<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------------- -----------------
Commission File Number 1-6098
---------
DANIEL INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 74-1547355
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9753 Pine Lake Drive, Houston, Texas 77055
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
713-467-6000
----------------------------------------------------
(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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
On November 7, 1997, there were outstanding 17,250,431 shares of
Common Stock, $1.25 par value, of the registrant.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DANIEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................. $ 6,881 $ 5,423
Receivables, net of reserve of $1,362 and $1,252 ........................... 60,683 50,588
Costs and estimated earnings in excess of billings on
uncompleted contracts ................................................ 5,439 3,671
Inventories ................................................................ 47,543 52,006
Deferred taxes on income ................................................... 6,108 8,807
Other ...................................................................... 8,002 6,618
----------- -----------
Total current assets .................................................. 134,656 127,113
Property, plant and equipment, net ............................................ 72,011 75,555
Intangibles and other assets .................................................. 28,242 30,907
----------- -----------
$ 234,909 $ 233,575
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable .............................................................. $ 21,762 $ 18,287
Current maturities of long-term debt ....................................... 5,439 5,552
Accounts payable ........................................................... 18,985 18,311
Accrued expenses ........................................................... 27,939 30,591
----------- -----------
Total current liabilities ............................................. 74,125 72,741
Long-term debt ................................................................ 28,225 30,233
Deferred taxes on income ...................................................... 8,670 8,789
----------- -----------
Total liabilities ................................................. 111,020 111,763
----------- -----------
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, 150 shares
designated as Series A junior participating preferred stock, no shares
issued or outstanding
Common stock, $1.25 par value, 40,000 shares authorized, ................. 21,453 21,330
17,162 and 17,064 shares issued ...................................... 91,634 90,732
Capital in excess of par value ........................................... (5,440) (2,006)
Translation component .................................................... 16,242 11,756
----------- -----------
Retained earnings ........................................................ 123,889 121,812
----------- -----------
Total stockholders' equity ........................................ $ 234,909 $ 233,575
=========== ===========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
2
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DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues .................................. $ 71,334 $ 69,134 $ 197,470 $ 179,457
--------- --------- --------- ---------
Costs, expenses and other income:
Cost of sales .......................... 44,688 44,801 125,695 115,005
Selling, engineering and administrative
expenses ......................... 17,890 17,280 54,367 45,963
Research and development expenses ...... 1,593 1,005 3,632 2,061
Unusual Items .......................... 0 (583) 0 (2,082)
Interest and other expenses (income) ... 914 823 2,060 2,471
--------- --------- --------- ---------
Total costs, expenses and other income .. 65,085 63,326 185,754 163,418
--------- --------- --------- ---------
Income before income tax expense .......... 6,249 5,808 11,716 16,039
Income tax expense ........................ 2,649 2,341 4,921 6,170
--------- --------- --------- ---------
Net income ................................ $ 3,600 $ 3,467 $ 6,795 $ 9,869
========= ========= ========= =========
Earnings per common share ................. $ .21 $ .20 $ .40 $ .58
========= ========= ========= =========
Cash dividends per common share ........... $ .045 $ .045 $ .135 $ .135
========= ========= ========= =========
Average number of shares outstanding ...... 17,127 17,035 17,099 17,022
========= ========= ========= =========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
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DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................ $ 6,795 $ 9,869
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ...................... 7,423 7,122
Changes in operating assets and liabilities ........ (9,562) (7,945)
--------- ---------
Net cash provided by operating activities ............... 4,656 9,046
--------- ---------
Cash flows from investing activities:
Acquisitions .......................................... (32,528)
Capital expenditures .................................. (8,049) (5,077)
Proceeds from sales of assets ......................... 6,694 7,823
--------- ---------
Net cash used in investing activities ................... (1,355) (29,782)
--------- ---------
Cash flows from financing activities:
Net borrowings under notes payable .................... 1,152 5,989
Net borrowings (payments) on long-term debt ........... (2,121) 18,186
Cash dividends paid ................................... (2,309) (1,637)
Activity under stock option plans ..................... 887 44
--------- ---------
Net cash provided by (used in) financing activities ..... (2,391) 22,582
--------- ---------
Effect of exchange rate changes on cash ................. 548 (243)
--------- ---------
Increase in cash and cash equivalents ................... 1,458 1,603
Cash and cash equivalents, beginning of period .......... 5,423 6,806
--------- ---------
Cash and cash equivalents, end of period ................ $ 6,881 $ 8,409
========= =========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
4
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - General
The foregoing financial statements have been prepared from the books
and records of Daniel Industries, Inc. ("Daniel" or the "Company") without
audit. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods presented, are reflected in the financial statements.
These condensed statements should be read in conjunction with the
financial statements and the related notes included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1996 and the Transition
Report on Form 10-Q filed for the three-month transition period ended December
31, 1996. As noted in that transition report, (1) on December 12, 1996, the
Company completed a merger with Bettis Corporation ("Bettis"), accounted for as
a pooling of interests, and accordingly, the Company's financial statements
have been restated to include the operations of Bettis for all periods
presented, and (2) the Company's fiscal year has been changed to December 31
from September 30.
The Company adopted Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation" for its year ending December 31,
1997. The Company did not elect fair value expense recognition for stock
options and, therefore, implementation will not materially affect its financial
statements.
Note 2 - Earnings per Share
Earnings per share ("EPS") for the nine-month and three-month periods
ended September 30, 1997 and 1996 are calculated as primary EPS (net income
divided by weighted average shares outstanding including common stock
equivalents).
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which requires a calculation of basic
and diluted EPS. The statement is effective for periods ending after December
15, 1997, which is the Company's fourth quarter of 1997, with early adoption
prohibited and restatement of prior EPS amounts required. The Company does not
expect adoption to materially affect its EPS amounts because of the Company's
simple capital structure and the immaterial effect of common stock equivalents.
Note 3 - Divestitures
As previously reported in the Company's Annual Report on Form 10-K for
the year ended September 30, 1996, the Company sold in March 1996, a
non-manufacturing property in Germany for a pretax gain of $1,499,000 and in
August 1996, the operating assets of the positive displacement meter product
line for a pretax gain of $583,000.
5
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Note 4 - Inventories
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Raw materials ....................................... $ 22,905 $ 26,036
Work-in-process ..................................... 14,809 12,809
Finished goods ...................................... 16,904 19,803
--------- ---------
Inventories before LIFO reserve ................... 54,618 58,648
Less LIFO reserve ................................... 7,075 6,642
--------- ---------
Total inventories ................................. $ 47,543 $ 52,006
========= =========
</TABLE>
Note 5 - Notes Payable
Notes payable at September 30, 1997 and December 31, 1996 of $21,762,000
and $18,287,000, respectively, consisted of borrowings under lines of credit and
notes to banks. Interest rates ranged from 7.0% to 8.4% at September 30, 1997.
At September 30, 1997, the Company had both committed and uncommitted
short-term lines of credit aggregating approximately $66,000,000. Some of these
lines contain restrictions regarding the amount available for short-term
borrowings or issuance of letters of credit. At September 30, 1997,
approximately $35,600,000 was available for additional short-term borrowings.
Note 6 - Long-Term Debt
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
(in thousands)
<S> <C> <C>
Revolving credit facility (secured by Bettis' U.S. assets); interest
at prime rate (8.50% at September 30, 1997 and 8.25% at December 31,
1996); interest payable quarterly; principal due October 31, 1998 ........ $ 21,200 $ 21,100
Notes payable to four insurance companies (unsecured);
11.5%; principal payable in annual installments
of $2,857; interest payable semi-annually ................................ 5,715 5,715
Note payable to bank (secured by Bettis' U.S.
assets); 5.95%; principal payable in quarterly
installments of $500; interest payable quarterly ......................... 3,500 5,000
Term loan to bank (secured by Bettis' Canadian assets); interest at the
Canadian prime rate (4.75% at September 30, 1997 and December 31, 1996);
principal and interest payable monthly; payable through August 31, 2001.. 1,448 1,733
Capital lease obligations .................................................... 1,677 2,056
Miscellaneous obligations .................................................... 124 181
---------- ----------
Total obligations ................................................... 33,664 35,785
Less portion due within one year ............................................. 5,439 5,552
---------- ----------
Long-term debt ...................................................... $ 28,225 $ 30,233
========== ==========
</TABLE>
6
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The terms of certain financing agreements contain, among other
provisions, requirements for maintaining defined levels of working capital, net
worth, capital expenditures and various financial ratios, including debt to
equity.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 vs. Nine Months Ended September
30, 1996
Revenues for the nine months ended September 30, 1997 were
$197,470,000 compared to $179,457,000 for the same period in 1996. The increase
is primarily due to incremental revenues from measurement and actuator
businesses acquired in 1996 partially offset by a decline in revenues from
sales of valve products. The Company's backlog at September 30, 1997 was
$77,849,000, an increase of 25% and 53% from the backlog balance at December
31, 1996 and September 30, 1996, respectively, reflecting improved demand for
the Company's measurement and actuator products.
The gross profit margin for the nine months ended September 30, 1997
remained constant at 36% of revenues. Improved margins from the increased sales
of measurement products were offset by decreased margins at the valve
operations due to lower production levels.
Selling, engineering and administrative ("SE&A") expenses increased
$8,404,000 to $54,367,000 in the current period largely due to SE&A expenses of
companies acquired in 1996. Included in SE&A expenses for the nine months ended
September 30, 1997 is a provision for $1,123,000 relating to anticipated costs
associated with the Company's German subsidiary prior to the completion of its
pending sale to a group including members of the subsidiary's management.
Research and development expenses increased $1,571,000 to $3,632,000 in the
current period largely due to the May 1996 acquisition of Spectra-Tek
International Limited coupled with increased spending on electronic development
projects.
For the nine months ended September 30, 1996, the Company recorded
pretax gains of $1,499,000 from the sale of a German facility and $583,000 from
the sale of the assets of the Company's positive displacement meter product
line.
Interest and other expense (income) decreased by $411,000 in the nine
months ended September 30, 1997 as compared to the same period in 1996. An
increase in interest expense of $562,000 in the current period, due principally
to borrowings used to fund 1996 acquisitions, was more than offset by an
increase of $722,000 in interest income on previously discounted notes received
upon the sale of the assets of the Company's fastener subsidiary in 1996 and
other miscellaneous income.
The effective tax rate for the nine months ended September 30, 1997
was 42.0% as compared to 38.5% for the same period in the prior year. The
increase was due principally to foreign losses for which no tax benefit was
allowed.
7
<PAGE> 8
Quarter Ended September 30,1997 vs. Quarter Ended September 30, 1996
Revenues for the quarter ended September 30, 1997 were $71,334,000
compared to $69,134,000 for the same period in 1996. The increase is due
primarily to higher revenues from measurement and actuator businesses which
were partially offset by a decline in revenues from sales of valve products.
The gross profit margin for the quarter ended September 30, 1997
increased to 37% of revenues from 35% in the quarter ended September 30, 1996.
Margins improved on sales of measurement products and valve actuators due
principally to higher sales noted above.
SE&A expenses increased $610,000 to $17,890,000 in the current period
due primarily to SE&A expenses of companies acquired in 1996. Research and
development expenses increased $588,000 to $1,593,000 in the current period
representing increased expenditures on electronic development projects.
In the quarter ended September 30, 1996, the Company recorded a pretax
gain of $583,000 on the sale of the assets of the positive displacement meter
product line.
The effective tax rate for the current quarter was 42.4% compared to
40.3% for the same period last year. This increase was due principally to
foreign losses for which no tax benefit was allowed.
Liquidity and Capital Resources
The primary source of the Company's liquidity for the nine months
ended September 30, 1997 was short-term borrowings, internally generated funds,
and proceeds from the sale of assets. These funds were used primarily for
capital expenditures, funding of operations, payments on short-term and
long-term debt, payment of severance costs which were accrued at December 31,
1996, and for the payment of cash dividends.
Working capital at September 30, 1997 of $60,531,000 reflects an
increase of $6,159,000 from the balance at December 31, 1996. The increase is
primarily due to the increase in accounts receivable associated with higher
revenues realized this year. Daniel considers its financial position to be
strong with a current ratio at September 30, 1997 of 1.8 to 1.0. Working
capital at September 30, 1997 included $53,651,000 in inventory and deferred
tax assets, which are not as liquid as other current assets.
At September 30, 1997, the Company had both committed and uncommitted
short-term lines of credit aggregating approximately $66,000,000. Some of these
lines contain restrictions regarding the amount available for short-term
borrowings or the issuance of letters of credit. At September 30, 1997,
approximately $35,600,000 was available under these lines for additional
short-term borrowings.
8
<PAGE> 9
Capital expenditures for the quarter and nine months ended September
30, 1997 were $3,982,000 and $8,049,000, respectively. The Company continues to
seek acquisitions that would build upon its expertise in the manufacture and
sale of fluid measurement, flow control, actuation and analytical products and
services.
The Company believes that its working capital, cash generated from
operations and amounts available under its short-term lines of credit will be
adequate to meet its operating needs for the foreseeable future.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is subject to legal proceedings and claims which arise in
the ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 By-laws of the Company, as amended through June 1, 1997.
10.1 Daniel Industries, Inc. 1997 Stock Option Plan
10.2 Daniel Industries, Inc. 1997 Non-Employee Director Stock Option Plan
*10.3 Employment Agreement dated as of June 17, 1997, between the Company and
Thomas A. Newton, Jr.
*10.4 Stock Award Agreement dated as of June 17, 1997, between the Company
and Thomas A. Newton, Jr.
*10.5 Change in Control Agreement dated as of June 17, 1997, between the
Company and Thomas A. Newton, Jr.
*10.6 Change In Control Agreement dated as of June 17, 1997, between the
Company and Ronald C. Lassiter.
*10.7 Form of Change in Control Agreement between the Company and each of
Daniel J. Sarik, Katie-Pat Bowman, and Michael T. Atkins.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
*Management Contract or Compensatory Plan or Arrangement.
9
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SIGNATURE
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.
DANIEL INDUSTRIES, INC.
------------------------------------
(Registrant)
Date: November 12, 1997 By: /s/ James M. Tidwell
----------------- --------------------------------
Executive Vice President and
Chief Financial Officer
Date: November 12, 1997 By: /s/ Wilfred M. Krenek
----------------- --------------------------------
Vice President and Controller
(Chief Accounting Officer)
10
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1 By-laws of the Company, as amended through June 1, 1997.
10.1 Daniel Industries, Inc. 1997 Stock Option Plan
10.2 Daniel Industries, Inc. 1997 Non-Employee Director Stock Option Plan
*10.3 Employment Agreement dated as of June 17, 1997, between the Company and
Thomas A. Newton, Jr.
*10.4 Stock Award Agreement dated as of June 17, 1997, between the Company
and Thomas A. Newton, Jr.
*10.5 Change in Control Agreement dated as of June 17, 1997, between the
Company and Thomas A. Newton, Jr.
*10.6 Change In Control Agreement dated as of June 17, 1997, between the
Company and Ronald C. Lassiter.
*10.7 Form of Change in Control Agreement between the Company and each of
Daniel J. Sarik, Katie-Pat Bowman, and Michael T. Atkins.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
BY-LAWS
OF
DANIEL INDUSTRIES, INC.
(as amended through June 1, 1997)
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1.1. PLACE OF MEETINGS. All meetings of stockholders shall be
held at such place, either within or without the State of Delaware, as shall be
determined from time to time by the Board of Directors.
SECTION 1.2. ANNUAL MEETINGS. The annual meeting of stockholders shall
be held at such date and time as shall be determined from time to time by the
Board of Directors. The annual meeting shall be held for the purpose of
electing directors in accordance with Article X of the Certificate of
Incorporation and transacting such other business as may be properly brought
before the meeting.
SECTION 1.3. SPECIAL MEETINGS. Special meetings of stockholders may be
called only by the Board of Directors. The Board of Directors shall determine
the date and time of each special meeting of stockholders. The business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice of that meeting.
