<PAGE>
of incorporation to: (i) purchasing or otherwise acquiring
from Falcon, owning, holding, granting security interests or
selling interests in Pool Assets, (ii) entering into agreements
for the selling and servicing of the Receivables Pool, and
(iii)conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or
activity, or incur any indebtedness or liability, other than
as expressly permitted by the Transaction Documents;
(c) Not less than one member of the Seller's Board of
Directors (the "INDEPENDENT DIRECTOR") shall be an individual
who is not a direct, indirect or beneficial stockholder,
officer, director, employee, affiliate, associate or supplier
of Falcon or any of its Affiliates. The certificate of
incorporation of the Seller shall provide that: (i) the
Seller's Board of Directors shall not approve, or take any
other action to cause the filing of, a voluntary bankruptcy
petition with respect to the Seller unless the Independent
Director shall approve the taking of such action in writing
before the taking of such action, and (ii) such provision
cannot be amended without the prior written consent of the
Independent Director;
(d) The Independent Director shall not at any time serve
as a trustee in bankruptcy for the Seller, Falcon or any
Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will
be compensated from the Seller's funds for services provided
to the Seller. The Seller will not engage any agents other
than its attorneys, auditors and other professionals, and a
servicer and any other agent contemplated by the Transaction
Documents for the Receivables Pool, which servicer will be
fully compensated for its services by payment of the Servicing
Fee, and a manager, which manager will be fully compensated
from the Seller's funds;
(f) The Seller will contract with the Servicer to
perform for the Seller all operations required on a daily
basis to service the Receivables Pool. The Seller will pay
the Servicer the Servicing Fee pursuant hereto. The Seller
will not incur any material indirect or overhead expenses for
items shared with Falcon (or any other Affiliate thereof) that
are not reflected in the Servicing Fee or the fee to Falcon in
its role as manager for the Seller. To the extent, if any,
that the Seller (or any Affiliate thereof) shares items of
expenses not reflected in the Servicing Fee or the manager's
fee, such as legal, auditing and other professional services,
such expenses will be allocated to the extent practical on the
basis of actual use or the value
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-11
<PAGE>
of services rendered, and otherwise on a basis reasonably
related to the actual use or the value of services rendered;
it being understood that Falcon shall pay all expenses
relating to the preparation, negotiation, execution and
delivery of the Transaction Documents, including legal, agency
and other fees;
(g) The Seller's operating expenses will not be paid by
Falcon or any other Affiliate thereof;
(h) The Seller will have its own separate stationery;
(i) The Seller's books and records will be maintained
separately from those of Falcon and any other Affiliate thereof;
(j) All financial statements of Falcon or any Affiliate
thereof that are consolidated to include Seller will contain
detailed notes clearly stating that: (i) a special purpose
corporation exists as a Subsidiary of Falcon, and (ii) Falcon
has sold receivables and other related assets to such special
purpose Subsidiary that, in turn, has sold undivided interests
therein to certain financial institutions and other entities;
(k) The Seller's assets will be maintained in a manner
that facilitates their identification and segregation from
those of Falcon or any Affiliate thereof;
(l) The Seller will strictly observe corporate
formalities in its dealings with Falcon or any Affiliate
thereof, and funds or other assets of the Seller will not be
commingled with those of Falcon or any Affiliate thereof
except as permitted by the Agreement in connection with
servicing the Pool Receivables. The Seller shall not maintain
joint bank accounts or other depository accounts to which
Falcon or any Affiliate thereof (other than Falcon in its
capacity as the Servicer) has independent access. The Seller
is not named, and has not entered into any agreement to be
named, directly or indirectly, as a direct or contingent
beneficiary or loss payee on any insurance policy with respect
to any loss relating to the property of Falcon or any
Subsidiary or other Affiliate of Falcon. The Seller will pay
to the appropriate Affiliate the marginal increase or, in the
absence of such increase, the market amount of its portion of
the premium payable with respect to any insurance policy that
covers the Seller and such Affiliate; and
(m) The Seller will maintain arm's-length relationships
with Falcon (and any Affiliate thereof). Any Person that
renders or otherwise furnishes services to the Seller will be
compensated by the Seller at market rates for such services it
renders or otherwise furnishes to the Seller.
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-12
<PAGE>
Neither the Seller nor Falcon will be or will hold itself out
to be responsible for the debts of the other or the decisions
or actions respecting the daily business and affairs of the
other. The Seller and Falcon will immediately correct any
known misrepresentation with respect to the foregoing, and
they will not operate or purport to operate as an integrated
single economic unit with respect to each other or in their
dealing with any other entity.
RECEIVABLES PURCHASE AGREEMENT
Exhibit IV-13
<PAGE>
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "TERMINATION EVENT":
(a) (i) The Seller, Falcon or the Servicer (if Falcon or
any of its Affiliates) shall fail to perform or observe any
term, covenant or agreement under the Agreement or any other
Transaction Document and, except as set forth in CLAUSE(ii) or
(iii) or CLAUSE(b), such failure shall continue for 30 days,
(ii) the Seller or the Servicer shall fail to make when due any
payment or deposit to be made by it under the Agreement and
such payment or deposit shall remain unmade for two Business
Days or (iii) Falcon shall resign as Servicer, and no successor
Servicer reasonably satisfactory to the Administrator shall
have been appointed;
(b) Falcon shall fail to transfer to any successor
Servicer when required any rights pursuant to the Agreement
that Falcon then has as Servicer;
(c) Any representation or warranty made or deemed made
by the Seller or the Servicer (or any of their respective
officers) under or in connection with the Agreement or any
other Transaction Document, or any information or report
delivered by the Seller or the Servicer pursuant to the
Agreement or any other Transaction Document, shall prove to
have been incorrect or untrue in any material respect when
made or deemed made or delivered, and shall remain incorrect
or untrue 30 days after notice to the Seller or the Servicer
of such inaccuracy;
(d) The Seller or the Servicer shall fail to deliver the
Information Package pursuant to the Agreement, and such
failure shall remain unremedied for five days;
(e) The Agreement or any purchase or reinvestment
pursuant to the Agreement shall for any reason: (i)cease to
create, or the Purchased Interest shall for any reason cease
to be, a valid and enforceable perfected undivided percentage
ownership interest to the extent of the Purchased Interest in
each Pool Receivable, the Related Security and Collections
with respect thereto, free and clear of any Adverse Claim, or
(ii) cease to create with respect to the Pool Assets, or the
interest of the Issuer with respect to such Pool Assets shall
cease to be, a valid and enforceable first priority perfected
security interest, free and clear of any Adverse Claim;
(f) (i) The Seller or Falcon shall generally not pay
its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall
RECEIVABLES PURCHASE AGREEMENT
Exhibit V-1
<PAGE>
make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Seller or
Falcon seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any
substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such
proceeding (including the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian
or other similar official for, it or for any substantial part
of its property) shall occur; or the Seller or Falcon shall
take any corporate action to authorize any of the actions set
forth above in this paragraph; or
(ii) Any Originator shall generally not pay its debts as
such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be
instituted by or against such Originator seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property
and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 60 days, or any
of the actions sought in such proceeding (including the entry
of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or
such Originator shall take any corporate action to authorize
any of the actions set forth above in this paragraph;
(g) (i) The Default Ratio shall exceed 1.50% or the
Delinquency Ratio shall exceed 3.95%, or (ii) the average for
three consecutive Fiscal Months of: (a) the Default Ratio
shall exceed 1.05%, (B) the Delinquency Ratio shall exceed
3.75%, or (C) the Dilution Ratio shall exceed 6.75%;
(h) A Change in Control shall occur;
RECEIVABLES PURCHASE AGREEMENT
Exhibit V-2
<PAGE>
(i) The Purchased Interest shall exceed 100% and such
circumstance shall not have been cured within five Business Days;
(j) Falcon or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any of its Permitted Debt
that is outstanding in a principal amount of at least $10,000,000
in the aggregate when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand
or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement,
mortgage, indenture or instrument relating to such Permitted Debt
(and shall have not been waived); or any other event shall occur
or condition shall exist under any agreement, mortgage, indenture
or instrument relating to any such Permitted Debt and shall
continue after the applicable grace period, if any, specified in
such agreement, mortgage, indenture or instrument (and shall
have not been waived), if, in either case: (a) the effect of such
non-payment, event or condition is to give the applicable
debtholders the right (whether acted upon or not) to accelerate
the maturity of such Permitted Debt, or (b)any such Permitted
Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to
repay, redeem, purchase or defease such Permitted Debt shall
be required to be made, in each case before the stated maturity
thereof; or
(k) Either: (i) a contribution failure shall occur with
respect to any Benefit Plan sufficient to give rise to a lien
under Section 302(f) of ERISA, (ii) the Internal Revenue
Service shall, or shall indicate its intention in writing to
the Seller, any Originator, Falcon or any ERISA Affiliate to,
file a notice of lien asserting a claim or claims of $100,000
or more in the aggregate pursuant to the Internal Revenue Code
with regard to any of the assets of Seller, any Originator,
Falcon or any ERISA Affiliate and such lien shall have been
filed and not released within 10 days, or (iii) the Pension
Benefit Guaranty Corporation shall, or shall indicate its
intention in writing to the Seller, any Originator, Falcon or
any ERISA Affiliate to, either file a notice of lien asserting
a claim pursuant to ERISA with regard to any assets of the
Seller, any Originator, Falcon or any ERISA Affiliate or
terminate any Benefit Plan that has unfunded benefit
liabilities, or any steps shall have been taken to terminate
any Benefit Plan subject to Title IV of ERISA so as to result
in any liability in excess of $1,000,000 and such lien shall
have been filed and not released within 10 days.
RECEIVABLES PURCHASE AGREEMENT
Exhibit V-3
<PAGE>
EXHIBIT 10.11
CORPORATE SERVICES AGREEMENT
between
FALCON BUILDING PRODUCTS, INC.
and
EAGLE INDUSTRIES, INC.
dated
June 16, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Services to be Rendered. . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Prevention of Performance. . . . . . . . . . . . . . . . . . . . . . . . .2
5. Independent Contractor; Indemnification. . . . . . . . . . . . . . . . . .2
6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
7. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
8. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
9. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
10. Governing Law; Severability. . . . . . . . . . . . . . . . . . . . . . . .5
11. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
12. Effectiveness, Termination of Prior Agreement. . . . . . . . . . . . . . .6
EXHIBIT A Affiliates
EXHIBIT B Services to be Provided by Eagle Industries, Inc.
EXHIBIT C Schedule of Compensation
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CORPORATE SERVICES AGREEMENT
THIS CORPORATE SERVICES AGREEMENT (this "Agreement") is made as of this
16th day of June, 1997, by and between Falcon Building Products, Inc., a
Delaware corporation, with its principal offices at Two North Riverside Plaza,
Chicago, Illinois 60606 (the "Company"), and Eagle Industries, Inc., a Delaware
corporation, with its principal offices at Two North Riverside Plaza, Suite
1100, Chicago, Illinois 60606 ("Eagle").
W I T N E S S E T H:
WHEREAS, pursuant to a Corporate Services Agreement dated June 22, 1994,
(the "Prior Agreement") Eagle and its affiliated entities, including, without
limitation, those listed on Exhibit A hereto ("Affiliates"), have been providing
services to the Company, and whereas Eagle and the Company wish to terminate the
Prior Agreement and replace it with this Agreement; and
WHEREAS, the Company wishes to continue to purchase and acquire from Eagle
certain services designed to assist the Company in the cost-efficient management
of the Company's corporate and business affairs, in the manner and pursuant to
terms and conditions as more specifically described herein; and
WHEREAS, Eagle desires to provide or cause to be provided those services
requested by the Company under such terms, conditions and arrangements.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. SERVICES TO BE RENDERED
(a) Eagle and the Affiliates shall render to the Company, upon
request of the Company, those services listed on Exhibit B attached hereto and
made a part hereof at the rates or predetermined fees set forth on Exhibit C
attached hereto and made a part hereof. Such rates or fees are intended to allow
Eagle only to recover its costs and expenses without realizing any profit.
(b) From time to time, the Company may desire additional services not
specifically addressed in Exhibit B. For such additional services, if
requested, Eagle will be compensated
<PAGE>
in amounts otherwise agreed to by the parties and subject to the terms of this
Agreement.
2. TERM
The term of this Agreement shall commence on the date hereof and shall
terminate December 31, 1997 provided, however that either party may terminate
this Agreement at any time by giving the other party at least thirty (30) days'
prior written notice.
3. COMPENSATION
For the services rendered by Eagle and the Affiliates to the Company
pursuant to this Agreement, the Company shall pay to Eagle the amounts specified
on Exhibit C in equal monthly installments as invoiced to the Company. The
rates provided for in Exhibit C may be amended only by the mutual consent of
Eagle and the Affiliates and the Company.
4. PREVENTION OF PERFORMANCE
Neither Eagle nor any affiliate shall be determined to be in violation of
this Agreement if it is prevented from performing any of its obligations
hereunder for any reason beyond its reasonable control, including without
limitation, acts of God, nature, or of public enemy, strikes, or limitations of
law, regulations or rules of the Federal or of any state or local government or
of any agency thereof.
5. INDEPENDENT CONTRACTOR; INDEMNIFICATION
(a) It is expressly agreed by the parties hereto that each is at all
times acting and performing hereunder as an independent contractor and not as
agent for the other, and that no act of commission or omission of either party
hereto shall be construed to make or render the other party its principal,
agent, joint venturer or associate, except to the extent specified herein.
(b) The Company shall indemnify, defend and hold Eagle and the
Affiliates, and their respective directors, officers, and employees, harmless
from and against all damages, losses and out-of-pocket expenses (including fees)
incurred by them in the course of performing the duties prescribed hereby,
except for matters covered by Paragraph 5(c) below.
(c) Eagle shall indemnify, defend and hold the Company, its
directors, officers and employees harmless from and against all damages, losses
and out-of-pocket expenses, including
2
<PAGE>
fees, caused by or arising out of any willfull misconduct or gross negligence in
the performance of any obligation or agreement of Eagle or the Affiliates
contained in this Agreement.
(d) Except as otherwise provided in Paragraph 5(c), Eagle does not
assume any responsibility under this Agreement other than to render the services
called for under this Agreement in good faith. The Company's sole remedy on
account of the failure of Eagle or the Affiliates to render the services as and
when required hereunder shall be to procure services elsewhere and to charge
Eagle the difference between the reasonable increased cost, if any, to procure
new services, and the current cost to the Company to procure services under this
Agreement for the remaining term of the Agreement.
6. NOTICES
(a) Each notice, demand, request, consent, report, approval or
communication ("Notice") which is or may be required to be given by either party
to the other party in connection with this Agreement and the transactions
contemplated hereby, shall be in writing, and given by telex, telegram,
telecopy, personal delivery, receipted delivery service, or by certified mail,
return receipt requested, prepaid and properly addressed to the party to be
served.
Such Notices, if to Eagle, addressed as follows:
Eagle Industries, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Telephone: 312/906-8700
Facsimile: 312/906-8402
Attention: Richard McNamee
3
<PAGE>
with a copy to :
Donald J. Liebentritt
Rosenberg & Liebentritt
Two North Riverside Plaza
Suite 1600
Chicago, IL 60606
Telephone: 312/466-3651
Such Notices, if to the Company, addressed as follows:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Telephone: 312/906-9700
Facsimile: 312/906-8402
Attention: Sam A. Cottone
(b) Notices shall be effective on the date sent via telex, telegram
or telecopy, the date delivered personally or by receipted delivery service, or
three (3) days after the date mailed, to the address indicated in the preamble
to this Agreement.
(c) Each party may designate by Notice to the others in writing,
given in the foregoing manner, a new address to which any Notice may thereafter
be so given, served or sent.
7. ENTIRE AGREEMENT
Upon its effectiveness as provided for in Paragraph 12 hereof, this
Agreement, together with the Exhibits hereto, will constitute and set forth the
entire agreement and understanding of the parties pertaining to the subject
matter hereof, and no prior or contemporaneous written or oral agreements
(including the Prior Agreement), understandings, undertakings, negotiations,
promises, discussions, warranties or covenants not specifically referred to or
contained herein or attached hereto shall be valid and enforceable. No
supplement, modification, termination in whole or in part, or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision hereof (whether or not
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided therein.
4
<PAGE>
8. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, each of their respective successors and permitted assigns, but
may not be assigned by either party without the prior written consent of the
other party, and no other persons (other than the Affiliates) shall have or
derive any right, benefit or obligation hereunder.
9. HEADINGS
The headings and titles of the various paragraphs of this Agreement are
inserted merely for the purpose of convenience, and do not expressly or by
implication limit, define, extend or affect the meaning or interpretation of
this Agreement or the specific terms or text of the paragraph so designated.
10. GOVERNING LAW; SEVERABILITY
This Agreement shall be governed in all respects, whether as to validity,
construction, capacity, performance or otherwise, by the laws of the State of
Illinois, in which it has a situs. If any provision of this Agreement shall be
held invalid by a court with jurisdiction over the parties to this Agreement,
then and in that event such provision shall be deleted from the Agreement, which
shall then be construed to give effect to the remaining provisions thereof. If
any one or more of the provisions contained in this Agreement or in any other
instrument referred to herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then in that event, to the maximum
extent permitted by law, such invalidity, illegality or unenforceability shall
not affect any other provisions of this Agreement or any other such instrument.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which taken together shall be considered
one and the same instrument.
5
<PAGE>
12. EFFECTIVENESS, TERMINATION OF PRIOR AGREEMENT
This Agreement shall become effective upon the closing of the merger of FBP
Acquisition Corp., Inc. with and into the Company, and upon such closing the
Prior Agreement shall terminate and be of no further force or effect.
FALCON BUILDING PRODUCTS, INC.
By: /s/ Sam Cottone
--------------------------------
Its: Senior Vice-President
----------------------------
EAGLE INDUSTRIES, INC.
By: /s/ Gus J. Athas
--------------------------------
Its: Senior Vice-President
--------------------------------
6
<PAGE>
EXHIBIT A
AFFILIATES
1. Eagle Industries, Inc.
2. Eagle Industrial Products Corporation
<PAGE>
EXHIBIT B
SERVICES TO BE PROVIDED BY EAGLE
1. Tax Return Preparation and Research
2. Computer Consulting Services - including, but not limited to, consulting
services in connection with all phases of the Company's computer systems.
3. Risk Management Services - including, but not limited to: (i) supplying
comprehensive insurance consulting for the Company, (ii) monitoring and
filing claims for the Company, and (iii) providing consulting services and
managing reconstruction and claim processing after a property loss is
incurred.
4. Personnel Management and Employment Relations - including but not limited
to: (i) insurance, benefit and healthcare plan maintenance, including
collection, allocation and premium payments, (ii) processing of
post-employment benefits, (iii) processing of claims for worker's
compensation and unemployment benefits, (iv) design, negotiations and
maintenance of all benefit plans, and (v) miscellaneous matters, including
but not limited to, pension and 401(k) plan review, computation and
submission to plan administrators and all necessary documentation necessary
to maintain plans to produce individual account and pension statements; and
(vi) temporary services and recruiting.
5. Physical Expenses - including, but not limited to: (i) providing services
at the corporate office for mailing, couriers, telephone, meeting rooms,
offices, and storage facilities, (ii) use of offices for persons providing
services for items 1 to 4 above, and Falcon employees and (iii) providing
office supplies, and use of office equipment including fax, copiers,
computers, furniture and fixtures.
<PAGE>
EXHIBIT C
SCHEDULE OF COMPENSATION
As of June 16, 1997
Physical plant expense including Payment of actual
corporate office use, utilities, expenditures
telephone, maintenance, postage, reasonably
office supplies and use of office allocable to
equipment and furniture the Company
Tax advice and assistance; computer Payment of actual
consulting services; risk management expenditures
services; and personnel management reasonably
services allocable to the
Company
Third party service providers such
as, but not limited to, accountants,
actuaries, consultants, lawyers; and
other purchased services; will be
paid directly by the Company or
reimbursed to Eagle or its
Affiliates.
<PAGE>
EXHIBIT 10.12
FORM OF
INDEMNITY AGREEMENT
AGREEMENT dated as of June 17, 1997 by and between FBP Acquisition Corp.,
Inc., a Delaware corporation (the "Corporation"), and the undersigned (the
"Indemnitee").
RECITALS
The Indemnitee is a director and/or officer of the Corporation and/or an
Affiliate Indemnitee (as hereafter defined). Both the Corporation and the
Indemnitee recognize the increased risk of litigation and other claims being
asserted against directors and officers in today's environment.
The Restated Certificate of Incorporation of the Corporation requires the
Corporation to indemnify its directors and officers as currently provided
therein, and the Indemnitee has been serving and continues to serve as a
director and/or officer of the Corporation in part in reliance on such
provision. The Restated Certificate of Incorporation of the Corporation permits
the Corporation to purchase and maintain insurance or to furnish similar
protection or make other arrangements (any such insurance, protection or
arrangement, an "Indemnification Arrangement") on behalf of the Indemnitee
against personal liability (including, but not limited to, providing for
Advanced Amounts as hereafter defined), asserted against him or incurred by or
on behalf of him in such capacity as a director or officer of the Corporation or
as an Affiliate Indemnitee, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of this Agreement or under the Delaware General Corporation
Law (the "DGCL"), as it may then be in effect.
In part to provide the Indemnitee with specific contractual assurance of
substantial protection against personal liability (regardless of, among other
things, any amendment to or revocation of the aforementioned provisions of the
Corporation's Restated Certificate of Incorporation or any change in the
composition of the Corporation's Board of Directors or control of the
Corporation), the Corporation desires to enter into this Agreement. DGCL
Section 145(f) expressly recognizes that the indemnification provisions of the
DGCL are not exclusive of any other rights to which a person seeking
indemnification may be entitled under the Certificate of Incorporation or Bylaws
of the Corporation, or an agreement providing for indemnification, or a
resolution of stockholders or directors, or otherwise, and the Restated
Certificate of Incorporation of the Corporation expressly recognizes that the
indemnification provisions of the Restated Certificate of Incorporation of the
Corporation shall be deemed exclusive of, and shall not affect, any other rights
to which a person seeking indemnification may be entitled under any agreement,
and this Agreement is being entered into pursuant to the Restated Certificate of
Incorporation of the Corporation as permitted by the DGCL as authorized by the
stockholders of the Corporation.
In order to induce the Indemnitee to serve as a director and/or officer of
the Corporation and in consideration of the Indemnitee's so serving, the
Corporation desires to hold harmless and indemnify the Indemnitee and to make
arrangements pursuant to which the Indemnitee may be
1
<PAGE>
advanced or reimbursed expenses incurred by the Indemnitee in certain
proceedings, in every case to the fullest extent authorized or permitted by
the DGCL or any other applicable law, or by any amendment thereof or other
statutory provisions authorizing or permitting such indemnification which are
adopted after the date hereof (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader
indemnification rights than the DGCL or other applicable law permitted the
Corporation to provide prior to such amendment).
NOW THEREFORE, in consideration of the foregoing recitals and of the
Indemnitee's continuing to serve the Corporation as a director and/or officer,
the parties agree as follows:
1. INDEMNIFICATION. To the fullest extent allowed by law, the
Corporation shall hold harmless and indemnify the Indemnitee, his executors,
administrators or assigns against any and all expenses, liabilities, and losses
(including, without limitation, investigation expenses and expert witnesses' and
attorneys' fees and expenses, judgment, penalties, fines, and amounts paid or to
be paid in settlement) actually incurred by the Indemnitee (net of any related
insurance proceeds or other amounts received by the Indemnitee or paid by or on
behalf of the Corporation on the Indemnitee's behalf in compensation of such
expenses, liabilities or losses), in connection with any actual or threatened
action, suit or proceeding, whether civil, criminal, administrative or
investigative, to which the Indemnitee is a party or is threatened to be made a
party (a "Proceeding"), as a plaintiff, defendant, respondent or otherwise,
based upon, arising from, relating to or by reason of the fact that the
Indemnitee is, was, shall be or shall have been a director and/or officer of the
Corporation or is or was serving, shall serve or shall have served as a
director, officer, partner, trustee, fiduciary, employee or agent ("Affiliate
Indemnitee") of another foreign or domestic corporation or non-profit
corporation, cooperative, partnership, joint venture, trust, employee benefit
plan, or other incorporated or unincorporated enterprise at the request of the
Corporation or as a result of the Corporation merging with and into such an
entity, including, without limitation, Falcon Building Products, Inc., a
Delaware corporation (each, a "Company Affiliate"); provided, however, that,
except as provided in Section 8(b) hereof, the Corporation shall indemnify the
Indemnitee in connection with a Proceeding initiated by the Indemnitee only if
such proceeding (or part thereof) was authorized by a majority vote of the Board
of Directors. The Indemnitee shall be presumed to be entitled to such
indemnification under this Agreement upon submission of a written claim pursuant
to Section 3 hereof. Thereafter, the Corporation shall have the burden of proof
to overcome the presumption that the Indemnitee is so entitled. Such
presumption shall only be overcome by a judgment or other final adjudication
after all appeals and all time for appeals has expired ("Final Determination")
adverse to the Indemnitee establishing that his acts were committed in bad
faith, or were the result of active and deliberate dishonesty and were material
to the cause of action so adjudicated, or that the Indemnitee personally gained
in fact a financial profit or other advantage to which he was not legally
entitled. Neither the failure of the Corporation (including its Board of
Directors, legal counsel, or its stockholders) to have made a determination
prior to the commencement of such Proceeding that indemnification of the
Indemnitee is proper in the circumstances because such person has met the
applicable standard of conduct set forth in the DGCL, nor an actual
determination by the Corporation (including its Board of Directors, legal
counsel, or its stockholders) that the Indemnitee has not met the applicable
standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable
2
<PAGE>
standard of conduct. The purchase, establishment, or maintenance of any
Indemnification Arrangement shall not in any way diminish, restrict, limit or
affect the rights and obligations of the Corporation or of the Indemnitee
under this Agreement except as expressly provided herein, and the execution
and delivery of this Agreement by the Corporation and the Indemnitee shall
not in any way diminish, restrict, limit or affect the Indemnitee's right to
indemnification from the Corporation or any other party or parties under any
other Indemnification Arrangement, the Certificate of Incorporation or Bylaws
of the Corporation or the DGCL.
