EXHIBIT 10.1
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
This agreement (the "Agreement") is made and effective as of April 30,
1999 between FALCON BUILDING PRODUCTS, INC. (the "Company") and ▇▇▇ ▇. ▇▇▇▇▇,
an individual residing at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Executive").
WHEREAS, the parties have entered into an Employment Agreement made
effective as of May 22, 1997, as amended, whereby the Company has secured the
exclusive services of the Executive (the "Employment Agreement"); and
WHEREAS, in lieu of a funded supplemental executive retirement plan
pursuant to Section 3(b) of the Employment Agreement, the parties wish to have
the Company provide supplemental executive retirement plan benefits ("SERP
benefits") on an unfunded basis pursuant to the provisions of this Agreement;
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. Definitions. Unless otherwise defined herein, terms defined in the
Employment Agreement shall be used as so defined.
2. Supplemental Executive Retirement Benefits.
(a) Time of Payment. Subject to satisfaction of the vesting
requirements set forth in Section 2(c) hereof and except as otherwise provided
in this Section 2, the Executive shall be entitled to receive SERP benefits for
a ten-year period, the first such payment to be made on July lst of 2004 and
additional payments to be made on each succeeding July 1 through and including
2013 (each such date being hereinafter called a "Benefit Payment Date").
(b) Amount of Benefit. The amount payable to the Executive on each
Benefit Payment Date shall be such amount as shall be necessary to leave the
Executive with $200,000 net after the payment of applicable income taxes (the
"Maximum SERP Benefit"), or, if less than 100% vesting is attained, such lesser
amount as shall correspond to the degree of vesting attained. In calculating
the amount payable in any year, the Company shall use the federal and state
income tax rates applicable to the Executive (determined in the manner
prescribed below), giving effect to any reduction in the effective federal rate
to reflect the deduction for state income taxes paid. However, no account
shall be given to any interest or penalty arising from Executive's failure to
pay taxes in a timely manner, nor to any excise taxes arising from the
characterization of any payment hereunder as a "parachute payment". For
purposes of this calculation, the federal rate applicable to the Executive
(before reduction to reflect the deduction for state income taxes paid, as set
forth above) in any year shall be the highest actual marginal rate applied in
the Executive's federal income tax return for the preceding year and the state
income tax rate applicable to the Executive shall be the lower of (i) the
effective rate imposed by the state of Illinois for the year of payment, or
(ii) the effective rate applicable to such year in the state in which the
Executive then resides. The Executive shall provide such information as the
Company shall reasonably request to determine the applicable rates.
(c) Vesting. The Executive shall be deemed to have vested in one-
seventh of the Maximum SERP Benefit (i.e., a net after-tax benefit of
$28,571.43 per year for ten years commencing in 2004) on December 31, 1997, and
shall vest in an additional one-seventh of the Maximum SERP Benefit on each of
the next six anniversaries of such date provided the Executive is a full time
Executive of the Company on any such date.
(d) Termination of Employment. In the event the Executive's
employment with the Company shall terminate prior to December 31, 2003, vesting
and payment of SERP benefits hereunder shall be determined in accordance with
the following provisions:
(i) Death or Disability. In the event the Executive's
employment is terminated prior to December 31, 2003 because of his death, then
the Executive shall thereupon be fully vested in the Maximum SERP Benefit and,
in lieu of payment of the Maximum SERP Benefit over a ten-year period
commencing in 2004, the Executive's Beneficiary shall receive a lump sum
payment of death benefits proceeds under a term life insurance policy in the
applicable amount set forth in Exhibit I hereto. The Company shall assist in
applying for such death benefits proceeds as expeditiously as possible
following the Executive's death. In the event the Executive's employment is
terminated prior to December 31, 2003 because of his permanent disability (as
determined under the Company's long-term disability program), then the
Executive shall be vested in his SERP benefits through the date of such
termination, vesting for the year of termination being prorated, on a monthly
basis, through the end of the last complete calendar month preceding such
termination. Thus, for example, if such termination shall occur on September
30, 2000, the Executive shall be deemed to have satisfied three years and nine
months of the vesting requirement and shall be vested in 3.75/7 of the Maximum
SERP Benefit. In the event of such a termination because of permanent
disability, the Executive shall receive his vested net after tax SERP benefit
over a ten-year period commencing in 2004, or, in the sole and absolute
discretion of the Board of Directors of the Company (the "Board"), in lieu of
such benefit, a lump sum payment on the first anniversary of the Executive's
termination of a net after tax actuarially equivalent amount, discounted to
present value at an eight percent (8 %) annual interest rate.
(ii) Termination Without Good Cause or With Good Reason. In
the event that the Executive's employment is terminated prior to December 31,
2003 either by the Company without Good Cause or by the Executive with Good
Reason, then, except as otherwise provided in Section 2(d)(iv) hereof with
respect to approval by the Company's Board of Directors of the date selected by
the Executive to retire from the Company, the Executive shall thereupon be
deemed to be fully vested in the Maximum SERP Benefit, such benefit to be paid
in accordance with Section 2(a). For all purposes of this Section 2, the term
"Good Cause" shall have the meaning ascribed to it in the Employment Agreement
but shall not include the Executive's death or permanent disability, which are
provided for in Section 2(d)(i) above and the term "Good Reason" shall have the
meaning ascribed to it in the Employment Agreement.