SECTION 1.4. NOTICE OF MEETINGS. Written notice of each meeting of
stockholders, stating
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the time and place and purpose or purposes thereof, shall be given to each
stockholder entitled to vote at the meeting, within the time prescribed by
statute.
SECTION 1.5. QUORUM. The holders of a majority of the shares entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at any meeting of stockholders except as otherwise provided by statute.
The holders of a majority of the shares entitled to vote thereat, present in
person or represented by proxy, whether or not a quorum is present, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
If the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified.
SECTION 1.6. VOTING. When a quorum is present or represented at any
meeting of stockholders, the affirmative vote of the holders of a majority of
the shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders in
all matters, including the election of directors, unless the matter is one upon
which, by express provision of the statutes, of the Certificate of
Incorporation or of these by-laws, a different vote is required, in which case
such express provision shall govern and control the decision of that matter.
Every stockholder having the right to vote shall be entitled to vote in person,
or by proxy appointed by an instrument in writing subscribed by such
stockholder, bearing a date not more than three years prior to voting, unless
such instrument provides for a longer
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period, and filed with the Secretary of the corporation before, or at the time
of, the meeting. If such instrument shall designate two or more persons to act
as proxies, unless such instrument shall provide to the contrary, a majority of
such persons present at any meeting at which their powers thereunder are to be
exercised shall have and may exercise all the powers of voting thereby
conferred.
SECTION 1.7. CONSENTS OF STOCKHOLDERS. As provided in Article VI of
the Certificate of Incorporation, the right of stockholders of the corporation
to take action by a consent in writing is denied.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. POWERS. The business and affairs of the corporation shall
be managed under the direction of its Board of Directors, which may exercise
all powers of the corporation and do all lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these by-laws required to
be exercised or done by the stockholders.
SECTION 2.2. NUMBER AND CLASSIFICATION. The number of directors shall
be fixed in the manner provided by, and the directors shall be divided into
classes in accordance with, Article X of the Certificate of Incorporation. The
number of directors so fixed shall constitute the total number of directors of
the corporation.
SECTION 2.3. CHAIRMAN OF THE BOARD. Annually the Board of Directors
shall elect from among its members a person to serve as Chairman of the Board
of Directors until his successor is elected and duly qualified. The Chairman
shall preside at all meetings of the Board of Directors,
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and he shall have such other authority and perform such other duties as may be
determined from time to time by resolution of the Board of Directors not
inconsistent with these by-laws. If the Chairman of the Board of Directors
shall have been last designated as Chief Executive Officer, then he also shall
have the authority and perform the duties appertaining to that designation, as
specified in Section 5.6 of these by-laws.
SECTION 2.4. REMOVAL. A director may not be removed except in
accordance with Article X of the Certificate of Incorporation.
SECTION 2.5. ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held each year, without other notice than this by-law, at
the place of, and immediately following, the annual meeting of stockholders.
However, if a majority of the whole Board of Directors shall so consent in
writing, such regular meeting may be held at such time and place as shall be
fixed by such consent, and the Secretary shall give notice of such regular
meeting, stating such time and place, in the manner required by these by-laws.
SECTION 2.6. OTHER MEETINGS. Other meetings of the Board of Directors
may be called by the Chairman of the Board of Directors, the President or any
two directors. Except as provided in Section 2.5 of these by-laws, notice of
each meeting of the Board of Directors stating the time and place of the
meeting shall be given not less than seventy-two hours before the time of the
meeting, by or at the direction of the person or persons calling the meeting,
to each director. If the person or persons calling the meeting shall instruct
the Secretary or any Assistant Secretary to give such notice, then the
Secretary or such Assistant Secretary shall promptly do so in the manner
required by these by-laws.
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SECTION 2.7. WAIVER OF NOTICE. 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 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 meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 2.8. QUORUM. A majority of the total number of directors,
determined in accordance with Section 2.2 of these by-laws, shall constitute a
quorum for the transaction of business at any meeting of the Board of
Directors, and the vote of a majority of the directors present at a meeting at
which there is a quorum shall be the act of the Board of Directors unless the
Certificate of Incorporation or these by-laws shall require a vote of a greater
number of directors. If a quorum shall not be present at any meeting of the
Board of Directors, a majority of the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 2.9. ACTION BY CONSENT OF DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a consent in writing, setting forth the action so taken,
is signed by all of the directors.
SECTION 2.10. COMPENSATION OF DIRECTORS. The Board of Directors,
irrespective of any personal interest of any of its members, shall have
authority to fix the compensation of all directors for services to the
corporation as directors, as members of one or more committees of the Board of
Directors, as officers, or otherwise.
5
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ARTICLE III
COMMITTEES OF DIRECTORS
SECTION 3.1. DESIGNATION, POWERS AND NAME. The Board of Directors may,
by resolution passed by a majority of the whole Board of Directors, designate
one or more committees, including, if they shall so determine, an Executive
Committee, each such committee to consist of one or more of the directors of
the corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or disqualification of
any member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
SECTION 3.2. MEETINGS OF AND ACTION BY COMMITTEES. Except as otherwise
provided in the resolution pursuant to which a particular committee of the
Board of Directors was designated, (i) meetings of such committee may be held
within or without the State of Delaware and may be called by any member
thereof, (ii) notice of each meeting of such committee stating the time and
place of the meeting shall be given not less than forty-eight hours before the
time of the meeting, by or at the direction of the person or persons calling
the meeting, to each member of such committee, and if the person or persons
calling the meeting shall instruct the Secretary or any Assistant Secretary to
give such notice, then the Secretary or such Assistant Secretary shall promptly
do so in the manner required by these by-laws, (iii) attendance of a director
at any meeting of such committee shall constitute a waiver of notice of such
meeting, except where a
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director attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, (iv) neither the business to be transacted at, nor the
purpose of, any meeting of such committee need be specified in the notice or
waiver of notice of such meeting, (v) at all meetings of such committee, a
majority of the number of directors comprising such committee, as fixed by such
resolution, shall constitute a quorum for the transaction of business, (vi) the
vote of a majority of the members present at a meeting of such committee at
which there is a quorum shall be the act of such committee, and (vii) if a
quorum shall not be present at any meeting of such committee, a majority of the
members present at such meeting may adjourn such meeting from time to time,
without notice other than announcement at such meeting, until a quorum shall be
present. The Board of Directors, by resolution adopted by a majority of the
whole Board of Directors may amend or repeal the resolution pursuant to which
any committee of the Board of Directors was designated, may remove any member
of any committee, and may fill any vacancy occurring on any committee. Each
committee of directors shall keep regular minutes of its proceedings and report
the same to the Board of Directors when requested to do so.
SECTION 3.3. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a consent in writing, setting forth the action so take, is
signed by all of the members of such committee.
ARTICLE IV
NOTICE
SECTION 4.1. METHODS OF GIVING NOTICE. Whenever under the provisions
of the statutes,
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the Certificate of Incorporation or these by-laws, notice is required to be
given to any director, member of any committee or stockholder, such notice
shall be in writing and delivered personally or mailed to such director, member
or stockholder; provided that in the case of a director or a member of any
committee such notice may be given orally or by telephone or telegram. If
mailed, notice to a director, member of a committee or stockholder shall be
deemed to be given when deposited in the United States mail first class in a
sealed envelope, with postage thereon prepaid, addressed, in the case of a
stockholder, to the stockholder at the stockholder's address as it appears on
the records of the corporation or, in the case of a director or a member of a
committee, to such person at his business or home address. If sent by
telegraph, notice to a director or member of a committee shall be deemed to be
given when the telegram, so addressed, is delivered to the telegraph company.
SECTION 4.2. WRITTEN WAIVER. Whenever any notice is required to be
given under the provisions of the statutes, the Certificate of Incorporation or
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 5.1. OFFICERS. The officers of the corporation shall be a
Chief Executive Officer, President, one or more Vice Presidents, a Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint other officers and agents, including
Assistant Secretaries and Assistant Treasurers, who shall hold their offices
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for such terms and shall exercise such powers and perform such duties as shall
be determined by
the Board of Directors. Any two or more offices, other than the offices of
President and Secretary, may be held by the same person.
SECTION 5.2. TERM OF OFFICE. Each officer shall hold office until his
successor is elected by the Board of Directors or until his earlier death,
resignation or removal from office.
SECTION 5.3. REMOVAL AND RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed without cause by the Board
of Directors whenever, in its sole judgment, the best interests of the
corporation shall be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. Any officer may resign at any time by giving written notice
to the corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5.4. VACANCIES. Any vacancy occurring in any office of the
corporation by death, resignation or removal from office may be filled only by
the Board of Directors.
SECTION 5.5. SALARIES. The salaries of all officers of the corporation
shall be fixed by the Board of Directors or pursuant to its direction. No
officer shall be prevented from receiving a salary by reason of his also being
a director.
SECTION 5.6. CHIEF EXECUTIVE OFFICER. The Board of Directors shall
designate either the Chairman of the Board of Directors or the President as the
Chief Executive Officer of the corporation, and the person last so designated
shall be the Chief Executive Officer of the corporation until a successor Chief
Executive Officer is designated by the Board of Directors or
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until such person ceases to hold the office held by him at the time of such
designation. The Chief Executive Officer shall be the principal executive
officer of the corporation for the purposes of all filings by the corporation
with the United States Securities and Exchange Commission, shall preside at all
meetings of stockholders, shall have general and active management of the
business of the corporation, and shall see that all resolutions of the Board of
Directors are carried into effect. The Board of Directors may change the
designation of Chief Executive Officer at any time, but no such change shall
constitute removal of any person from the office of Chairman of the Board of
Directors or President, as the case may be. If the Chairman of the Board of
Directors shall have been last designated as Chief Executive Officer, then in
the absence or disability of the Chairman of the Board of Directors, the
President shall perform the duties and have the authority of the Chief
Executive Officer. If the President shall have been last designated as Chief
Executive Officer, then in the absence or disability of the President, the
Chairman of the Board of Directors shall perform the duties and have the
authority of the Chief Executive Officer.
SECTION 5.7. PRESIDENT. The President shall be the Chief Operating
Officer of the corporation, and he shall have general supervision of the day-
to-day operations of the corporation's several industry segments. Unless the
Board of Directors shall have designated a particular officer of the
corporation as Chief Financial Officer, then the President shall be the
Principal Financial Officer of the corporation for purposes of all filings by
the corporation with the United States Securities and Exchange Commission. The
President shall have such other authority and perform such other duties as may
be determined from time to time by resolution of the Board of Directors not
inconsistent with these by-laws. If the President shall have been last
designated as Chief Executive Officer, then he also shall have the authority
and perform the duties
10
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appertaining to that designation, as specified in Section 5.6 of these by-laws.
SECTION 5.8. VICE PRESIDENTS. The Vice Presidents shall have such
authority and perform such duties as may be determined from time to time by
resolution of the Board of Directors not inconsistent with these by-laws or as
the Chairman of the Board of Directors or the President may from time to time
delegate. The Board of Directors may, at the time of the election of any Vice
President of the corporation, designate such Vice President a "Senior Vice
President" or "Executive Vice President" of the corporation or designate such
Vice President by reference to a principal business function, such as "Finance"
or "Administration".
SECTION 5.9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and shall record all of
the proceedings of such meetings in minute books to be kept for that purpose.
If any member of any committee of the Board of Directors shall so request, the
Secretary shall perform like duties in respect of the proceedings of meetings
of such committee. If requested by any person or persons having authority to
call such a meeting, the Secretary shall give, or cause to be given, notice of
each meeting of the Board of Directors and notice of each meeting of
stockholders, such notice to be given promptly in the manner required by these
by-laws. The Secretary shall keep in safe custody the seal of the corporation
and, when authorized by the Board of Directors, shall affix the same to any
instrument requiring it. The Secretary shall have such other authority and
perform such other duties as may be determined from time to time by resolution
of the Board of Directors not inconsistent with these by-laws or as the Chief
Executive Officer may from time to time delegate.
SECTION 5.10. ASSISTANT SECRETARY. The Assistant Secretary shall, in
the absence or disability of the Secretary, have the authority and perform the
duties of the Secretary. He shall
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have such other authority and perform such other duties as may be determined
from time to time by resolution of the Board of Directors not inconsistent with
these by-laws or as the Secretary may from time to time delegate.
SECTION 5.11. TREASURER. The Treasurer shall have custody of the
corporate funds and securities and shall keep full and accurate accounts and
records of receipts, disbursements and other transactions in books belonging to
the corporation. He shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as and when ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chief Executive
Officer and to the Board of Directors, when the Chief Executive Officer or the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the corporation. The Treasurer shall have
such other authority and perform such other duties as may be determined from
time to time by resolution of the Board of Directors not inconsistent with
these by-laws or as the Chief Executive Officer may from time to time delegate.
SECTION 5.12. ASSISTANT TREASURER. The Assistant Treasurer shall, in
the absence or disability of the Treasurer, have the authority and perform the
duties of the Treasurer. He shall have such other authority and perform such
other duties as may be determined from time to time by resolution of the Board
of Directors not inconsistent with these by-laws or as the Treasurer may from
time to time delegate.
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ARTICLE VI
CHECKS AND DEPOSITS
SECTION 6.1. CHECKS, ETC. All checks, demands, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the corporation shall be signed by such officer or officers or such
agent or agents of the corporation, and in such manner, as shall be determined
by the Board of Directors.
SECTION 6.2. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES OF STOCK
SECTION 7.1. ISSUANCE. Each stockholder of the corporation shall be
entitled to a certificate or certificates showing the number of shares of stock
registered in his name on the books of the corporation. The certificates shall
be in such form as may be determined by the Board of Directors, shall be issued
in numerical order and shall be entered in the books of the corporation as they
are issued. They shall exhibit the holder's name and number of shares and
shall be signed by the President or a Vice President and by the Secretary or an
Assistant Secretary, provided that such signatures may be facsimile. All
certificates surrendered to the corporation's transfer agent for transfer shall
be canceled, and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled,
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except that in the case of a lost, stolen, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and with such indemnity, if any,
to the corporation as the Board of Directors may prescribe. Unless otherwise
provided in the resolution or resolutions of the Board of Directors providing
for the issuance of shares of Preferred Stock of the corporation of a
particular series, certificates shall not be issued representing fractional
shares of stock.
SECTION 7.2. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate or certificates alleged to have been lost,
stolen or destroyed, or both.
SECTION 7.3. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Delaware.
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ARTICLE VIII
DIVIDENDS
SECTION 8.1. DECLARATION. Dividends upon the stock of the corporation
may be declared by the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of stock.
SECTION 8.2. RESERVE. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the corporation.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1. THIRD PARTY ACTIONS. The corporation shall indemnify any
natural person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director or officer or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgements, fines and amounts paid in settlement
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actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonable believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
preceding by judgement, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 9.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any natural person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the
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case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 9.3. DETERMINATION OF CONDUCT. The determination whether an
officer, director or agent has met the applicable standard of conduct set forth
in Sections 9.1 and 9.2 (unless indemnification is ordered by a court) shall be
made (1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
SECTION 9.4. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred by an
officer, director or agent in defending a civil or criminal action, suit or
proceeding for which such person may be entitled to indemnity under this
Article IX shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified under this
Article IX.
SECTION 9.5. DEFINITIONS. For purposes of this Article IX, references
to Athe corporation@ shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued would have had power and authority to indemnify its directors and
officers, so that any person who is or who was a director or officer of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article IX with respect to the resulting
or surviving corporation as he
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would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article IX, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director or officer of the corporation that
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the best interest of the participants and beneficiaries in the employee benefit
plan shall be deemed to have acted in a manner Anot opposed to the best
interests of the corporation@ as referred to in this Article IX.