2. INSURANCE. Subject only to the provisions of this Section 2, as long
as the Indemnitee shall continue to serve as a director and/or officer of the
Corporation (or shall continue at the request of the Corporation to serve as an
Affiliate Indemnitee) and thereafter as long as the Indemnitee shall be subject
to any possible Proceeding by reason of the fact that the Indemnitee was a
director and/or officer of the Corporation (or served in any of said other
capacities), the Corporation will, unless no such policies are available in any
market, purchase and maintain in effect for the benefit of the Indemnitee one or
more valid, binding, and enforceable policies (the "Insurance Policies") of
directors' and officers' liability insurance ("D&O Insurance") providing
adequate liability coverage for the Indemnitee's acts as a director and/or
officer of the Corporation or as an Affiliate Indemnitee. The Corporation shall
promptly notify the Indemnitee of any lapse, amendment or failure to renew said
policy or policies or any provision thereof relating to the extent or nature of
coverage provided thereunder. In the event the Corporation does not purchase
and maintain in effect said policy or policies of D&O Insurance pursuant to the
provisions of this Section 2, the Corporation shall, in addition to and not in
limitation of the other rights granted the Indemnitee under this Agreement, hold
harmless and indemnify the Indemnitee to the full extent of coverage which would
otherwise have been provided for the benefit of the Indemnitee pursuant to the
Insurance Policies.
3. CLAIMS FOR PAYMENTS. The Indemnitee shall have the right to receive
from the Corporation on demand, or at his option to have the Corporation pay
promptly on his behalf, in advance of a Final Determination of a Proceeding all
amounts payable by the Corporation pursuant to the terms of this Agreement as
corresponding amounts are expended or incurred by the Indemnitee in connection
with any Proceeding or otherwise expended or incurred by the Indemnitee (such
amounts so expended or incurred being referred to as "Advanced Amounts.") In
making any claim for payment by the Corporation of any amount, including any
Advanced Amount, pursuant to this Agreement, the Indemnitee shall submit to the
Corporation a written request for payment (a "Claim"), which includes a schedule
setting forth in reasonable detail the dollar amount expended (or incurred or
expected to be expended or incurred). Each item on such schedule shall be
supported by the bill, agreement, or other documentation relating thereto, a
copy of which shall be appended to the schedule as an exhibit.
Where the Indemnitee is requesting Advanced Amounts, the Indemnitee must
also provide an undertaking to repay such Advanced Amounts if a Final
Determination is made that the Indemnitee is not entitled to indemnification
hereunder.
4. SECTION 16(b) LIABILITY. The Corporation shall not be liable under
this Agreement to make any payment in connection with any claim made against the
Indemnitee for an accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Corporation
3
<PAGE>
within the meaning of Section 16(b) of the Securities Exchange Act of 1934
and amendments thereto or similar provisions of any state statutory law or
common law.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period the Indemnitee is
a director and/or officer of the Corporation (or is serving at the request of
the Corporation as an Affiliate Indemnitee) and shall continue thereafter so
long as the Indemnitee shall be subject to any possible Proceeding by reason of
the fact that the Indemnitee was a director or officer of the Corporation or was
serving as such an Affiliate Indemnitee.
6. SUCCESSORS: BINDING AGREEMENT. This Agreement shall be binding on
and shall inure to the benefit of and be enforceable by the Corporation's
successors and assigns and by the Indemnitee's personal or legal
representatives, executors, administrators, successors, heirs, distributee,
divisees, and legatees. The Corporation shall require any successor or assignee
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business and/or assets of the Corporation, by
written agreement in form and substance reasonably satisfactory to the
Corporation and to the Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform if no such succession or assignment had taken place.
7. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the
Indemnitee of notice of the commencement of any Proceeding, the Indemnitee
shall, if a claim in respect thereof is to be made against the Corporation under
this Agreement, notify the Corporation of the commencement thereof, but the
omission so to notify the Corporation will not relieve the Corporation from any
liability which it may have to the Indemnitee. With respect to any such
Proceeding:
(i) The Corporation shall be entitled to participate therein at its
own expense;
(ii) Except with prior written consent of the Indemnitee, the
Corporation shall not be entitled to assume the defense of any
Proceeding; and
(iii) The Corporation shall not settle any Proceeding in any manner
which would impose any penalty or limitation on the Indemnitee
without the Indemnitee's prior written consent.
The Indemnitee shall not settle any Proceeding with respect to which the
Indemnitee has received indemnified amounts or Advanced Amounts without the
Corporation's prior written consent, nor will the Indemnitee unreasonably
withhold consent to any proposed settlement.
8. ENFORCEMENT. (a) The Corporation has entered into this Agreement
and assumed the obligations imposed on the Corporation hereby in order to
induce the Indemnitee to act as a director and/or officer of the Corporation
or as an Affiliate Indemnitee, and acknowledges that the Indemnitee is
relying upon this Agreement in continuing in such capacity.
(b) In the event the Indemnitee has requested payment of any amount
under this Agreement and has not received payment thereof within thirty (30)
days of such request, the
4
<PAGE>
Indemnitee may bring any action to enforce rights or collect moneys due
under this Agreement and if the Indemnitee is successful in such action, the
Corporation shall reimburse the Indemnitee for all of the Indemnitee's fees
and expenses in bringing and pursuing such action. The Indemnitee shall be
entitled to the advancement of such amounts to the full extent contemplated
by Section 3 hereof in connection with such Proceeding.
9. SEPARABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any sections or
subsections of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (ii) to
the fullest extent possible, the provisions of any section or subsections of
this Agreement containing any such provisions held to be invalid, illegal, or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent of the parties that the
Corporation provide protection to the Indemnitee to the fullest enforceable
extent.
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in writing signed by the Indemnitee and an officer of the Corporation
designated by the Board of Directors. No waiver by either party at any time of
any branch by the other party of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same time or
at any prior or subsequent time. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of laws thereof.
The Indemnitee may bring an action seeking resolution of disputes or
controversies arising under or in any way related to this Agreement in the state
or federal court jurisdiction in which the Indemnitee resides or in which his
place of business is located, and in any related appellate courts, and the
Corporation consents to the jurisdiction of such courts and to such venue.
11. NOTICES. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Indemnitee: To the address set forth below his
signature
If to the Corporation: Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, IL 60606
Attention: General Counsel
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<PAGE>
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. 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
together shall constitute one and the same instrument.
13. EFFECTIVENESS. This Agreement shall be effective as of the day and
year first above written.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
Falcon Building Products, Inc.
By:
--------------------------------
Name: Gus J. Athas
Title: Executive Vice-President
INDEMNITEE
--------------------------------
(Name)
Address:
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<PAGE>
EXHIBIT 10.13
FALCON BUILDING PRODUCTS, INC.
1997 SENIOR EXECUTIVE STOCK LOAN PLAN
1. PURPOSE. The Falcon Building Products, Inc. 1997 Senior Executive
Stock Loan Plan (the "Plan") has been established by Falcon Building Products,
Inc. (the "Company") to secure for the Company and its shareholders the benefits
arising from capital ownership, and thereby entrepreneurial risk, by those
senior executive officers of the Company and its subsidiaries who are and will
be responsible for the fixture growth and continued success of the Company and
its subsidiaries. The Plan will provide a means whereby such individuals,
pursuant to loans made under the Plan, may acquire shares of Class C Common
Stock, par value $0.01 per share ("Class C Stock") and shares of Class A Common
Stock, par value $0.01 per share ("Class A Common Stock").
2. ADMINISTRATION. The authority to manage and control the operation
and administration of the Plan shall be vested in a Committee (the "Committee")
consisting of two or more non-employee members of the Board of Directors of the
Company (the "Board") who are appointed by, and may be removed by, the Board.
Any interpretation of the Plan by the Committee and any decision made by the
Committee on any matter within its discretion is final and binding on all
persons. No member of the Committee shall be liable for any action or
determination made with respect to the Plan.
3. PARTICIPATION. The Committee shall determine and designate from
among the senior executive officers of the Company and its subsidiaries
(including employees who are also directors), other than those executives who
have loans outstanding under the Company's Senior Executive Stock Purchase Plan,
the officers who will participate in the Plan ("Participants").
4. PURCHASE LOANS. The Company shall make a loan (a "Loan") to each
Participant in an amount up to fifty percent (50%) of the purchase price of (i)
shares of Class C Stock purchased from FBP Limited, a Cayman Island Company, and
(ii) subject to approval by the Committee, certain shares of Class A Common
Stock purchased prior to the adoption of the Plan (collectively the "Purchased
Shares") subject to the following:
(a) Each Loan shall be evidenced by a promissory note in such
form as the Committee shall approve; provided, that the note shall (i)
provide flill recourse to the Participant, (ii) provide for interest at a
rate for each calendar year or part thereof equal to (a) the sum of the
interest accrued under the Company's revolving credit facility during such
period and the interest, discount or yield, accrued under the Company's
receivable facility during such period, divided by (b) the sum of the
average indebtedness outstanding on the Company's revolving credit facility
during such period (based on the daily balances of such facility) and the
average amount of indebtedness incurred, or interests in receivables sold,
pursuant to the Company's receivables facility during such period (based on
the daily balances of such facility) payable in arrears on January 31,
(iii) be secured by a Pledge Agreement (described in subsection 5.1), and
(iv) comply with all applicable laws, regulations and rules of the Board
of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
1
<PAGE>
(b) Subject to the prepayment provisions of subsection 5.2 and
the acceleration provisions set forth in paragraphs (c) and (d) below, each
Loan shall mature on June 20, 2004 (the "Maturity Date"), at which time all
unpaid principal and interest shall be payable.
(c) The principal and interest outstanding under a Loan of a
Participant who retires on or after age 65 or whose employment with the
Company and its affiliates terminates by reason of his death or Disability
(as defined below) or is terminated for a reason other than Cause (as
defined below) will not become due and payable until the Maturity Date of
the Loan. All principal and interest outstanding under a Loan with respect
to any other Participant will automatically become due and payable on the
date the Participant's employment with the Company and its affiliates
terminates. "Disability" means a determination by the Committee in its sole
discretion that a Participant has become "disabled" within the meaning of
the Company's long-term disability plan as in effect at the time. "Cause"
means a Participant has been convicted of a felony (without regard to
whether the conviction is subject to appeal), the Board or the Committee
has determined that the Participant has wililly engaged in gross misconduct
materially and demonstrably injurious to the Company, or the Participant
has failed to substantially perform his duties (other than any such failure
resulting from the Participant's Disability) and has failed to remedy the
situation within ten (10) business days after receiving from the Committee
a written demand for substantial performance that specifically identifies
the manner in which the Committee believes that the Participant has not
substantially performed his duties.
(d) The Company has the right to accelerate the principal and
interest due under the Loan if any of the following events occurs: (i) the
Participant defaults in the payment of any amount due under the Loan and
the default remains uncured for a period often (10) days after the date the
Company gives the Participant notice of the default, (ii) the Participant
defaults under or breaches any other covenant, representation or warranty
under the Note, the Pledge Agreement or any other agreement under the Plan
and the default or breach remains uncured for a period of thirty (30) days
after the date the Company gives the Participant notice of his default or
breach, (iii) the Participant applies for or consents.to the appointment of
a receiver, trustee, custodian or liquidator of any of his property, admits
in writing his inability to pay his debts as they mature, makes a general
assignment as a banlrupt or insolvent or is the subject of an order for
relief under Chapter 13 of the United States Bankruptcy Code or files a
voluntary petition in banlcruptcy or a petition or answer seeking an
arrangement with creditors to take advantage of any bancruptcy, insolvency,
readjustment or debt or liquidation law or statute, or an answer admitting
the material allegations of a petition filed against him in any proceeding
under any such law, or (iv) any court of competent jurisdiction enters an
order, judgment or decree, without the application, approval or consent of
the Participant, approving a petition appointing a receiver, trustee,
custodian or liquidator of all or a substantial part of the assets of the
Participant, and such order, judgment or decree continues unstayed and in
effect for a period of thirty (30) days.
2
<PAGE>
(e) If a Participant fails to make any payment required under
his Loan when due, the Company may foreclose on the Pledged Property (as
defined in subsection 5.1) and may otherwise enforce its rights under the
Plan and any Note or other agreement entered into under the Plan.
5. Pledge of Shares.
5.1 PLEDGE AGREEMENT. Each Participant shall enter into an agreement
with the Company in such form as the Committee shall approve (the "Pledge
Agreement") to pledge to the Company all of the Purchased Shares (the "Pledged
Shares"), any non-cash dividends or distributions payable with respect to such
shares and any securities or other property (other than cash) payable in respect
of or in exchange for such shares pursuant to any merger, reorganization,
consolidation, recapitalization, exchange offer or other similar corporate
transaction ("Related Property") and all proceeds thereof (collectively, the
"Pledged Property") to secure repayment of the Loan. Notwithstanding the
foregoing, in the event that the Committee determines that a Participant would
recognize a net increase in taxable income from the receipt of any such
dividends or distributions, the Committee may in its discretion permit the
Participant to retain a portion of the dividends or distributions so as to be
able to pay all or part of his related increase in taxes.
(a) Certificates representing shares of stock that consist of
Pledged Property shall bear the following legend in addition to any other
legends that the Company may deem appropriate:
THIS CERTIFICATE AND THE SHARES OF STOCK AND ALLRIGHTS HEREBY REPRESENTED
ARE SUBJECT TO THETERMS, CONDITIONS AND RESTRICTIONS SET FORTH INTHE FALCON
BUILDING PRODUCTS, INC. 1997 SENIOREXECUTIVE STOCK LOAN PLAN AND ANY
AGREEMENTUNDER THAT PLAN AND THE PLEDGE AGREEMENTBETWEEN THE OWNER OF SUCH
SHARES AND FALCONBUILDING PRODUCTS, INC. AND MAY NOT BE SOLD ORTRANSFERRED
EXCEPT IN ACCORDANCE WITH THE TERMSAND CONDITIONS OF SUCH PLAN AND
AGREEMENTS,COPIES OF WHICH ARE ON FILE AT THE OFFICES OFFALCON BUILDING
PRODUCTS, INC.
(b) Any cash received upon an exchange or conversion of Pledged
Property shall be applied to reduce the outstanding Loan balance (with
accrued but unpaid interest being reduced first). Any cash in excess of
that applied against the outstanding Loan balance shall be paid to the
Participant.
3
<PAGE>
5.2. Prepayments of Loan and Releases from Pledge.
(a) A Participant may make voluntary prepayments on the Loan at
any time without penalty in such minimum amounts as the Committee may
determine, which shall be applied first to accrued but unpaid interest, and
then to principal.
(b) In the event that any cash dividend or distribution is paid
by the Company with respect to any Pledged Property relating to the Loan,
the Participant shall make a mandatory prepayment with respect to the Loan
equal to the amount of such dividend or distribution, which shall be
applied first to accrued but unpaid interest under the Loan, then to
principal. Notwithstanding the foregoing, in the event that the Committee
determines that a Participant would recognize a net increase in taxable
income from the receipt of any such dividends or distributions after giving
effect to any deduction for the related payment under the Loan, the
Committee may in its discretion permit the Participant to retain a portion
of the dividends or distributions so as to be able to pay all or part of
his related increase in taxes.
(c) In the event that the Participant at any time desires to
obtain a release of all or part of any Pledged Property securing the Loan,
whether for the purpose of selling such Pledged Property or otherwise, as a
condition to the release, the Participant shall make arrangements
satisfactory to the Company for the prepayment by the Participant of an
amount equal to the higher of (i) a percentage of the outstanding Loan
balance as of the date of the release equal to the percentage in value of
the Pledged Property sought to be released and (ii) a sufficient portion of
the outstanding Loan balance so that the amount of the outstanding Loan
balance remaining unpaid after giving effect to such payment does not
exceed fifty percent (50%) of the fair market value of the Pledged Property
determined in good faith by the Committee that will remain subject to the
Pledge Agreement after giving effect to the release, which shall be applied
first to accrued but unpaid interest under the Loan, then to principal.
(d) In the event of any prepayment of principal under the Loan,
the Company will release from the pledge under the Pledge Agreement a
portion of the Pledged Property equal to the percentage of the outstanding
principal balance so paid, provided, that (i) the Company will retain
Pledged Property with an aggregate fair market value determined in good
faith by the Committee equal to at least two hundred percent (200%) of the
outstanding Loan balance as of the date of the prepayment (after giving
effect to the prepayment) and (li) to the extent any of the released
Pledged Property is subject to restriction under section 6, the Company
will retain custody of the property until the end of the Restricted Period.
6. RESTRICTIONS ON SHARES. From the date of the purchase of the
Purchased Shares until the principal of the Loan and all unpaid interest thereon
is repaid in flill (the "Restricted Period"):
(a) Purchased Shares may not be sold, assigned, transferred,
pledged or otherwise encumbered;
4
<PAGE>
(b) the certificate representing such shares shall be registered
in the name of the Participant and shall be deposited with the Company,
together with a stock power (in such form as the Company may determine);
and
(c) the Participant shall be treated as a stockholder with
respect to the Purchased Shares, including the right to vote such shares.
7. TRANSFERS AT TERMINATION OF RESTRICTED PERIOD. At the end of the
Restricted Period with respect to Purchased Shares, the certificate representing
such shares shall be transferred to the Participant (or the Participant's legal
representative or heir) free of all restrictions under this Agreement.
8. General.
8.1. EFFECTIVE DATE AND DURATION. The Plan will become effective upon its
approval by the Company's Board of Directors.
8.2. AGREEMENTS EVIDENCING PARTICIPATION. At the time of his designation
as a Participant, the Committee may require a Participant to enter into one or
more agreements with the Company in a form specified by the Committee agreeing
to the terms and conditions of the Plan and to such additional terms and
conditions, not inconsistent with the Plan, as the Committee may in its
discretion prescribe.
8.3. NONTRANSFERABILITY. No right provided under the Plan to any
Participant may be transferred pledged or assigned by the Participant (except,
in the event of the Participant's death, by will or the laws of descent and
distribution), and the Company shall not be required to recognize any attempted
assignment of such rights by any Participant. During a Participant's lifetime,
purchases may be made only by him or by his guardian or legal representative.
8.4. COMPLIANCE WITH APPLICABLE LAW AND WITHHOLDING. The Company shall
have the right to require a Participant to pay to the Company the amount of any
taxes that are required to be withheld with respect to a Participant's
participation in the Plan, including any such taxes required to be withheld in
connection with (i) the purchase by the Participant of any Purchased Shares,
(ii) any dividend or distribution in respect of the Purchased Shares or any
Related Property, (iii) any repayment of a Loan, (iv) the lapse of the
Restricted Period, (v) any release of Pledged Property or (vi) any sale of
Purchased Shares or any Related Property. To the extent permitted by the
Committee, a Participant may elect to have any distribution otherwise required
to be made under the Plan to be withheld to flilfill any tax withholding
obligation.
5
<PAGE>
8.5. NO EMPLOYMENT RIGHTS. The Plan does not constitute a contract of
employment, and participation in the Plan will not give any Participant the
right to be retained in the employ of the Company or an affiliate or the right
to continue as a director of the Company or any right or claim to any benefit
under the Plan unless such right or claim has specifically accrued under the
terms of the Plan or the terms of any award under the Plan.
8.6. GOVERNING LAW. The Plan and all determinations made and actions
taken thereunder, to the extent not otherwise governed by the laws of the United
States, shall be governed by the internal laws of the State of Illinois and
construed accordingly.
6
<PAGE>
EXHIBIT 10.14
FORM OF PLEDGE AGREEMENT
------------------------
PLEDGE AGREEMENT dated as of June 20, 1997, between Falcon Building
Products, Inc., a Delaware corporation (the "Lender"), and ______A______ (the
"Borrower").
The parties hereto agree as follows:
1. AMOUNT AND TERMS OF THE LOAN.
1.1. THE LOAN. On the terms and subject to the conditions of this
Agreement, the Lender agrees to lend $_____B_____ to the Borrower for the
purpose of enabling the Borrower to purchase shares of Class C Common Stock, par
value $0.01 per share, and Class A Common Stock, par value $0.01 per share, of
the Lender (collectively, the "Purchased Shares"), said loan is being made
pursuant to the Falcon Building Products, Inc. 1997 Senior Executive Stock Loan
Plan (the "Plan"). Except as otherwise defined herein, capitalized terms used
in this Agreement have the respective meanings set forth in the Plan.
1.2. MATURITY DATE. Subject to the prepayment provisions of
subsections 1.3 and 1.4 and the acceleration provisions set forth below and in
Section 3 below, the Loan shall mature on June 20, 2004 (the "Maturity Date").
Notwithstanding the foregoing, all principal and accrued but unpaid interest
outstanding under the Loan will automatically become due and payable on the date
the Borrower's employment with the Lender and its affiliates terminates if the
Borrower terminates employment before age 65 unless his employment (i)
terminates by reason of his death or Disability or (ii) is terminated for a
reason other than Cause.
1.3. MANDATORY PREPAYMENTS AND PAYMENTS.
(a) In the event that any cash dividend or distribution is paid
by the Lender with respect to any Pledged Property relating to the
Loan, the Borrower shall make a mandatory prepayment with respect to
the Loan equal to the amount of such dividend or distribution, which
shall be applied first to accrued but unpaid interest under the Loan,
then to principal. Notwithstanding the foregoing, in the event that
the Committee under the Plan determines that the Borrower would
recognize a net increase in taxable income from the receipt of any
such dividends or distributions after giving effect to any deduction
for the related payment under the Loan, the Committee may in its
discretion permit the Borrower to retain a portion of the dividends or
distributions so as to be able to pay all or part of his related
increase in taxes.
(b) Any cash received upon an exchange or conversion of Pledged
Property shall be applied to reduce the outstanding Loan balance (with
any accrued but unpaid interest being reduced first). Any cash in
excess of that applied to repay in full all principal and interest
outstanding under the Loan shall be paid to the Borrower.
<PAGE>
(c) Borrower shall pay any accrued interest on the Loan on the
first day of each calendar quarter.
(d) Borrower agrees to make annual principal payments on this
Note within two (2) business days of his receipt of his annual
employment bonus, if any, from Lender or a subsidiary of Lender in an
amount equal to twenty percent (20%) of such bonus amount, net of
applicable state and federal taxes due thereon.
1.4 OPTIONAL PREPAYMENTS.
(a) The Borrower may make voluntary prepayments on the Loan at
any time without penalty in such minimum amounts as the Committee may
determine, which shall be applied first to accrued but unpaid
interest, and then to principal.
(b) In the event that the Borrower at any time desires to obtain
a release of all or part of any Pledged Property securing the Loan,
whether for the purpose of selling such Pledged Property or otherwise,
as a condition to the release, the Borrower shall make arrangements
satisfactory to the Lender for the prepayment by the Borrower of an
amount equal to the higher of (i) a percentage of the outstanding Loan
balance as of the date of the release equal to the percentage in value
of the Pledged Property sought to be released and (ii) a sufficient
portion of the outstanding Loan balance so that the amount of the
outstanding Loan balance remaining unpaid after giving effect to such
payment does not exceed fifty percent (50%) of the fair market value
of the Pledged Property, as determined in good faith by the Committee,
that will remain subject to this Agreement after giving effect to the
release, which shall be applied first to accrued but unpaid interest
under the Loan, then to principal.
1.5. EVIDENCE OF BORROWING. The Loan will be evidenced by a
promissory note in substantially the form attached as Exhibit A to this
Agreement (the "Note"). The Borrower will promptly execute and deliver to the
Lender any other instruments evidencing the Loan reasonably requested by the
Lender.
2. SECURITY.
2.1. GRANT OF SECURITY INTEREST. As security for the Borrower's
performance of this Agreement and the Borrower's indefeasible payment in full of
the Loan and all interest thereon in accordance with this Agreement, the
Borrower hereby pledges, hypothecates, assigns, transfers and delivers to the
Lender and grants the Lender a continuing security interest in the Borrower's
right, title and interest in and to the Pledged Property, to have and to hold,
together with all rights, titles, interests, privileges and preferences
appertaining or incidental thereto, unto the Lender, its successors and assigns,
forever, subject to the terms and conditions of this Agreement.
2.2. PERFECTION OF SECURITY INTEREST. Simultaneously with the
execution and delivery of this Agreement, the Borrower will deliver to the
Lender all instruments and certificates evidencing the Pledged Property and will
execute and deliver to the Lender stock powers or assignments in such forms as
may reasonably be requested by the Lender with respect to each such instrument
or certificate. The Borrower will perform all additional acts and execute all
other documents reasonably requested by the Lender at any time to further
evidence, perfect, maintain
2
<PAGE>
and enforce the Lender's security interest in the Pledged Property. The
Borrower will not pledge, hypothecate or grant a security interest in any of
the Pledged Property to any other person without the prior written consent of
the Lender.
2.3. VOTING AND OTHER RIGHTS OF THE BORROWER AND THE LENDER. So long
as no Event of Default (as described in subsection 3.1) has occurred and is
continuing, the Borrower will be entitled to vote and to exercise all other
rights and remedies with respect to the Pledged Property. Upon the occurrence
and during the continuance of an Event of Default, the Lender, subject to the
terms and conditions of this Agreement, will have the right, after the delivery
of written notice to the Borrower, to vote and to exercise all other rights and
remedies with respect to the Pledged Property.