(iii) Termination With Good Cause or Without Good Reason. In
the event that the Executive's employment is terminated prior to December 31,
2003 either by the Company with Good Cause or by the Executive without Good
Reason, then the Executive shall be vested in his SERP benefits through the
date of such termination, vesting for the year of termination being prorated,
on a monthly basis, through the end of the last complete calendar month
preceding such termination. Payment of such vested SERP benefits shall be made
in accordance with Section 2(a).
(iv) The Company's Board of Directors shall, in its sole and
absolute discretion, (i) have the right to grant its approval to the date
selected by the Executive to retire from the Company, and (ii) in the event it
grants such approval, to determine the amount of additional vesting, if any, in
the Maximum SERP Benefit, up to 100% vesting, that the Executive shall be
treated as having attained, any benefit attributable to any such additional
vesting to be paid in accordance with Section 2(a) hereof. This Section
2(d)(iv) shall supersede and replace in its entirety Section 5(c)(iii) of the
Employment Agreement to the extent that the latter section relates to vesting
of the Executive's supplemental retirement benefits upon the Executive's
termination of the Employment Agreement and his employment by the Company for
Good Reason, in circumstances where Good Reason exists because of the
Executive's retirement from the Company on a date that is mutually agreed upon
by the Company and the Executive.
3. Acceleration of Payment. Notwithstanding the foregoing Section 2,
the Board, in its sole discretion, may accelerate the payment of all or part of
the Executive's SERP benefits if so requested by the Executive or, after the
Executive's death, by his Beneficiary; provided, however, that any such
accelerated payment may be permitted only in case of an unforeseeable emergency
(within the meaning of Section 457 of the Internal Revenue Code and the
regulations promulgated thereunder) that is caused by an event beyond the
control of the Executive or his Beneficiary and that would result in severe
financial hardship to such person if accelerated payment were not permitted.
Any such accelerated payment shall be limited to the amount necessary to meet
or satisfy the emergency.
4. Designation of Beneficiary. Executive shall file with the Company a
written designation of one or more persons as the Beneficiary who shall be
entitled to receive the amounts, if any, payable hereunder after Executive's
death. Executive may, from time to time, revoke or change his Beneficiary
designation without the consent of any prior Beneficiary by filing a new
designation with the Company. The last such designation received by the
Company shall be controlling; provided, however, that no designation, or change
or revocation thereof, shall be effective unless received by the Company prior
to Executive's death, and in no event shall it be effective as of a date prior
to such receipt. If no such Beneficiary designation is in effect at the time
of Executive's death, or if no designated Beneficiary survives Executive,
Executive's estate shall be deemed to have been designated his Beneficiary and
the executor or administrator thereof shall receive the amount, if any, payable
hereunder after Executive's death. If the Company is in doubt as to the right
of any person to receive all or part of such amount, the Company may retain
such amount until the rights thereto are determined, or the Company may pay
such amount into any court of appropriate jurisdiction and such payment shall
be a complete discharge of the liability of the Company therefor.
5. Administration of the Agreement and Claims.
a) Administration. This Agreement shall be administered by a
committee composed of the Board ("the Committee") which shall have full power,
discretion and authority to interpret, construe and administer this Agreement
and any part thereof
b) Claims for Benefits. Any claim for SERP benefits by Executive or
anyone claiming through Executive under this Agreement shall be delivered in
writing by the claimant to the Committee. The claim shall identify the
benefits being requested and shall include a statement of the reasons why the
benefits should be granted. The Committee shall grant or deny the claim. If
the claim is denied in whole or in part, the Committee shall give written
notice to the claimant setting forth: (a) the reasons for the denial, (b)
specific reference to pertinent provisions of the Agreement on which the denial
is based, (c) a description of any additional material or information necessary
to request a review of the claim and an explanation of why such material or
information is necessary, and (d) an explanation of the Agreement's claim
review procedure. The notice shall be furnished to the claimant within a
period of time not exceeding 90 days after receipt of the claim, except that
such period of time may be extended, if special circumstances should require,
for an additional 90 days commencing at the end of the initial 90-day period.
Written notice of any such extension shall be given to the claimant before the
expiration of the initial 90-day period and shall indicate the special
circumstances requiring the extension and the date by which the final decision
is expected to be rendered.
(c) Appeals Procedure. A claimant who has been denied a claim for
benefits, in whole or in part, may, within a period of 60 days following his
receipt of the denial, request a review of such denial by filing a written
notice of appeal with the Committee. In connection with an appeal, the
claimant (or his authorized representative) may review pertinent documents and
may submit evidence and arguments in writing to the Committee. The Committee
may decide the questions presented by the appeal, either with or without
holding a hearing, and shall issue to the claimant a written notice setting
forth: (a) the specific reasons for the decision and (b) specific reference to
the pertinent provisions of the Agreement on which the decision is based. The
notice shall be issued within a period of time not exceeding 60 days after
receipt of the request for review; except that such period of time may be
extended, if special circumstances (including, but not limited to, the need to
hold a hearing) should require, for an additional 60 days commencing at the end
of the initial 60-day period. Written notice of any such extension shall be
provided to the claimant prior to the expiration of the initial 60-day period.