SECTION 9.6. INDEMNITY NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any agreement, vote of
stockholders, vote of disinterested directors, insurance arrangement or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 9.7 CONTINUATION. The indemnification and advancement of
expenses provided by this Article IX shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 9.8. NO FURTHER AUTHORIZATION REQUIRED. This Article IX is
intended to make mandatory the indemnification permitted by Section 145 of the
Delaware General Corporation Law. This Article IX shall be deemed to
constitute the authorization required by subsection (d) of said Section 145,
and no further authorization by the Board of Directors or the stockholders of
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the corporation shall be necessary in any specific case if the indemnification
or advancement of expenses referred to in this Article IX is, by the terms of
this Article IX, required to be afforded in that case.
ARTICLE X
BY-LAW AMENDMENTS: APPLICATION OF Section 203
OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 10.1. CERTIFICATE OF INCORPORATION TO GOVERN. These by-laws
may not be adopted, amended or repealed otherwise than in accordance with
Article VI of the Certificate of Incorporation, provided that Section 10.2 of
these by-laws may not be further amended by the Board of Directors.
SECTION 10.2. NO APPLICATION OF Section 203. The corporation hereby
expressly elects not to be governed by Section 203 of the Delaware General
Corporation Law entitled "Business Combinations with Interested Stockholders".
19
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EXHIBIT 10.1
DANIEL INDUSTRIES, INC.
1997 STOCK OPTION PLAN
<PAGE> 2
DANIEL INDUSTRIES, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
-------
<S> <C>
ARTICLE I - PLAN
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . 1.2
ARTICLE II - DEFINITIONS
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Incentive Option . . . . . . . . . . . . . . . . . . . . . . . . . 2.8
Non-Employee Director . . . . . . . . . . . . . . . . . . . . . . . 2.9
Nonqualified Option . . . . . . . . . . . . . . . . . . . . . . . . 2.10
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.11
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
Outside Director . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16
10% Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17
ARTICLE III - ELIGIBILITY
ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS
Authority to Grant Options . . . . . . . . . . . . . . . . . . . . 4.1
Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Non-Transferability . . . . . . . . . . . . . . . . . . . . . . . . 4.3
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Changes in the Company's Capital Structure . . . . . . . . . . . . 4.5
ARTICLE V - OPTIONS
Type of Option . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . 5.4
Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . 5.5
Substitution Options . . . . . . . . . . . . . . . . . . . . . . . 5.6
No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . 5.7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI - ADMINISTRATION
ARTICLE VII - AMENDMENT OR TERMINATION OF PLAN
ARTICLE VIII - MISCELLANEOUS
No Employment Obligation . . . . . . . . . . . . . . . . . . . . . 8.1
Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 8.3
Indemnification of the Committee and the Board of Directors . . . . 8.4
Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6
Other Compensation Plans . . . . . . . . . . . . . . . . . . . . . 8.7
Other Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8
Arbitration of Disputes . . . . . . . . . . . . . . . . . . . . . . 8.9
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
</TABLE>
<PAGE> 4
ARTICLE I
PLAN
1.1 PURPOSE. This Plan is a plan for employees, consultants and
advisors of the Company and its Affiliates and is intended to advance the best
interests of the Company, its Affiliates, and its stockholders by providing
those persons who have substantial responsibility for the management and growth
of the Company and its Affiliates with additional incentives and an opportunity
to obtain or increase their proprietary interest in the Company, thereby
encouraging them to continue in the employ of the Company or any of its
Affiliates.
1.2 EFFECTIVE DATE OF PLAN. This Plan is effective June 17, 1997, if
within one year of that date it shall have been approved by at least a majority
vote of stockholders voting in person or by proxy at a duly held stockholders'
meeting, or if the provisions of the corporate charter, by-laws or applicable
state law prescribe a greater degree of stockholder approval for this action,
the approval by the holders of that percentage, at a duly held meeting of
stockholders. No Option shall be granted pursuant to this Plan after June 16,
2007.
I-1
<PAGE> 5
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if,
at the time of the action or transaction, each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
The term "subsidiary corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
2.2 "BOARD OF DIRECTORS" means the board of directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended.
2.4 "COMMITTEE" means the committee designated by the Board of
Directors. The Committee shall be comprised solely of at least two members who
are both Outside Directors and Non-Employee Directors.
2.5 "COMPANY" means Daniel Industries, Inc., a Delaware corporation.
2.6 "EMPLOYEE" means a person employed by the Company or any
Affiliate.
II.7 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date (or, if there
was no sale on such date, the next preceding date on which there was such a
sale) on the principal securities exchange on which the Stock is listed; or (b)
if the Stock is not listed on a securities exchange, an amount as determined by
the Committee in its sole discretion.
2.8 "INCENTIVE OPTION" means an Option granted under this Plan which
is designated as an "Incentive Option" and satisfies the requirements of
section 422 of the Code.
2.9 "NON-EMPLOYEE DIRECTOR" means a "non-employee director" as that
term is defined in Rule 16b-3 of the Securities Exchange Act of 1934.
2.10 "NONQUALIFIED OPTION" means an Option granted under this Plan
other than an Incentive Option.
2.11 "OPTION" means either an Incentive Option or a Nonqualified
Option granted under this Plan to purchase shares of Stock.
2.12 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
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2.13 "OPTIONEE" means a person who is granted an Option under this
Plan.
2.14 "OUTSIDE DIRECTOR" means a member of the Board of Directors
serving on the Committee who satisfies the criteria of section 162(m) of the
Code.
2.15 "PLAN" means the Daniel Industries, Inc. 1997 Stock Option Plan,
as set out in this document and as it may be amended from time to time.
2.16 "STOCK" means the common stock of the Company, $1.25 par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company
or another corporation, that other stock or security.
2.17 "10% STOCKHOLDER" means an individual who, at the time the Option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Affiliate. An
individual shall be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its stockholders, partners,
or beneficiaries.
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ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options shall
be those key Employees as the Committee shall determine from time to time. The
individuals who shall be eligible to receive Nonqualified Options shall be
those key Employees, consultants and advisors of the Company or any of its
Affiliates as the Committee shall determine from time to time. However, no
member of the Committee shall be eligible to receive any Option or to receive
stock, stock options, or stock appreciation rights under any other plan of the
Company or any of its Affiliates, if to do so would cause the individual not to
be an Outside Director or a Non-Employee Director. The Board of Directors may
designate one or more individuals who shall not be eligible to receive any
Option under this Plan or under other similar plans of the Company.
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ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS
4.1 AUTHORITY TO GRANT OPTIONS. The Committee may grant Options to
those individuals as it shall from time to time determine under the terms and
conditions of this Plan. Subject only to any applicable limitations set out in
this Plan, the number of shares of Stock to be covered by any Option shall be
as determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with
respect to which Options may be granted under the Plan shall be 730,000 shares.
The shares may be treasury shares or authorized but unissued shares. The total
number of shares of Stock with respect to which Incentive Options may be
granted under the Plan shall be 730,000 shares. The maximum number of shares
subject to Options which may be issued to any Optionee under the Plan during
any period of three consecutive years is 365,000 shares. The number of shares
stated in this Section 4.2 shall be subject to adjustment in accordance with
the provisions of Section 4.5.
If any outstanding Option expires or terminates for any reason or any
Option is surrendered, the shares of Stock allocable to the unexercised portion
of that Option may again be subject to an Option under the Plan.
4.3 NON-TRANSFERABILITY. Options shall not be transferable by the
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Committee has received evidence
satisfactory to it to the effect that the holder of that Option will not
transfer the Stock except in accordance with applicable law, including receipt
of an opinion of counsel satisfactory to the Company to the effect that any
proposed transfer complies with applicable law. The determination by the
Committee on this matter shall be final, binding and conclusive. The Company
may, but shall in no event be obligated to, register any Stock covered by this
Plan pursuant to applicable securities laws of any country or any political
subdivision. In the event the Stock issuable on exercise of an Option is not
registered, the Company may imprint on the certificate evidencing the Stock any
legend that counsel for the Company considers necessary or advisable to comply
with applicable law. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option and the issuance
of shares thereunder, to comply with any law or regulation of any governmental
authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
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<PAGE> 9
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares
he would have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares of
Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved,
that number and class of shares of Stock that would have been received by the
owner of an equal number of outstanding shares of such class of Stock as the
result of the event requiring the adjustment.
If the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or if the Company is liquidated
or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan, after the effective
date of the merger, consolidation, liquidation, sale or other disposition, as
the case may be, each holder of an outstanding Option shall be entitled, upon
exercise of the Option, to receive, in lieu of shares of Stock, the number and
class or classes of shares of stock or other securities or property to which
the holder would have been entitled if, immediately prior to the merger,
consolidation, liquidation, sale or other disposition, the holder had been the
holder of record of a number of shares of Stock equal to the number of shares
as to which the Option shall be so exercised; and (b) the Committee shall waive
any limitations set out in or imposed under this Plan so that, from and after
the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, all Options shall be exercisable in full.
However, no Option will vest under the preceding sentence to the extent that
such vesting could result in a diminution of any compensation that would
otherwise be payable to the Optionee.
The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.
ARTICLE V
OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given
Option shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price at which Stock may be purchased under an
Option shall not be less than the greater of: (a) 100% of the Fair Market
Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
In the case of any 10% Stockholder, the price at which shares of Stock may be
purchased under an Incentive Option shall not be less than 110% of the Fair
Market Value of the Stock on the date the Incentive Option is granted.
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<PAGE> 10
5.3 DURATION OF OPTIONS. No Option shall be exercisable after the
earlier of (a) 10 years from the date the Option is granted or (b) 30 days
after the severance of the employment relationship between the Optionee and the
Company and all Affiliates for any reason other than death. In the case of a
10% Stockholder, no Incentive Option shall be exercisable after the earlier of
(a) five years from the date the Incentive Option is granted or (b) 30 days
after the severance of the employment relationship between the Optionee and the
Company and all Affiliates.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to
time, in whole or in part, in the manner and subject to the conditions the
Committee, in its sole discretion, may provide in the Option Agreement, as long
as the Option is valid and outstanding. To the extent that the aggregate Fair
Market Value (determined as of the time an Incentive Option is granted) of the
Stock with respect to which Incentive Options first become exercisable by the
Optionee during any calendar year (under this Plan and any other incentive
stock option plan(s) of the Company or any Affiliate) exceeds $100,000, the
Incentive Options shall be treated as Nonqualified Options. In making this
determination, Incentive Options shall be taken into account in the order in
which they were granted.
5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Stock with respect to which the Option is to be exercised, together with:
(a) cash, check, bank draft, or postal or express money order payable to the
order of the Company for an amount equal to the option price of the shares, or
(b) Stock at its Fair Market Value on the date of exercise, and/or any other
form of payment which is acceptable to such committee, and specifying the
address to which the certificates for the shares are to be mailed. Subject to
Section 8.3, as promptly as practicable after receipt of written notification
and payment, the Company shall deliver to the Optionee certificates for the
number of shares with respect to which the Option has been exercised, issued in
the Optionee's name. If shares of Stock are used in payment of the exercise
price, the aggregate Fair Market Value of the shares of Stock tendered must be
equal to or less than the aggregate exercise price of the shares being
purchased upon exercise of the Option, and any difference must be paid by cash,
check, bank draft, or postal or express money order payable to the Company.
Delivery of the shares shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Optionee, at the address specified by the
Optionee.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally
and beneficially owned by the Optionee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates, (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The
delivery of certificates upon the exercise of Options is subject to the
condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale
or other disposition of an Option.
5.6 SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the
Company or any Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or any Affiliate, or the acquisition by
the Company or any Affiliate of the assets of the employing corporation, or the
acquisition by the Company or any Affiliate of stock of the employing
corporation as the result of which it
V-2
<PAGE> 11
becomes an Affiliate of the Company. The terms and conditions of the
substitute Options granted may vary from the terms and conditions set out in
this Plan to the extent the Committee, at the time
of grant, may deem appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are granted.
5.7 NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
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<PAGE> 12
ARTICLE VI
ADMINISTRATION
This Plan shall be administered by the Committee. All questions of
interpretation and application of this Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to writing
and signed by a majority of the members shall be as effective as if it had been
made by a majority vote at a meeting properly called and held. This Plan shall
be administered in such a manner as to permit the Options granted under it
which are designated to be Incentive Options to qualify as Incentive Options.
In carrying out its authority under this Plan, the Committee shall have full
and final authority and discretion, including but not limited to the following
rights, powers and authorities, to:
(a) determine the persons to whom and the time or times at
which Options will be made,
(b) determine the number of shares and the purchase price of
Stock covered in each Option, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each
Option, which need not be identical,
(d) accelerate the time at which any outstanding Option may be
exercised,
(e) define the effect, if any, on an Option of the death,
disability, or retirement of the Optionee,
(f) prescribe, amend and rescind rules and regulations
relating to administration of this Plan, and
(g) make all other determinations and take all other actions
deemed necessary, appropriate, or advisable for the proper
administration of this Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive
and binding on all parties.
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ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that to the extent required to maintain the status of any Incentive Option
under the Code, no amendment that would (a) change the aggregate number of
shares of Stock which may be issued under Incentive Options, (b) change the
class of employees eligible to receive Incentive Options, or (c) decrease the
exercise price for Incentive Options below the Fair Market Value of the Stock
at the time it is granted, shall be made without the approval of the Company's
stockholders. Subject to the preceding sentence, the Board shall have the
power to make any changes in this Plan and in the regulations and
administrative provisions under it or in any outstanding Incentive Option as in
the opinion of counsel for the Company may be necessary or appropriate from
time to time to enable any Incentive Option granted under this Plan to continue
to qualify as an incentive stock option or such other stock option as may be
defined under the Code so as to receive preferential Federal income tax
treatment.
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ARTICLE VIII
MISCELLANEOUS
8.1 NO EMPLOYMENT OBLIGATION. The granting of any Option shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Optionee. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option has been granted to him.
8.2 TAX WITHHOLDING. The Company or any Affiliate shall be entitled
to deduct from other compensation payable to each Optionee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option. In the alternative, the Company may require the
Optionee (or other person exercising the Option) to pay the sum directly to the
Company or an Affiliate. If the Optionee (or other person exercising the
Option) is required to pay the sum directly, payment in cash or by check of
such sums for taxes shall be made on the date of exercise. The Company shall
have no obligation upon exercise of any Option until payment has been received,
unless withholding (or offset against a cash payment) as of or prior to the
date of exercise is sufficient to cover all sums due with respect to that
exercise. The Company and its Affiliates shall not be obligated to advise an
Optionee of the existence of the tax or the amount which the employer
corporation will be required to withhold.
8.3 WRITTEN AGREEMENT. Each Option shall be embodied in a written
Option Agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by a member of the Committee on
behalf of the Committee and the Company. The Option Agreement may contain any
other provisions that the Committee in its discretion shall deem advisable
which are not inconsistent with the terms of this Plan.
8.4 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of
the Committee and/or the Board of Directors at the time of incurring the
expenses--including, without limitation, matters as to which he shall be
finally adjudged in any action, suit or proceeding to have been found to have
been negligent in the performance of his duty as a member of the Committee or
of the Board of Directors. However, this indemnity shall not include any
expenses incurred by any member of the Committee and/or the Board of Directors
in respect of matters as to which he shall be finally adjudged in any action,
suit or proceeding to have been guilty of gross negligence or willful
misconduct in the performance of his duty as a member of the Committee or the
Board of Directors. In addition, no right of indemnification under this Plan
shall be available to or enforceable by any member of the Committee or the
Board of Directors unless, within 60 days after institution of any action, suit
or proceeding, he shall have offered the Company, in writing, the opportunity
to handle and defend same at its own expense. This right of indemnification
shall inure to the benefit of the heirs, executors or administrators of each
member of the Committee and the
VIII-1
<PAGE> 15
Board of Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.
8.5 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.
8.6 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.
8.7 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall this Plan preclude the
Company from establishing any other forms of incentive or other compensation
for employees of the Company or any Affiliate.