2.4. RELEASE OF COLLATERAL. In the event of any prepayment of
principal under the Loan, the Lender will release from the pledge under this
Agreement a portion of the Pledged Property equal to the percentage of the
outstanding principal balance so paid, provided, that the Lender will retain
Pledged Property with an aggregate fair market value, as determined in good
faith by the Committee, equal to at least two hundred percent (200%) of the
outstanding Loan balance as of the date of the prepayment (after giving effect
to the prepayment).
3. EVENTS OF DEFAULT.
3.1. EVENTS OF DEFAULT. For purposes of this Agreement, any of the
following events will constitute an Event of Default:
(a) the Borrower fails to pay any amount due under the Loan and
the default remains uncured for a period of (10) days after the date
the Lender gives the Borrower notice of the default;
(b) the Borrower defaults under or breaches any other covenant,
representation or warranty under the Note, this Agreement or any other
agreement under the Plan and the default or breach remains uncured for
a period of thirty (30) days after the date the Lender gives the
Borrower notice of his default or breach;
(c) the Borrower applies for or consents to the appointment of a
receiver, trustee, custodian or liquidator of any of his property,
admits in writing his inability to pay his debts as they mature, makes
a general assignment as a bankrupt or insolvent or is the subject of
an order for relief under Chapter 13 of the United States Bankruptcy
Code or files a voluntary petition in bankruptcy or a petition or
answer seeking an arrangement with creditors to take advantage of any
bankruptcy, insolvency, readjustment or debt or liquidation law or
statute, or an answer admitting the material allegations of a petition
filed against him in any proceeding under any such law; or
(d) any court of competent jurisdiction enters an order,
judgment or decree, without the application, approval or consent of
the Borrower, approving a petition appointing a receiver, trustee,
custodian or liquidator of all or a substantial part of the assets of
the Borrower, and such order, judgment or decree continues unstayed and
in effect for a period of thirty (30) days.
3
<PAGE>
3.2. CONSEQUENCES OF EVENTS OF DEFAULT. If an Event of Default
occurs, the Lender may foreclose on the Pledged Property and may otherwise
enforce its rights under the Plan, the Note and any other agreement entered into
under the Plan.
4. GENERAL.
4.1. COMPLIANCE WITH WITHHOLDING. The Lender shall have the right to
require the Borrower to pay to the Lender the amount of any taxes that are
required to be withheld in connection with any repayment of a Loan, any release
of Pledged Property or any sale of Pledged Property. To the extent permitted by
the Committee, the Borrower may elect to have any distribution otherwise
required to be made under this Agreement to be withheld to fulfill any tax
withholding obligation.
4.2. AMENDMENT AND WAIVER. This Agreement may be amended by written
agreement of the Borrower and the Lender, without the consent of any other
person.
4.3. 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 prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
4.4. COMPLETE AGREEMENT. This document and the documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which relate to the subject matter hereof.
4.5. GOVERNING LAW. The provisions of this Agreement shall be
construed in accordance with the internal laws of the State of Illinois.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.
BORROWER FALCON BUILDING PRODUCTS, INC.
By /s/ Gus J. Athas
- ------------------------------ -------------------------------
______________A_______________ Its Executive Vice President
----------------------------------
----------------------------------
4
<PAGE>
SCHEDULE OF PLEDGE AGREEMENTS
A B
- ------------------------ ------------------------
Borrower Amount
Ed Finnegan $130,016.42
Mark Haddock $49,700.00
Bill Menke $24,850.00
Anthony Navitsky $137,193.55
<PAGE>
EXHIBIT 10.15
FORM OF
COMMON STOCK OPTION SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is made as of June 17, 1997,
by and between Falcon Building Products, Inc., a Delaware corporation ( the
"Company") and _____ (the "Employee").
RECITALS
A. Pursuant to one or more option agreements (the "Option Agreements")
issued under the Falcon Building Products, Inc. 1994 Stock Option and Restricted
Share Plan (the "1994 Plan"), the Company issued Employee options to purchase
_______ shares of the Company's common stock par value $.01 per share (the
"Common Stock");
B. The Company has entered into an Agreement and Plan of Merger pursuant
to which the Company will merge with another corporation and fifty (50) percent
or more of the voting stock of the surviving corporation will be held by persons
other than former stockholders of the corporation (the "Merger"), and pursuant
to which the fair market value of the Common Stock has been determined to be
$17.75 per share;
C. Pursuant to the terms of the 1994 Plan, Employee's options will vest
on the closing date of the Merger; and
D. The Company and Employee desire to cancel the Option Agreements in
exchange for payment of the difference between the exercise price and the fair
market value of the Common Stock covered by such Option Agreements on the date
hereof.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing recitals and of the mutual
covenants and agreements contained herein, the Company and Employee agree as
follows:
1. PAYMENT TO EMPLOYEE. The Company shall pay Employee _______ by check.
2. CANCELLATION OF OPTION AGREEMENTS. The Option Agreements are hereby
terminated and shall be of no further force and effect. Employee hereby waives
all rights granted
<PAGE>
under the 1994 Plan including, but not limited to, rights under the Option
Agreements to purchase Common Stock.
3. REPRESENTATION AND WARRANTIES.
3.1 Employee represents, warrants and covenants to the Company that:
(1) Employee has not exercised any portion of the Options
evidenced by the Option Agreements;
(2) Employee has not assigned, pledged, transferred or otherwise
disposed of the Option Agreements, or any interest therein, to any other person;
(3) Employee has the full right and power to execute, deliver,
exercise, and perform his obligation under this Agreement, and upon the
execution and delivery hereof, this Agreement will constitute a legal, valid and
binding agreement of Employee, enforceable against him in accordance with its
terms.
3.2 The Company represents and warrants to Employee that the Company
has the full right and power to execute, deliver and perform its obligations
pursuant to this Agreement; and upon execution and delivery hereof, this
Agreement will constitute a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its term.
4. WITHHOLDING. If the Company determines, in its reasonable discretion
that it is obligated to withhold an amount on account of any federal, state or
local tax imposed as a result of the transaction contemplated by this Agreement
including, without limitation, any federal, state or income tax, or any
F.I.C.A., state disability insurance tax or other employment tax, then the
Company may withhold such amount from the amount paid pursuant to Section 1,
hereof, or Employee shall promptly pay such amount to the Company in cash or by
cashier's check payable to the Company.
5. MISCELLANEOUS.
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and obligations of the parties hereto shall survive the termination
of the Option Agreements and payment therefor.
5.2 BINDING UPON SUCCESSORS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
5.3 COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one document. A photocopy of this Agreement
may be used in lieu of an original in any action or proceeding brought to
enforce or construe this Agreement.
2
<PAGE>
5.4 FURTHER ASSURANCES. The parties shall take such acts and execute
such other documents as the other party may reasonably request to fulfill the
purposes of this Agreement.
IN WITNESS WHEREOF, Employee has executed this Agreement, and the Company
has caused this agreement to be executed by its duly authorized representative;
all as of the date first above written.
EMPLOYEE: COMPANY:
Falcon Building Products, Inc.,
a Delaware Corporation
- -------------------------------- -------------------------------
3
<PAGE>
<TABLE>
<CAPTION>
OPTION TERMINATION AGREEMENTS SCHEDULE
--------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------- ---------------------------------------------------
Number Payment Number Payment
Holder of Shares Amount Holder of Shares Amount
- --------------------------------------------------- ---------------------------------------------------
ALLEN, WILLIAM 56,600 $373,095.00 HALL, WILLIAM 136,600 $902,447.00
- --------------------------------------------------- ---------------------------------------------------
ATHAS, GUS 102,200 675,618.00 KANTZ, PHILIP 6,000 45,420.00
- --------------------------------------------------- ---------------------------------------------------
CASTELLANO, ROSA 10,000 51,900.00 LEE, LAWRENCE 56,850 378,565.50
- --------------------------------------------------- ---------------------------------------------------
COTTONE, SAM 102,200 675,618.00 MCNAMEE, RICHARD 15,000 77,850.00
- --------------------------------------------------- ---------------------------------------------------
CROUCH, DAVID 10,300 66,484.00 MENKE, WILLIAM 6,100 42,789.00
- --------------------------------------------------- ---------------------------------------------------
DAMMEYER, ROD 6,000 42,400.00 NAVITSKY, ANTHONY 5,000 77,850.00
- --------------------------------------------------- ---------------------------------------------------
DEWITT, TOM 10,000 66,420.00 ROSENBERG, SHELLI 6,000 42,400.00
- --------------------------------------------------- ---------------------------------------------------
DRANCHAK, RON 10,000 51,900.00 SCHOLTEN, DALE 10,700 69,579.00
- --------------------------------------------------- ---------------------------------------------------
DYER, BRADBURY 6,000 42,400.00 SIM, RICHARD 4,000 27,400.00
- --------------------------------------------------- ---------------------------------------------------
ELLIS, DANIEL 47,400 301,176.00 SMIALEK, ROBERT 2,000 12,420.00
- --------------------------------------------------- ---------------------------------------------------
FINNEGAN JR., E. 20,000 148,130.00 SWACKER, HAROLD 10,000 66,420.00
- --------------------------------------------------- ---------------------------------------------------
FISCHER, PAUL 54,450 361,936.50
- --------------------------------------------------- ---------------------------------------------------
HADDOCK, MARK 10,900 73,939.00
- --------------------------------------------------- ---------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------
- --------------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.16
FORM OF
RESTRICTED SHARES SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is made as of June 17,
1997, by and between Falcon Building Products, Inc., a Delaware corporation
( the "Company") and ____ (the "Employee").
RECITALS
A. Pursuant to the Falcon Building Products, Inc. 1994 Stock Option
and Restricted Share Plan and one or more Restricted Share Agreements issued
to Employee thereunder (collectively, the "Restricted Shares Documents"), the
Company has issued Employee ______ shares of the Company's Common Stock par
value $.01 per share of which _______ shares have previously vested and been
delivered to Employee and ______ shares have not vested and are currently
subject to restrictions (such unvested shares are hereinafter referred to as
the "Restricted Shares");
B. The Company has entered into an Agreement and Plan of Merger pursuant
to which the Company will merge with another corporation and and in fifty (50)
percent or more of the voting stock of the surviving corporation will be held by
persons other than former stockholders of the corporation (the "Merger"), and
pursuant to which the fair market value of the Common Stock has been determined
to be $17.75 per share;
C. Pursuant to the terms of the Restricted Shares Documents, the
Restricted Shares will vest on the closing date of the Merger; and
D. The Company desires to cancel all of the Employee's rights under the
Restricted Shares Documents in exchange for payment equal to the fair market
value of the Restricted Shares on the date hereof.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the Company and Employee agree as
follows:
1. PAYMENT TO EMPLOYEE. The Company shall pay Employee __________
by check.
<PAGE>
2. CANCELLATION OF RIGHTS UNDER THE RESTRICTED SHARES DOCUMENTS. All
rights of the Employee under the Restricted Shares Documents are hereby
terminated.
3. REPRESENTATION AND WARRANTIES.
3.1 Employee represents, warrants and covenants to the Company that:
(1) Employee has not assigned, pledged, transferred or
otherwise disposed of the rights granted pursuant to the Restricted Shares
Documents, or any interest therein, to any other person;
(2) Employee has the full right and power to execute, deliver,
exercise, and perform his obligation under this Agreement, and upon the
execution and delivery hereof, this Agreement will constitute a legal, valid
and binding agreement of Employee, enforceable against him in accordance with
its terms.
3.2 The Company represents and warrants to Employee that the Company
has the full right and power to execute, deliver and perform its obligations
pursuant to this Agreement; and upon execution and delivery hereof, this
Agreement will constitute a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its term.
4. WITHHOLDING. If the Company determines, in its reasonable discretion
that it is obligated to withhold an amount on account of any federal, state or
local tax imposed as a result of the transaction contemplated by this Agreement
including, without limitation, any federal, state or income tax, or any
F.I.C.A., state disability insurance tax or other employment tax, then the
Company may withhold such amount from the amount paid pursuant to Section 1,
hereof, or Employee shall promptly pay such amount to the Company in cash or by
cashier's check payable to the Company.
5. MISCELLANEOUS.
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and obligations of the parties hereto shall survive the termination
of the Restricted Shares Documents and payment for the Restricted Shares
hereunder.
5.2 BINDING UPON SUCCESSORS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
5.3 COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one document. A photocopy of this Agreement
may be used in lieu of an original in any action or proceeding brought to
enforce or construe this Agreement.
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<PAGE>
5.4 FURTHER ASSURANCES. The parties shall take such acts and
execute such other documents as the other party may reasonably request to
fulfill the purposes of this Agreement.
IN WITNESS WHEREOF, Employee has executed this Agreement, and the Company
has caused this agreement to be executed by its duly authorized representative;
all as of the date first above written.
EMPLOYEE: COMPANY:
Falcon Building Products, Inc.,
a Delaware Corporation
- -------------------------------- -------------------------------
3
<PAGE>
RESTRICTED SHARE SETTLEMENT AGREEMENTS RECEIVED
-----------------------------------------------
- ------------------------------------------------------------------
Holder Number of Payment
Shares Amount
- ------------------------------------------------------------------
WILLIAM E. ALLEN 8,250 $146,437.50
- ------------------------------------------------------------------
GUS J. ATHAS 2,225 39,493.75
- ------------------------------------------------------------------
SAM A. COTTONE 2,225 39,493.75
- ------------------------------------------------------------------
PAUL G. FISCHER 8,250 146,437.50
- ------------------------------------------------------------------
WILLIAM K. HALL 3,325 59,018.75
- ------------------------------------------------------------------
LAWRENCE B. LEE 8,750 155,312.50
- ------------------------------------------------------------------
<PAGE>
EXHIBIT 10.17
FALCON BUILDING PRODUCTS, INC.
MANAGEMENT STOCK INCENTIVE PLAN
l. ESTABLISHMENT AND PURPOSE OF THE PLAN. This Management Stock
Incentive Plan (the "Plan") is established by Falcon Building Products, Inc., a
Delaware corporation (the "Company"), as of June 17, 1997. The Plan is designed
to enable the Company to attract, retain and motivate directors, members of the
management and certain other officers and key employees of the Company and its
subsidiaries ("Eligible Employees"), by providing for or increasing their
proprietary interest in Company. The Plan provides for the grant of options
("Options") that qualify as incentive stock options ("Incentive Stock Options")
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as Options that do not so qualify ("Non-Qualified Options"), for the
grant of stock appreciation rights ("Stock Appreciation Rights") and for the
sale or grant of restricted stock ("Restricted Stock").
2. STOCK SUBJECT TO PLAN. The number of shares of stock that may be
subject to Options or Stock Appreciation Rights granted hereunder plus the
number of shares of stock that may be granted or sold as Restricted Stock
hereunder shall not in the aggregate exceed 947,851 shares of the Class C Stock,
$0.01 par value (the "Shares"), of the Company, subject to adjustment under
Section 13 hereof. The Shares that may be subject to Options granted and
Restricted Stock sold or granted under the Plan may be authorized and unissued
Shares or Shares reacquired by the Company and held as treasury stock.
Shares that are subject to the unexercised portions of any Options that
expire, terminate or are canceled, and Shares that are subject to any Stock
Appreciation Rights that expire, terminate or are canceled, and Shares of
Restricted Stock that are reacquired by the Company pursuant to the restrictions
thereon, shall again be available for the grant of Options or Stock Appreciation
Rights and the sale or grant of Restricted Stock under the Plan. If a Stock
Appreciation Right is exercised, any Option or portion thereof that is
surrendered in connection with such exercise shall terminate and the Shares
theretofore subject to the Option or portion thereof shall not be available for
further use under the Plan.
3. SHARES SUBJECT TO CERTIFICATE OF INCORPORATION. All Shares issuable
under Options or Stock Appreciation Rights and all Shares of Restricted Stock
sold or granted pursuant to this Plan shall be subject to the terms and
restrictions contained in the Certificate of Incorporation of the Company. A
copy of the Certificate of Incorporation shall be delivered to the recipient of
an Option, Stock Appreciation Right or Restricted Stock at the time of grant or
issuance.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee (the "Committee") appointed by the Board of Directors (the "Board") of
the Company. If no persons are designated by the Board to serve on the
Committee, the Plan shall be administered by the Board and all references herein
to the Committee shall refer to the Board. The Board shall have the discretion
to add, remove or replace members of the Committee, and shall have the sole
authority to fill vacancies on the Committee.
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<PAGE>
All actions of the Committee shall be authorized by a majority vote thereof
at a duly called meeting. The Committee shall have the sole authority, in its
absolute discretion, to adopt, amend, and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of the Plan, to construe
and interpret the Plan, the rules and regulations, and the agreements and other
instruments evidencing Options and Stock Appreciation Rights granted and
Restricted Stock sold or granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
final and conclusive upon the Eligible Employees. Notwithstanding the
foregoing, any dispute arising under any Agreement (as defined below) shall be
resolved pursuant to the dispute resolution mechanism set forth in such
Agreement.
Subject to the express provisions of the Plan, the Committee shall
determine the number of Shares subject to grants or sales and the terms thereof,
including the provisions relating to the exercisability of Options and Stock
Appreciation Rights, lapse and non-lapse restrictions upon the Shares obtained
or obtainable under the Plan and the termination and/or forfeiture of Options
and Stock Appreciation Rights and Restricted Stock under the Plan. The terms
upon which Options and Stock Appreciation Rights are granted and Restricted
Stock is sold or granted shall be evidenced by a written agreement executed by
the Company and the Participant (as defined below) to whom such Options, Stock
Appreciation Rights or Restricted Stock are sold or granted (the "Agreement").
5. ELIGIBILITY. Persons who shall be eligible for grants of Options or
Stock Appreciation Rights or sales or grants of Restricted Stock hereunder shall
be those directors, officers and employees of the Company or a subsidiary of the
Company who are members of a select group of directors, management and other key
employees that the Committee may from time to time designate to participate
under the Plan ("Participants") through grants of Non-Qualified Options,
Incentive Stock Options and, if applicable, Stock Appreciation Rights, and/or
through sales or grants of Restricted Stock.
6. TERMS AND CONDITIONS OF OPTIONS. No Incentive Stock Option shall be
granted for a term of more than ten years and no Non-Qualified Option shall be
granted for a term of more than ten years and thirty days. Options may, in the
discretion of the Committee, be granted with associated Stock Appreciation
Rights or be amended so as to provide for associated Stock Appreciation Rights.
The Agreement may contain such other terms, provisions, and conditions as may be
determined by the Committee as long as such terms, conditions and provisions are
not inconsistent with the Plan. The Committee shall designate as such those
Options intended to be eligible to qualify and be treated as Incentive Stock
Options and, correspondingly, those Options not intended to be eligible to
qualify and be treated as Incentive Stock Options.
7. EXERCISE PRICE OF OPTIONS. The exercise price for each Non-Qualified
Option granted hereunder shall be set forth in the Agreement. For so long as
required under Section 422 of the Code and the regulations promulgated
thereunder (or any successor statute or rules), the exercise price of any Option
intended to be eligible to qualify and be treated as an Incentive Stock Option
shall not be less than the fair market value of the Shares on the date such
Incentive Stock Option is granted, except that if such Incentive Stock Option is
granted to a Participant who on
2
<PAGE>
the date of grant is treated under Section 424(d) of the Code as owning stock
(not including stock purchasable under outstanding options) possessing more than
ten percent of the total combined voting power of all classes of the Company's
stock, the exercise price shall not be less than one hundred ten percent (110%)
of the fair market value of the Shares on the date such Incentive Stock Option
is granted.
For all Options granted within one month of the date of adoption of the
Plan, the fair market value of the Shares subject to the Option shall be $17.75.
Thereafter, the fair market value of Shares for the purposes of this Plan shall
be determined in good faith by the Board, whose valuation shall be binding upon
each Eligible Employee.
Payment for Shares purchased upon exercise of any Option granted hereunder
shall be in cash at the time of exercise, except that, if either the Agreement
so provides or the Committee so permits, and if the Company is not then
prohibited from doing so, such payment may be made in whole or in part with
shares of stock of the same class as the stock then subject to the Option. The
Committee also may on an individual basis permit payment or agree to permit
payment by such other alternative means as may be lawful, including by delivery
of an executed exercise notice together with irrevocable instructions to a
broker promptly to deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price.
8. NON-TRANSFERABILITY. Unless provided otherwise in the Agreement, any
Option granted under this Plan shall by its terms be nontransferable by the
Participant other than by will or the laws of descent and distribution (in which
case such descendant or beneficiary shall be subject to all terms of the Plan
applicable to Participants) and is exercisable during the Participant's lifetime
only by the Participant or by the Participant's guardian or legal
representative.
9. CODE PROVISIONS. The provisions of the Plan are intended to satisfy
the requirements set forth in Section 422 of the Code and the regulations
promulgated thereunder (including the aggregate fair market value limits set
forth in Section 422(d) of the Code) with respect to Incentive Stock Options
granted under the Plan. For so long as required under Section 422 of the Code
and the regulations promulgated thereunder (or any successor statute or rules),
during the term of the Plan, the aggregate fair market value of the Shares with
respect to which Incentive Stock Options are first exercisable by a Participant
during any calendar year shall not exceed $100,000. For the purpose of this
Section 9, the fair market value of the Shares shall be determined at the time
the Incentive Stock Option is granted.
Notwithstanding any other provision of this Plan, in order for the
compensation attributable to any Option hereunder to qualify as
performance-based compensation under Section 162(m) of the Code, no one
recipient of Options shall be granted any Options with respect to more than
258,505 Shares in any one calendar year. The limitations set forth in this
Section 9 shall be subject to adjustment as provided in Section 13, but only to
the extent such adjustment would not affect the status of compensation
attributable to Options hereunder as performance-based compensation.
3
<PAGE>
10. STOCK APPRECIATION RIGHTS. The Committee may, under such terms and
conditions as it deems appropriate, grant to any Eligible Employee selected by
the Committee Stock Appreciation Rights, which may or may not be associated with
Options. Upon exercise of a Stock Appreciation Right, the Participant shall be
entitled to receive payment of an amount equal to the excess of the fair market
value, as defined by the Committee, of the underlying Shares on the date of
exercise over the Stock Appreciation Right's exercise price. Such payment may
be made in additional Shares valued at their fair market value on the date of
exercise or in cash, or partly in Shares and partly in cash, as the Committee
may designate. The Committee may require that any Stock Appreciation Right
shall be subject to the condition that the Committee may at any time in its
absolute discretion not allow the exercise of such Stock Appreciation Right.
The Committee may further impose such conditions on the exercise of Stock
Appreciation Rights as may be necessary or desirable to comply with Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
11. RESTRICTED STOCK. The Committee may sell or grant Restricted Stock
under the Plan (either independently or in connection with the exercise of
Options or Stock Appreciation Rights under the Plan) to Eligible Employees
selected by the Committee. The Committee shall in each case determine the
number of Shares of Restricted Stock to be sold or granted, the price at which
such Shares are sold, if applicable, and the terms and duration of the
restrictions to be imposed upon those Shares.
12. INVESTMENT REPRESENTATION. Each Agreement may contain an agreement
that, upon demand by the Committee for such a representation, the Eligible
Employee shall deliver to the Committee at the time of any exercise of an Option
a written representation that the Shares to be acquired upon such exercise are
to be acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such representation prior
to the delivery of any Shares issued upon exercise of an Option and prior to the
expiration of the option period shall be a condition precedent to the right of
the Participant to purchase any Shares.
13. ADJUSTMENTS. In the event of any one or more mergers, consolidations,
acquisitions, reorganizations, recapitalizations, stock splits, reverse stock
splits, stock dividends, extraordinary dividends, or distributions, or similar
events, an appropriate adjustment shall be made in the number, exercise or sale
price and/or type of shares or securities for which Options or Stock
Appreciation Rights may thereafter be granted and Restricted Stock may
thereafter be sold or granted under the Plan. The Committee also shall
designate the appropriate changes that shall be made in Options or Stock
Appreciation Rights, or rights to purchase Restricted Stock under the Plan, so
as to preserve the value of any such Options, Stock Appreciation Rights or
Restricted Stock. Any such adjustment in outstanding Options shall be made
without changing the aggregate exercise price applicable to the unexercised
portions of such Options. Any such adjustments in outstanding rights to
purchase Restricted Stock shall be made without changing the aggregate purchase
price of such Restricted Stock.
14. DURATION OF PLAN. Options may not be granted and Restricted Stock may
not be sold or granted under the Plan after June 17, 2007.
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<PAGE>
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time
amend, suspend or terminate the Plan. The Committee may amend the Plan or any
Agreement issued hereunder to the extent necessary for any Option or Stock
Appreciation Right granted or Restricted Stock sold or granted under the Plan to
comply with applicable tax or securities laws. If the Company shall become a
reporting company under the Exchange Act and if the Board determines that the
approval of such amending action by the stockholders of the Company is advisable
or necessary for compliance with Exchange Act Rule 16b-3 or any successor or
similar rule or regulation, no such action of the Board or the Committee shall
be permitted unless taken with or ratified by such approval.
No Option or Stock Appreciation Right may be granted or Restricted Stock
sold or granted during any suspension of the Plan or after the termination of
the Plan. No amendment, suspension or termination of the Plan or of any
Agreement issued hereunder shall, without the consent of the affected holder of
such Option or Stock Appreciation Right or Restricted Stock, alter or impair any
rights or obligations in any Option or Stock Appreciation Right or Restricted
Stock theretofore granted or sold to such holder under the Plan.
16. NATURE OF PLAN. This Plan is intended to qualify as a compensatory
benefit plan within the meaning of Rule 701 under the Securities Act of 1933.
This Plan is intended to constitute an unfunded arrangement for a select group
of directors, management and other key employees.