6. Executive is Unsecured Creditor. Executive shall be a general
unsecured creditor of the Company with respect to his right to receive payments
of SERP benefits hereunder. This Agreement represents a mere promise by the
Company to make payments of deferred compensation (i.e., SERP benefits) in the
future. All payments of deferred compensation to be made hereunder shall be
paid from the general funds of the Company. It is the intention of the Company
and Executive that this Agreement and the Company's obligation to make payments
of deferred compensation hereunder be unfunded both for tax purposes and for
purposes of Title I of ERISA.
7. Substantial Subsidiary Business Disposition. In the event that the
Company engages in a "Substantial Subsidiary Business Disposition", as
hereinafter defined, the Company, after consultation with the Executive, shall
take such steps as are reasonably appropriate to assure the satisfaction of the
Company's obligations to make payments of SERP benefits under this Agreement,
consistent with the intention of the parties that any such steps shall not
cause immediate taxation of the Executive with respect to his SERP benefits and
shall not subject the Company's obligations under this Agreement to the
substantive provisions of Title I of ERISA. For purposes of this paragraph,
"Substantial Subsidiary Business Disposition" shall mean the occurrence of both
(i) the sale of eighty percent (80%) or more of either the stock or the net
value of the assets of any two of the three corporations now wholly owned by
the Company (including, for purposes of determining such net asset value, the
assets of any subsidiary of any such corporation), i.e., Mansfield Plumbing
Products, Inc., DeVilbiss Air Power Company, and ▇▇▇▇ & ▇▇▇▇▇▇, Inc., whether
or not such sales occur simultaneously, and (ii) the distribution to the
shareholders of the Company at any time whatsoever subsequent to the first of
such sales, of an aggregate amount equal to more than twenty-five percent (25%)
of the proceeds (whether paid directly from such proceeds or from the company's
general funds), net of transaction expenses, of such sales.
8. No Assignment of Rights. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns, and
Executive, his Beneficiary and his estate. The rights of Executive, his
Beneficiary and his estate to payments of SERP benefits hereunder are expressly
declared not to be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors of Executive, his Beneficiary or his estate. Any attempted
disposition of such rights shall be null and void.
9. Facility of Payment. If the Committee shall find that any person to
whom any payment is payable under the Agreement is unable to care for his
affairs because of illness or accident, or is a minor, then any payment due
(unless a prior claim therefor shall have been made by a duly appointed
guardian, committee or other legal representative) may, if the Committee so
elects, be paid to his spouse, a child, a parent, or a brother or sister, or
any other person deemed by the Committee to have incurred expenses for such
person otherwise entitled to payment, in such manner and proportions as the
Committee may determine. Any such payment shall be a complete discharge of the
liabilities of the Company under the Agreement as to the amount of the payment.
10. Satisfaction of Employment Agreement. The Executive acknowledges that
the execution of this Agreement by the parties satisfies the Company's
obligation to establish a funded supplemental executive retirement plan as set
forth in Section 3(b) of the Employment Agreement.
11. Notices. Unless either party notifies the other to the contrary, any
notice required hereunder shall be duly given if delivered in person or by
certified or registered first class mail (a) if to the Company, to the
President, Falcon Building Products, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and (b) if to Executive, to the address shown at the
beginning of this Agreement.
12. 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.
13. 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.
14. 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 Executive 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.
15. Governing Law; Legal Proceeding. This Agreement shall be governed by
and construed and interpreted pursuant to the laws of the State of Illinois
from time to time in effect. Venue for any legal proceeding arising under this
Agreement shall lie in a court of competent jurisdiction located in ▇▇▇▇
County, Illinois.
16. Amendment. This Agreement may be amended only by a written document
signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
Falcon Building Products, Inc.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Executive Vice President for Its: Chairman and Chief
Administration, General Counsel Executive Officer
& Secretary
EXHIBIT I
FALCON BUILDING PRODUCTS, INC.
LUMP-SUM AMOUNTS
PAYABLE UPON DEATH
Calendar Year Lump Sum
Of Death Payment *
1999 986,000
2000 1,065,000
2001 1,151,000
2002 1,243,000
2003 1,342,000
* The lump-sum amounts set forth in this Exhibit I represent the payments to be
made to the Executive's Beneficiary pursuant to Section 2(d)(i) of the Agreement
upon Executive's death prior to December 31, 2003. The parties have assumed
that such payments will represent death benefit proceeds under a term life
insurance policy insuring the Executive's life and will not be subject to income
taxation upon receipt by the Executive's Beneficiary. In such event, the lump
sum payment shall represent payment in full of the Company's obligations under
the Agreement. If, however, such lump sum payment shall be subject to income
tax upon receipt by the Executive's Beneficiary, then such lump sum payment
shall be increased by such amount as shall be necessary to leave the Executive's
beneficiary with the applicable lump sum amount set forth in this Exhibit I net
after the payment of applicable income taxes.