8.8 OTHER OPTIONS. The grant of an Option shall not confer upon an
Optionee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Optionees, or the
right to receive future Options upon the same terms or conditions as previously
granted.
8.9 ARBITRATION OF DISPUTES. Any controversy arising out of or
relating to the Plan or an Option Agreement shall be resolved by arbitration
conducted pursuant to the arbitration rules of the American Arbitration
Association. The arbitration shall be final and binding on the parties.
8.10 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
VIII-2
<PAGE> 1
EXHIBIT 10.2
DANIEL INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<PAGE> 2
DANIEL INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
-------
<S> <C>
ARTICLE I - DEFINITIONS
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Non-Employee Director . . . . . . . . . . . . . . . . . . . . . . . 1.4
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9
ARTICLE II - GENERAL PROVISIONS RELATING TO OPTIONS
Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Non-Transferability . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Changes in the Company's Capital Structure . . . . . . . . . . . . 2.4
ARTICLE III - OPTIONS
Automatic Awards For Service on the
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 3.1
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . 3.3
Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Form of Options . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . 3.7
ARTICLE IV - AMENDMENT OR TERMINATION OF PLAN
ARTICLE V - MISCELLANEOUS
No Retention Obligation . . . . . . . . . . . . . . . . . . . . . . 5.1
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
Other Compensation . . . . . . . . . . . . . . . . . . . . . . . . 5.6
Other Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
Arbitration of Disputes . . . . . . . . . . . . . . . . . . . . . . 5.8
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
</TABLE>
<PAGE> 3
DANIEL INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
This Daniel Industries, Inc. 1997 Non-Employee Director Stock Option
Plan (the "Plan") is adopted, subject to stockholder approval, for the benefit
of the directors of Daniel Industries, Inc., a Delaware corporation (the
"Company") who at the time of their service are not employees of the Company or
any of its subsidiaries. The Plan is intended to advance the interest of the
Company by providing such directors with an additional incentive to serve the
Company by increasing their proprietary interest in the success of the Company.
<PAGE> 4
ARTICLE I
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
1.1 "BOARD OF DIRECTORS" means the board of directors of the Company.
1.2 "COMPANY" means Daniel Industries, Inc., a Delaware corporation.
1.3 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date (or, if there
was no sale on such date, the next preceding date on which there was such a
sale) on the principal securities exchange on which the Stock is listed; or (b)
if the Stock is not listed on a securities exchange, an amount determined by
the Board of Directors in good faith in its sole discretion.
1.4 "NON-EMPLOYEE DIRECTOR" means a director of the Company who while
a director is not an employee of the Company, or a corporation, of which a
majority of voting securities is owned, directly or indirectly, by the Company.
1.5 "OPTION" means an option granted under this Plan to purchase
shares of Stock.
1.6 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
1.7 "OPTIONEE" means a person who is granted an Option under this
Plan.
1.8 "PLAN" means the Daniel Industries, Inc. 1997 Non-Employee
Director Stock Option Plan, as set out in this document and as it may be
amended from time to time.
1.9 "STOCK" means the common stock of the Company, $1.25 par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company
or another corporation, that other stock or security.
I-1
<PAGE> 5
ARTICLE II
GENERAL PROVISIONS RELATING TO OPTIONS
2.1 DEDICATED SHARES. The total number of shares of Stock with
respect to which Options may be granted under the Plan shall be 120,000 shares.
The shares may be treasury shares or authorized but unissued shares. The
number of shares stated in this Section 2.1 shall be subject to adjustment in
accordance with the provisions of Section 2.4.
If any outstanding Option expires or terminates for any reason or any
Option is surrendered, the shares of Stock allocable to the unexercised portion
of that Option may again be subject to an Option under the Plan.
2.2 NON-TRANSFERABILITY. Except as expressly provided otherwise in
an Optionee's Option Agreement, Options shall not be transferable by the
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.
2.3 REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Board of Directors has received
evidence satisfactory to it to the effect that the holder of that Option will
not transfer the Stock except in accordance with applicable law, including
receipt of an opinion of counsel satisfactory to the Company to the effect that
any proposed transfer complies with applicable law. The determination by the
Board of Directors on this matter shall be final, binding and conclusive. The
Company may, but shall in no event be obligated to, register any Stock covered
by this Plan pursuant to applicable securities laws of any country or any
political subdivision. In the event the Stock issuable on exercise of an
Option is not registered, the Company may imprint on the certificate evidencing
the Stock any legend that counsel for the Company considers necessary or
advisable to comply with applicable law. The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an Option
and the issuance of shares thereunder, to comply with any law or regulation of
any governmental authority.
2.4 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares
he would have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares of
Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved,
that number and class
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of shares of Stock that would have been received by the owner of an equal
number of outstanding shares of such class of Stock as the result of the event
requiring the adjustment.
If the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or if the Company is liquidated
or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan, after the effective
date of the merger, consolidation, liquidation, sale or other disposition, as
the case may be, each holder of an outstanding Option shall be entitled, upon
exercise of the Option, to receive, in lieu of shares of Stock, the number and
class or classes of shares of stock or other securities or property to which
the holder would have been entitled if, immediately prior to the merger,
consolidation, liquidation, sale or other disposition, the holder had been the
holder of record of a number of shares of Stock equal to the number of shares
as to which the Option shall be so exercised.
The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.
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ARTICLE III
OPTIONS
3.1 AUTOMATIC AWARDS FOR SERVICE ON THE BOARD OF DIRECTORS. On the
date that this Plan is approved by the Board of Directors, each person who is a
Non-Employee Director on that date shall be granted an Option to purchase 5,000
shares of Stock. Thereafter, on the first day of each fiscal year of the
Company through and including the 2001 fiscal year of the Company, each person
who is a Non-Employee Director on that date shall be granted an Option to
purchase 5,000 shares of Stock.
3.2 OPTION PRICE. The price at which Stock may be purchased under an
Option shall be equal to 100% of the Fair Market Value of the shares of Stock
on the date the Option is granted.
3.3 AMOUNT EXERCISABLE.
Each Option Agreement evidencing the grant of an Option shall provide
that the Option is exercisable in full immediately upon the date of grant.
However, no Option will be exercisable before the stockholders of the Company
approve the Plan.
3.4 DURATION OF OPTIONS.
Each Option awarded, to the extent it shall not previously have
been exercised, shall terminate on the earliest of the following dates:
(i) on the last day within the three month period
commencing on the date on which the Optionee ceases to be a
member of the Board of Directors, for any reason other than
death, during which period the Optionee shall be entitled to
exercise his Option in respect of the number of shares that the
Optionee would have been entitled to purchase had the Optionee
exercised such Option on the date on which the Optionee ceased to
be a member of the Board of Directors;
(ii) on the last day within the one-year period
commencing on the date of the Optionee's death while serving as a
member of the Board of Directors, during which period the
executor or administrator of the Optionee's estate or the person
or persons to whom the Optionee's Option shall have been
transferred by will or the laws of descent or distribution, shall
be entitled to exercise such Option in respect of the number of
shares that the Optionee would have been entitled to purchase had
the optionee exercised such Option on the date of his death; or
(iii) ten years after the date of grant of such Option.
3.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the
delivery of written notice to the Treasurer of the Company setting forth the
number of shares of Stock with respect to which the Option is to be exercised,
together with: (a) cash, check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option price of
the shares, or (b) Stock at its Fair Market Value on the date of exercise,
and/or any other form of payment which is acceptable to such committee, and
specifying the address to which the certificates for the shares are to be
mailed. As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Optionee certificates for the number
of shares with respect to which the Option has been exercised, issued in the
Optionee's name. If shares of Stock
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are used in payment of the exercise price, the aggregate Fair Market Value of
the shares of Stock tendered must be equal to or less than the aggregate
exercise price of the shares being purchased upon exercise of the Option, and
any difference must be paid by cash, check, bank draft, or postal or express
money order payable to the Company. Delivery of the shares shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the
Optionee, at the address specified by the Optionee.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally
and beneficially owned by the Optionee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates, (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The
delivery of certificates upon the exercise of Options is subject to the
condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale
or other disposition of an Option.
3.6 FORM OF OPTIONS. All Options granted under this Plan will be
nonqualified stock options that are not intended to qualify as incentive stock
options under section 422 of the Internal Revenue Code of 1986, as amended.
3.7 NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
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ARTICLE IV
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that no amendment shall decrease the exercise price for Options below the Fair
Market Value of the Stock at the time it is granted.
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ARTICLE V
MISCELLANEOUS
5.1 NO RETENTION OBLIGATION. The granting of any Option shall not
impose upon the Company any obligation to continue to retain the Optionee's
services as a director of the Company.
5.2 TAXES. The Company shall not be obligated to advise an Optionee
of the existence of any tax that may apply with respect to the grant or
exercise of an Option.
5.3 WRITTEN AGREEMENT. Each Option shall be embodied in a written
Option Agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by an officer of the Company.
5.4 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.
5.5 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.
5.6 OTHER COMPENSATION. The adoption of this Plan shall not affect
any other compensation in effect for the Non-Employee Directors, nor shall this
Plan preclude the Company from establishing any other forms of compensation for
Non-Employee Directors.
5.7 OTHER OPTIONS. The grant of an Option shall not confer upon an
Optionee the right to receive any future or other Options under this Plan.
5.8 ARBITRATION OF DISPUTES. Any controversy arising out of or
relating to the Plan or an Option Agreement shall be resolved by arbitration
conducted pursuant to the arbitration rules of the American Arbitration
Association. The arbitration shall be final and binding on the parties.
5.9 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 17th day
of June 1997, between Daniel Industries, Inc., a Delaware corporation, with its
principal operating offices located in Houston, Texas ("Employer"), and Mr.
Thomas A. Newton, Jr. residing in Houston, Texas (the "Employee").
AGREEMENT
In consideration of the agreements herein contained and other good and
valuable consideration the parties hereto agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions hereinafter set
forth, Employer hereby agrees to employ the Employee, and the Employee hereby
agrees to serve Employer, in the capacity and for the Term of Employment
specified in Section 4.
2. SCOPE OF EMPLOYMENT.
(a) During the Term of Employment, the Employee will serve as
the President and Chief Operating Officer of Employer in accordance with
the provisions of the Bylaws of Employer. In that connection, the
Employee will:
(i) devote his full time, attention and energies to the
business of Employer and will diligently and to the best of his
ability perform all duties incident to his employment under this
Agreement;
(ii) use his best efforts to promote the interests and
goodwill of Employer; and
(iii) perform such other duties commensurate with his
office as the Board of Directors of Employer may from time-to-
time assign to him.
(b) The provisions of Section 2(a) shall not be construed as
preventing the Employee from making investments in, or serving as a
director of, other businesses or enterprises provided such investments
do not require the provision of substantial services by the Employee to
the operations or the affairs of such businesses or enterprises such
that the provision thereof would interfere in any significant respect
with the performance of the Employee's duties under this Agreement or
result in the Employee, in effect, engaging in competition with
Employer.
3. COMPENSATION. As compensation for his services hereunder,
Employer shall during the Term of Employment pay the Employee, subject to the
terms and conditions of this Agreement, a base salary payable in accordance
with the normal payroll practices of Employer. Initially, the Employee's
salary will be $200,000.00 per year ("Base Salary"). Thereafter, each year,
upon recommendation by the Compensation Committee of the Board of Directors,
the Employee's Base Salary may be increased. In addition to his Base Salary,
Employer shall pay the Employee a cash bonus in the minimum amount of
$75,000.00 on January 4, 1998. In addition to Base Salary, Employer may pay
the Employee an annual performance bonus as the Board of Directors of Employer
shall in its sole discretion deem appropriate. Such bonus may be in an amount
ranging from 12.5%, if any bonus is awarded, up to 100% of the Base Salary of
the Employee for a fiscal year and would be payable in the following fiscal
year. The Board of Directors of Employer will
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review the Employee's performance annually and determine whether a bonus will
be payable based upon the objectives and goals set by the Board of Directors.
The Board of Directors shall seek input from the Employee in setting such
objectives and goals; provided, however, that the payment and amount of any
bonus will be subject to the sole discretion of the Board of Directors.
4. TERM. The "Term of Employment", as used in this Agreement, means
a period commencing on June 17, 1997, and ending on June 17, 1999, provided,
however, that the occurrence of any of the following prior to June 17, 1999,
shall result in the immediate termination of the Term of Employment:
(a) the termination of the Employee by Employer for "Cause" as
defined in the Change in Control Agreement entered into simultaneously
with this Agreement, the form of which is attached hereto (the "C in C
Agreement");
(b) the death of the Employee;
(c) the Employee's disability as defined below; or
(d) the resignation by the Employee without "Good Reason", as
defined in the C in C Agreement regardless of whether there has been a
Change in Control as defined in such Agreement.
For purposes of this Agreement, the term disability means a physical or
mental infirmity which, in the opinion of a physician selected by Employer, (1)
shall prevent the Employee from earning a reasonable livelihood with Employer,
(2) can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months and (3) did not
result from alcoholism or addiction to narcotics.
5. ADJUSTMENTS UPON TERMINATION OF EMPLOYMENT PRIOR TO JUNE 17,
1999.
(a) In the event of termination of the Term of Employment for
any reason specified in Section 4, Employer shall no longer be obligated
to make the payments specified under Section 3 or to provide the
benefits under Section 7; provided, however, any amounts that have been
earned or incurred under Section 3 or Section 6 but not yet paid shall
be paid by Employer to the Employee (or his legal representatives, as
the case may be), and the Employee shall pay any amount or amounts then
owed by the Employee to Employer and, provided further that, in the
event of such termination on account of death or the Employee's
disability, there shall be paid to Employee, or his legal representative
as the case may be, a pro rata amount (for his time of service during
the year in which such termination occurs) of the performance bonus, if
any, that Employee would have received had such termination not
occurred, as determined in the sole discretion of the Board of
Directors, as contemplated by Section 3.
(b) In the event of the termination of the Term of Employment
for any reason other than pursuant to an event specified in Section 4
Employer shall be obligated to pay to the Employee:
(i) all Base Salary amounts payable under Section 3 and
all amounts payable under Section 6 that have been earned or
incurred but not yet paid by Employer to the Employee;
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(ii) a lump sum amount equal to the greater of (A) the
Base Salary that would have been paid during the remainder of the
Term of Employment had the Employee's premature severance of
employment not occurred or (B) a full year of Base Salary; and
(iii) if the Ending Date is on or before December 31,
1997, the $75,000.00 bonus referred to in Section 3.
6. EXPENSES. Employer agrees that during the Term of Employment it
will reimburse the Employee for out-of-pocket expenses reasonably incurred by
him in connection with the performance of his service hereunder in compliance
with Employer's expense reimbursement policy as then in effect. The Employee
agrees to submit to Employer on a timely basis such documentation as may be
necessary to substantiate such expenses and the business purpose thereof.
7. EMPLOYEE BENEFITS. During the Term of Employment:
(a) The Employee shall be entitled to sick leave and holidays
(in each case in accordance with the regular policy of Employer) and,
notwithstanding any policy of the Company, 20 days vacation per year,
during which time his compensation shall be paid in full. The Employee
shall not be entitled to pay for any vacation that he has accrued but
not used as of the date of the severance of his employment relationship
with Employer.
(b) The Employee shall, upon satisfaction of any eligibility
requirements with respect thereto, be entitled to participate in all
employee benefit plans of Employer, including without limitation any
retirement plans and any health, accidental death and dismemberment and
long-term disability plans of Employer now or hereafter in effect that
are made generally available to executive officers of Employer.
(c) The Employee shall be entitled to participate in (i) all
officer and director liability insurance policies of Employer now or
hereafter in effect that are made available to executive officers and
directors of Employer, and (ii) all officer and director indemnity
agreements of Employer hereafter entered into that are made available to
executive officers and directors of Employer.