17. CANCELLATION OF OPTIONS. Any Option granted under the Plan may be
canceled at any time with the consent of the holder and a new Option may be
granted to such holder in lieu thereof.
18. WITHHOLDING TAXES. Whenever Shares are to be issued with respect to
the exercise of Options or amounts are to be paid or income earned with respect
to Stock Appreciation Rights or Restricted Stock under the Plan, the Committee
in its discretion may require the Participant to remit to the Company, prior to
the delivery of any certificate or certificates for such Shares or the payment
of any such amounts, all or any part of the amount determined in the Committee's
discretion to be sufficient to satisfy federal, state and local withholding tax
obligations (the "Withholding Obligation") that the Company or its counsel
determines may arise with respect to such exercise, issuance or payment.
Pursuant to a procedure established by the Committee or as set forth in the
Agreement, the Participant may (i) request the Company to withhold delivery of a
sufficient number of Shares or a sufficient amount of the Participant's
compensation or (ii) deliver a sufficient number of previously-issued Shares, to
satisfy the Withholding Obligation.
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<PAGE>
EXHIBIT 10.18
FORM OF
STOCK OPTION AGREEMENT
PURSUANT TO THE
FALCON BUILDING PRODUCTS, INC.
MANAGEMENT STOCK INCENTIVE PLAN
THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of June 17, 1997
(the "Effective Date"), between Falcon Building Products, Inc., a Delaware
corporation (the "Company"), and the individual signatory hereto (the
"Optionee").
R E C I T A L S
- - - - - - - -
A. The Company has adopted the Senior Management Stock Incentive Plan
(the "Plan"), a copy of which is attached hereto as Exhibit 1.
B. The Company desires to grant the Optionee the opportunity to acquire
an increased proprietary interest in the Company to encourage the Optionee's
contribution to the success and progress of the Company.
C. In accordance with the Plan, the Committee (as defined in the Plan)
has as of the Effective Date granted to the Optionee a non-qualified option to
purchase shares of Class C Common Stock, $0.01 par value, of the Company (the
"Class C Stock") subject to the terms and conditions of the Plan and this
Agreement.
AGREEMENTS
----------
1. DEFINITIONS. Capitalized terms used herein shall have the following
meanings:
"Act" is defined in Section 10(a).
"Acquisition Capital" is defined in Section 3(b).
"Affiliate" means (i) any person which, directly or indirectly, is
in control of, is controlled by, or is under common control with such person,
(ii) any person who is a director or officer (A) of such person, (B) of any
subsidiary of such person or (C) of any person described in clause (i) above,
or (iii) any person which is a transferee of any such person and with which
Investcorp Bank E.C. or one of its affiliates has an administrative
relationship. For purposes of this definition, control of a person shall
mean the power, direct or indirect, (X) to vote 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 (Y) to
direct or cause the direction of the management and policies of such person,
whether by ownership of securities, contract, proxy or otherwise.
"Agreement" means this Stock Option Agreement.
<PAGE>
"Approved Sale" means a transaction or a series of related
transactions which results in a BONA FIDE, unaffiliated change of economic
beneficial ownership of the Company or its business of greater than 50%
(disregarding for this purpose any disparate voting rights attributable to the
outstanding stock of the Company), whether pursuant to the sale of the stock of
the Company, the sale of the assets of the Company, or a merger or consolidation
(other than (i) a sale of stock by an Initial Stockholder to another Initial
Stockholder or (ii) a sale of stock in a public offering or pursuant to Rule 144
under the Act).
"Cause," when used in connection with the termination of employment of
Optionee means (a) conviction of Optionee for a felony, or the entry by Optionee
of a plea of guilty or NOLO CONTENDERE to a felony, (b) the commission of an act
of fraud involving dishonesty for personal gain which is materially injurious to
the Company, (c) the willful and continued refusal by the Optionee to
substantially perform his duties with the Company (other than any such refusal
resulting from his incapacity due to mental illness or physical illness or
injury), after a demand for substantial performance is delivered to the Optionee
by the Company's Board of Directors, where such demand specifically identifies
the manner in which the Company's Board of Directors believes that the Optionee
has refused to substantially perform his duties and the passage of a reasonable
period of time for Buyer to comply with such demand or (d) the willful engaging
by the Optionee in gross misconduct materially and demonstrably injurious to the
Company or its Subsidiaries. Notwithstanding the foregoing, with respect to
termination for Cause arising out of conduct described in clause (b), (c) or (d)
above, such a termination will not be deemed to be a termination for Cause
hereunder unless there shall have been delivered to the Optionee a copy of a
resolution duly adopted by the affirmative vote of a majority of the entire
Board of Directors of the Company, at a meeting of such Board called and held
for that purpose (after reasonable notice to the Optionee and an opportunity for
the Optionee, together with his counsel or other advisors, to be heard at such
meeting), finding that in the good faith opinion of the Board the Optionee had
engaged in conduct described above in clause (b), (c) or (d) of the first
sentence of this paragraph and specifying the particulars thereof in detail.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company setting forth the rights, preferences and privileges of and
restrictions on the Class C Stock.
"Class C Stock" is defined in recital C.
"Closing Date" means the date of the closing of the merger of FBP
Acquisition Corp., Inc. with and into the Company (the "Merger").
"Company" is defined in the preamble.
"Disability" means the failure by the Optionee to render full-time
employment services to the Company for an aggregate of sixty (60) business days
in any continuous period of six (6) months on account of physical or mental
disability.
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<PAGE>
"EBITDA" is defined in Section 3(a).
"Effective Date" is defined in the preamble.
"Endorsed Certificate" is defined in Section 9(a).
"Exercise Price" is defined in Section 2.
"Fair Market Value" means the value of a Share, as of the Termination
Date, calculated pursuant to Section 9(d).
"Fiscal Year" means the fiscal year of the Company.
"Good Reason" means a significant adverse change to the employment
responsibilities, authority or base compensation of the Optionee, provided that
Good Reason shall not exist unless the Optionee shall have first provided the
Board of Directors with written notice of the facts constituting such adverse
change and the Company shall have failed to remedy or cure such situation within
thirty (30) days following receipt of such notice.
"Initial Public Offering" means the closing of the sale of any of the
common stock of the Company pursuant to a registration statement that has been
declared effective under the Act, if following such sale (i) the Company is a
reporting company under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, and (ii) such stock is traded on the New York Stock Exchange
or the American Stock Exchange, or is quoted on the NASDAQ National Market
System or is traded or quoted on any other national stock exchange or national
securities system.
"Initial Stockholders" means the stockholders of the Company
immediately following the closing of the Merger who were neither (i) employees
of the Company on the Closing Date, nor (ii) stockholders of the Company's Class
A Common Stock prior to the Closing Date; and any Affiliates of such
stockholders.
"Instrument" is defined in Section 3(b).
"Investment" is defined in Section 3(b).
"Merger" is defined in the definition of "Closing Date."
"Option" is defined in Section 2.
"Optionee" is defined in the preamble.
"Option Shares" is defined in Section 2.
"permitted transferee" means for an Optionee, his or her spouse,
child, estate, personal representative, heir or successor or a trust for the
benefit of the Optionee or his or her spouse, child or heir.
"person" means an individual, partnership, corporation, limited
liability company, trust, joint venture or other entity.
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<PAGE>
"Plan" is defined in recital A.
"Put Date" is defined in Section 9(b).
"Repurchase Date" is defined in Section 9(a).
"Repurchase Period" is defined in Section 9(a).
"Retirement" has the meaning set forth in the employment agreement
between the Company and the Optionee, or if there is no such employment
agreement, means the Optionee's retirement from employment with the Company in
accordance with the Company's normal retirement policy generally applicable to
its salaried employees or as approved in connection with such Retirement by the
Board of Directors.
"Second Repurchase Period" is defined in Section 9(a).
"Shareholder" means FBP Limited, a Cayman Islands corporation.
"Subsidiary" means any joint venture, corporation, partnership or
other entity as to which the Company, whether directly or indirectly, has more
than 50% of the (i) voting rights or (ii) rights to capital or profits.
"Termination Date" means the date on which the Optionee ceases to be
employed by the Company for any reason.
"Vesting Date" is defined in Section 3(b).
2. GRANT OF OPTION. The Company grants to the Optionee the right and
option (the "Option") to purchase, on the terms and conditions hereinafter set
forth, all or any part of the number of shares of Class C Stock set forth below
the Optionee's signature below (the "Option Shares"), at the purchase price of
$17.75 per Share (as such amount may be adjusted in accordance with this
Agreement and the terms of the Plan, the "Exercise Price"), on the terms and
conditions set forth herein.
3. EXERCISABILITY. Subject to the provisions of Section 4:
(a) The Optionee's right to exercise the Option shall vest to the
extent of the percentage of Option Shares set forth in Column (D) of Exhibit
2 of this Agreement as of the end of each fiscal year set forth on Exhibit 2
if the Company's Earnings before Interest, Taxes, Depreciation and
Amortization ("EBITDA"), as defined on Exhibit 2, equals or exceeds the
Target annual EBITDA amount set forth in column (B) of Exhibit 2 with respect
to such fiscal year. If for any such fiscal year the Company's cumulative
annual EBITDA amount for that and the preceding fiscal years equals or
exceeds the Cumulative Target EBITDA amount set forth in column (C) of
Exhibit 2 with respect to such fiscal year, the Optionee's right to exercise
the Option shall vest to the extent that it would have vested, but did not in
fact vest, had the Company achieved its Target annual EBITDA amounts for that
and each of the preceding fiscal years; provided, however, that
notwithstanding the Company's cumulative EBITDA amount
4
<PAGE>
equaling or exceeding the Cumulative Target EBITDA amount, the Option shall
not vest (subject to Sections 3(c) and 3(d)) as to any year in which the
Company's EBITDA did not equal or exceed the Minimum Level EBITDA amount set
forth in column (A) of Exhibit 2 with respect to such fiscal year.
(b) In addition to the seventy percent (70%) of the Option Shares
which may vest under Section 3(a) above, the Optionee's right to exercise the
Option shall vest to the extent of up to thirty percent (30%) of the number of
Option Shares as set forth in the following sentence. For the first One Hundred
Ninety Million Dollars ($190,000,000) of funds invested (including cash expended
by the Company and obligations assumed in consummating the investment including,
but not limited to, third party debt financing and contingent liabilities
associated with the investment such as earn-out payments, such cash and assumed
obligations being referred to herein as "Acquisition Capital") by the Company
prior to December 31, 2001, in connection with the acquisition of operating
businesses or participation in joint ventures (an "Investment "), the Option
shall vest on the Vesting Date (as defined below) to the extent of thirty
percent (30%) multiplied by a fraction, the numerator of which is, for each
Investment, the Acquisition Capital and the denominator of which is One Hundred
Ninety Million Dollars ($190,000,000); provided, however, with respect to each
Investment, no such vesting shall occur until (i) the end of twenty four (24)
whole months after the closing of the Investment (the "Vesting Date"), and (ii)
the Board of Directors of the Company, in its sole discretion, having determined
that the Investment has attained the financial and strategic objectives
initially established at the time the Investment was made.
(c) To the extent any portion of the Option is unvested at the
closing of the Initial Public Offering, the provisions of Sections 3(a) and 3(b)
shall thereafter cease to be applicable to such unvested portion and
thirty-three percent (33%) of such unvested portion will vest on the first
anniversary of the Initial Public Offering and the remaining sixty-seven percent
(67%) of such unvested portion will vest on the second anniversary of the
Initial Public Offering.
(d) Notwithstanding Sections 3(a), 3(b), 3(c), the right to
exercise the Option shall immediately vest (i) in full upon the seventh (7th)
anniversary of the Effective Date provided that the Optionee remains
continuously employed by the Company through such anniversary, or (ii) upon
an Approved Sale or during the thirty (30) day period prior to such Approved
Sale as provided in Section 6(a), (A) as to fifty percent (50%) of the number
of then unvested Option Shares if, and only if, the Approved Sale results in
the Initial Stockholders actually receiving an Internal Rate of Return (as
hereinafter defined) equal or greater than twenty percent (20%) per annum,
but less than thirty percent (30%) per annum, and (B) as to one hundred
percent (100%) of the number of then unvested Option Shares if, and only if,
the Approved Sale results in the Initial Stockholders actually receiving an
Internal Rate of Return equal or greater than thirty percent (30%) per annum
provided that, if the Company is a corporation described in Section
280G(b)(5)(ii) of the Internal Revenue Code of 1986, as amended (the Code),
no acceleration shall occur pursuant to this Section 3(d)(ii) unless prior to
the Approved Sale the shareholder approval requirements of Code Section 280G
are met. The Internal Rate of Return shall be calculated on a compounded
basis from the Closing Date to the date of the closing of the Approved Sale
and shall take into account all dilution resulting from the vesting of
Options as a result of such Approved Sale.
5
<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Section 3, if on the Effective Date the Company is a publicly held company
within the meaning of Section 162 of the Code, and the regulations promulgated
thereunder, the Option granted hereunder shall not become exercisable prior to
the date on which shareholder approval within the meaning of Code Section 162(m)
has been received.
(f) The Company will use commercially reasonable best efforts to
obtain those shareholder approvals which may be required pursuant to Sections
3(d) and 3(e) prior to June 30, 1998.
4. EXPIRATION.
(a) Subject to Section 6(a), the vested portion of the Option shall
expire upon the thirtieth (30th) day following the tenth (10th) anniversary of
the Effective Date unless (i) the Optionee is terminated by the Company other
than for Cause or the Optionee terminates his or her employment for Good Reason,
in which case the vested portion of the Option shall expire on the earlier of
the date (A) eighteen (18) months after the Termination Date or (B) the
thirtieth (30th) day following the tenth (10th) anniversary of the Effective
Date; (ii) the Optionee resigns without Good Reason or is terminated for Cause
from employment by the Company, in either of which cases the vested portion of
the Option shall expire on the Termination Date; (iii) the Optionee ceases to be
employed by the Company for any other reason, including without limitation, the
Optionee's death, Disability or Retirement, in which case the vested portion of
the Option shall expire sixty (60) days following the Termination Date; (iv) the
Company or the Shareholder exercises the repurchase right pursuant to Section 9
hereof, in which case the vested portion of the Option shall expire on the
business day immediately preceding the Repurchase Date; of (v) the Optionee or
his or her representative exercises the put right pursuant to Section 9 hereof,
in which case the vested portion of the Option shall expire on the business day
immediately preceding the Put Date.
(b) The unvested portion of the Option shall expire on the earlier to
occur of (i) the Termination Date, except in the case where the Optionee is
terminated from employment by the Company without Cause, resigns for Good Reason
or ceases to be employed by the Company due to Retirement, death or Disability,
in each of which cases the unvested portion of the Option shall expire for all
purposes other than vesting under Section 3(a) on the Termination Date, but for
purposes of vesting under Section 3(a) shall expire on the thirtieth (30th) day
following the date on which the Optionee received notice of the EBITDA for the
Fiscal Year during which the Termination Date occurred, or (ii) an Approved
Sale, but only after giving effect to the provisions of Section 3(d)(ii).
5. NONTRANSFERABILITY. Subject to Section 9 hereof, the Option shall not
be transferable by the Optionee otherwise than upon the Optionee's death to a
permitted transferee and the Option is exercisable, during the Optionee's
lifetime, only by him or her or, in the event of the Optionee's Disability, his
or her guardian or legal representative. More particularly (but without
limiting the generality of the foregoing), the Option may not be assigned,
transferred (except as aforesaid), pledged or hypothecated in any way (whether
by operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Any assignment,
6
<PAGE>
transfer, pledge, hypothecation or other disposition of the Option contrary
to the provisions hereof, and the levy of any attachment or similar process
upon the Option that would otherwise effect a change in the ownership of the
Option, shall terminate the Option; provided, however, that in the case of
the involuntary levy of any attachment or similar involuntary process upon
the Option, the Optionee shall have thirty (30) days after notice thereof to
cure such levy or process before the Option terminates. This Agreement shall
be binding on and enforceable against any person who is a permitted
transferee of the Option pursuant to the first sentence of this Section.
6. EFFECT OF APPROVED SALE; ADJUSTMENTS.
(a) In the event of an Approved Sale, the unexercised portion of the
Option shall terminate upon such Approved Sale, provided that, unless the
agreement or plan of merger effecting such Approved Sale provides that the
Optionee shall receive upon such Approved Sale, with respect to the entire
vested but unexercised portion of the Option, the same consideration that the
holders of the Class C Stock shall be entitled to receive upon such Approved
Sale, less the Exercise Price attributable to such vested but unexercised
portion, then the Optionee shall be given at least thirty (30) days' prior
notice of the proposed Approved Sale and shall be entitled to exercise (which
exercise may be made contingent on the closing of such Approved Sale) such
vested but unexercised portion of the Option at any time during such thirty (30)
day period up to and until the close of business on the day immediately
preceding the date of consummation of such Approved Sale and upon exercise of
the Option the Option Shares shall be treated in the same manner as the shares
of any other holder of Class C Stock.
(b) Subject to Section 6(a), if the shares of any outstanding class
of equity security of the Company are changed into or exchanged for a different
number or kind of shares or securities, as the result of any one or more
reorganizations, recapitalization, mergers, acquisitions, stock splits, reverse
stock splits, stock dividends or similar events (including without limitation
the conversion of Class C Stock into common stock pursuant to the charter
documents of the Company), an appropriate adjustment shall be made in the number
and kind of shares or other securities subject to the Option, and the price for
each share or other unit of any securities subject to this Agreement, in
accordance with Section 13 of the Plan. No fractional interests shall be issued
on account of any such adjustment unless the Committee specifically determines
to the contrary; provided, however, that in lieu of fractional interests, the
Optionee, upon the exercise of the Option in whole or part, shall receive cash
in an amount equal to the amount by which the fair market value of such
fractional interests exceeds the Exercise Price attributable to such fractional
interests.
7. EXERCISE OF THE OPTION. Prior to the expiration thereof, the
Optionee may exercise the vested portion of the Option from time to time in
whole or in part. Upon electing to exercise the Option, the Optionee shall
deliver to the Secretary of the Company a written and signed notice of such
election setting forth the number of Option Shares the Optionee has elected
to purchase and shall at the time of delivery of such notice tender cash or a
cashier's or certified bank check to the order of the Company for the full
Exercise Price of such Option Shares and any amount required pursuant to
Section 18 hereof. The Committee further may, in its discretion, permit
payment of the Exercise Price in such form or in such manner as may be
permissible under the Plan and under any applicable law.
7
<PAGE>
8. RESTRICTIONS ON TRANSFERS OF OPTION SHARES; PERMITTED TRANSFEREES.
Subject to Sections 9, 13 and 14 hereof, prior to 180 days following an Initial
Public Offering, the Option Shares shall not be transferable or transferred,
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) except that the Optionee may transfer the Option Shares (i) to a
permitted transferee or (ii) pursuant to Section 4 or Section 5 of Article IV of
the Certificate of Incorporation. This Agreement shall be binding on and
enforceable against any person who is a permitted transferee of the Option
Shares and each reference to the Optionee herein shall encompass also permitted
transferees of the Optionee. The stock certificates issued to evidence Option
Shares upon exercise of the Option hereunder shall bear a legend referring to
this Agreement and the restrictions contained herein.
9. REPURCHASE OF OPTION SHARES.
(a) In the event that the Optionee ceases to be employed by the
Company for any reason prior to an Initial Public Offering or an Approved Sale,
the Company, during the ninety (90) days following the Termination Date (the
"Repurchase Period"), shall have the right to purchase all, but not less than
all, of the Option Shares. If the Company does not elect to purchase the Option
Shares during the Repurchase Period, the Shareholder, during the thirty (30)
days following the expiration of the Repurchase Period (the "Second Repurchase
Period"), shall have a one-time right to purchase all, but not less than all, of
the Option Shares. The purchase price for each Option Share shall equal Fair
Market Value. If the Company or Shareholder (as applicable) elects to purchase
the Option Shares, it shall notify the Optionee at or before the end of the
Repurchase Period or Second Repurchase Period, as applicable, of such election
and the purchase price shall be paid in cash at a time set by the Company or
Shareholder (as applicable) (the "Repurchase Date") within thirty (30) days
after the end of the Repurchase Period or Second Repurchase Period, as
applicable, provided that the Optionee has presented to the Company or
Shareholder (as applicable) a stock certificate evidencing the Option Shares
duly endorsed for transfer (the "Endorsed Certificate"). If the Optionee fails
to deliver the Endorsed Certificate, the Option Shares represented thereby shall
be deemed to have been purchased upon (i) the payment by the Company or
Shareholder (as applicable) of the purchase price to the Optionee or his or her
permitted transferee or (ii) notice to the Optionee or such permitted transferee
that the Company is holding the purchase price for the account of the Optionee
or such permitted transferee, and upon such payment or notice the Optionee and
such permitted transferee will have no further rights in or to such Option
Shares.
(b) If the Optionee's employment by the Company is terminated prior
to an Initial Public Offering or an Approved Sale due to the Optionee's
Retirement, death or Disability, the Optionee or his or her representative,
during the sixty (60) days following the Termination Date, shall have a
one-time right to require the Company to purchase all, but not less than all,
of the Option Shares at Fair Market Value. The purchase price shall be paid
in cash on the thirtieth (30th) day after the Company has received notice of
the Optionee's election to exercise his put right (the "Put Date"), provided
that the Company need not pay the purchase price until such later time that
the Optionee presents to the Company the Endorsed Certificate.
(c) In the event that at the Termination Date a portion of the Option
may subsequently vest and/or remain exercisable in accordance with Section 4(b)
hereof, by notice to
8
<PAGE>
the Optionee delivered during the Repurchase Period or the Second Repurchase
Period, as applicable, the Company or the Shareholder may elect to purchase
any Option Shares that may subsequently be acquired by the Optionee upon such
subsequent vesting or exercise, and Optionee may elect to sell said shares to
the Company by notice to such effect during the ninety (90) day period
following the Termination Date. If notice with respect to the purchase or
sale of such Option Shares was delivered as provided in this paragraph, the
Option Shares acquired upon such exercise shall be acquired by the Company on
the earlier of the date of acquisition of the Option Shares or the
thirty-first (31st) day following the date on which the Optionee received the
notice of the determination of the EBITDA for the Fiscal Year during which
the Termination Date occurred at Fair Market Value calculated as of the
Termination Date.
(d) The Fair Market Value of Option Shares to be purchased by the
Company or Shareholder hereunder shall be determined in good faith by the
Company's Board of Directors. If the Board determination is challenged by
Optionee, a mutually acceptable investment banker or appraiser shall establish
the Fair Market Value. If Optionee and the Company cannot agree upon an
investment banker or appraiser each shall choose an investment banker or
appraiser and the two investment bankers or appraisers shall choose a third
investment banker or appraiser who alone shall establish the Fair Market Value.
The Fair Market Value shall be based on an assumed sale of 100% of the
outstanding capital stock of the Company (without reduction for minority
discount or lack of liquidity of the Option Shares) and shall be determined
using customary criteria generally employed within the investment banking
community at the time such determination is made for valuing an entity similar
to the Company. The investment banker's or appraiser's determination shall be
conclusive and binding on Shareholder, the Company and Optionee. The Company
shall bear all costs incurred in connection with the services of such investment
banker or appraiser unless the Fair Market Value established by the investment
banker or appraiser is (i) less than or equal to 110% of the Board of Directors'
determination, in which case Optionee shall promptly pay or reimburse the
Company for such costs or (ii) greater than 110% but less than 133% of the Board
of Directors' determination, in which case Optionee shall promptly pay or
reimburse the Company for 50% of such costs.
(e) The Optionee shall not be considered to have ceased to be
employed by the Company for purposes of this Agreement if he or she continues to
be employed by a Subsidiary of the Company or by a company of which the Company
is a Subsidiary.
10. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) No Option Shares shall be issued or transferred pursuant to
this Agreement unless and until all legal requirements applicable to such
issuance or transfer have, in the reasonable opinion of counsel to the
Company, been satisfied. Such requirements may include, but are not limited
to, registering or qualifying such Shares under any state or federal law,
satisfying any applicable law relating to the transfer of unregistered
securities or demonstrating the availability of an exemption from applicable
laws, placing a legend on the Shares to the effect that they were issued in
reliance upon an exemption from registration under the Securities Act of
1933, as amended (the "Act"), and may not be transferred other than in
reliance upon Rule 144 or Rule 701 promulgated under the Act, if available,
or upon another exemption from the Act, or obtaining the consent or approval
of any governmental regulatory body.
9
<PAGE>
(b) The Optionee understands that the Company intends for the
offering and sale of Option Shares to be effected in reliance upon Rule 701 or
another available exemption from registration under the Act, and that the
Company is under no obligation to register for resale the Option Shares issued
upon exercise of the Option, subject to Section 21 hereof. In connection with
any such issuance or transfer, the person acquiring the Option Shares shall, if
requested by the Company, provide information and assurances satisfactory to
counsel to the Company with respect to such matters as the Company reasonably
may deem desirable to assure compliance with all applicable legal requirements.
11. SUBJECT TO CERTIFICATE OF INCORPORATION. The Optionee acknowledges
that the Option Shares are subject to the terms of the Certificate of
Incorporation.
12. NO INTEREST IN SHARES SUBJECT TO OPTION. Neither the Optionee
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through the Optionee shall have any right, title, interest, or
privilege in or to any shares of stock allocated or reserved for the purpose of
the Plan or subject to this Agreement except as to such Option Shares, if any,
as shall have been issued to such person upon exercise of this Option or any
part of it.
