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
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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.
"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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"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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"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
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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.
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(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,
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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.
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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
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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.
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(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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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
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.
12
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.
13
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:
14
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
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