8. ADJUSTMENTS UPON TERMINATION OF EMPLOYMENT ON OR AFTER JUNE 17,
1997. In the event of the termination of the Employee's employment with
Employer on or after June 17, 1997, for any reason other than pursuant to an
event specified in Section 4, Employer shall be obligated to pay Employee:
(a) all salary earned for services rendered to Employer but
not yet paid to Employee and all business expense reimbursements due to
Employee under Employer's expense reimbursement policy; and
(b) a lump sum amount equal to the greater of a full year of
the Employee's (A) Base Salary in effect at the end of the Term of
Employment or (B) salary, exclusive of any bonuses, in effect at the
time of his severance of employment with the Employer.
9. WITHHOLDING TAXES. Notwithstanding any other provision of this
Agreement, any payment or distribution under this Agreement shall be subject to
reduction to the extent required to satisfy any withholding tax obligation
imposed by federal, state or local law.
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10. DISCLOSURE OF CONFIDENTIAL INFORMATION. During the Term of
Employment, the Employee will disclose to Employer all ideas and business plans
developed by him during such period that relate directly to the business of
Employer. The Employee recognizes and acknowledges that he may have access to
certain additional confidential information of Employer or of certain
corporations affiliated with Employer, and that all such information
constitutes valuable, special and unique property of Employer and its
affiliates. The Employee agrees that, during the Term of Employment and
indefinitely after the termination of the Term of Employment, he will not,
without the prior written consent of Employer, disclose or authorize or permit
anyone under his direction to disclose to anyone not properly entitled thereto
any of such confidential information; provided, however, such prohibition shall
not relate to any information that has been disclosed in the public domain
other than by or through the Employee or by or through another person who has
an obligation of confidentiality to Employer with respect to such information.
For purposes of the immediately preceding sentence, persons properly entitled
to such information shall be (i) the Board of Directors of Employer and such
officers, employees and agents and attorneys of Employer or any affiliate
thereof to whom such information is furnished in the normal course of business
under established policies approved by Employer and (ii) such outside parties
as are legally entitled to or are customarily furnished such information,
including banking, lending, collection, accounting, and data processing
institutions or agencies who or which are provided such information in the
normal course of business of Employer. The Employee further agrees that upon
termination of the Term of Employment he will not take with him or retain,
without the prior written authorization of Employer, any papers, procedural or
technical manuals, customer lists, customer account analyses (including,
without limitation, accounts receivable agings, customer payment histories and
customer account activity reports), price books, files, drawings, product
design information, trade secrets or other documents or computerized data or
copies thereof belonging to Employer or to any affiliate of Employer, or any
materials, supplies, equipment or furnishings belonging to Employer or to any
affiliate of Employer, or any other confidential information of any kind
belonging to Employer or any affiliate of Employer. In the event of a breach
or threatened breach by the Employee of the provisions of this Section 10,
Employer and the Employee agree that the remedy at law or through arbitration
available to Employer and its affiliates would be inadequate and that Employer
and its affiliates shall be entitled to an injunction, without the necessity of
posting bond therefor, restraining the Employee from disclosing, taking or
possessing, in whole or in part, such confidential information. Nothing in
this Agreement shall be construed as prohibiting Employer and its affiliates
from pursuing any other remedies, in addition to the injunctive relief
available under this Section 10, for such breach or threatened breach,
including the recovery of damages from the Employee.
11. TRADE SECRETS. All patents, formulae, inventions, processes,
copyrights, proprietary information, trademarks or trade names, or future
improvements to patents, formulae, inventions, processes, copyrights,
proprietary information, trademarks or trade names, developed or completed by
the Employee during the Term of Employment (collectively, the "Items") shall be
promptly disclosed to Employer, and the Employee shall execute such instruments
of assignment of the Items to Employer as Employer shall request. The Employee
acknowledges that a remedy at law for any breach by him of the provisions of
this Section 11 would be inadequate, and the Employee hereby agrees that
Employer shall be entitled to injunctive relief in case of any such breach.
12. DEFENSE OF CLAIMS. The Employee agrees that he shall cooperate
with Employer in the defense of all litigation against Employer that relates to
acts or omissions occurring during the Term of Employment and, upon reasonable
advance notice by Employer, will appear on behalf of Employer at trial or as
otherwise reasonably required without need for a subpoena. Employer shall
reimburse the Employee for his reasonable travel expenses associated with such
cooperation.
13. ASSIGNMENT. This Agreement is a personal employment contract and
the rights and
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interests of the Employee hereunder may not be sold, transferred, assigned,
pledged or hypothecated, directly or indirectly, or by operation of law or
otherwise.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon Employer and its successors and assigns and upon the Employee and
his legal representatives.
15. ENTIRE AGREEMENT. This Agreement, which, together with the
Change in Control Agreement and stock option and restricted stock agreements
between Employer and the Employee contemplated hereby, contains the entire
contractual understanding between the parties, may not be changed orally but
only by a written instrument signed by the Employee and the Chairman of the
Board of Directors of Employer.
16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
17. WAIVER. The waiver of any breach of any term or condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition.
18. ENFORCEABILITY. In the event any provision of this Agreement is
found to be unenforceable or invalid, such provision shall be severable from
this Agreement and shall not affect the enforceability or validity of any other
provision contained in this Agreement.
19. NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered or sent
by registered mail, postage prepaid,
(a) if to the Employee, addressed to him at his address last
shown in Employer's records, and
(b) if to Employer, addressed to it as follows:
Daniel Industries, Inc.
9753 Pine Lake Drive
Houston, Texas 77055
Attention: Chairman of the Board
or such other address as the party to whom or to which such notice or other
communication is to be given shall have specified in writing to the other
party, and any such notice or communication shall be deemed to have been given
as of the date so personally delivered or mailed, as the case may be.
20. ARBITRATION. Subject to the right of Employer to seek injunctive
or other emergency relief pursuant to Sections 10 and 11 hereof, Employer and
the Employee agree to submit to arbitration any dispute arising out of this
Agreement, whether as to this Agreement's construction, interpretation or
enforceability or as to any party's breach or alleged breach of any provision
of this Agreement in accordance with the arbitration provisions of Section 20
of the C in C Agreement.
The parties will each pay their costs of arbitration and one-half of the
fees and expenses of the arbitrators, unless the Employee is the prevailing
party in the arbitration proceedings, in which case Employer shall pay the
entire costs of arbitration, including the fees and expenses of the
arbitrators.
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21. LEGAL FEES AND EXPENSES. If Employer and the Employee are not
able to resolve a dispute through arbitration, and if the Employee is the
prevailing party in the litigation, Employer shall pay the Employee any
reasonable legal fees and expenses incurred by the Employee in connection with
any litigation by the Employee against Employer to enforce the terms of this
Agreement.
22. CHANGE IN CONTROL AGREEMENT. Notwithstanding any other
provisions hereof, any termination of the Employee's employment by Employer
following a "Change in Control", as defined in the C in C Agreement, shall be
governed by such Agreement and not by this Agreement and the benefits to which
the Employee is thereafter entitled shall be governed by the C in C Agreement.
In this regard, Employer and the Employee will simultaneously with this
Agreement enter into a Change in Control Agreement in the form of the C in C
Agreement.
23. STOCK PLANS. Simultaneously with the effective date of this
Employment Agreement, Employee has been granted an award of 50,000 restricted
shares under the Daniel Industries, Inc. Stock Award Plan, the terms of which
award are set forth in an award agreement between the Employee and Employer,
and options for 200,000 shares of Employer's common stock, $1.25 par value,
under the Daniel Industries, Inc. 1997 Stock Option Plan, the terms of which
option are set forth in an option agreement between the Employee and Employer.
24. NONCOMPETITION. Employer and the Employee agree that the
services rendered by Employee hereunder are unique. Employee hereby agrees
that, while he is employed by Employer and, if his employment relationship with
Employer is severed for any reason specified in Section 4, for a period of one
year thereafter, he shall not (except in the course of his employment under
this Agreement and in furtherance of the business of Employer or any of its
subsidiaries) (i) engage in as principal, consultant or employee in any segment
of a business of a corporation, partnership or other firm or entity that is
directly competitive with any significant business of Employer in one of its
major commercial or geographic markets ("Competing Entity") or (ii) hold an
interest (except as a holder of a less than five percent interest in a publicly
traded firm or mutual fund, or as a minority stockholder, limited partner or
unitholder in a firm not publicly traded) in a Competing Entity, without prior
written consent of Employer.
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IN WITNESS WHEREOF, Employer has caused this Agreement to be executed by
its duly authorized officer, and the Employee has executed this Agreement as of
the date first above written.
DANIEL INDUSTRIES, INC.
By James M. Tidwell
-----------------------------------
James M. Tidwell
Executive Vice President
EMPLOYEE
Thomas A. Newton, Jr.
----------------------------------------
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EXHIBIT 10.4
STOCK AWARD AGREEMENT
DANIEL INDUSTRIES, INC.
STOCK AWARD PLAN
This stock award (the "Award") is made effective June 17, 1997,
(the Date of Grant") by and between Mr. Thomas A. Newton, Jr. (the "Grantee")
and Daniel Industries, Inc. (the "Company") pursuant to the Daniel Industries,
Inc. Stock Award Plan (the "Plan"), and is subject to the terms and conditions
of the Plan and this Agreement.
WHEREAS, the Grantee is employed by the Company in a key
capacity; and
WHEREAS, the Company has elected to provide the Grantee an Award
of Stock;
NOW THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Company and Grantee agree as follows:
1. NUMBER OF SHARES. This Award to the Grantee is for 50,000
shares of common stock of the Company, $1.25 par value ("Stock").
2. VESTING RESTRICTIONS. The Stock awarded to the Grantee
pursuant to this Agreement shall be subject to the following vesting
limitations.
(a) (i) On the first anniversary of the Date of
Grant 1/5 of the shares of Stock shall vest; and
(ii) after each succeeding anniversary of the
Date of Grant, 1/5 of the shares of Stock shall vest, so that after the
expiration of the fifth anniversary of the Date of Grant the Award shall
be fully vested.
(b) In the event of the severance of the employment
relationship between the Company and the Grantee due to (i) the
resignation of the Grantee upon an event of termination for good reason
as defined in the Change in Control Agreement entered into by the
Company and the Grantee contemporaneously herewith (the "C in C
Agreement"), (ii) the discharge of the Grantee by the Company other than
as a result of an event of termination for cause as defined in the C in
C Agreement, (iii) the death of the Grantee, or
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(iv) the disability of the Grantee as defined in the C in C Agreement,
all shares of the Stock awarded hereby shall become fully vested.
(c) In the event of the severance of the employment
relationship between the Company and the Grantee due to the Grantee's
resignation or discharge by the Company as a result of an event of
termination for cause as defined in the C in C Agreement, all nonvested
shares of Stock that are the subject of this Award shall be forfeited to
the Company.
3. TRANSFERABILITY RESTRICTIONS AND STOCKHOLDER RIGHTS WITH
RESPECT TO STOCK. Except as provided herein, the Stock awarded hereby may not
be sold, assigned, transferred, pledged, or otherwise encumbered during the
period in which the Grantee does not have a fully nonforfeitable interest in
the Stock (the "Restricted Period"). Any attempted sale, assignment, transfer,
pledge or encumbrance of Stock in violation of this Agreement shall be void and
the Company shall not be bound thereby.
During the Restricted Period, certificates representing the Stock
shall be registered in the Grantee's name. Such certificates shall be
deposited by the recipient with the Company, together with stock powers or
other instruments of assignment, each endorsed in blank, that will permit
transfer to the Company of all or any portion of the Stock which shall be
forfeited in accordance with the Plan and this Agreement. Stock shall
constitute issued and outstanding shares of the Company's common stock for all
corporate purposes.
Subject to the terms of the Plan and this Agreement, the Grantee
shall have the right to vote the Stock awarded to the Grantee and to receive
and retain all regular cash dividends, and to exercise all other rights, powers
and privileges of a holder of Stock, with respect to such Stock, with the
exception that (i) the Grantee shall not be entitled to delivery of the stock
certificate or certificates representing such Stock until the restrictions
applicable thereto shall have expired, and (ii) the Grantee may not sell,
assign, transfer, pledge, exchange, encumber, or dispose of the Stock during
the Restricted Period. Nothing in this Agreement shall prevent transfers by
will or by the applicable laws of descent and distribution.
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4. CONSEQUENCE OF VESTING. When shares of Stock become
vested, the Restricted Period shall be terminated as to those shares, and the
Company shall deliver to the Grantee (or his estate, if he is not then living)
a Stock certificate representing those shares, reduced as necessary to satisfy
the Company's tax withholding obligation.
5. NO ENLARGEMENT OF EMPLOYMENT CONTRACT. This Agreement is
not an employment contract between the Company and the Grantee, and this
Agreement shall have no effect upon the employment relationship of the Company
and the Grantee, including without limitation, the right of either party to
terminate said employment relationship.
6. SECTION 83(b) ELECTION. The Grantee shall not exercise
the election permitted under Section 83(b) of the Internal Revenue Code of
1986, as amended, with respect to the Award without the written approval of the
Treasurer of the Company. If the Treasurer permits the election, the Grantee
shall timely pay the Company the amount necessary to satisfy the Company's tax
withholding obligations.
7. AMENDMENT. This Agreement may be modified or amended only
by an instrument in writing, executed by the Company and the Grantee.
8. GOVERNED BY PLAN. This Award is subject to all of the
terms and conditions of the Plan, a copy of which is incorporated in this
Agreement.
-3-
<PAGE> 4
9. GOVERNING LAW. This Agreement shall be subject to and
governed by the laws of the State of Texas.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the 17th day of June 1997, in multiple counterparts, each of which shall be
deemed to be an original.
DANIEL INDUSTRIES, INC.
By: James M. Tidwell
---------------------------------
GRANTEE
Thomas A. Newton, Jr.
------------------------------------
-4-
<PAGE> 1
EXHIBIT 10.5
CHANGE IN CONTROL AGREEMENT
This Agreement between Daniel Industries, Inc., a Delaware corporation
(the "Company"), and Mr. Thomas A. Newton, Jr. (the "Employee") is dated as of
the 17th of June, 1997, (the "Effective Date").
W I T N E S S E T H:
Whereas, the Company considers it to be in the best interests of its
stockholders to encourage the continued employment of key employees of the
Company; and
Whereas, the Employee is a key employee of the Company; and
Whereas, the Company believes that the possibility of the occurrence of
a Change in Control of the Company (as that phrase is defined in Section 2) may
result in the termination by the Employee of the Employee's employment by the
Company or in the distraction of the Employee from the performance of his
duties to the Company, in either case to the detriment of the Company and its
stockholders; and
Whereas, the Company recognizes that the Employee could suffer adverse
financial and professional consequences if a Change in Control of the Company
were to occur; and
Whereas, the Company wishes to enter into this Agreement to protect the
Employee if a Change in Control of the Company occurs, thereby encouraging the
Employee to remain in the employ of the Company and not be distracted from the
performance of his duties to the Company;
Now, Therefore, the parties agree as follows:
Section 1. Other Employment Arrangements. Except as provided in
Section 14, this Agreement does not affect the Employee's employment agreement
with the Company executed simultaneously herewith or future employment
arrangements with the Company unless a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement. The
Employee's employment by the Company shall continue to be at the will of the
Board of Directors or, if the Employee is not an officer of the Company at the
time of the termination of the Employee's employment by the Company, the will
of the Chief Executive Officer of the Company, except that if (i) a Change in
Control of the Company shall have occurred before the expiration of the term of
this Agreement and (ii) the Employee's employment by the Company is terminated
(whether by the Employee or the Company or automatically as provided in Section
3) after the occurrence of that Change in Control of the Company, then the
Employee shall be entitled to receive certain benefits as provided in this
Agreement.