13. DRAG ALONG OBLIGATION. If, at any time following an Initial Public
Offering, Initial Stockholders of the Company owning not less than 20% of the
outstanding shares of the Company's capital stock (the "Selling Group")
determine to sell all of their shares of the Company's capital stock in an
arm's-length sale to a person other than an Initial Stockholder, the members of
the Selling Group shall have the right to require Optionee, and Optionee hereby
agrees, to sell and deliver free and clear of all liens, claims and
encumbrances, all Option Shares then owned by Optionee in the same transaction
to such person, provided that Optionee receives the same terms, including
without limitation the same consideration per Option Share, as is received in
such transaction by the members of the Selling Group. Without limiting any
rights or remedies available to any party hereto against the Optionee for any
breach of this Section, it is expressly agreed that the Company shall have the
right to enforce the rights intended to be extended to the Selling Group under
this Section and to seek any available remedies against the Optionee for breach
of this Section.
14. TRANSFER AND ACQUISITION RIGHTS. If, at any time following an
Initial Public Offering, Initial Stockholders of the Company (the
"Transferring Stockholders") seek to transfer to a person other than an
Initial Stockholder (the "Third Party") in a single transaction or series of
related transactions more than 35% of the then outstanding capital stock of
the Company, the Company shall give notice of the proposed transaction to the
Optionee, which notice shall specify the number of shares of the Company's
capital stock that the Transferring Stockholders desire to sell and the
proposed terms thereof. If the Optionee is not otherwise afforded the
opportunity to participate on a pro rata basis in such transfer on the same
terms and conditions as the Transferring Stockholders, the Optionee shall
have the right to sell to the Company, upon the same terms and conditions
offered to the Transferring Stockholders by the Third Party, the number of
vested but unexercised Option Shares that bears the same ratio to the total
number of vested but unexercised Option Shares held by the Optionee as the
total number of shares of capital stock of the Company proposed to be sold by
the Transferring Stockholders to the Third Party bears to the total number of
shares of capital stock of the Company held by all of the
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<PAGE>
Transferring Stockholders. Notwithstanding anything to the contrary
contained herein, the provisions of this Section shall not be applicable to
any sales by Initial Stockholders in a public offering registered under the
Act.
15. PLAN CONTROLS. The Option hereby granted is subject to, and the
Company and the Optionee agree to be bound by, all of the terms and conditions
of the Plan as the same may be amended from time to time in accordance with the
terms thereof, but no such amendment shall be effective as to the Option without
the Optionee's consent insofar as it may adversely affect the Optionee's rights
under this Agreement.
16. NOT AN EMPLOYMENT CONTRACT. Nothing in the Plan, in this Agreement or
any other instrument executed pursuant thereto shall confer upon the Optionee
any right to continue in the employ of the Company or any Subsidiary or shall
affect the right of the Company or any Subsidiary to terminate the employment of
the Optionee with or without Cause.
17. GOVERNING LAW. All terms of and rights under this Agreement shall be
governed by and construed in accordance with the internal law of the State of
New York, without giving effect to principles of conflicts of law.
18. TAXES. The Committee may, in its discretion, make such provisions and
take such steps as it may deem necessary or appropriate for the withholding of
all federal, state, local and other taxes required by law to be withheld with
respect to the issuance or exercise of the Option including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, requiring the Optionee to pay to the Company
the amount required to be withheld or to execute such documents as the Committee
deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other means provided in the Plan.
19. NOTICES. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered, telexed or telecopied to, or, if mailed,
when received by, the other party at the following addresses (or at such other
address as shall be given in writing by either party to the other):
If to the Company to:
Falcon Building Products, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: General Counsel
With a copy to:
Investcorp International Inc.
280 Park Avenue, 37th Floor
New York, New York
Attention: Christopher Stadler
11
<PAGE>
If to the Optionee to the address set forth below the Optionee's signature
below.
20. AMENDMENTS AND WAIVERS. This Agreement may be amended, and any
provision hereof may be waived, only by a writing signed by the party to be
charged.
21. S-8 REGISTRATION. The Company agrees that, immediately upon the
occurrence of an Initial Public Offering, it will use its best efforts to file
and have declared effective under the Act, and thereafter to maintain the
effectiveness of, a registration statement on Form S-8 covering the Option
Shares.
22. ENTIRE AGREEMENT. This Agreement, together with the Plan, sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and supersedes all prior oral and written and all contemporaneous
oral discussions, agreements and understandings of any kind or nature.
23. SEPARABILITY. In the event that any provision of this Agreement is
declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the
extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of this Agreement shall not be affected except to the
extent necessary to reform or delete such illegal, invalid or unenforceable
provision.
24. HEADINGS. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
25. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
26. FURTHER ASSURANCES. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.
27. REMEDIES. In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is hereby waived.
28. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns.
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<PAGE>
29. AUTHORIZED SHARES. The Company covenants that it will at all times
maintain a sufficient number of authorized but unissued shares of Class C Stock
or common stock, as the cases may be, to permit the exercise of the Option.
30. THIRD PARTY BENEFICIARY. Shareholder is a third party beneficiary
under the Agreement and shall have the right to enforce all rights granted to it
hereunder.
31. ARBITRATION. The parties shall use their best efforts and good will
to settle all disputes by amicable negotiations. Except as otherwise provided
in Section 9(d), any claim, dispute, disagreement or controversy that arises
among the parties relating to this Agreement that is not amicably settled shall
be resolved by arbitration, as follows:
(a) Any such arbitration shall be heard in New York, New York, before
a panel consisting of one (1) to three (3) arbitrators, each of whom shall be
impartial. Except as the parties may otherwise agree, all arbitrators shall be
appointed in the first instance by the President of the Association of the Bar
of the City of New York or, in the event of his unavailability by reason of
disqualification or otherwise, by the Chairman of the Executive Committee of the
Association of the Bar of the City of New York. In determining the number and
appropriate background of the arbitrators, the appointing authority shall give
due consideration to the issues to be resolved, but his decision as to the
number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by any party to this Agreement by
the service of a written Request for Arbitration upon the other affected
parties. Such Request for Arbitration shall summarize the controversy or claim
to be arbitrated, and shall be referred by the complaining party to the
appointing authority for appointment of arbitrators ten (10) days following such
service or thereafter. If the panel of arbitrators is not appointed by the
appointing authority within thirty (30) days following such reference, any party
may apply to any court within the State of New York for an order appointing
arbitrators qualified as set forth below. No Request for Arbitration shall be
valid if it relates to a claim, dispute or controversy that would have been time
barred under the applicable statute of limitations had such claim, dispute,
disagreement or controversy been submitted to the Supreme Court of the State of
New York.
(c) All attorneys' fees and costs of the arbitration shall be borne
by the respective party incurring such costs and fees. The parties hereby
expressly waive punitive damages, and under no circumstances shall an award
contain any amount that in any way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
(e) It is intended that controversies or claims submitted to
arbitration under this Section 30 shall remain confidential, and to that end it
is agreed by the parties that neither the facts disclosed in the arbitration,
the issues arbitrated, nor the views or opinions of any persons concerning them,
shall be disclosed to third persons at any time, except to the extent necessary
to enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
FALCON BUILDING PRODUCTS, INC.
By:
---------------------------
Name: Gus J. Athas
Title: Executive Vice President
"OPTIONEE"
--------------------------------
Name:
Address:
Number of Option Shares:
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<PAGE>
STOCK OPTION AWARD SCHEDULE
Shares Outstanding - 8,616,830
Option Awards - 11%-947,851
FALCON BUILDING PRODUCTS
William K. Hall 241,271
Sam A. Cottone 120,636
Gus J. Athas 86,168
Edward Finnegan 86,168
Anthony Navitsky 51,701
Other 12,925
Reserved (for future issuance) 38,776
------
637,645
HART & COOLEY
Lawrence Lee 51,701
Dale A. Scholten 9,500
David A. Crouch 9,000
Other 15,967
Reserved (for future issuance) 17,234
------
103,402
MANSFIELD
Paul Fischer 51,701
J. Mark Haddock 9,000
William Menke 9,000
Theodore Catino 9,000
Other 8,000
Reserved (for future issuance) 16,701
------
103,402
DEVILBISS AIR POWER
William Allen 51,706
1
<PAGE>
Tom DeWitt 10,340
H. Eugene Swacker 10,340
Other 31,016
-------
103,402
TOTALS:
Falcon 637,645
Hart & Cooley 103,402
Mansfield 103,402
DeVilbiss 103,402
-------
947,851
2
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EXHIBIT 10.19
FORM OF STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is made as of June 17, 1997,
among Falcon Building Products, Inc., a Delaware corporation (the "Company"),
FBP Limited, a Cayman Islands company ("Seller"), and the individual employee of
the Company signatory hereto ("Buyer").
R E C I T A L S
A. Buyer is an employee of the Company and desires to increase his equity
interest in the Company.
B. Subject to the terms and conditions hereof, Seller is willing to sell
to Buyer the number of shares of Class C Common Stock of the Company as
determined by the calculation set forth on the signature page hereto (the
"Shares") at a price per share of $17.75.
C. Buyer desires to purchase the Shares, subject to terms and conditions
and the rights of the Company and the other parties hereto as set forth herein.
D. In consideration of the actions described above and contemplated
herein, the parties hereto desire to set forth herein certain agreements
regarding their rights and obligations with respect to the Shares and any shares
of Class A Common Stock of the Company owned by Buyer on the Closing Date (the
"Class A Stock").
AGREEMENTS
1. DEFINITIONS. Capitalized terms used herein shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" means (i) any person which, directly or indirectly, is in
control of, is controlled by, or is under common control with such person,
(ii) any person who is a director or officer (A) of such person, (B) of any
subsidiary of such person or (C) of any person described in clause (i) above, or
(iii) any person which is a transferee of any such person and with which
Investcorp Bank E.C. or one of its affiliates has an administrative
relationship. For purposes of this definition, control of a person shall mean
the power, direct or indirect, (X) to vote 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 (Y) to direct or cause
the direction of the management and policies of such person, whether by
ownership of securities, contract, proxy or otherwise.
"Agreement" means this Stockholder Agreement.
"Approved Sale" means a transaction or a series of related
transactions which results in a BONA FIDE, unaffiliated change of economic
beneficial ownership of the Company or its business of greater than 50%
(disregarding for this purpose any disparate voting rights
<PAGE>
attributable to the outstanding stock of the Company), whether pursuant to
the sale of the stock of the Company, the sale of the assets of the Company,
or a merger or consolidation (other than (i) a sale of stock by an Initial
Stockholder to another Initial Stockholder or (ii) a sale of stock in a
public offering or pursuant to Rule 144 under the Act).
"Buyer" is defined in the preamble.
"Cause," when used in connection with the termination of employment of
Buyer, means (a) conviction of Buyer for a felony, or the entry by Buyer of a
plea of guilty or NOLO CONTENDERE to a felony, (b) the commission of an act of
fraud involving dishonesty for personal gain which is materially injurious to
the Company, (c) the willful and continued refusal by the Buyer to substantially
perform his duties with the Company (other than any such refusal resulting from
his incapacity due to mental illness or physical illness or injury), after a
demand for substantial performance is delivered to the Buyer by the Company's
Board of Directors, where such demand specifically identifies the manner in
which the Company's Board of Directors believes that the Buyer has refused to
substantially perform his duties and the passage of a reasonable period of time
for Buyer to comply with such demand or (d) the willful engaging by the Buyer in
gross misconduct materially and demonstrably injurious to the Company or its
Subsidiaries. Notwithstanding the foregoing, with respect to termination for
Cause arising out of conduct described in clause (b), (c) or (d) above, such a
termination will not be deemed to be a termination for Cause hereunder unless
there shall have been delivered to the Buyer a copy of a resolution duly adopted
by the affirmative vote of a majority of the entire Board of Directors of the
Company, at a meeting of such Board called and held for that purpose (after
reasonable notice to the Buyer and an opportunity for the Buyer, together with
his counsel or other advisors, to be heard at such meeting), finding that in the
good faith opinion of the Board the Buyer had engaged in conduct described above
in clause (b), (c) or (d) of the first sentence of this paragraph and specifying
the particulars thereof in detail.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company setting forth the rights, preferences and privileges of and
restrictions on the Shares.
"Closing Date" means the date on which the purchase of the Shares is
closed.
"Company" is defined in the preamble.
"Company Average Rate" means for any period (a) the sum of (i) the
interest accrued under the Company's revolving credit facility during such
period and (ii) the interest, discount or yield, accrued under the Company's
receivable facility during such period, divided by (b) the sum of (i) the
average indebtedness outstanding on the Company's revolving credit facility
during such period (based on the daily balances of such facility) and the
(ii) average amount of indebtedness incurred, or interests in receivables sold,
pursuant to the Company's receivables facility during such period (based on the
daily balances of such facility).
"Cost" equals $17.75, subject to adjustment as set forth herein.
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"Disability" means the failure by Buyer to render full-time employment
services to the Company for an aggregate of sixty (60) business days in any
continuous period of six (6) months on account of physical or mental disability.
"Endorsed Certificate" is defined in Section 4(a).
"Fair Market Value" means the value of a share of the Company's
capital stock, as of the Termination Date, determined pursuant to Section 4(b).
"FBP" means FBP Acquisition Corp., Inc., a Delaware corporation.
"Fiscal Year" means the fiscal year of the Company.
"Good Reason" means a significant adverse change to the employment
responsibilities, authority or base compensation of Buyer, provided that Good
Reason shall not exist unless Buyer shall have first provided the Board of
Directors with written notice of the facts constituting such adverse change and
the Company shall have failed to remedy or cure such situation within thirty
(30) days following receipt of such notice.
"Initial Public Offering" means the closing of the sale of any of the
common stock of the Company pursuant to a registration statement that has been
declared effective under the Act, if following such sale (i) the issuer is a
reporting company under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, and (ii) such stock is traded on the New York Stock Exchange
or the American Stock Exchange, or is quoted on the NASDAQ National Market
System, or is traded or quoted on any other national stock exchange or national
securities system.
"Initial Stockholders" means the stockholders of the Company
immediately following the Merger who were neither (i) employees of the Company
at the closing of the Merger, nor (ii) stockholders of the Company's Class A
Common Stock prior to the Merger; and any Affiliates of such stockholders.
"Merger" means the merger of FBP with and into the Company pursuant to
the Agreement and Plan of Merger dated as of March 20, 1997, by and between the
Company and FBP.
"permitted transferee" is defined in Section 3.
"person" means an individual, partnership, corporation, limited
liability company, trust, joint venture or other entity.
"Purchase Price " means $17.75 multiplied by the number of Shares.
"Repurchase Date" is defined in Section 4(a).
"Repurchase Period" is defined in Section 4(a).
3
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"Retirement" has the meaning set forth in the employment agreement
between the Company and Buyer, or if there is no such employment agreement,
means Buyer's retirement from the Company in accordance with the Company's
normal retirement policy generally applicable to its salaried employees.
"Securities" is defined in Section 3.
"Shares" is defined in recital B.
"Subsidiary" means any joint venture, corporation, partnership or
other entity as to which the Company, whether directly or indirectly, has more
than 50% of the (i) voting rights or (ii) rights to capital or profits.
"Termination Date" means the date on which Buyer ceases to be employed
by the Company for any reason.
2. PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions hereof, Seller will sell and transfer to Buyer, on a date not more
than five (5) business days following the closing of the Merger, the Shares in
consideration of the transfer by Buyer to Seller of the Purchase Price.
3. RESTRICTIONS ON TRANSFERS OF THE SHARES AND THE CLASS A STOCK;
PERMITTED TRANSFEREES. Subject to Sections 4, 5, 6 and 7 hereof, prior to the
earlier of (A) 180 days following an Initial Public Offering or (B) an Approved
Sale, none of the Shares and the Class A Stock (collectively, the "Securities")
shall be transferable or transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise), except that Buyer may transfer
all or a portion of the Securities (i) to his or her spouse, child, estate,
personal representative, heir or successor or to a trust for the benefit of
Buyer or his or her spouse, child or heir (a "permitted transferee"),
(ii) pursuant to Section 4 or Section 5 of Article IV of the Certificate of
Incorporation or (iii) subject to the Certificate of Incorporation, as part of
the Initial Public Offering. This Agreement shall be binding on and enforceable
against any person who is a permitted transferee of the Securities, and for
purposes of Sections 3, 4, 5, 6 and 7, the rights and obligations relating to
the Securities owned by Buyer shall extend as well to Securities owned by
permitted transferees of Buyer and, unless the context otherwise requires, each
reference to Buyer in said Sections shall also encompass permitted transferees
of Buyer. The stock certificates issued to evidence Securities hereunder shall
bear a legend referring to this Agreement and the restrictions contained herein.
4. RIGHT TO REPURCHASE SECURITIES.
(a) In the event that Buyer ceases to be employed by the Company
for any reason prior to an Initial Public Offering or an Approved Sale, the
Company, during the sixty (60) days following the Termination Date (the
"Repurchase Period"), shall have the right to purchase all, but not less than
all, of the Securities. If the Company does not elect to purchase the
Securities during the Repurchase Period, the Seller, during the thirty (30)
days following the expiration of the Repurchase Period (the "Second
Repurchase Period"), shall have a one-time
4
<PAGE>
right to purchase all, but not less than all, of the Securities. The
purchase price for each share included in the Securities shall equal Fair
Market Value, or, if the Buyer resigns without Good Reason prior to June 17,
2000, or is terminated for Cause at any time, the lower of Fair Market Value
or Cost. If the Company or Seller (as applicable) elects to purchase the
Securities, it shall notify the Buyer at or before the end of the Repurchase
Period or Second Repurchase Period, as applicable, of such election and the
purchase price shall be paid in cash at a time set by the Company or Seller
(as applicable) (the "Repurchase Date") within thirty (30) days after the end
of the Repurchase Period or Second Repurchase Period, as applicable, provided
that the Buyer has presented to the Company or Seller (as applicable) a stock
certificate evidencing the Securities duly endorsed for transfer (the
"Endorsed Certificate"). If Buyer fails to deliver the Endorsed Certificate,
the Securities represented thereby shall be deemed to have been purchased
upon (i) the payment by the Company or Seller (as applicable) of the purchase
price to the Buyer or his or her permitted transferee or (ii) notice to Buyer
or such permitted transferee that the Company is holding the purchase price
for the account of Buyer or such permitted transferee, and upon such payment
or notice the Buyer and such permitted transferee will have no further rights
in or to such Securities. If the Company or Seller (as applicable) does not
purchase the Securities, the restrictions on transfer thereof contained in
Section 3 of this Agreement shall terminate and be of no further force and
effect after the Second Repurchase Period.
(b) "Cost" for the purposes of Sections 4 and 5 hereof shall include
interest on the amount of $17.75 per share for the period from the Closing Date
until the Termination Date calculated at the Company Average Rate, compounded
annually. Fair Market Value for purposes of Sections 4 and 5 hereof shall be
determined in good faith by the Company's Board of Directors. If the Board
determination is challenged by Buyer, a mutually acceptable investment banker or
appraiser shall establish the Fair Market Value. The Fair Market Value shall be
based on an assumed sale of 100% of the outstanding capital stock of the Company
(without reduction for minority discount or lack of liquidity of the
Securities). The investment banker's or appraiser's determination shall be
conclusive and binding on all parties. The Company shall bear all costs
incurred in connection with the services of such investment banker or appraiser
unless the Fair Market Value established by such investment banker or appraiser
is (i) less than or equal to 110% of the Board of Director's determination, in
which case Buyer shall promptly pay or reimburse the Company for such costs, or
(ii) greater than 110% but less than 133% of the Board of Directors'
determination, in which case Buyer shall promptly pay or reimburse the Company
for 50% of such costs. If Buyer and the Company cannot agree upon an investment
banker or appraiser, they shall each choose an investment banker or appraiser
and the two shall choose a third investment banker or appraiser who shall
establish the Fair Market Value.
(c) Buyer shall not be considered to have ceased to be employed by
the Company for purposes of this Agreement if he or she continues to be employed
by the Company or a Subsidiary of the Company or by a company of which the
Company is a subsidiary.
5. OBLIGATION TO REPURCHASE SECURITIES. If Buyer's employment by the
Company is terminated prior to an Initial Public Offering or an Approved Sale
(i) by the Company without Cause or by Buyer for Good Reason, (ii) due to
Buyer's death, Disability or Retirement, or (iii) by Buyer after June 17,
2000 without Good Reason and provided Buyer has not agreed to accept
employment and does not accept employment from a competitor of the Company
during the 120-
5
<PAGE>
day period described below; Buyer or his representative,
assuming no notice of repurchase has been given under Section 4(a) hereof
prior to the end of the Second Repurchase Period, shall have a one-time right
expiring 120 days following the Termination Date to require the Company to
purchase all, but not less than all, of the Securities at Fair Market Value;
provided that if the Buyer is terminated without Cause or resigns for Good
Reason on or prior to June 17, 2000, the purchase price shall be the lower of
Cost or Fair Market Value. If Buyer elects to have the Securities purchased,
the purchase price shall be paid in cash on the later of (i) the thirtieth
(30) day after the expiration of such notice period or (ii) the day Buyer
presents to the Company the Endorsed Certificate. The Securities shall be
transferred to the Company free and clear of all liens, encumbrances,
mortgages, pledges, security interests, restrictions, prior assignments and
claims of any kind or nature whatsoever, except those created by the
Certificate of Incorporation or this Agreement.
6. DRAG-ALONG OBLIGATION. If, at any time following an Initial Public
Offering, Initial Stockholders of the Company owning not less than (a) 20% of
the outstanding shares of the Company's capital stock, and (b) 50.1% of the
total shares of the Company's capital stock then owned by all Initial
Stockholders (the "Selling Group") determine to sell in one transaction or a
series of related transactions all of their shares of the Company's capital
stock in an arm's-length sale to a person other than an Initial Stockholder, the
members of the Selling Group shall have the right to require Buyer to sell, and
Buyer hereby agrees to sell and to deliver free and clear of all liens, claims
and encumbrances, all of Buyer's Securities in the same transaction to such
person, provided that Buyer receives the same terms including without
limitation, the same consideration per share, as is received in such transaction
by the members of the Selling Group. Without limiting any rights or remedies
available to any party hereto against Buyer for any breach of this Section, it
is expressly agreed that the Company shall have the right to enforce the rights
of the Initial Stockholders under this Section and to seek any available
remedies against Buyer for breach of this Section.
7. ACQUISITION OBLIGATION. If, at any time following an Initial Public
Offering, Initial Stockholders of the Company (the "Transferring Stockholders")
seek to transfer to a person other than an Initial Stockholder (the "Third
Party") in a single transaction or series of related transactions more than 35%
of the then outstanding capital stock of the Company, the Company shall give
notice of the proposed transaction to Buyer, which notice shall specify the
number of shares of the Company's capital stock that the Transferring
Stockholders desire to sell and the proposed terms thereof. If Buyer is not
otherwise afforded the opportunity to participate on a pro rata basis in such
transfer on the same terms and conditions as the Transferring Stockholders,
Buyer shall have the right to sell to the Company, upon the same terms and
conditions offered to the Transferring Stockholders by the Third Party, the
number of Securities that bears the same ratio to the total number of Securities
held by Buyer as the total number of shares of capital stock of the Company
proposed to be sold by the Transferring Stockholders to the Third Party bears to
the total number of shares of capital stock of the Company held by all of the
Transferring Stockholders. Notwithstanding anything to the contrary contained
herein, the provisions of this Section shall not be applicable to any sales by
Initial Stockholders in a public offering registered under the Act.
6
<PAGE>
8. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants
as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The Company has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated herein. This Agreement is a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to or
affecting creditors' rights, and for the limitations imposed by general
principles of equity.
9. REPRESENTATIONS AND ACKNOWLEDGMENTS OF BUYER.
(a) Buyer hereby represents and warrants as follows:
(i) Buyer is acquiring the Shares for investment for his or her
own account and without a view to further distribution of the Shares.
(ii) Buyer is an executive of the Company and has been given
access to all information that Buyer considers necessary to make an
investment decision as to the Shares.
(b) Buyer hereby acknowledges to the Company as follows:
(i) The Shares are being transferred to Buyer without
registration under the Act pursuant to exemptions from registration
thereunder. Buyer cannot transfer the Shares except pursuant to an
effective registration statement or an exemption from registration under
the Act.
(ii) The Shares are nonvoting in the election of directors and
certain other matters and are subject to the terms and restrictions of the
Certification of Incorporation.
10. REPRESENTATIONS OF THE SELLER. The Seller represents and warrants
that (i) it has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated herein, and (ii) this Agreement is a valid and binding agreement of
it, enforceable against it in accordance with its terms except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting creditors' rights,
and for the limitations imposed by general principles of equity. Seller also
represents that upon purchase of the Shares, Buyer will be the owner of the
Shares free and clear of any claims, liens, encumbrances and security interests,
except as may exist by reason of the Certificate of Incorporation or this
Agreement.
7
<PAGE>
11. GOVERNING LAW. All terms of and rights under this Agreement shall be
governed by and construed in accordance with the internal law of the State of
New York, without giving effect to principles of conflicts of law.
12. NOTICES. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered, telexed or telecopied to, or, if mailed,
when received by, the other party at the following addresses (or at such other
address as shall be given in writing by either party to the other):
If to the Company to:
Falcon Building Products, Inc.
Two North Riverside Plaza, Suite 1100
Chicago, Illinois 60606
Attention: General Counsel
With a required copy (which shall not constitute notice to the
principal) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 47th Floor
New York, New York 10166
Attention: Charles K. Marquis, Esq.
If to Buyer, to the address set forth on the signature page hereof.
If to the Seller to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 47th Floor
New York, New York 10166
Attention: Charles K. Marquis, Esq.
13. AMENDMENTS AND WAIVERS. This Agreement may be amended, and any
provision hereof may be waived, only by a writing signed by the party to be
charged.
14. CAPITALIZATIONS, EXCHANGES, ETC. AFFECTING SECURITIES; ADJUSTMENT OF
COST.