Section 2. Change in Control of the Company. A "Change in Control of
the Company" shall have occurred if, after the Effective Date:
(i) a report on Schedule 13D shall be filed with the
Commission pursuant to Section 13(d) of the Exchange Act and that report
discloses that any person (within the meaning of Section 13(d) of the
Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), is the beneficial owner (as that term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 20 percent or
more of the outstanding Voting Stock;
<PAGE> 2
(ii) any person (within the meaning of Section 13(d) of the
Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), shall purchase securities pursuant to a tender offer or
exchange offer to acquire any Voting Stock (or any securities
convertible into Voting Stock) and, immediately after consummation of
that purchase, that person is the beneficial owner (as that term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 20 percent or more of the outstanding Voting Stock (such person's
beneficial ownership to be determined, in the case of rights to acquire
Voting Stock, pursuant to paragraph (d) of Rule 13d-3 under the Exchange
Act);
(iii) the stockholders of the Company shall approve (w) a merger
or consolidation of the Company with or into any other person, unless
the sole purpose of the merger is to change the Company's domicile
within the United States of America, (x) any sale, lease, exchange or
other transfer of all or substantially all the assets of the Company and
its consolidated subsidiaries, (y) the dissolution of the Company, or
(z) a transaction immediately after the consummation of which any person
(within the meaning of Section 13(d) of the Exchange Act) would be the
beneficial owner (as that term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50 percent of the
outstanding Voting Stock; or
(iv) during any period of 12 consecutive months, the
individuals who at the beginning of that period constituted the Board of
Directors shall cease to constitute a majority of the Board of
Directors.
Section 3. Term of This Agreement. The term of this Agreement shall
begin on the Effective Date and shall expire on the termination by the Employee
or the Company of the Employee's employment relationship with the Company.
Section 4. Event of Termination for Cause. An "Event of Termination
for Cause" shall have occurred if, after the Effective Date, the Employee
shall:
(i) willfully and continuously fail to substantially perform
the Employee's duties to the Company (other than any failure that
results from the Employee's having become mentally or physically
disabled or any actual or anticipated failure that results from the
occurrence of an Event of Termination for Good Reason) within 30 days
after notice demanding substantial performance, which notice shall
specifically identify the duties that the Employee has failed to
substantially perform, is given to the Employee by the Company; or
(ii) willfully engages in conduct that the Employee knows to be
materially injurious to the Company.
Section 5. An Event of Termination for Good Reason. An "Event of
Termination for Good Reason" shall have occurred if, after the Effective Date,
the Company shall:
(i) assign to the Employee any duties inconsistent with the
Employee's position (including offices, titles and reporting
requirements), authority, duties or responsibilities with the Company in
effect immediately before the occurrence of the first Change in Control
of the Company;
<PAGE> 3
(ii) remove the Employee from, or fail to re-elect or appoint
the Employee to, any position with the Company that was held by the
Employee immediately before the occurrence of the first Change in
Control of the Company, except that a nominal change in the Employee's
title shall not constitute such an event;
(iii) take any other action that results in a material
diminution in such position, authority, duties or responsibilities;
(iv) reduce the Employee's annual Base Salary as in effect
immediately before the occurrence of the first Change in Control of the
Company or as the Employee's annual Base Salary may be increased from
time to time after that occurrence;
(v) relocate the Employee's principal office outside of the
metropolitan area of the City of Houston, Texas;
(vi) fail to (x) continue in effect any profit sharing,
savings, retirement or pension plan of the Company in which the Employee
was a participant immediately before the occurrence of the first Change
in Control of the Company (including the Company's Employees' Profit
Sharing and Savings Plan), or any substitute plan adopted by the Board
of Directors and in which the Employee was a participant immediately
before the occurrence of the last Change in Control of the Company,
unless an equitable arrangement (embodied in a substitute or alternative
plan) shall have been made with respect to such profit sharing, savings,
retirement or pension plan promptly following the occurrence of the last
Change in Control of the Company, or (y) continue the Employee's
participation in any such plan (or any substitute or alternative plan)
on substantially the same basis, both in terms of the amount of benefits
provided to the Employee and the level of the Employee's participation
relative to other participants, as existed immediately before the
occurrence of the first Change in Control of the Company;
(vii) fail to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of the
Company's other employee benefit plans (the "Other Benefit Plans"),
including life insurance, medical, dental, health, accident or
disability plans, in which the Employee was a participant immediately
before the occurrence of the first Change in Control of the Company;
(viii) take any action that would directly or indirectly
materially reduce any other benefits that were provided to the Employee
by the Company immediately before the occurrence of the first Change in
Control of the Company or deprive the Employee of any material fringe
benefit enjoyed by the Employee immediately before the occurrence of the
first Change in Control of the Company;
(ix) fail to provide the Employee with the number of paid
vacation days to which the Employee was entitled in accordance with the
Company's vacation policy in effect immediately before the occurrence of
the first Change in Control of the Company;
(x) fail to comply with Section 8;
(xi) fail to promote the Employee to Chief Executive Officer of
the Company by July 1, 2000; or
(xii) purport to terminate the Employee's employment by the
Company unless notice of that termination shall have been given to the
Employee pursuant to, and that notice shall meet the requirements of,
Section 6.
<PAGE> 4
Section 6. Notice of Termination. If a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement, any subsequent termination by the Employee or the Company of the
Employee's employment by the Company, or any determination of the Employee's
Disability, shall be communicated by notice to the other party that shall
indicate the specific paragraph of Section 7 pursuant to which the Employee is
to receive benefits as a result of the termination. If the notice states that
the Employee's employment by the Company has been automatically terminated as a
result of the Employee's Disability, the notice shall (i) specifically describe
the basis for the determination of the Employee's Disability and (ii) state the
date of the determination of the Employee's Disability, which date shall be not
more than ten days before the date such notice is given. If the notice is from
the Company and states that the Employee's employment by the Company is
terminated by the Company as a result of the occurrence of an Event of
Termination for Cause, the notice shall specifically describe the action or
inaction of the Employee that the Company believes constitutes an Event of
Termination for Cause. If the notice is from the Employee and states that the
Employee's employment by the Company is terminated by the Employee as a result
of the occurrence of an Event of Termination for Good Reason, the notice shall
specifically describe the action or inaction of the Company that the Employee
believes constitutes an Event of Termination for Good Reason. Each notice
given pursuant to this Section 6 (other than a notice stating that the
Employee's employment by the Company has been automatically terminated as a
result of the Employee's Disability) shall state a date, which shall be not
fewer than 30 days nor more than 60 days after the date such notice is given,
on which the termination of the Employee's employment by the Company is
effective. The date so stated in accordance with this Section 6 shall be the
"Termination Date". If a Change in Control of the Company shall have occurred
before the expiration of the term of this Agreement, any subsequent purported
termination by the Company of the Employee's employment by the Company, or any
subsequent purported determination by the Company of the Employee's Disability,
shall be ineffective unless that termination or determination shall have been
communicated by the Company to the Employee by notice that meets the
requirements of the foregoing provisions of this Section 6 and the provisions
of Section 9.
Section 7. Benefits Payable on Change in Control and Termination. If
(x) a Change in Control of the Company shall have occurred before the
expiration of the term of this Agreement and (y) the Employee's employment by
the Company is terminated (whether by the Employee or the Company or
automatically as provided in Section 3) after the occurrence of that Change in
Control of the Company, the Employee shall be entitled to the following
benefits:
(i) If the Employee's employment by the Company is terminated
(x) by the Company as a result of the occurrence of an Event of
Termination for Cause or (y) by the Employee before the occurrence of an
Event of Termination for Good Reason, then the Company shall pay to the
Employee the Base Salary accrued through the Termination Date but not
previously paid to the Employee.
(ii) If the Employee's employment by the Company is
automatically terminated as a result of the Employee's death, the
Employee's Disability or the Employee's Retirement, then (x) the Company
shall pay to the Employee the Base Salary accrued through the date of
the occurrence of that event but not previously paid to the Employee and
(y) the other benefits to be paid to the Employee as a result of that
occurrence shall be determined in accordance with the Other Benefit
Plans in effect at that date.
(iii) If the Employee's employment by the Company is terminated
(x) by the Company otherwise than as a result of the occurrence of an
Event of Termination for Cause or (y) by the Employee after the
occurrence of an Event of Termination for Good Reason, then the Employee
shall be entitled to the following benefits:
<PAGE> 5
(1) the Company shall pay to the Employee the Base Salary
accrued through the Termination Date but not previously paid to the
Employee;
(2) the Company shall pay to the Employee a lump sum cash
amount equal to three times the sum of:
(A) the greater of the amount of the Employee's
annualized Base Salary in effect (I) for the fiscal year of the
Company in which the Termination Date occurs or (II) immediately
before any reduction in the Base Salary that constituted an Event
of Termination for Good Reason; and
(B) the greater of the amount of any cash bonus (I)
paid or payable by the Company to the Employee for services
rendered during the immediately preceding fiscal year of the
Company, regardless of whether that bonus was paid, or is
payable, after the end of such immediately preceding fiscal year,
or (II) fifty percent of the annualized Base Salary amount as
determined in the foregoing clause (A).
(3) all of the Employee's outstanding awards of Company stock
and outstanding options to purchase Company stock shall become fully
exercisable and nonforfeitable; and
(4) the Company (at its sole expense) shall take the following
actions:
(A) throughout the Relevant Period, the Company shall
maintain in effect employee benefit programs that are
substantially similar to the Other Benefit Plans in which the
Employee was a participant immediately before the Termination
Date; and
(B) the Company shall arrange for the Employee's
uninterrupted participation throughout the Relevant Period in
each of such Other Benefit Plans or substantially similar
employee benefit programs.
Upon payment by the Company to the Employee of the amounts and other benefits
required to be paid pursuant to the foregoing provisions of this Section 7, the
Company shall no longer be obligated to pay any other amounts or benefits to
the Employee, other than benefits that, at the time of termination of the
Employee's employment by the Company, had vested in the Employee as a result of
the Employee's participation in any profit sharing, savings, retirement, or
pension plan of the Company. If the Employee's employment by the Company shall
have been terminated as a result of the Employee's death, the benefits
otherwise required to be paid to the Employee pursuant to the foregoing
provisions of this Section 7 shall be paid to the executor or administrator of
the estate of the Employee. Each payment required to be made to the Employee
pursuant to the foregoing provisions of this Section 7 (i) shall be made by
check drawn on an account of the Company at a bank located in the United States
of America and (ii) shall be paid (x) if the Employee's employment by the
Company was terminated as a result of the Employee's death, the Employee's
Disability or the Employee's Retirement, not more than 30 days immediately
following the date of the occurrence of that event, and (y) if the Employee's
employment by
<PAGE> 6
the Company was terminated for any other reason, not more than 10 days
immediately following the Termination Date.
Section 8. Successors. If a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement,
(i) the Company shall not, directly or indirectly, consolidate
with, merge into or sell or otherwise transfer its assets as an entirety
or substantially as an entirety to, any person, or permit any person to
consolidate with or merge into the Company, unless immediately after
such consolidation, merger, sale or transfer, the Successor shall have
assumed in writing the Company's obligations under this Agreement, and
(ii) not fewer than 10 days before the consummation of any
consolidation of the Company with, merger by the Company into, or sale
or other transfer by the Company of its assets as an entirety or
substantially as an entirety to, any person, the Company shall give the
Employee notice of that proposed transaction.
Section 9. Notice. Notices required or permitted to be given by
either party pursuant to this Agreement shall be in writing and shall be deemed
to have been given when delivered personally to the other party or when
deposited with the United States Postal Service as registered mail with postage
prepaid and addressed:
(i) if to the Employee, at the Employee's address last shown
on the Company's records, and
(ii) if to the Company, at 9753 Pine Lake Drive, Houston, Texas
77055, directed to the attention of the Chief Executive Officer,
or, in either case, to such other address as the party to whom or which such
notice is to be given shall have specified by notice given to the other party.
Section 10. Withholding Taxes. The Company may withhold from all
payments to be paid to the Employee pursuant to this Agreement all taxes that,
by applicable federal or state law, the Company is required to so withhold.
Section 11. Expenses of Enforcement. If a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement, then, upon demand by the Employee made to the Company, the Company
shall reimburse the Employee for the reasonable expenses (including attorneys'
fees and expenses) incurred by the Employee in enforcing or seeking to enforce
the payment of any amount or other benefit to which the Employee shall have
become entitled pursuant to this Agreement.
Section 12. Employment by Subsidiaries. If, at the Effective Date,
the Employee is an employee of a subsidiary of the Company, references in this
Agreement to the Employee's employment by the Company shall be to the
Employee's employment by the subsidiary.
Section 13. No Obligation to Mitigate. The Employee shall not be
required to mitigate the amount of any payment or other benefit required to be
paid to the Employee pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other
benefit be reduced on account of any compensation earned by the Employee as a
result of employment by another person.
Section 14. Confidential Information. From the Effective Date until
the expiration of the term of this Agreement, the Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
<PAGE> 7
companies, and their respective businesses, that shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and that shall not have become public knowledge (other
than as a result of acts by the Employee in violation of this Section 14). The
Company shall not withhold or reduce any amount or other benefit payable to the
Employee pursuant to the terms of this Agreement or otherwise on the grounds
that the Employee has breached or threatened to breach the foregoing provisions
of this Section 14, and the sole remedy of the Company for a breach or
anticipated breach of those provisions shall be injunctive relief.
Section 15. Amendment and Waiver. No provision of this Agreement may
be amended or waived unless that amendment or waiver is by written instrument
signed by the parties hereto. No waiver by either party of any breach of this
Agreement shall be deemed a waiver of any other or subsequent breach.
Section 16. Governing Law. The validity, interpretation, construction
and enforceability of this Agreement shall be governed by the laws of the State
of Texas.
Section 17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
Section 18. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute the same instrument.
Section 19. Assignment. This Agreement shall inure to the benefit of
and be enforceable by the Employee's legal representative. The Company may not
assign any of its obligations under this Agreement unless (i) such assignment
is to a Successor and (ii) the requirements of Section 8 are fulfilled.
Section 20. Arbitration. Any dispute between the parties arising out
of this Agreement, whether as to this Agreement's construction, interpretation
or enforceability or as to any party's breach or alleged breach of any
provision of this Agreement, shall be submitted to arbitration in accordance
with the following procedures:
(i) Either party may demand such arbitration by giving notice
of that demand to the other party. The notice shall state (x) the
matter in controversy and (y) the name of the arbitrator selected by the
party giving the notice.
(ii) Not more than 15 days after such notice is given, the
other party shall give notice to the party who demanded arbitration of
the name of the arbitrator selected by the other party. If the other
party shall fail to timely give such notice, the arbitrator that the
other party was entitled to select shall be named by the Arbitration
Committee of the American Arbitration Association. Not more than 15
days after the second arbitrator is so named, the two arbitrators shall
select a third arbitrator. If the two arbitrators shall fail to timely
select a third arbitrator, the third arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association.
(iii) The dispute shall be arbitrated at a hearing that shall be
concluded within 10 days immediately following the date the dispute is
submitted to arbitration unless a majority of the arbitrators shall
elect to extend the period of arbitration. Any award made by a majority
of the arbitrators (x) shall be made within 10 days following the
conclusion of the arbitration hearing, (y) shall be conclusive and
binding on the parties, and (z) may be made the subject of a judgment of
any court having jurisdiction.
(iv) All expenses of the arbitration shall be borne by the
Company.
<PAGE> 8
The agreement of the parties contained in the foregoing provisions of this
Section 21 shall be a complete defense to any action, suit or other proceeding
instituted in any court or before any administrative tribunal with respect to
any dispute between the parties arising out of this Agreement.
Section 21. Interpretation.
(a) As used in this Agreement, the following terms and phrases have
the indicated meanings:
(i) "Base Salary" has the meaning assigned to that term in the
employment agreement entered into by the Company and the Employee
simultaneously with this Agreement.
(ii) "Board of Directors" means the Board of Directors of the
Company.
(iii) "Change in Control of the Company" has the meaning
assigned to that phrase in Section 2.
(iv) "Commission" means the United States Securities and
Exchange Commission or any successor agency.
(v) "Company" has the meaning assigned to that term in the
recitals to this Agreement. The term "Company" shall also include any
Successor, whether the liability of such Successor under this Agreement
is established by contract or occurs by operation of law.
(vi) "Effective Date" has the meaning assigned to that term in
the recitals to this Agreement.
(vii) "Employee's Disability" means:
(1) if no Change in Control of the Company shall have
occurred before the date of determination, the physical or mental
disability of the Employee determined in accordance with the
disability policy of the Company at the time in effect and
generally applicable to its salaried employees; and
(2) if a Change in Control of the Company shall have
occurred at that date, the physical or mental disability of the
Employee determined in accordance with the disability policy of
the Company in effect immediately before the occurrence of the
first Change in Control of the Company and generally applicable
to its salaried employees.
The Employee's Disability, and the automatic termination of the
Employee's employment by the Company by reason of the Employee's
Disability, shall be deemed to have occurred on the date of
determination, provided that if (1) a Change in Control of the Company
shall have occurred before the expiration of the term of this Agreement,
(2) the Company shall have subsequently given notice pursuant to Section
6 of the Company's determination of the Employee's Disability and (3)
the Employee shall have given notice to the Company that the Employee
disagrees with that determination, then (A) whether the Employee's
Disability shall have occurred shall be submitted to arbitration
pursuant to Section 20, and (B) if a majority of the arbitrators decide
that the Employee's Disability had not occurred at the date of
determination by the Company, then (I) the Employee's Disability, and
the automatic termination of the Employee's employment by the Company by
reason of the Employee's Disability, shall be deemed not to have
<PAGE> 9
occurred and (II) on demand by the Employee made to the Company, the
Company shall reimburse the Employee for the reasonable expenses
(including attorneys' fees and expenses) incurred by the Employee in
obtaining that decision.
(viii) "Employee's Retirement" means (x) if no Change in Control
of the Company shall have occurred before the date of the Employee's
proposed retirement, the retirement of the Employee in accordance with
the retirement policy of the Company at the time in effect and generally
applicable to its salaried employees and (y) if a Change in Control of
the Company shall have occurred at that date, the retirement of the
Employee from the employ of the Company in accordance with the
retirement policy of the Company in effect immediately before the
occurrence of the first Change in Control of the Company and generally
applicable to its salaried employees.
(ix) "Event of Termination for Good Reason" has the meaning
assigned to that phrase in Section 5.
(x) "Event of Termination for Cause" has the meaning assigned
to that phrase in Section 4.
(xi) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(xii) "Other Benefit Plans" has the meaning assigned to that
term in Section 5.
(xiii) "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited partnership,
limited liability company, trust, unincorporated organization,
government, or agency or political subdivision of any government. When
the context of this Agreement indicates, the term "person" also has the
meaning assigned to that term in Section 13(d) of the Exchange Act.
(xiv) "Relevant Period" means a period beginning on the
Termination Date and ending on the first to occur of (x) the first
anniversary of the Termination Date, (y) the date on which the Employee
becomes a full time employee of another person and (z) the Employee's
normal retirement date, determined in accordance with the retirement
policy of the Company in effect on the Termination Date.
(xv) "Successor" means a person with or into which the Company
shall have been merged or consolidated or to which the Company shall
have transferred its assets as an entirety or substantially as an
entirety.
(xvi) "Termination Date" has the meaning assigned to that term
in Section 6.
(xvii) "this Agreement" means this Change in Control Agreement as
it may be amended from time to time in accordance with Section 15.
(xviii) "Voting Stock" means shares of capital stock of the
Company the holders of which are entitled to vote for the election of
directors of the Company, but excluding shares entitled to so vote only
upon the occurrence of a contingency unless that contingency shall have
occurred.
(b) In the event of the enactment of any successor provision to any
statute or rule cited in this Agreement, references in this Agreement to such
statute or rule shall be to such successor provision.
<PAGE> 10
(c) The headings of Sections of this Agreement shall not control the
meaning or interpretation of this Agreement.
(d) References in this Agreement to any Section are to the
corresponding Section of this Agreement unless the context otherwise indicates.
<PAGE> 11
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the Effective Date.
DANIEL INDUSTRIES, INC.
By James M. Tidwell
-------------------------------------
Executive Vice President
THOMAS A. NEWTON, JR.
Thomas A. Newton
----------------------------------------
<PAGE> 1
EXHIBIT 10.6
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT between Daniel Industries, Inc., a Delaware corporation
(the "Company"), and Mr. Ronald C. Lassiter (the "Employee") is dated as of the
17th of June, 1997, (the "Effective Date").
W I T N E S S E T H:
WHEREAS, the Company considers it to be in the best interests of its
stockholders to encourage the continued employment of key employees of the
Company; and
WHEREAS, the Employee is a key employee of the Company; and
WHEREAS, the Company believes that the possibility of the occurrence of
a Change in Control of the Company (as that phrase is defined in Section 2) may
result in the termination by the Employee of the Employee's employment by the
Company or in the distraction of the Employee from the performance of his
duties to the Company, in either case to the detriment of the Company and its
stockholders; and
WHEREAS, the Company recognizes that the Employee could suffer adverse
financial and professional consequences if a Change in Control of the Company
were to occur; and
WHEREAS, the Company wishes to enter into this Agreement to protect the
Employee if a Change in Control of the Company occurs, thereby encouraging the
Employee to remain in the employ of the Company and not be distracted from the
performance of his duties to the Company;
NOW, THEREFORE, the parties agree as follows:
Section 1. Other Employment Arrangements. Except as provided in
Section 14, this Agreement does not affect the Employee's existing or future
employment arrangements with the Company unless a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement. The Employee's employment by the Company shall continue to be at
the will of the Board of Directors or, if the Employee is not an officer of the
Company at the time of the termination of the Employee's employment by the
Company, the will of the Chief Executive Officer of the Company, except that if
(i) a Change in Control of the Company shall have occurred before the
expiration of the term of this Agreement and (ii) the Employee's employment by
the Company is terminated (whether by the Employee or the Company or
automatically as provided in Section 3) after the occurrence of that Change in
Control of the Company, then the Employee shall be entitled to receive certain
benefits as provided in this Agreement.
Section 2. Change in Control of the Company. A "Change in Control of
the Company" shall have occurred if, after the Effective Date:
(i) a report on Schedule 13D shall be filed with the
Commission pursuant to Section 13(d) of the Exchange Act and that report
discloses that any person (within the meaning of Section 13(d) of the
Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), is the beneficial owner (as that term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 20 percent or
more of the outstanding Voting Stock;
-1-
<PAGE> 2
(ii) any person (within the meaning of Section 13(d) of the
Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), shall purchase securities pursuant to a tender offer or
exchange offer to acquire any Voting Stock (or any securities
convertible into Voting Stock) and, immediately after consummation of
that purchase, that person is the beneficial owner (as that term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 20 percent or more of the outstanding Voting Stock (such person's
beneficial ownership to be determined, in the case of rights to acquire
Voting Stock, pursuant to paragraph (d) of Rule 13d-3 under the Exchange
Act);
(iii) the stockholders of the Company shall approve (w) a merger
or consolidation of the Company with or into any other person, unless
the sole purpose of the merger is to change the Company's domicile
within the United States of America, (x) any sale, lease, exchange or
other transfer of all or substantially all the assets of the Company and
its consolidated subsidiaries, (y) the dissolution of the Company, or
(z) a transaction immediately after the consummation of which any person
(within the meaning of Section 13(d) of the Exchange Act) would be the
beneficial owner (as that term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50 percent of the
outstanding Voting Stock; or
(iv) during any period of 12 consecutive months, the
individuals who at the beginning of that period constituted the Board of
Directors shall cease to constitute a majority of the Board of
Directors.
Section 3. Term of This Agreement. The term of this Agreement shall
begin on the Effective Date and shall expire on the termination by the Employee
or the Company of the Employee's employment relationship with the Company.
Section 4. Event of Termination for Cause. An "Event of Termination
for Cause" shall have occurred if, after the Effective Date, the Employee
shall:
(i) willfully and continuously fail to substantially perform
the Employee's duties to the Company (other than any failure that
results from the Employee's having become mentally or physically
disabled or any actual or anticipated failure that results from the
occurrence of an Event of Termination for Good Reason) within 30 days
after notice demanding substantial performance, which notice shall
specifically identify the duties that the Employee has failed to
substantially perform, is given to the Employee by the Company; or
(ii) willfully engages in conduct that the Employee knows to be
materially injurious to the Company.
Section 5. An Event of Termination for Good Reason. An "Event of
Termination for Good Reason" shall have occurred if, after the Effective Date,
the Company shall:
(i) assign to the Employee any duties inconsistent with the
Employee's position (including offices, titles and reporting
requirements), authority, duties or responsibilities with the Company in
effect immediately before the occurrence of the first Change in Control
of the Company;
(ii) remove the Employee from, or fail to re-elect or appoint
the
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Employee to, any position with the Company that was held by the Employee
immediately before the occurrence of the first Change in Control of the
Company, except that a nominal change in the Employee's title shall not
constitute such an event;
(iii) take any other action that results in a material
diminution in such position, authority, duties or responsibilities;
(iv) reduce the Employee's annual Base Salary as in effect
immediately before the occurrence of the first Change in Control of the
Company or as the Employee's annual Base Salary may be increased from
time to time after that occurrence;
(v) relocate the Employee's principal office outside of the
metropolitan area of the City of Houston, Texas;
(vi) fail to (x) continue in effect any profit sharing,
savings, retirement or pension plan of the Company in which the Employee
was a participant immediately before the occurrence of the first Change
in Control of the Company (including the Company's Employees' Profit
Sharing and Savings Plan), or any substitute plan adopted by the Board
of Directors and in which the Employee was a participant immediately
before the occurrence of the last Change in Control of the Company,
unless an equitable arrangement (embodied in a substitute or alternative
plan) shall have been made with respect to such profit sharing, savings,
retirement or pension plan promptly following the occurrence of the last
Change in Control of the Company, or (y) continue the Employee's
participation in any such plan (or any substitute or alternative plan)
on substantially the same basis, both in terms of the amount of benefits
provided to the Employee and the level of the Employee's participation
relative to other participants, as existed immediately before the
occurrence of the first Change in Control of the Company;
(vii) fail to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of the
Company's other employee benefit plans (the "Other Benefit Plans"),
including life insurance, medical, dental, health, accident or
disability plans, in which the Employee was a participant immediately
before the occurrence of the first Change in Control of the Company;
(viii) take any action that would directly or indirectly
materially reduce any other benefits that were provided to the Employee
by the Company immediately before the occurrence of the first Change in
Control of the Company or deprive the Employee of any material fringe
benefit enjoyed by the Employee immediately before the occurrence of the
first Change in Control of the Company;
(ix) fail to provide the Employee with the number of paid
vacation days to which the Employee was entitled in accordance with the
Company's vacation policy in effect immediately before the occurrence of
the first Change in Control of the Company;
(x) fail to comply with Section 8; or
(xi) purport to terminate the Employee's employment by the
Company unless
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notice of that termination shall have been given to the Employee
pursuant to, and that notice shall meet the requirements of, Section 6.
Section 6. Notice of Termination. If a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement, any subsequent termination by the Employee or the Company of the
Employee's employment by the Company, or any determination of the Employee's
Disability, shall be communicated by notice to the other party that shall
indicate the specific paragraph of Section 7 pursuant to which the Employee is
to receive benefits as a result of the termination. If the notice states that
the Employee's employment by the Company has been automatically terminated as a
result of the Employee's Disability, the notice shall (i) specifically describe
the basis for the determination of the Employee's Disability and (ii) state the
date of the determination of the Employee's Disability, which date shall be not
more than ten days before the date such notice is given. If the notice is from
the Company and states that the Employee's employment by the Company is
terminated by the Company as a result of the occurrence of an Event of
Termination for Cause, the notice shall specifically describe the action or
inaction of the Employee that the Company believes constitutes an Event of
Termination for Cause. If the notice is from the Employee and states that the
Employee's employment by the Company is terminated by the Employee as a result
of the occurrence of an Event of Termination for Good Reason, the notice shall
specifically describe the action or inaction of the Company that the Employee
believes constitutes an Event of Termination for Good Reason. Each notice
given pursuant to this Section 6 (other than a notice stating that the
Employee's employment by the Company has been automatically terminated as a
result of the Employee's Disability) shall state a date, which shall be not
fewer than 30 days nor more than 60 days after the date such notice is given,
on which the termination of the Employee's employment by the Company is
effective. The date so stated in accordance with this Section 6 shall be the
"Termination Date". If a Change in Control of the Company shall have occurred
before the expiration of the term of this Agreement, any subsequent purported
termination by the Company of the Employee's employment by the Company, or any
subsequent purported determination by the Company of the Employee's Disability,
shall be ineffective unless that termination or determination shall have been
communicated by the Company to the Employee by notice that meets the
requirements of the foregoing provisions of this Section 6 and the provisions
of Section 9.
Section 7. Benefits Payable on Change in Control and Termination. If
(x) a Change in Control of the Company shall have occurred before the
expiration of the term of this Agreement and (y) the Employee's employment by
the Company is terminated (whether by the Employee or the Company or
automatically as provided in Section 3) after the occurrence of that Change in
Control of the Company, the Employee shall be entitled to the following
benefits:
(i) If the Employee's employment by the Company is terminated
(x) by the Company as a result of the occurrence of an Event of
Termination for Cause or (y) by the Employee before the occurrence of an
Event of Termination for Good Reason, then the Company shall pay to the
Employee the Base Salary accrued through the Termination Date but not
previously paid to the Employee.
(ii) If the Employee's employment by the Company is
automatically terminated as a result of the Employee's death, the
Employee's Disability or the Employee's Retirement, then (x) the Company
shall pay to the Employee the Base Salary accrued through the date of
the occurrence of that event but not previously paid to the Employee and
(y) the other benefits to be paid to the Employee as a result of that
occurrence shall be determined in accordance with the Other Benefit
Plans in effect at that date.
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<PAGE> 5
(iii) If the Employee's employment by the Company is terminated
(x) by the Company otherwise than as a result of the occurrence of an
Event of Termination for Cause or (y) by the Employee after the
occurrence of an Event of Termination for Good Reason, then the Employee
shall be entitled to the following benefits:
(1) the Company shall pay to the Employee the Base
Salary accrued through the Termination Date but not previously
paid to the Employee;
(2) the Company shall pay to the Employee a lump sum
cash amount equal to three times the sum of:
(A) the greater of the amount of the Employee's
annualized Base Salary in effect (I) for the fiscal year
of the Company in which the Termination Date occurs or
(II) immediately before any reduction in the Base Salary
that constituted an Event of Termination for Good Reason;
and
(B) the amount of any cash bonus paid or payable
by the Company to the Employee for services rendered
during the immediately preceding fiscal year of the
Company, regardless of whether that bonus was paid, or is
payable, after the end of such immediately preceding
fiscal year.
(3) all of the Employee's outstanding awards of Company
stock and outstanding options to purchase Company stock shall
become fully exercisable and nonforfeitable; and
(4) the Company (at its sole expense) shall take the
following actions:
(A) throughout the Relevant Period, the Company
shall maintain in effect employee benefit programs that
are substantially similar to the Other Benefit Plans in
which the Employee was a participant immediately before
the Termination Date; and
(B) the Company shall arrange for the Employee's
uninterrupted participation throughout the Relevant Period
in each of such Other Benefit Plans or substantially
similar employee benefit programs.