(a) The provisions of this Agreement shall apply to any and all
shares of capital stock of the Company or any successor or assign of the Company
that may be issued in respect of, in exchange for, or in substitution of, the
Securities by reason of any stock dividend, stock split, stock issuance, reverse
stock split, combination, recapitalization, reclassification, merger,
consolidation or otherwise. Nothing herein shall prohibit or restrict the
Company from taking any corporate action, including, without limitation,
declaring any dividend (whether in cash or stock),
8
<PAGE>
or engaging in any corporate transaction of any kind, including, without
limitation, any merger, consolidation, liquidation or sale of assets.
(b) In the event of any stock dividend, stock split, stock issuance,
reverse stock split, combination, recapitalization, reclassification, merger,
consolidation or similar event as a result of which Buyer holds a lesser or
greater number of Securities and/or other securities, the Cost of a share or
other security shall be appropriately adjusted, provided that the aggregate Cost
of all Securities held by Buyer immediately after such event is equal to the
aggregate Cost of all Securities held by Buyer immediately prior to such event.
15. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and supersedes
all prior oral and written and all contemporaneous oral discussions, agreements
and understandings of any kind or nature.
16. SEPARABILITY. In the event that any provision of this Agreement is
declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the
extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of this Agreement shall not be affected except to the
extent necessary to reform or delete such illegal, invalid or unenforceable
provision.
17. HEADINGS. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
19. FURTHER ASSURANCES. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.
20. REMEDIES. In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is hereby waived.
21. NOT AN EMPLOYMENT CONTRACT. Nothing in this Agreement or any other
instrument executed pursuant hereto shall confer upon Buyer any right to
continue in the employ of the Company or any Subsidiary or shall affect the
right of the Company or any Subsidiary to terminate the employment of Buyer with
or without Cause.
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<PAGE>
22. ARBITRATION. The parties shall use their best efforts and good will
to settle all disputes by amicable negotiations. Except as otherwise provided
in Section 4(b), any claim, dispute, disagreement or controversy that arises
among the parties relating to this Agreement that is not amicably settled shall
be resolved by arbitration, as follows:
(a) Any such arbitration shall be heard in New York, New York, before
a panel consisting of one (1) to three (3) arbitrators, each of whom shall be
impartial. Except as the parties may otherwise agree, all arbitrators shall be
appointed in the first instance by the President of the Association of the Bar
of the City of New York or, in the event of his unavailability by reason of
disqualification or otherwise, by the Chairman of the Executive Committee of the
Association of the Bar of the City of New York. In determining the number and
appropriate background of the arbitrators, the appointing authority shall give
due consideration to the issues to be resolved, but his decision as to the
number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by any party to this Agreement by
the service of a written Request for Arbitration upon the other affected
parties. Such Request for Arbitration shall summarize the controversy or claim
to be arbitrated, and shall be referred by the complaining party to the
appointing authority for appointment of arbitrators ten (10) days following such
service or thereafter. If the panel of arbitrators is not appointed by the
appointing authority within thirty (30) days following such reference, any party
may apply to any court within the State of New York for an order appointing
arbitrators qualified as set forth below. No Request for Arbitration shall be
valid if it relates to a claim, dispute or controversy that would have been time
barred under the applicable statute of limitations had such claim, dispute,
disagreement or controversy been submitted to the Supreme Court of the State of
New York.
(c) All attorneys' fees and costs of the arbitration shall be borne
by the respective party incurring such costs and fees. The parties hereby
expressly waive punitive damages, and under no circumstances shall an award
contain any amount that in any way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
(e) It is intended that controversies or claims submitted to
arbitration under this Section shall remain confidential, and to that end it is
agreed by the parties that neither the facts disclosed in the arbitration, the
issues arbitrated, nor the views or opinions of any persons concerning them,
shall be disclosed to third persons at any time, except to the extent necessary
to enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration.
23. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns.
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IN WITNESS WHEREOF, this Agreement is entered into as of the date first
above written.
Falcon Building Products, Inc.
By:
---------------------------------
Its:
---------------------------------
"Buyer"
By:
---------------------------------
Name:
--------------------------------
Number of Shares of Class C
Stock to be acquired by Buyer:
__(Blank 1)____ plus
the number of shares, if any, by which the
number of shares of Class A Common Stock of
the Company the Buyer elected to retain in the
Merger is reduced below _(Blank 2)_ shares by
virtue of the proration procedures applicable
to Electing Shares as defined in the Merger
Agreement.
FBP Limited
By:
---------------------------------
Its:
---------------------------------
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SCHEDULE OF TERMS OF INDIVIDUAL STOCKHOLDER AGREEMENTS
------------------------------------------------------
Buyer Blank 1 Blank 2
William E. Allen 100 14,549
Gus J. Athas 100 14,549
Sam A. Cottone 100 14,549
Edward G. Finnegan, Jr. 13,649 1,000
Paul Fischer 100 14,549
Mark Haddock 5,600 0
William K. Hall 11,168 75,000
Lawrence B. Lee 7,500 7,149
William Menke 5,600 0
Anthony J. Navitsky 10,000 0
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<PAGE>
EXHIBIT 10.20
STOCKHOLDER RIGHTS AGREEMENT
THIS STOCKHOLDER RIGHTS AGREEMENT (this "Agreement") is entered into as of
June 17, 1997, by and among FALCON BUILDING PRODUCTS, INC., a Delaware
corporation (the "Company"), EQUITY HOLDINGS LIMITED, an Illinois limited
partnership ("EHL"), FBP Acquisition Corp., Inc., a Delaware corporation
("MergerCo"), INVESTCORP INVESTMENT EQUITY LIMITED, a Cayman Islands corporation
("IIEL"), and the other holders of Class D Common Stock of MergerCo (IIEL and
each such other holder individually a "Class D Stockholder" and collectively the
"Class D Stockholders").
R E C I T A L S
A. The Company and MergerCo have entered into an Agreement and Plan of
Merger Agreement (the "Merger Agreement"), dated as of March 20, 1997, pursuant
to which MergerCo will be merged with and into the Company upon the terms and
conditions set forth therein (the "Merger") and, among other things, the shares
of Class D Common Stock of MergerCo held by the Class D Stockholders will be
converted into shares of Class D Stock of the Company.
B. Pursuant to the Merger Agreement, EHL will, as of immediately after
the closing of the Merger, retain ownership of 861,683 shares of Class A Common
Stock of the Company or such lesser number of such shares as is determined by
the proration procedures described in Section 1.6 of the Merger Agreement (the
"EHL Shares").
C. This Agreement is being entered into pursuant to the Stockholder
Voting Agreement which was entered into by EHL, the Company and MergerCo
concurrently with the Merger Agreement.
A G R E E M E N T
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person will be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"CERTIFICATE OF INCORPORATION" means the Restated Certificate of
Incorporation of the Company in effect as of immediately following the closing
of the Merger which shall be in the form
<PAGE>
attached hereto as Exhibit A, as such Certificate may thereafter from
time to time be amended in accordance with applicable law and such
Certificate.
"COMMISSION" means the U.S. Securities and Exchange Commission and any
successor federal agency having similar powers.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended from time to time, including the various rules and regulations
promulgated by the Commission thereunder.
"INITIAL PUBLIC OFFERING" shall have the meaning ascribed to that term
in Article IV, Section 1 of the Certificate of Incorporation.
"INVESTCORP INVESTORS" means Investcorp Bank E.C. and its Affiliates
and any other investor with whom Investcorp Bank E.C. or any Affiliate thereof
has an administrative relationship.
"PERMITTED TRANSFEREE" shall mean (i) a Person acquiring EHL Shares
pursuant to Section 2, 3 or 4 hereof, (ii) a Person acquiring EHL Shares which
have previously been the subject of a Section 2(d) sale or (iii) a Person that
is an Affiliate of either EHL or a Permitted Transferee; PROVIDED, HOWEVER,
that: (A) EHL may distribute the EHL Shares to the direct and indirect partners
of EHL and such partners may contribute EHL Shares to Affiliates of such
partners (each of whom shall be a Permitted Transferee), PROVIDED that the
number of Persons to whom EHL Shares may be transferred pursuant to this clause
(A) shall not exceed 10; (B) any transfer to a Permitted Transferee other than
pursuant to clause (A) must be of at least 100,000 EHL Shares (as adjusted for
stock splits, reverse stock splits and stock dividends of 2% or more with an
effective date after the closing date of the Merger), except that where EHL or a
Permitted Transferee owns less than 100,000 EHL Shares (as so adjusted) a
transfer to a Permitted Transferee of all EHL Shares so held may be made; and
(C) no transfer to a Permitted Transferee will be effective unless and until
such Permitted Transferee has agreed in writing to be bound by this Agreement
with respect to the EHL Shares to be so transferred.
"PERSON" means an individual, limited or general partnership, joint
venture, limited liability company, corporation, trust, unincorporated
organization or a government or any department or agency thereof.
"REGISTRABLE SECURITIES", as of any date of determination, means the
EHL Shares then held by EHL and any Permitted Transferee; PROVIDED, HOWEVER,
that any particular Registrable Securities shall cease to be such when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities have been disposed
of in accordance with such registration statement, (ii) they shall have ceased
to be outstanding, or (iii) with respect to any Holder (as defined in Section
5), all such securities beneficially held by such Holder and its Affiliates may
be sold in compliance with Rule 144 under the Securities Act within a three
month period.
"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with its obligations under Section 5 hereof
including, without limitation, all Commission and any stock exchange
registration, listing, filing or NASD fees, all fees and expenses
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of complying with securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications), all word processing, duplicating and printing expenses, all
messenger and delivery expenses, the fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses
of any special audits or "comfort" letters required by or incident to such
performance and compliance, and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities and the reasonable fees
and expenses of any special experts retained in connection with the requested
registration, but excluding underwriting discounts and commissions and fees
of any counsel employed by any Holder (as defined in Section 5 hereof) other
than in-house counsel of the Company and outside counsel employed by the
Company for purposes of the registration.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, including the various rules and regulations promulgated by the
Commission thereunder.
Certain other terms are defined elsewhere in this Agreement.
SECTION 2. RIGHT OF FIRST OFFER ON EHL SHARES.
(a) In the event that EHL or any Permitted Transferee holding EHL Shares
proposes to sell any EHL Shares (the "Initiating Holder") to any Person, such
Initiating Holder shall furnish to the Company and to IIEL a written notice
specifying the number of such EHL Shares proposed to be sold, the proposed sale
price and all other material terms and conditions of the proposed sale (a
"Section 2 Sale Notice").
(b) IIEL and the Company shall each then have the irrevocable option,
exercisable by written notice to the Initiating Holder within 20 days after
receipt of a Section 2 Sale Notice, to purchase all (but not less than all) of
the EHL Shares covered by such Notice at the same price and on the same terms
and conditions as contained in such Notice (the "Option"). As between IIEL and
the Company, IIEL will have first priority with respect to the Option, and the
EHL Shares covered by such Option may be allocated between IIEL and the Company
in any amounts mutually agreed upon by IIEL and the Company.
(c) In the event that either IIEL or the Company elects to exercise the
Option (either or both, as applicable, an "Electing Offeree"), the closing of
the purchase or purchases pursuant to the exercise of such Option shall occur
at the offices of the Company on the date specified in the notice of
exercise, which date shall not be later than 30 days after receipt by the
Initiating Holder of such notice of exercise (or such earlier date, if any,
mutually agreed upon by the Initiating Holder and the Electing Offeree). At
such closing, (i) the Initiating Holder shall deliver to the Electing Offeree
the stock certificate or certificates evidencing such EHL Shares in valid
form for transfer with appropriate and duly executed assignments, stock
powers or endorsements, as the case may be, bearing any necessary documentary
stamps and accompanied by such certificates of authority, consents to
transfer or other instruments or evidences of good title of the Initiating
Holder to such Shares, free and clear of any and all claims, liens, pledges
and encumbrances, as may reasonably be requested by such Electing Offerees,
and (ii) each Electing Offeree shall pay to the Initiating Holder the
applicable purchase price.
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(d) If the Option is not validly exercised within the applicable option
period specified in Section 2(b) above or if prior to the expiration of such
option period each of IIEL and the Company shall have given the Initiating
Holder written notice that it will not exercise the Option, then the Initiating
Holder shall be free, for a period of 90 days beginning on earlier of the day
after the expiration of such option period or the date on which the Initiating
Holder shall have received such notices of non-election, as applicable, to sell
such EHL Shares to any other purchaser or purchasers at prices, terms and
conditions no less favorable to the Initiating Holder than those contained in
the Section 2 Sale Notice; PROVIDED that (i) any such other purchaser or
purchasers agree in writing to be bound by all provisions of this Agreement
applicable to the Initiating Holder to the extent such provisions by their terms
continue in effect; (ii) the minimum number of such EHL Shares that may be so
sold to any such purchaser shall be 100,000 EHL Shares (as adjusted for stock
splits, reverse stock splits and stock dividends of 2% or more with an effective
date after the closing date of the Merger); and (iii) in no event shall the
total number of Persons holding EHL Shares as a result of sales pursuant to this
Section 2(d) exceed 5 Persons.
(e) No transfer, assignment or other disposition of any EHL Shares
(including without limitation any transfer, assignment or other disposition by
operation of law) may be made by EHL or a Permitted Transferee, other than a
transfer by EHL to a Permitted Transferee or by a Permitted Transferee to
another Permitted Transferee; PROVIDED that, subject to the prior written
consent of IIEL (which consent shall not be unreasonably withheld), EHL or a
Permitted Transferee may pledge EHL Shares in a bona fide credit transaction
with an unaffiliated financial institution.
(f) Any EHL Shares sold pursuant to Section 2(d) shall upon closing of
such sale no longer be subject to the provisions of Section 2(a), (b), (c), (d)
and (e) hereof.
(g) The transfer restrictions imposed on EHL Shares by this Section 2 are
in addition to any restrictions applicable to such EHL Shares which are
contained in the Company's Certificate of Incorporation.
(h) The provisions of this Section 2 do not apply to any sale pursuant to
Section 4 or Section 3 hereof.
(i) The provisions of this Section 2 shall expire and be of no further
force and effect at the earlier of (x) the Initial Public Offering or (y) the
closing of a Section 4 Transaction (as defined in Section 4).
SECTION 3. RIGHT TO PARTICIPATE IN SALE.
(a) In the event that, during the period beginning immediately after the
closing of the Merger and ending upon the Initial Public Offering, one or
more Class D Stockholders propose to engage in a sale or series of related
sales of equity interests in the Company which is not a "Tag-Along Transfer"
within the meaning of Article IV of the Certificate of Incorporation, but
such sale would result in a transfer of a majority of the voting power of the
Company (a "Section 3 Sale") to a purchaser who is not an Investcorp Investor
(a "Section 3 Purchaser"), then EHL and any Permitted Transferee holding EHL
Shares shall be given the right to participate in such Section 3 Sale at the
same price and on the same terms and conditions as the Class D Stockholders
of the Company participating in such transaction, up to the Pro Rata EHL
Share Amount (as defined below)
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applicable to EHL and each such Permitted Transferee. As used in this
Section 3, "Pro Rata EHL Share Amount" applicable to a holder of EHL Shares
shall mean the number of whole EHL Shares (disregarding any fractional share)
derived by multiplying (x) the total number of EHL Shares held by such holder
by (y) a fraction, the numerator of which is the total number of outstanding
shares of capital stock of the Company (other than EHL Shares) to be included
in the Section 3 Sale and the denominator of which is the total number of
outstanding shares of capital stock held by stockholders of any class of
capital stock (other than holders of EHL Shares) who are participating as
sellers in the Section 3 Sale.
(b) The Class D Stockholders proposing to engage in a Section 3 Sale shall
notify, or cause to be notified, EHL and each Permitted Transferee holding EHL
Shares in writing of each Section 3 Sale at least 30 days prior to the scheduled
closing of the Section 3 Sale. Such notice (the "Section 3 Sale Notice") shall
set forth the following: (i) the total number of shares of Company capital
stock, by class, to be included in the Section 3 Sale, (ii) the applicable Pro
Rata EHL Share Amount for each holder of EHL Shares then having rights under
this Section 3 and the basis on which each such Amounts have been calculated,
(iii) the consideration per share to be paid by the Section 3 Purchaser, (iv) a
summary of other material terms and conditions of the Section 3 Sale and an
estimate of anticipated expenses, (v) that the Section 3 Purchaser has been
informed of the participation rights under this Section 3 and has agreed to
purchase EHL Shares up to the applicable Pro Rata EHL Share Amounts to the
extent holders of such EHL Shares elect to participate and (vi) the name and
address of the person to whom such holders of EHL Shares should direct their
election notices as provided in Section 3(c) below.
(c) (i) The participation rights granted pursuant to this Section 3
may be exercised by holders of such rights by delivery of a written notice (the
"Section 3 Election Notice") to the person designated in the Section 3 Sale
Notice within 15 days following receipt of such Notice (each holder of such
participation rights who so elects is referred to herein as an "Electing
Holder"). The Section 3 Election Notice shall state either (A) that the
Electing Holder elects to include in such sale its full Pro Rata EHL Share
Amount or (B) if such Electing Holder elects to include in such Sale a lesser
number of shares, such lesser number of shares (the amount so included, the
"Included EHL Shares").
(ii) The Section 3 Election Notice shall constitute a binding
agreement by the applicable Electing Holder to sell the Included EHL Shares
in the Section 3 Sale on the terms and conditions specified in the Section 3
Sale Notice. In addition, by delivering the Section 3 Election Notice, such
Electing Holder agrees to the following: (A) prior to the closing of any
such Sale, to execute and deliver (or cause to be executed and delivered) any
purchase agreement or other documentation required by the Section 3 Purchaser
to consummate the Sale which purchase agreement and other documentation shall
be on terms no less favorable in respect of any material term to such
Electing Holder than those executed by the other Company stockholders
participating in such Sale PROVIDED that no Electing Holder shall be required
to make any representation or warranty or undertake any liability in any such
purchase agreement or otherwise in connection with a Section 3 Sale other
than representations and warranties as to its ownership and authority to
transfer the Included EHL Shares, free and clear of all liens and
encumbrances and in compliance with all applicable laws and (B) at the
closing of any such Sale, deliver to the Section 3 Purchaser the
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certificate or certificates representing the Included EHL Shares, duly
endorsed for transfer with signatures guaranteed, against receipt of the
purchase price therefor.
(iii) If no Section 3 Election Notice is received by the person
designated in the Section 3 Sale Notice to receive such Election Notice within
the time period specified in Section 3(c)(i) above, the other selling
stockholders participating in the Section 3 Sale shall have the right for a
120-day period to sell to the Section 3 Purchaser up to the number of shares
designated as proposed for sale in the Section 3 Sale Notice on terms and
conditions no more favorable in any material respect to such stockholders than
those stated in such Notice.
(d) Each holder of Included Shares shall be required to bear its PRO RATA
share, based on the number of total shares included in such Sale by all Company
stockholders, of the expenses of the transaction, including without limitation
legal, accounting and investment banking fees and expenses.
(e) The provisions of this Section 3 shall not apply to any EHL Shares
that have previously been the subject of a completed Section 3 Sale nor shall
the holder of any such EHL Shares have the right, pursuant to this Agreement, to
participate in any subsequent Section 3 Sale.
(f) The provisions of this Section 3 shall not apply to sales by a Class D
Stockholder to any Affiliate of any Class D Stockholder or to any Investcorp
Investor.
SECTION 4. RIGHT TO CAUSE SALE.
(a) If, after the Initial Public Offering, the Investcorp Investors
determine to sell, in one transaction or a series of related transactions, 85%
or more in the aggregate of their respective equity interests in the Company (a
"Section 4 Transaction") to a purchaser who is not an Investcorp Investor or to
a group of purchasers who are not Investcorp Investors (the "Section 4
Purchaser"), then IIEL shall have the right to in its sole discretion require
EHL and any Person who became a Permitted Transferee prior to the Initial Public
Offering, to the extent either of them then beneficially own EHL Shares, to sell
all of their remaining equity interests in the Company as a part of the Section
4 Transaction at the same price and on the same terms and conditions as are
applicable to the other Investcorp Investors participating in such Transaction;
PROVIDED that no Holder of EHL Shares shall be required to make any
representation or warranty or undertake any liability in connection with such
Section 4 Transaction other than representations and warranties as to its
ownership and authority to transfer the EHL Shares, free and clear of all liens
and encumbrances and in compliance with all applicable laws; and PROVIDED
FURTHER that such right to require EHL and any such Permitted Transferee to sell
their remaining equity interests in the Company shall be available only so long
as the equity interests in the Company beneficially held by Investcorp Investors
represent an aggregate equity position in the Company equal to or
greater than 50% of the aggregate equity position that Investcorp Investors
beneficially held as of immediately after the closing of the Merger.
(b) In the event that both Sections 3 and 4 apply to a single transaction
or to a series of related transactions, the rights set forth in this Section 4
will have priority over the rights set forth in Section 3 above, and the rights
set forth in Section 3 above will become exercisable by EHL (and Permitted
Transferees, if any) following a determination by IIEL not to exercise its right
under this Section 4. IIEL will provide written notice to EHL and each
Permitted Transferee of such determination at least 15 days prior to the
scheduled closing of the Transaction.
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(c) In the event that IIEL exercises its right to require EHL and any
Permitted Transferee to sell their remaining equity interests in the Company in
a Section 4 Transaction, IIEL will cause EHL and any such Permitted Transferee
to receive written notice thereof (a "Section 4 Notice") not less than 20 days
prior to the scheduled closing date of the Section 4 Transaction. The Section 4
Notice shall state the following: (1) the name and address of the Section 4
Purchaser, (ii) the number of shares of each class of capital stock to be sold
in the Section 4 Transaction, (iii) the amount and form of consideration to be
paid for such shares, (iv) a summary of the material terms and conditions of the
Section 4 Transaction, (v) that the conditions to the right of IIEL to require
the sale of such remaining equity interests in the Company in the Section 4
Transaction have been satisfied, (vi) that the Section 4 Purchaser has agreed to
purchase such remaining equity interests in the Company as a part of the Section
4 Transaction, and (vii) the name and address of the person to whom the holders
of such remaining interests should send their stock certificates and with whom
the holders of such remaining interests should otherwise communicate with
respect to the Section 4 Transaction. Upon receipt of a Section 4 Notice, EHL
and each such Permitted Transferee shall take all steps necessary to facilitate
the prompt closing of the Section 4 Transaction.
(d) Without limiting any rights or remedies available to any party hereto
against EHL and any such Permitted Transferee for any breach of this Section 4,
it is expressly agreed that the Section 4 Purchaser and the Company shall each
have the right to enforce the rights of IIEL under this Section 4 and to seek
any available remedies against EHL and any such Permitted Transferee for breach
of this Section 4.
SECTION 5. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION.
(i) WRITTEN REQUEST. If, prior to the date which is 5 years
from the closing of the Merger, the Initial Public Offering has not occurred,
then, at any time after such fifth anniversary until such time as the Initial
Public Offering has occurred, the holders of Registrable Securities (each for
purposes of this Section 5, a "Holder," and collectively the "Holders")
representing at least 75% of the EHL Shares shall have the right, exercisable
only once, to require the Company to register under the Securities Act such
number of Registrable Securities as such Holders shall designate for sale in a
written request (the "Demand Registration Notice") to the Company (the "Demand
Registration").
(ii) DEMAND REGISTRATION.
(A) If the Demand Registration is requested pursuant to
Section 5(a)(i) hereof, the Company agrees to use its reasonable best
efforts to cause to be filed at the earliest possible date, and in no
event later than one-hundred twenty (120) days from the receipt of such
request, and declared effective a registration statement providing for
the sale by the Holders of such Registrable Securities as are designated
for sale in the Demand Registration Notice on an appropriate
registration form pursuant to the Securities Act. A registration shall
not count as a Demand Registration until it has become effective;
PROVIDED that all of the other obligations of the Company to the Holders
with respect to such Demand Registration will remain in effect whether
or not such registration is counted as the Demand Registration; and
PROVIDED FURTHER that, after filing of a registration statement pursuant
to a
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Demand Registration Notice until such time as such registration
statement becomes effective, the Holders of a majority of the
Registrable Securities included therein may by written notice to the
Company request that such registration statement be withdrawn, and the
Company shall thereafter promptly notify the appropriate staff of the
Commission that such registration statement (and any request for
acceleration of effectiveness thereof) are being withdrawn, but if such
Holders elect to cause such a withdrawal then the Holders of Registrable
Securities shall not be entitled to initiate another Demand Registration
until 6 months after such withdrawal and any subsequently filed
registration statement pursuant to a Demand Registration will count as
the Demand Registration if the reason it does not become effective is
due to another withdrawal request by Holders.
(B) The Company shall be entitled to postpone for a reasonable
period of time (not exceeding twelve (12) months) the filing of a
registration statement pursuant to the Demand Registration if, within
ten (10) business days after the Company receives the Demand
Registration Notice, the Company shall furnish to the Holders making
such request a certificate signed by the President of the Company
stating that in the good faith belief of a majority of the Board of
Directors, it would be in the best interests of the Company and its
stockholders to defer the filing required hereunder. Such certificate
shall summarize the reasons for such good faith belief, and such Holders
shall be entitled to discuss the reasons given with the entire Board of
Directors.
(C) The Company will not, without the written consent of a
majority in interest of the Holders, include in any Demand Registration
securities for sale for the account of any Person other than the
Holders, except that the Company may include securities held by other
holders whose contractual registration rights (now existing or hereafter
granted) give them the right to be so included ("Other Rights Holders").
(D) In the event that a Demand Registration is proposed by the
Holders to be effected through an underwritten offering (x) the
provisions of Section 5(b)(i)(A) or (B), as applicable, shall govern
such Demand Registration, (y) (I) the Company shall have the right in
its sole discretion to select the managing underwriter if 50% or more of
the shares to be included in such offering will be sold for the account
the Company and (II) in connection with any other Demand Registration
which is to be an underwritten offering, the holders of a majority of the
shares to be included therein pursuant to contractual registration rights
(now existing or hereafter granted) shall have the right to select the
managing underwriter and, in the absence of such a majority designation,
the managing underwriter will be selected by the Company subject to the
consent of the Holders of a majority of the Registrable Securities to be
included therein, which consent will not be unreasonably withheld; and
(z) the Company shall make available its senior management to provide
reasonable and customary assistance to the underwriters in connection
with the marketing of the securities included therein.
(b) COMPANY REGISTRATION.
(i) As long as EHL and Permitted Transferees, in the
aggregate, beneficially own Registrable Securities comprising at least
two percent (2%) of the outstanding equity securities of the Company, if
the Company proposes to file a registration statement with respect to
equity securities of the Company (other than a registration statement on
Form S-8 or S-4 or comparable successor
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forms or a registration statement relating to a dividend reinvestment
plan), which is available for use for Registrable Securities, under the
Securities Act, then the Company shall give written notice of such
proposed filing to each Holder at least 30 days before the anticipated
filing date of such registration statement, and such notice shall offer
each Holder the opportunity to include in such registration statement
the Registrable Securities then owned by such Holder, as such Holder may
request in writing within 15 days after receipt of the Company's notice
(which request shall specify the number of Registrable Securities to be
included in such registration statement and the intended method of
disposition). The Company shall include in any such registration
statement all such Registrable Securities requested to be included.
Notwithstanding the foregoing:
(A) if (x) the registration statement relates to an
underwritten offering which includes equity securities of the Company to
be offered and sold for the account of the Company and (y) the managing
underwriter of any such offering advises the Company in writing that the
total number of shares which the Company, the Holders and the Other
Rights Holders intend to include in such offering is sufficiently large
to affect materially and adversely the ability of such underwriter to
complete successfully an offering that does not significantly and
adversely impact the market price of the equity securities being
offered, then the number of Registrable Securities to be included in
such registration statement and offering for the account of the Holders
shall be reduced, PRO RATA with the number of shares to be so included
for the account of the Other Rights Holders, so that the aggregate
amount of shares included in such registration statement and offering
for the account of Holders and the Other Rights Holders does not exceed
the amount that such managing underwriter determines in good faith can
be sold in such offering without materially and adversely affecting the
ability of such managing underwriter to complete successfully such
offering without significantly and adversely affecting the market price
of the equity securities being offered; and
(B) if (x) the registration statement relates to an
underwritten offering which does not include equity securities of the
Company to be sold for the account of the Company and (y) the managing
underwriter advises the Holders and the Other Rights Holders who have
requested that shares be included therein that the total number of shares
which the Holders and the Other Rights Holders intend to include in such
offering is sufficiently large to affect materially and adversely the
ability of such underwriter to complete successfully an offering that
does not significantly and adversely affect the market price of the equity
securities being offered, then the number of Registrable Securities to be
included in such registration statement and offering for the account of
the Holders shall be reduced, PRO RATA with the number of shares to be so
included for the account of the Other Rights Holders, so that the
aggregate amount of shares included in such registration statement and
offering for the account of Holders and the Other Rights Holders in the
aggregate does not exceed the amount that such managing underwriters
determine in good faith can be sold in such offering without materially
and adversely affecting the ability of such managing underwriter to
complete successfully such offering without significantly and adversely
affecting the market price of the equity securities being offered.
(ii) The Company may require each Holder to furnish to the
Company information regarding such Holder and the disposition of such Holder's
Registrable Securities, and Holders shall
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furnish such information to the Company and any other information as the
Company may reasonably request.
(iii) In connection with any registration pursuant to this Section
5(b) which relates to a proposed underwritten offering which includes equity
securities of the Company to be sold for the account of the Company, the Company
shall have the right in its sole discretion to select the managing underwriter.
In connection with any other registration pursuant to this Section 5(b) which
relates to a proposed underwritten offering, holders of a majority of the shares
to be included therein pursuant to contractual registration rights (now existing
or hereafter granted) shall have the right to select the managing underwriter
and, in the absence of such a majority designation, the managing underwriter
will be selected by the Company.
(c) REGISTRATION PROCEDURES. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 5(a) or (b) hereof, the Company will as expeditiously as
possible:
(i)(A) prepare and file with the Commission a registration
statement with respect to such Registrable Securities, (B) promptly respond to
all comments received with respect to such registration statement and make and
file all amendments thereto deemed necessary by the Company's legal counsel, and
(C) thereafter use its reasonable best efforts to cause such registration
statement to become effective; PROVIDED, HOWEVER, that the Company shall not be
required to cause such registration statement to become effective if the
Company's legal counsel delivers a reasoned written opinion to the Company that
it is likely that the Commission will commence proceedings either to issue an
order under Section 8(b) of the Act refusing to permit such registration
statement to become effective or to issue a stop order under Section 8(d) of the
Act suspending the effectiveness of such registration statement;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
accurate and effective and to comply with the provisions of the Act with
respect to the disposition of all Registrable Securities and other securities
covered by such registration statement until the earlier of such time as all
of such Registrable Securities have been disposed of by the Holder or Holders
thereof set forth in such registration statement or for the longer of (A)
nine months or (B) if the Company is eligible to conduct a continuous
secondary offering pursuant to Rule 415 under the Act, two years; and will
furnish to each such Holder at least 2 business days prior to the filing
thereof a copy of any amendment or supplement to such registration statement
or prospectus and shall not file any such amendment or supplement to which
any such Holder shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Act or of the rules or regulations thereunder;
(iii) furnish to each Holder of such Registrable Securities such
number of conformed copies of such registration statement and of each such
amendment thereof and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Act, such documents, if any,
incorporated by
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reference in such registration statement or prospectus, and such other
documents as such seller may reasonably request;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and do any and all other
acts and things that may be necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of its Registrable Securities
covered by such registration statement, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this subdivision (iv) be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of process
in any such jurisdiction;
(v) if such registration statement relates to an underwritten
written offering, obtain and furnish to each Holder a signed counterpart,
addressed to such Holder, of the legal opinions and accountants' comfort letters
which are to be delivered to the underwriters;
(vi) promptly notify each Holder of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the Company shall promptly prepare a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(vii) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month of the first fiscal quarter after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder;
(viii) if the Common Stock of the Company is listed on a national
securities exchange or quoted on NASDAQ, use its best efforts to comply with the
requirements of such exchange or NASDAQ to include shares of Registrable
Securities covered by such registration statement for listing on each such
securities exchange or for quotation on NASDAQ.
(ix) if requested by Holder or the managing underwriters retained
in the case of a Demand Registration, and subject to the reasonable judgment of
the Company and its counsel and to applicable law, promptly include in a
prospectus supplement or post-effective amendment such information concerning
Holder, Holder's Registrable Securities covered thereby and/or the intended
method of distribution of such Registrable Securities which is furnished to the
Company by Holder
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or in writing and expressly for use in the prospectus, and
promptly make all required filings of such prospectus supplement or
post-effective amendment; and
(x) make available, upon reasonable notice and during business
hours, for inspection by Holder, any underwriters participating in any
disposition pursuant to such registration statement (in the case of a Demand
Registration only), and any attorney, accountant or other agent retained by
Holder, if any, or such underwriters, pertinent financial and other records,
corporate documents and properties of the Company as shall be reasonably
necessary to enable them to exercise their due diligence responsibility.
The Company may require each Holder of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such Holder and the distribution of such securities as the Company may from time
to time reasonably request in writing and as shall be required by law or by the
Commission in connection therewith.
(d) UNDERWRITING AGREEMENT. If requested by the underwriters for any
underwritten offering of Registrable Securities on behalf of Holders pursuant
to a registration requested under Section 5(b) hereof, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to contain representations and warranties by the Company and other
terms and provisions not inconsistent with this Section 5 as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities to the effect and to the extent
provided in Section 5(g) hereof, and the Company will cooperate with such
Holders to the end that the conditions precedent to the obligations of such
Holders under such underwriting agreement shall not include conditions that
are not customary in underwriting agreements with respect to secondary
distributions and shall be otherwise satisfactory to such Holders. Holders
on whose behalf shares are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters, shall also be made to and for the
benefit of such Holders. Such Holders shall not be required by the Company
to make any representations or warranties to or agreements with the Company
or the underwriters other than reasonable representations, warranties or
agreements regarding such Holder, such Holders' Registrable Securities and
such Holders' intended method or methods of disposition and any other
representation required by law.
(e) LOCK-UP. EHL and each Permitted Transferee shall, if and to the
extent requested in writing by the managing underwriter of the Initial Public
Offering, not sell or transfer (other than as part of such Offering) any equity
securities of the Company or any securities convertible into, or exercisable or
exchangeable for, such equity securities within the period of 180 days after the
effective date of the registration statement relating to such Offering or such
shorter period as may be acceptable to such managing underwriter; PROVIDED that,
if any selling stockholders are participating in the Initial Public Offering,
the foregoing obligation is conditioned on EHL and each such Permitted
Transferee, to the extent they are Holders of Registrable Securities, being
given the opportunity to participate in the registration relating to the Initial
Public Offering pursuant to and subject to the limitations contained in Section
5(a) or 5(b) hereof, as applicable.
12
<PAGE>
(f) REGISTRATION EXPENSES. The Company agrees to pay, in connection with
each registration of Registrable Securities requested pursuant to Section 5(a)
or 5(b) hereof, all Registration Expenses.
(g) INDEMNIFICATION AND CONTRIBUTION.
(i) INDEMNIFICATION BY COMPANY. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, each of its
officers, directors, employees and partners, and each Person who controls
such Holder within the meaning of Section 15 of the Securities Act and
Section 20(a) of the Exchange Act (each a "Stockholder Indemnified Party")
against any and all losses, claims, damages, liabilities or expenses, joint
or several (collectively, "Damages") to which they or any of them may become
subject: (i) under the Securities Act, the Exchange Act, or otherwise,
insofar as such Damages (or actions in respect thereof) arise out of or are
based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus, preliminary prospectus
or any amendment to any of the foregoing, or arise out of or are based upon
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
or (ii) as a result of or in connection with any violation of applicable
Federal, state or foreign laws or regulations (collectively, "Laws") by the
Company (other than as a result of any act committed by or omission of a
Stockholder Indemnified Party without the Company's approval) or any of the
Company's employees, officers or directors in connection with any such
registration; PROVIDED, HOWEVER, that the Company will not be liable if any
such Damages arise out of or are based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such Stockholder Indemnified Party in a signed
document stating that such information is specifically for use therein;
PROVIDED, FURTHER, that the foregoing indemnity is subject to the condition
that, insofar as it related to any untrue statement, alleged untrue
statement, omission or alleged omission made in a preliminary prospectus but
eliminated or remedied in the final prospectus (filed pursuant to Rule 424(b)
under the Securities Act), such indemnity shall not inure to the benefit of
the Holders from whom the Person asserting any Damages purchased the
Registrable Securities which are the subject thereof, if copies of such final
prospectus were delivered to such Holder on a timely basis and such Holder
did not deliver to such Person the final prospectus with or prior to the
written confirmation for the sale of such Registrable Securities to such
Person. In connection with an underwritten offering, the Company will
indemnify the underwriters thereof to the same extent as provided above with
respect to the indemnification of Stockholder Indemnified Parties and use
their reasonable best efforts to obtain a reciprocal and mutual indemnity
from the underwriters. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Stockholder
Indemnified Party and shall survive any transfer by the same of the
Registrable Securities of the Holders.
(ii) INDEMNIFICATION BY HOLDERS. Each Holder will furnish to the
Company in writing such information and affidavits with respect to such Holder
as the Company reasonably requests for use in connection with any registration
statement or prospectus to be filed or used under this Agreement and each of
them agrees to indemnify and hold harmless to the fullest extent permitted by
law, the Company, each person who signed the registration statement, and each
Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a)
13
<PAGE>
of the Exchange Act (each, a "Company Indemnified Party" and, collectively
with Stockholder Indemnified Parties, the "Indemnified Parties") against joint
or several Damages to which they or any of them may become subject: (i) under
the Securities Act, the Exchange Act or otherwise, insofar as such Damages
(or actions in respect thereof) arise out of or are based upon any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus, preliminary prospectus or any amendment thereof or
supplement thereto, or arise out of or are based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any Damages arise out of or are based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information furnished in writing by a Holder to the Company in a signed
document stating that such information is specifically for use therein; or (ii)
as a result of or in connection with any violation of applicable Laws by a
Holder (other than as a result of any act committed by or omission of a Company
Indemnified Party) or any general or limited partners, employees, officers or
directors of such Holder in connection with any such registration. This
indemnity will be in addition to any liability which a Holder may otherwise
have, including any under this Agreement. Notwithstanding the foregoing, the
liability of a Holder, except for any liability resulting from the willful
misconduct or intentional action of such Holder, shall not exceed an amount
equal to the proceeds realized by such Holder of Registrable Securities sold as
contemplated herein.
(iii) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by an Indemnified Party under subsection (a) or (b) above of notice
of the commencement of any action, such Indemnified Party shall, if a claim
in respect thereof is to be made against the indemnifying party under such
subsection, notify each party against whom indemnification is to be sought in
writing at the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which such party
may have under this Section 5(f) except to the extent that the indemnifying
party has been prejudiced in any material respect by such failure or from any
liability which such party may have otherwise). In case any such action is
brought against any Indemnified Party, and the Indemnified Party notifies an
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party, if any, so notified, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the
indemnifying party to such Indemnified Party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonably costs
of investigation. Notwithstanding the foregoing, the indemnified party shall
have the right to employ its counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such
action, or (ii) the indemnifying party shall not have employed counsel to
take charge of the defense of such action within a reasonable time after
notice of the commencement of the action. Anything in this subsection to the
contrary notwithstanding: (A) an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
and (B) no indemnifying party shall, without the consent of the Indemnified
Party, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
14
<PAGE>
(iv) CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in this Section 5(g) is
for any reason held to be unavailable or is insufficient to hold harmless an
Indemnified Party, then the indemnifying party and the Indemnified Party shall
contribute to the aggregate Damages of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting from Damages
suffered by the indemnifying party any contribution received by the indemnifying
party from Persons, other than the Indemnified Party, who may also be liable for
contribution, including Persons who control the indemnifying party within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act) to which the indemnifying party, on the one hand, and the Indemnified
Party, on the other hand, may be subject, in such proportions as is appropriate
to reflect the relative fault of the indemnifying party, on the one hand, and
the Indemnified Party, on the other hand, in connection with the statements or
omissions which resulted in Damages, as well as any other relevant equitable
considerations.
The relative fault of the parties shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by a party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties agree that it would not be just and
equitable if contribution pursuant to this Section 5(g)(iv) was determined by
PRO RATA allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding
the foregoing, (i) any underwriting agreement entered into pursuant hereto
may provide that in no case shall any underwriter (except as may be provided
in any agreement among underwriters) be liable or responsible for any amount
in excess of the underwriting discount applicable to the Registrable
Securities purchased by such underwriters, and (ii) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section
5(g)(iv), notify such party or parties from which contribution may be sought
of any obligation it or they may have under this Section 5(g)(iv) or
otherwise. No party shall be liable for contribution with respect to any
action or claim settled without its consent, which consent may not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the
liability of a Holder except for any liability resulting from the willful
misconduct or intentional action of such Holder shall not exceed an amount
equal to the proceeds realized by such Holder of Registrable Securities sold
as contemplated herein.
(h) RULE 144 SALES.
(i) COMPLIANCE. The Company covenants that, so long as it is
subject to the reporting requirements of the Exchange Act, it will use its
reasonable best efforts to file the reports required to be filed by it under the
Exchange Act so as to enable any Holder to sell Registrable Securities pursuant
to Rule 144 under the Securities Act.
15
<PAGE>
(ii) COOPERATION WITH HOLDERS. In connection with any sale,
transfer or other disposition by any Holder of any Registrable Securities
pursuant to Rule 144 under the Securities Act, the Company shall, to the extent
permissible under applicable law, cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Securities to be issued at least two business
days prior to any sale of such Registrable Securities for such number of shares
and registered in such names as the Holder may reasonably request upon ten (10)
business days prior notice. The Company's obligation set forth in the previous
sentence shall be subject to the delivery, if reasonably requested by the
Company or its transfer agent, by counsel to such Holder (which counsel shall be
reasonably acceptable to the Company and its transfer agent), in form and
substance reasonably satisfactory to the Company and its transfer agent, of an
opinion that such Securities Act legend need not appear on such certificate.
SECTION 6. INFORMATION RIGHTS.
(a) From and after the closing of the Merger and so long as EHL
beneficially owns (x) at least 90% of the EHL Shares held by it immediately
after the closing of the Merger and (y) at least 5% of the outstanding equity
securities of the Company (clauses (x) and (y) together, the "EHL Retention
Condition"), the Company shall, on a timely basis, furnish EHL with annual and
quarterly reports concerning the Company the content of which will be
substantially as would be required to be publicly disclosed by an issuer whose
securities are registered under Section 12 of the Exchange Act.
(b) So long as the EHL Retention Condition remains satisfied, the Company
shall, on a timely basis, furnish EHL with the written materials that the
Company submits to the members of its Board of Directors if either of the
following shall have occurred and is continuing: (A) a payment default under
any of the Company's material debt agreements shall have occurred and is
continuing; or (B) the fifth anniversary of the closing of the Merger shall have
occurred and no Initial Public Offering shall have been consummated. During any
period when EHL is entitled to receive Board materials in accordance with this
Section 6, EHL shall be entitled to have one representative attend as an
observer at one meeting of the Company's Board of Directors per calendar year.
(c) EHL's failure to satisfy either or both of clauses (x) and (y) of the
EHL Retention Condition notwithstanding, so long as EHL owns at least 50% of the
EHL Shares held by it immediately after the closing of the Merger, the Company
shall cooperate with and respond to all reasonable requests for information
concerning the Company.
SECTION 7. RIGHT TO PARTICIPATE IN FUTURE FINANCINGS.
(a) In the event that, during the period beginning immediately after the
closing of the Merger up to but not including the Initial Public Offering, the
Company intends to engage in a New Equity Financing (as defined below), it shall
(i) provide EHL with written notice of such intention at least 20 days prior to
the scheduled closing of the New Equity Financing, describing the type of equity
securities to be issued, the price and the number or amount thereof, and the
general terms upon which the Company proposes to effect such issuance and (ii)
take steps as are necessary to enable EHL to participate, at EHL's option, as a
purchaser in such New Equity Financing such that EHL, through the exercise of
such option, would maintain its percentage interest in the outstanding
16
<PAGE>
equity securities of the Company on a fully diluted basis ; PROVIDED that EHL
shall be entitled to the rights under this Section 7 only so long as the EHL
Retention Condition remains satisfied. For purposes hereof, a "New Equity
Financing" means the issuance by the Company of new equity securities of the
Company, or securities convertible into, or exercisable or exchangeable for,
such equity securities other than issuances of equity securities in
connection with (x) stock incentive or compensation plans approved by the
Board of Directors of the Company (y) business acquisitions by the Company
and (z) financings which in the aggregate involve gross proceeds of up to $25
million.
SECTION 8. CERTAIN COMPANY COVENANTS.
(a) The Company hereby agrees for the benefit of EHL and Permitted
Transferees that in the event that through one or more divestitures or asset
sales 98% or more of the Company's assets consist of cash or cash equivalents,
the Company will proceed expeditiously to liquidate the Company and distribute
its net assets to the Company's shareholders in accordance with the Certificate
of Incorporation and applicable law.
(b) The Company hereby agrees for the benefit of EHL and Permitted
Transferees that the holders of Class A Common, Class B Common, Class C Common
and Class D Common Stock of the Company will rank PARI PASSU with respect to the
declaration and payment of cash dividends by the Company.
(c) The covenants set forth in this Section 8 shall automatically
terminate at the Initial Public Offering.
SECTION 9. MISCELLANEOUS.
(a) NOTICES. All notices, instructions and other communications in
connection with this Agreement shall be in writing and may be given by (i)
personal delivery, (ii) sent by certified mail, return receipt requested,
postage prepaid, or (iii) delivery by a nationally recognized overnight courier,
to the parties at the addresses of each as set forth on the signature pages to
this Agreement (or at such other address as the Company may specify in a notice
to the other parties or as any other party may specify in a notice to the
Company and the other parties). Notices shall be deemed to have been given (A)
when actually delivered personally, (B) the next business day if sent by
overnight courier (with proof of delivery), and (C) on the fifth day after
mailing by certified mail.
(b) NO WAIVER. No course of dealing and no delay on the part of any party
hereto in exercising any right, power or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies conferred by this Agreement or shall preclude any other or
further exercise thereof or the exercise of any other right, power and remedy.
(c) BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon
and, except as otherwise provided herein, shall inure to the benefit of the
respective parties and their permitted successors and assigns, including,
without limitation, Permitted Transferees to the extent specifically provided
for herein. This Agreement shall not be assignable except as otherwise
specifically provided herein; PROVIDED that IIEL's rights under Section 2 and
Section 4 hereof may be exercised by IIEL or any Affiliate of IIEL.
17
<PAGE>
(d) AMENDMENT AND WAIVER. This Agreement may not be amended, modified or
supplemented, and no waiver or consent to departures from the provisions hereof
shall bind any party who has not given such waiver or consent, unless consented
to in writing by at least a majority in interest of the EHL Shares and the
Company.
(e) GOVERNING LAW; SERVICE OF PROCESS. This Agreement shall be construed
both as to validity and performance in accordance with, and governed by, the
laws of the State of New York applicable to agreements to be performed in New
York, without regard to principles of conflict of laws. Each of the parties
hereto irrevocably consents to the jurisdiction and venue of any state or
federal court situated in the City of New York in the State of New York, and
further consents to the service of any and all process in any action or
proceeding arising out of or relating to this Agreement by the mailing of copies
of such process to such party at its address pursuant to Section 7(a) hereof.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument, and all signatures need not appear
on any one counterpart.
(g) HEADINGS; SECTIONS. All headings and captions in this Agreement are
for purposes of reference only and shall not be construed to limit or affect the
substance of this Agreement. All references to Section in this Agreement refer
to Sections of this Agreement, unless the context otherwise expressly provides.
(h) ENTIRE AGREEMENT. This Agreement contains, and is intended as, a
complete statement of all the terms of the arrangements between the parties with
respect to the matters provided for, supersedes any previous agreements and
understandings between the parties with respect to those matters.
(i) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired in any way thereby.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Rights Agreement as of the date first above written.
FALCON BUILDING PRODUCTS, INC., a
Delaware corporation
By: /s/ Gus J. Athas
-----------------------------------
Name: Gus J. Athas
Title: Executive Vice-President
Address: 2 N. Riverside Plaza
Suite 1100
Chicago, Ill. 60606
EQUITY HOLDINGS LIMITED, an Illinois
limited partnership
By: /s/ Samuel Zell,
-----------------------------------
Name: Samuel Zell
Title: Trustee of General Partner
Address: Two North Riverside Plaza
Chicago, Ill. 60606
INVESTCORP INVESTMENT EQUITY
LIMITED, a Cayman Islands
corporation
By: /s/ Sydney J. Coleman
-----------------------------------
Name: The Director Ltd.
Title: Director
Address:
---------------------
---------------------
---------------------
OTHER CLASS D STOCKHOLDERS
BALLET LIMITED, a Cayman Islands
corporation
By: /s/ Grahame Ivey
-----------------------------------
Name: Grahame Ivey
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
19
<PAGE>
DENARY LIMITED, a Cayman Islands
corporation
By: /s/ Nabeel Al Sahaf
-----------------------------------
Name: Nabeel Al Sahaf
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
GLEAM LIMITED, a Cayman Islands
corporation
By: /s/ Zahid Zakiuddin
-----------------------------------
Name: Zahid Zakiuddin
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
HIGHLANDS LIMITED, a Cayman Islands
corporation
By: /s/ Timothy D. Trafford
-----------------------------------
Name: Timothy D. Trafford
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
NOBLE LIMITED, a Cayman Islands
corporation
By: /s/ Salman A. Abbasi
-----------------------------------
Name: Salman A. Abbasi
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
OUTRIGGER LIMITED, a Cayman Islands
corporation
By: /s/ P. James Abernathy
-----------------------------------
Name: P. James Abernathy
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
20
<PAGE>
QUILL LIMITED, a Cayman Islands
corporation
By: /s/ Adrian Hudson
-----------------------------------
Name: Adrian Hudson
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
RADIAL LIMITED, a Cayman Islands
corporation
By: /s/ Anthony L. Robinson
-----------------------------------
Name: Anthony L. Robinson
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
SHORELINE LIMITED, a Cayman Islands
corporation
By: /s/ H. Richard Lukens, III
-----------------------------------
Name: H. Richard Lukens, III
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
ZINNIA LIMITED, a Cayman Islands
corporation
By: /s/ Ibrahim Gharghour
-----------------------------------
Name: Ibrahim Gharghour
Address: P.O. Box 2197
West Wind Building,
George Town Grand Caymam,
Cayman Islands, BW1
21
<PAGE>
EXHIBIT 10.21
AMENDMENT
TO THE
FALCON BUILDING PRODUCTS, INC.
SENIOR EXECUTIVE STOCK PURCHASE PLAN
The following sentence shall be added to the end of subsection 9.8 of
the Falcon Building Products, Inc. Senior Executive Stock Purchase Plan:
"Notwithstanding the foregoing provisions of this subection 9.8, the
consummation of the transactions contemplated by the Agreement and Plan of
Merger between the Company and FBP Acquisition Corp., Inc., dated as of March
20, 1997 will not be a Change in Control or any purpose other than the
vesting of Purchased Shares under the Plan and will not require repayment of
amounts borrowed thereunder other than to the extent that the number of
Purchased Shares securing such borrowed amounts is reduced."
The following employees hereby consent to the above amendment to the Plan.
/s/ William K. Hall /s/ Sam A. Cottone
- ------------------------------------- ------------------------------------
William K. Hall Sam A. Cottone
/s/ Gus J. Athas /s/ Lawrence Lee
- ------------------------------------- ------------------------------------
Gus J. Athas Lawrence Lee
/s/ William E. Allan /s/ Paul C. Fischer
- ------------------------------------- ------------------------------------
William E. Allan Paul C. Fischer
<PAGE>
EXHIBIT 10.22
CASUALTY INSURANCE INDEMNITY AGREEMENT
CASUALTY INSURANCE INDEMNITY AGREEMENT dated as of March 20, 1997 by and
between GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC., a Delaware corporation
("GAMI"), EAGLE INDUSTRIAL PRODUCTS CORPORATION, a Delaware corporation
("EIPC"), EAGLE INDUSTRIES, INC., a Delaware corporation ("Eagle") (GAMI, EIPC
and Eagle are referred to as the "Indemnifying Parties," and each as an
"Indemnifying Party"), and FALCON BUILDING PRODUCTS, INC., a Delaware
corporation ("Falcon"), HART & COOLEY, INC., a Delaware corporation ("HCI"),
MANSFIELD PLUMBING PRODUCTS INC., a Delaware corporation ("MPP"), and DEVILBISS
AIR POWER, INC., a Delaware corporation ("DAP") (Falcon, HCI, MPP and DAP are
referred to as the "Indemnified Companies," and each as an "Indemnified
Company").
WHEREAS, prior to October 1, 1995, Falcon was covered under various
insurance policies purchased by Eagle and EIPC (the "Insurance Policies");
WHEREAS, the Insurance Policies also cover various other entities, in
addition to the Indemnified Companies;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. INDEMNIFICATION.
1.1. INDEMNITY. Each Indemnifying Party, jointly and severally,
agrees to indemnify each of the Indemnified Companies, and each of their
respective directors, officers, employees, affiliates, subsidiaries and their
subsidiaries and affiliates (collectively, the "Indemnified Company Affiliates")
(the Indemnified Companies and their respective Indemnified Company Affiliates
are referred to herein as the "Indemnified Parties" and each as an "Indemnified
Party") against, and agrees to hold each Indemnified Party harmless from, any
and all debts, claims, obligations, liabilities, losses, costs, damages,
penalties or expenses (including without limitation reasonable attorneys' fees
and expenses and costs of investigation, litigation and settlement)
(collectively, "Losses") suffered by any Indemnified Party directly or
indirectly arising out of, based upon or resulting from the exhaustion of limits
of liability coverage for general liability, products liability, auto liability,
employers' liability, workers' compensation, directors' and officers' liability,
fiduciary liability or umbrella insurance policies of Eagle or EIPC covering
periods prior to October 1, 1995. However, there shall be no double recovery
hereunder as to a particular Loss by virtue of there being multiple Indemnified
Parties.
1.2. NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE. Each Indemnified Party
shall give prompt notice to GAMI (which will act as representative of the
Indemnifying Parties for
<PAGE>
purposes of this Agreement), in accordance with the terms of SECTION 2.2, of
the assertion of any claim, or the commencement of any suit, action or
proceeding by any party, in respect of which indemnity may be sought
hereunder, giving GAMI such information with respect thereto as GAMI may
reasonably request (but the giving of such notice shall not be a condition
precedent to indemnification hereunder). The Indemnifying Parties shall, at
their own expense, assume the defense thereof; provided that (i) counsel is
reasonably satisfactory to the Indemnified Party, and (ii) GAMI, on behalf of
itself and the other Indemnifying Parties, shall thereafter consult with the
Indemnified Party upon reasonable request for such consultation from time to
time with respect to such claim, suit, action or proceeding. The Indemnified
Party shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at their own expense, separate from the
counsel employed by GAMI.
1.3. SETTLEMENT OR COMPROMISE. GAMI shall not settle or compromise
any claim, suit, action or proceeding without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
1.4. FAILURE OF INDEMNIFYING PARTY TO ACT. In the event that any
Indemnifying Party does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of such Indemnified Party to defend or to
participate in the defense of any such claim, suit, action or proceeding, or to
cause the same to be done, shall not relieve any Indemnifying Party of its
obligations hereunder.
1.5. BUY-OUT AGREEMENTS. In the event Eagle or EIPC, as the case may
be, determines to enter into a "buy-out agreement" with an insurance carrier
pursuant to which Eagle or EIPC pays consideration to eliminate the deductible
or self-insured retention with respect to all or a portion of a particular
policy period, then Eagle or EIPC, as applicable, shall notify Falcon of its
intention to enter into such transaction and the terms thereof. Falcon shall
have 30 days from the receipt of such notice to elect to participate in such
transaction by irrevocably agreeing to pay its portion of the consideration paid
by Eagle or EIPC. If Falcon elects not to so participate, it will continue to
be charged as though such buy-out transaction had not occurred.
2. MISCELLANEOUS PROVISIONS.
2.1. WAIVER AND AMENDMENT. The failure of any party hereto to comply
with any of the obligations or agreements set forth herein or to fulfill any
condition set forth herein may be waived only by written instrument signed by
all of the parties hereto. No failure by any party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver of such right
hereunder by any party hereto or preclude any other future exercise of that
right or any other right hereunder by such party. This Agreement may be amended
or modified only by a written instrument signed by all of the parties hereto.
2
<PAGE>
2.2. NOTICES. All notices, requests or other communications
required or permitted hereunder shall be in writing and shall be deemed given
(i) when received if delivered by hand, (ii) on the date of transmission if
sent by telex, telecopy or other wire transmission (receipt confirmed), (iii)
one day after being sent by reputable overnight courier or (iv) five days
after being deposited in the U.S. mail, registered or certified mail, return
receipt requested, postage prepaid, in each case to the party to receive the
same at such party's respective address set forth below, or at such other
address as may from time to time be designated by such party to the other
parties hereto in accordance with this SECTION 2.2:
If to an Indemnifying Party, to:
Great American Management and Investment, Inc.
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attn: Rod Dammeyer
Fax: (312) 902-1512
With a copy to:
Rosenberg & Liebentritt
Two North Riverside Plaza
Chicago, Illinois 60606
Attn: Donald Liebentritt, Esq.
Fax: (312) 454-0335
If to Falcon:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attn: Gus J. Athas, Esq.
Fax: (312) 906-8402
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: James J. Junewicz, Esq.
Fax: (312) 701-7711
2.3. NO CREATION OF RIGHTS IN THIRD PARTIES. Nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon
or give to any person, firm or corporation other than the parties hereto and
their successors and assigns any remedy or claim
3
<PAGE>
under or by reason of this Agreement or any term, covenant or condition
hereof, and all the terms, covenants and conditions in this Agreement shall
be for the sole and exclusive benefit of the parties hereto and their
successors and assigns.
2.4. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings
used herein are for convenience only and are not a part of this Agreement and
shall not be used in construing it.
2.5. ENTIRE AGREEMENT. This Agreement embodies the entire
understanding of the parties hereto with respect to the subject matter hereof,
and there are no other agreements or understandings, written or oral, in effect
between the parties hereto with respect to the subject matter hereof. This
Agreement supersedes and terminates all prior discussions, negotiations,
understandings, arrangements and agreements among the parties hereto relating to
the subject matter hereof.
2.6. COUNTERPARTS. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together constitute one and the same instrument.
2.7. ASSIGNABILITY. This Agreement and the provisions hereof shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto. No party may assign this Agreement without the prior
written consent of the other parties hereto. Any attempted assignment of this
Agreement without such prior written consent shall be void as to the other party
to this Agreement.
2.8. GOVERNING LAW. The validity, construction, operation and effect
of the terms of this Agreement shall be determined and enforced in accordance
with the laws of the State of Illinois without giving effect to principles of
conflicts of law thereunder.
2.9. EFFECTIVE TIME. This Agreement shall become effective at the
Effective Time, as if in effect from the signing of the Agreement and Plan of
Merger between Falcon Building Products, Inc. and FBP Acquisition Corp., Inc.,
dated March 20, 1997.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
signed on its behalf by a duly authorized officer as of the 20th day of March,
1997.
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
By: /s/ ROD DAMMEYER
----------------------
Name: Rod Dammeyer
Title: President
FALCON BUILDING PRODUCTS, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Senior Vice-President
EAGLE INDUSTRIES, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Senior Vice-President
EAGLE INDUSTRIAL PRODUCTS CORPORATION
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Senior Vice-President
5
<PAGE>
MANSFIELD PLUMBING PRODUCTS, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Vice-President
DEVILBISS AIR POWER, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Vice-President
HART & COOLEY, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Vice-President
6
<PAGE>
EXHIBIT 10.23
TAX INDEMNITY AGREEMENT
TAX INDEMNITY AGREEMENT dated as of March 20, 1997 by and between GREAT
AMERICAN MANAGEMENT AND INVESTMENT, INC., a Delaware corporation ("GAMI"), EAGLE
INDUSTRIAL PRODUCTS CORPORATION, a Delaware corporation ("EIPC"), EAGLE
INDUSTRIES, INC., a Delaware corporation ("Eagle") (GAMI, EIPC and Eagle are
referred to as the "Indemnifying Parties," and each as an "Indemnifying Party"),
and FALCON BUILDING PRODUCTS, INC., a Delaware corporation ("Falcon"), HART &
COOLEY, INC., a Delaware corporation ("HCI"), MANSFIELD PLUMBING PRODUCTS INC.,
a Delaware corporation ("MPP"), and DEVILBISS AIR POWER, INC., a Delaware
corporation ("DAP") (Falcon, HCI, MPP and DAP are referred to as the
"Indemnified Companies," and each as an "Indemnified Company").
WHEREAS, the Indemnified Companies were included in GAMI's consolidated
federal income tax returns prior to Falcon's initial public offering on
November 9, 1994;
WHEREAS, pursuant to the terms of the GAMI-Falcon Disaffiliation Tax
Sharing Agreement dated October 28, 1994, between Falcon and GAMI (the "Tax
Sharing Agreement"), Falcon shall compute and pay to GAMI its share of GAMI's
liability for U.S. federal income taxes for all periods in which Falcon was
included in GAMI's tax returns as if Falcon had filed a separate U.S. federal
income tax return.
NOW, THEREFORE, in consideration of the covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. INDEMNIFICATION.
1.1. INDEMNITY. Each Indemnifying Party, jointly and severally,
agrees to indemnify each of the Indemnified Companies and each of their
respective directors, officers, employees, affiliates, subsidiaries and their
subsidiaries and affiliates (collectively, the "Indemnified Company Affiliates")
(the Indemnified Companies and their respective Indemnified Company Affiliates
are referred to herein as the "Indemnified Parties" and each as an "Indemnified
Party") against, and agrees to hold each Indemnified Party harmless from, any
and all U.S. federal (and applicable state and local) income taxes, debts,
claims, obligations, liabilities, losses, costs, damages, penalties or expenses
(including without limitation reasonable attorneys' fees and expenses and costs
of investigation, litigation and settlement) (collectively, "Losses") suffered
by any Indemnified Party directly or indirectly arising out of, based upon or
resulting from the Tax Sharing Agreement or such Indemnified Party's inclusion
in GAMI's consolidated, combined, affiliated or unitary tax returns for any
period. However, there shall be no double recovery hereunder as to a particular
Loss by virtue of there being multiple Indemnified Parties.
<PAGE>
1.2. NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE. Each Indemnified
Party shall give prompt notice to GAMI (which will act as representative of
the Indemnifying Parties for purposes of this Agreement), in accordance with
the terms of SECTION 2.2, of the assertion of any claim, or the commencement
of any suit, action or proceeding by any party, in respect of which indemnity
may be sought hereunder, giving GAMI such information with respect thereto as
GAMI may reasonably request (but the giving of such notice shall not be a
condition precedent to indemnification hereunder). The Indemnifying Parties
shall, at their own expense, assume the defense thereof; provided that (i)
counsel is reasonably satisfactory to the Indemnified Party, and (ii) GAMI,
on behalf of itself and the other Indemnifying Parties, shall thereafter
consult with the Indemnified Party upon reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. The Indemnified Party shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at their own
expense, separate from the counsel employed by GAMI.
1.3. SETTLEMENT OR COMPROMISE. GAMI shall not settle or compromise
any claim, suit, action or proceeding without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
1.4. FAILURE OF INDEMNIFYING PARTY TO ACT. In the event that any
Indemnifying Party does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of such Indemnified Party to defend or to
participate in the defense of any such claim, suit, action or proceeding, or to
cause the same to be done, shall not relieve any Indemnifying Party of its
obligations hereunder.
2. MISCELLANEOUS PROVISIONS.
2.1. WAIVER AND AMENDMENT. The failure of any party hereto to comply
with any of the obligations or agreements set forth herein or to fulfill any
condition set forth herein may be waived only by written instrument signed by
all of the parties hereto. No failure by any party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver of such right
hereunder by any party hereto or preclude any other future exercise of that
right or any other right hereunder by such party. This Agreement may be amended
or modified only by a written instrument signed by all of the parties hereto.
2.2. NOTICES. All notices, requests or other communications required
or permitted hereunder shall be in writing and shall be deemed given (i) when
received if delivered by hand, (ii) on the date of transmission if sent by
telex, telecopy or other wire transmission (receipt confirmed), (iii) one day
after being sent by reputable overnight courier or (iv) five days after being
deposited in the U.S. mail, registered or certified mail, return receipt
requested, postage prepaid, in each case to the party to receive the same at
such party's respective address set forth below, or at such other address as may
from time to time be designated by such party to the other parties hereto in
accordance with this Section 2.2:
2
<PAGE>
If to an Indemnifying Party, to:
Great American Management and Investment, Inc.
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attn: Rod Dammeyer
Fax: (312) 902-1512
With a copy to:
Rosenberg & Liebentritt
Two North Riverside Plaza
Chicago, Illinois 60606
Attn: Donald Liebentritt, Esq.
Fax: (312) 454-0335
If to Falcon:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attn: Gus J. Athas, Esq.
Fax: (312) 906-8402
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: James J. Junewicz, Esq.
Fax: (312) 701-7711
2.3. NO CREATION OF RIGHTS IN THIRD PARTIES. Nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon
or give to any person, firm or corporation other than the parties hereto and
their successors and assigns any remedy or claim under or by reason of this
Agreement or any term, covenant or condition hereof, and all the terms,
covenants and conditions in this Agreement shall be for the sole and exclusive
benefit of the parties hereto and their successors and assigns.
2.4. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings
used herein are for convenience only and are not a part of this Agreement and
shall not be used in construing it.
2.5. ENTIRE AGREEMENT. This Agreement embodies the entire
understanding of the parties hereto with respect to the subject matter hereof,
and there are no other agreements
3
<PAGE>
or understandings, written or oral, in effect between the parties hereto
with respect to the subject matter hereof. This Agreement supersedes and
terminates all prior discussions, negotiations, understandings, arrangements
and agreements among the parties hereto relating to the subject matter hereof.
2.6. COUNTERPARTS. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together constitute one and the same instrument.
2.7. ASSIGNABILITY. This Agreement and the provisions hereof shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto. No party may assign this Agreement without the prior
written consent of the other parties hereto. Any attempted assignment of this
Agreement without such prior written consent shall be void as to the other party
to this Agreement.
2.8. GOVERNING LAW. The validity, construction, operation and effect
of the terms of this Agreement shall be determined and enforced in accordance
with the laws of the State of Illinois without giving effect to principles of
conflicts of law thereunder.
2.9. EFFECTIVE TIME. This Agreement shall become effective at the
Effective Time, as if in effect from the signing of the Agreement and Plan of
Merger between Falcon Building Products, Inc. and FBP Acquisition Corp., Inc.,
dated March 20, 1997.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
signed on its behalf by a duly authorized officer as of the 20th day of March,
1997.
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
By: /s/ Rod Dammeyer
-----------------------
Name: Rod Dammeyer
Title: President
FALCON BUILDING PRODUCTS, INC.
By: /s/ Gus J. Athas
-----------------------
Name: Gus J. Athas
Title: Senior Vice-President
EAGLE INDUSTRIES, INC.
By: /s/ Gus J. Athas
-----------------------
Name: Gus J. Athas
Title: Senior Vice-President
EAGLE INDUSTRIAL PRODUCTS CORPORATION
By: /s/ Gus J. Athas
-----------------------
Name: Gus J. Athas
Title: Senior Vice-President
5
<PAGE>
MANSFIELD PLUMBING PRODUCTS, INC.
By: /s/ Gus J. Athas
-----------------------
Name: Gus J. Athas
Title: Vice-President
DEVILBISS AIR POWER, INC.
By: /s/ Gus J. Athas
-----------------------
Name: Gus J. Athas
Title: Vice-President
HART & COOLEY, INC.
By: /s/ Gus J. Athas
-----------------------
Name: Gus J. Athas
Title: Vice-President
6
<PAGE>
EXHIBIT 10.24
PENSION BENEFITS INDEMNITY AGREEMENT
PENSION BENEFITS INDEMNITY AGREEMENT dated as of March 20, 1997 by and
between GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC., a Delaware corporation
("GAMI"), EAGLE INDUSTRIAL PRODUCTS CORPORATION, a Delaware corporation
("EIPC"), EAGLE INDUSTRIES, INC., a Delaware corporation ("Eagle") (GAMI, EIPC
and Eagle are referred to as the "Indemnifying Parties," and each as an
"Indemnifying Party"), and FALCON BUILDING PRODUCTS, INC., a Delaware
corporation ("Falcon"), HART & COOLEY, INC., a Delaware corporation ("HCI"),
MANSFIELD PLUMBING PRODUCTS INC., a Delaware corporation ("MPP"), and DEVILBISS
AIR POWER, INC., a Delaware corporation ("DAP") (Falcon, HCI, MPP and DAP are
referred to as the "Indemnified Companies," and each as an "Indemnified
Company").
WHEREAS, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), provides that each trade or business that is under common control
with another trade or business has joint and several liability with respect to
any employee pension benefit plan that is subject to ERISA, including liability
for contributions that are required to be made to the plan and for underfunding
in the event the Plan is terminated; and
WHEREAS, Falcon has agreed, pursuant to the October 27, 1994 agreement
between the Pension Benefit Guaranty Corporation (the "PBGC), Falcon, EIPC,
Eagle, HCI, MPP, DAP and GAMI, to remain jointly and severally liable for
liabilities arising under Section 4062 of ERISA in the event any plan maintained
by GAMI's control group is terminated by the PBGC after Falcon ceases to be a
member of GAMI's control group (the "PBGC Agreement"), a copy of which is
attached hereto;
NOW, THEREFORE, in consideration of the covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. INDEMNIFICATION
1.1. INDEMNITY. Each Indemnifying Party, jointly and severally,
agrees to indemnify each of the Indemnified Companies, and each of their
respective directors, officers, employees, affiliates, subsidiaries and their
subsidiaries and affiliates (collectively, the "Indemnified Company Affiliates")
(the Indemnified Companies and their respective Indemnified Company Affiliates
are referred to herein as the "Indemnified Parties" and each as an "Indemnified
Party") against, and agrees to hold each Indemnified Party harmless from, any
and all debts, claims, obligations, liabilities, losses, costs, damages,
penalties or expenses (including without limitation reasonable attorneys' fees
and expenses and costs of investigation, litigation and settlement)
(collectively, "Losses") suffered by any Indemnified Party directly or
indirectly arising out of, based upon or resulting from the PBGC Agreement or
any claim that any
<PAGE>
Indemnified Party is responsible for any liabilities related to any plans
ever maintained by GAMI's control group. However, there shall be no double
recovery hereunder as to a particular Loss by virtue of there being multiple
Indemnified Parties.
1.2. NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE. Each Indemnified Party
shall give prompt notice to GAMI (which will act as representative of the
Indemnifying Parties for purposes of this Agreement), in accordance with the
terms of SECTION 2.2, of the assertion of any claim, or the commencement of any
suit, action or proceeding by any party, in respect of which indemnity may be
sought hereunder, giving GAMI such information with respect thereto as GAMI may
reasonably request (but the giving of such notice shall not be a condition
precedent to indemnification hereunder). The Indemnifying Parties shall, at
their own expense, assume the defense thereof; provided that (i) counsel is
reasonably satisfactory to the Indemnified Party, and (ii) GAMI, on behalf of
itself and the other Indemnifying Parties, shall thereafter consult with the
Indemnified Party upon reasonable request for such consultation from time to
time with respect to such claim, suit, action or proceeding. The Indemnified
Party shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at their own expense, separate from the counsel
employed by GAMI.
1.3. SETTLEMENT OR COMPROMISE. GAMI shall not settle or compromise
any claim, suit, action or proceeding without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
1.4. FAILURE OF INDEMNIFYING PARTY TO ACT. In the event that any
Indemnifying Party does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of such Indemnified Party to defend or to
participate in the defense of any such claim, suit, action or proceeding, or to
cause the same to be done, shall not relieve any Indemnifying Party of its
obligations hereunder.
2. MISCELLANEOUS PROVISIONS
2.1. WAIVER AND AMENDMENT. The failure of any party hereto to comply
with any of the obligations or agreements set forth herein or to fulfill any
condition set forth herein may be waived only by written instrument signed by
all of the parties hereto. No failure by any party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver of such right
hereunder by any party hereto or preclude any other future exercise of that
right or any other right hereunder by such party. This Agreement may be amended
or modified only by a written instrument signed by all of the parties hereto.
2.2. NOTICES. All notices, requests or other communications required
or permitted hereunder shall be in writing and shall be deemed given (i) when
received if delivered by hand, (ii) on the date of transmission if sent by
telex, telecopy or other wire transmission (receipt confirmed), (iii) one day
after being sent by reputable overnight courier or (iv) five days after being
deposited in the U.S. mail, registered or certified mail, return receipt
requested,
2
<PAGE>
postage prepaid, in each case to the party to receive the same at
such party's respective address set forth below, or at such other address as may
from time to time be designated by such party to the other parties hereto in
accordance with this SECTION 2.2:
If to an Indemnifying Party, to:
Great American Management
and Investments, Inc.
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attn: Rod Dammeyer
Fax: (312) 902-1512
With a copy to:
Rosenberg & Liebentritt
Two North Riverside Plaza
Chicago, Illinois 60606
Attn: Donald Liebentritt, Esq.
Fax: (312) 454-0335
If to Falcon:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attn: Gus J. Athas, Esq.
Fax: (312) 906-8402
With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: James J. Junewicz, Esq.
Fax: (312) 701-7711
2.3. NO CREATION OF RIGHTS IN THIRD PARTIES. Nothing in this
Agreement, express or implied, is intended or shall be construed to confer upon
or give to any person, firm or corporation other than the parties hereto and
their successors and assigns any remedy or claim under or by reason of this
Agreement or any term, covenant or condition hereof, and all the terms,
covenants and conditions in this Agreement shall be for the sole and exclusive
benefit of the parties hereto and their successors and assigns.
3
<PAGE>
2.4. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings
used herein are for convenience only and are not a part of this Agreement and
shall not be used in construing it.
2.5. ENTIRE AGREEMENT. This Agreement embodies the entire
understanding of the parties hereto with respect to the subject matter hereof,
and there are no other agreement or understandings, written or oral, in effect
between the parties hereto with respect to the subject matter hereof. This
Agreement supersedes and terminates all prior discussions, negotiations,
understandings, arrangements and agreements among the parties hereto relating to
the subject matter hereof.
2.6. COUNTERPARTS. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together constitute one and the same instrument.
2.7. ASSIGNABILITY. This Agreement and the provisions hereof shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto. No party may assign this Agreement without the prior
written consent of the other parties hereto. Any attempted assignment of this
Agreement without such prior written consent shall be void as to the other party
to this Agreement.
2.8. GOVERNING LAW. The validity, construction, operation and effect
of the terms of this Agreement shall be determined and enforced in accordance
with the laws of the State of Illinois without giving effect to principles of
conflicts of law thereunder.
2.9. EFFECTIVE TIME. This Agreement shall become effective at the
Effective Time, as if in effect from the signing of the Agreement and Plan of
Merger between Falcon Building Products, Inc. and FBP Acquisition Corp., Inc.,
dated March 20, 1997.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
signed on its behalf by a duly authorized officer as of the 20th day of March,
1997.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By: /s/ ROD DAMMEYER
----------------------
Name: Rod Dammeyer
Title: President
FALCON BUILDING PRODUCTS, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Senior Vice-President
EAGLE INDUSTRIES, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Senior Vice-President
EAGLE INDUSTRIAL PRODUCTS
CORPORATION
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Senior Vice-President
5
<PAGE>
MANSFIELD PLUMBING PRODUCTS, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Vice-President
DEVILBISS AIR POWER, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Vice-President
HART & COOLEY, INC.
By: /s/ GUS J. ATHAS
----------------------
Name: Gus J. Athas
Title: Vice-President
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 42
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 93
<CURRENT-ASSETS> 170
<PP&E> 192
<DEPRECIATION> (95)
<TOTAL-ASSETS> 358
<CURRENT-LIABILITIES> 94
<BONDS> 424
0
0
<COMMON> 0
<OTHER-SE> (189)
<TOTAL-LIABILITY-AND-EQUITY> 358
<SALES> 356
<TOTAL-REVENUES> 356
<CGS> 291
<TOTAL-COSTS> 291
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (10)
<INCOME-TAX> 2
<INCOME-CONTINUING> (12)
<DISCONTINUED> 0
<EXTRAORDINARY> (2)
<CHANGES> 0
<NET-INCOME> (14)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> 0
</TABLE>