Upon payment by the Company to the Employee of the amounts and other benefits
required to be paid pursuant to the foregoing provisions of this Section 7, the
Company shall no longer be obligated to pay any other amounts or benefits to
the Employee, other than benefits that, at the time of termination of the
Employee's employment by the Company, had vested in the Employee as a
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result of the Employee's participation in any profit sharing, savings,
retirement, or pension plan of the Company. If the Employee's employment by
the Company shall have been terminated as a result of the Employee's death, the
benefits otherwise required to be paid to the Employee pursuant to the
foregoing provisions of this Section 7 shall be paid to the executor or
administrator of the estate of the Employee. Each payment required to be made
to the Employee pursuant to the foregoing provisions of this Section 7 (i)
shall be made by check drawn on an account of the Company at a bank located in
the United States of America and (ii) shall be paid (x) if the Employee's
employment by the Company was terminated as a result of the Employee's death,
the Employee's Disability or the Employee's Retirement, not more than 30 days
immediately following the date of the occurrence of that event, and (y) if the
Employee's employment by the Company was terminated for any other reason, not
more than 10 days immediately following the Termination Date.
Section 8. Successors. If a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement,
(i) the Company shall not, directly or indirectly, consolidate
with, merge into or sell or otherwise transfer its assets as an entirety
or substantially as an entirety to, any person, or permit any person to
consolidate with or merge into the Company, unless immediately after
such consolidation, merger, sale or transfer, the Successor shall have
assumed in writing the Company's obligations under this Agreement, and
(ii) not fewer than 10 days before the consummation of any
consolidation of the Company with, merger by the Company into, or sale
or other transfer by the Company of its assets as an entirety or
substantially as an entirety to, any person, the Company shall give the
Employee notice of that proposed transaction.
Section 9. Notice. Notices required or permitted to be given by
either party pursuant to this Agreement shall be in writing and shall be deemed
to have been given when delivered personally to the other party or when
deposited with the United States Postal Service as registered mail with postage
prepaid and addressed:
(i) if to the Employee, at the Employee's address last shown
on the Company's records, and
(ii) if to the Company, at 9753 Pine Lake Drive, Houston, Texas
77055, directed to the attention of the Chief Executive Officer,
or, in either case, to such other address as the party to whom or which such
notice is to be given shall have specified by notice given to the other party.
Section 10. Withholding Taxes. The Company may withhold from all
payments to be paid to the Employee pursuant to this Agreement all taxes that,
by applicable federal or state law, the Company is required to so withhold.
Section 11. Expenses of Enforcement. If a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement, then, upon demand by the Employee made to the Company, the Company
shall reimburse the Employee for the reasonable expenses (including attorneys'
fees and expenses) incurred by the Employee in enforcing or seeking to enforce
the payment of any amount or other benefit to which the Employee shall have
become
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entitled pursuant to this Agreement.
Section 12. Employment by Subsidiaries. If, at the Effective Date,
the Employee is an employee of a subsidiary of the Company, references in this
Agreement to the Employee's employment by the Company shall be to the
Employee's employment by the subsidiary.
Section 13. No Obligation to Mitigate. The Employee shall not be
required to mitigate the amount of any payment or other benefit required to be
paid to the Employee pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other
benefit be reduced on account of any compensation earned by the Employee as a
result of employment by another person.
Section 14. Confidential Information. From the Effective Date until
the expiration of the term of this Agreement, the Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, that shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and that shall not have become public knowledge (other
than as a result of acts by the Employee in violation of this Section 14). The
Company shall not withhold or reduce any amount or other benefit payable to the
Employee pursuant to the terms of this Agreement or otherwise on the grounds
that the Employee has breached or threatened to breach the foregoing provisions
of this Section 14, and the sole remedy of the Company for a breach or
anticipated breach of those provisions shall be injunctive relief.
Section 15. Amendment and Waiver. No provision of this Agreement may
be amended or waived unless that amendment or waiver is by written instrument
signed by the parties hereto. No waiver by either party of any breach of this
Agreement shall be deemed a waiver of any other or subsequent breach.
Section 16. Governing Law. The validity, interpretation, construction
and enforceability of this Agreement shall be governed by the laws of the State
of Texas.
Section 17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
Section 18. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute the same instrument.
Section 19. Assignment. This Agreement shall inure to the benefit of
and be enforceable by the Employee's legal representative. The Company may not
assign any of its obligations under this Agreement unless (i) such assignment
is to a Successor and (ii) the requirements of Section 8 are fulfilled.
Section 20. Arbitration. Any dispute between the parties arising out
of this Agreement, whether as to this Agreement's construction, interpretation
or enforceability or as to any party's breach or alleged breach of any
provision of this Agreement, shall be submitted to arbitration in accordance
with the following procedures:
(i) Either party may demand such arbitration by giving notice
of that
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<PAGE> 8
demand to the other party. The notice shall state (x) the matter in
controversy and (y) the name of the arbitrator selected by the party
giving the notice.
(ii) Not more than 15 days after such notice is given, the
other party shall give notice to the party who demanded arbitration of
the name of the arbitrator selected by the other party. If the other
party shall fail to timely give such notice, the arbitrator that the
other party was entitled to select shall be named by the Arbitration
Committee of the American Arbitration Association. Not more than 15
days after the second arbitrator is so named, the two arbitrators shall
select a third arbitrator. If the two arbitrators shall fail to timely
select a third arbitrator, the third arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association.
(iii) The dispute shall be arbitrated at a hearing that shall be
concluded within 10 days immediately following the date the dispute is
submitted to arbitration unless a majority of the arbitrators shall
elect to extend the period of arbitration. Any award made by a majority
of the arbitrators (x) shall be made within 10 days following the
conclusion of the arbitration hearing, (y) shall be conclusive and
binding on the parties, and (z) may be made the subject of a judgment of
any court having jurisdiction.
(iv) All expenses of the arbitration shall be borne by the
Company.
The agreement of the parties contained in the foregoing provisions of this
Section 21 shall be a complete defense to any action, suit or other proceeding
instituted in any court or before any administrative tribunal with respect to
any dispute between the parties arising out of this Agreement.
Section 21. Interpretation.
(a) As used in this Agreement, the following terms and phrases have
the indicated meanings:
(i) "Base Salary" means cash remuneration for personal
services rendered to the Company in the course of employment with the
Company, excluding welfare benefits, pension benefits, fringe benefits
(such as reimbursements or other expense allowances, deferred
compensation or severance pay) and bonuses, but including elective
contributions that are not includible in the Employee's gross income
under section 125 or 402(e)(3) of the Internal Revenue Code of 1986, as
amended.
(ii) "Board of Directors" means the Board of Directors of the
Company.
(iii) "Change in Control of the Company" has the meaning
assigned to that phrase in Section 2.
(iv) "Commission" means the United States Securities and
Exchange Commission or any successor agency.
(v) "Company" has the meaning assigned to that term in the
recitals to this Agreement. The term "Company" shall also include any
Successor, whether the liability of such Successor under this Agreement
is established by contract or occurs
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by operation of law.
(vi) "Effective Date" has the meaning assigned to that term in
the recitals to this Agreement.
(vii) "Employee's Disability" means:
(1) if no Change in Control of the Company shall have
occurred before the date of determination, the physical or mental
disability of the Employee determined in accordance with the
disability policy of the Company at the time in effect and
generally applicable to its salaried employees; and
(2) if a Change in Control of the Company shall have
occurred at that date, the physical or mental disability of the
Employee determined in accordance with the disability policy of
the Company in effect immediately before the occurrence of the
first Change in Control of the Company and generally applicable
to its salaried employees.
The Employee's Disability, and the automatic termination of the
Employee's employment by the Company by reason of the Employee's
Disability, shall be deemed to have occurred on the date of
determination, provided that if (1) a Change in Control of the Company
shall have occurred before the expiration of the term of this Agreement,
(2) the Company shall have subsequently given notice pursuant to Section
6 of the Company's determination of the Employee's Disability and (3)
the Employee shall have given notice to the Company that the Employee
disagrees with that determination, then (A) whether the Employee's
Disability shall have occurred shall be submitted to arbitration
pursuant to Section 20, and (B) if a majority of the arbitrators decide
that the Employee's Disability had not occurred at the date of
determination by the Company, then (I) the Employee's Disability, and
the automatic termination of the Employee's employment by the Company by
reason of the Employee's Disability, shall be deemed not to have
occurred and (II) on demand by the Employee made to the Company, the
Company shall reimburse the Employee for the reasonable expenses
(including attorneys' fees and expenses) incurred by the Employee in
obtaining that decision.
(viii) "Employee's Retirement" means (x) if no Change in Control
of the Company shall have occurred before the date of the Employee's
proposed retirement, the retirement of the Employee in accordance with
the retirement policy of the Company at the time in effect and generally
applicable to its salaried employees and (y) if a Change in Control of
the Company shall have occurred at that date, the retirement of the
Employee from the employ of the Company in accordance with the
retirement policy of the Company in effect immediately before the
occurrence of the first Change in Control of the Company and generally
applicable to its salaried employees.
(ix) "Event of Termination for Good Reason" has the meaning
assigned to that phrase in Section 5.
(x) "Event of Termination for Cause" has the meaning assigned
to that phrase in Section 4.
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(xi) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(xii) "Other Benefit Plans" has the meaning assigned to that
term in Section 5.
(xiii) "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited partnership,
limited liability company, trust, unincorporated organization,
government, or agency or political subdivision of any government. When
the context of this Agreement indicates, the term "person" also has the
meaning assigned to that term in Section 13(d) of the Exchange Act.
(xiv) "Relevant Period" means a period beginning on the
Termination Date and ending on the first to occur of (x) the first
anniversary of the Termination Date, (y) the date on which the Employee
becomes a full time employee of another person and (z) the Employee's
normal retirement date, determined in accordance with the retirement
policy of the Company in effect on the Termination Date.
(xv) "Successor" means a person with or into which the Company
shall have been merged or consolidated or to which the Company shall
have transferred its assets as an entirety or substantially as an
entirety.
(xvi) "Termination Date" has the meaning assigned to that term
in Section 6.
(xvii) "this Agreement" means this Change in Control Agreement as
it may be amended from time to time in accordance with Section 15.
(xviii) "Voting Stock" means shares of capital stock of the
Company the holders of which are entitled to vote for the election of
directors of the Company, but excluding shares entitled to so vote only
upon the occurrence of a contingency unless that contingency shall have
occurred.
(b) In the event of the enactment of any successor provision to any
statute or rule cited in this Agreement, references in this Agreement to such
statute or rule shall be to such successor provision.
(c) The headings of Sections of this Agreement shall not control the
meaning or interpretation of this Agreement.
(d) References in this Agreement to any Section are to the
corresponding Section of this Agreement unless the context otherwise indicates.
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IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the Effective Date.
DANIEL INDUSTRIES, INC.
By James M. Tidwell
------------------------------------------
James M. Tidwell, Executive Vice President
RONALD C. LASSITER
Ronald C. Lassiter
-----------------------------------------------
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<PAGE> 1
EXHIBIT 10.7
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT between Daniel Industries, Inc., a Delaware corporation
(the "Company"), and _______________ (the "Employee") is dated as of
__________, 1997 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, the Company considers it to be in the best interests of its
stockholders to encourage the continued employment of key employees of the
Company; and
WHEREAS, the Employee is a key employee of the Company; and
WHEREAS, the Company believes that the possibility of the occurrence of
a Change in Control of the Company (as that phrase is defined in Section 2) may
result in the termination by the Employee of the Employee's employment by the
Company or in the distraction of the Employee from the performance of his
duties to the Company, in either case to the detriment of the Company and its
stockholders; and
WHEREAS, the Company recognizes that the Employee could suffer adverse
financial and professional consequences if a Change in Control of the Company
were to occur; and
WHEREAS, the Company wishes to enter into this Agreement to protect the
Employee if a Change in Control of the Company occurs, thereby encouraging the
Employee to remain in the employ of the Company and not be distracted from the
performance of his duties to the Company;
NOW, THEREFORE, the parties agree as follows:
Section 1. Other Employment Arrangements. Except as provided in
Section 15, this Agreement does not affect the Employee's existing or future
employment arrangements with the Company unless a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement. The Employee's employment by the Company shall continue to be at
the will of the Board of Directors or, if the Employee is not an officer of the
Company at the time of the termination of the Employee's employment by the
Company, the will of the Chief Executive Officer of the Company, except that if
(i) a Change in Control of the Company shall have occurred before the
expiration of the term of this Agreement and (ii) the Employee's employment by
the Company is terminated (whether by the Employee or the Company or
automatically as provided in Section 3) after the occurrence of that Change in
Control of the Company, then the Employee shall be entitled to receive certain
benefits as provided in this Agreement.
Section 2. Change in Control of the Company. A "Change in Control of
the Company" shall have occurred if, after the Effective Date:
(i) a report on Schedule 13D shall be filed with the
Commission pursuant to Section 13(d) of the Exchange Act and that report
discloses that any person (within the meaning of Section 13(d) of the
Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), is the beneficial owner (as that term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 20 percent or
more of the outstanding Voting Stock;
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<PAGE> 2
(ii) any person (within the meaning of Section 13(d) of the
Exchange Act), other than the Company (or one of its subsidiaries) or
any employee benefit plan sponsored by the Company (or one of its
subsidiaries), shall purchase securities pursuant to a tender offer or
exchange offer to acquire any Voting Stock (or any securities
convertible into Voting Stock) and, immediately after consummation of
that purchase, that person is the beneficial owner (as that term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 20 percent or more of the outstanding Voting Stock (such person's
beneficial ownership to be determined, in the case of rights to acquire
Voting Stock, pursuant to paragraph (d) of Rule 13d-3 under the Exchange
Act);
(iii) the stockholders of the Company shall approve (w) a merger
or consolidation of the Company with or into any other person, unless
the sole purpose of the merger is to change the Company's domicile
within the United States of America, (x) any sale, lease, exchange or
other transfer of all or substantially all the assets of the Company and
its consolidated subsidiaries, (y) the dissolution of the Company, or
(z) a transaction immediately after the consummation of which any person
(within the meaning of Section 13(d) of the Exchange Act) would be the
beneficial owner (as that term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50 percent of the
outstanding Voting Stock; or
(iv) during any period of 12 consecutive months, the
individuals who at the beginning of that period constituted the Board of
Directors shall cease to constitute a majority of the Board of
Directors.
Section 3. Term of This Agreement. The term of this Agreement shall
begin on the Effective Date and, unless automatically extended pursuant to the
second sentence of this Section 3, shall expire on the first to occur of:
(i) the Employee's death, the Employee's Disability or the
Employee's Retirement, the occurrence of any of which shall
automatically result in the termination of the Employee's employment by
the Company,
(ii) the termination by the Employee or the Company of the
Employee's employment by the Company, or
(iii) the "Expiration Date", defined as the later to occur of
(a) August 23, 1999 (or such later date to which the term of this
Agreement shall have been automatically extended), provided that no
Change of Control shall have occurred during such period, and (b) if one
or more Changes in Control shall have occurred during the period
referred to in (a) above, the end of the three-year period beginning on
the date on which the last Change in Control of the Company occurred.
If (i) the term of this Agreement shall not have expired as a result of the
occurrence of one of the events described in clause (i) or (ii) of the
immediately preceding sentence and (ii) the Company shall not have given notice
to the Employee not fewer than 45 days before the Expiration Date that the term
of this Agreement will expire on the Expiration Date, then the term of this
Agreement shall be automatically extended for successive one-year periods (the
first such period to begin on the day immediately
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<PAGE> 3
following the Expiration Date) unless the Company shall have given notice to
the Employee not fewer than 45 days before the end of any one-year period for
which the term of this Agreement shall have been automatically extended that
such term will expire at the end of that one-year period. The expiration of
the term of this Agreement shall not terminate this Agreement itself or affect
the right of the Employee or the Employee's legal representative to enforce the
payment of any amount or other benefit to which the Employee was entitled
before the expiration of the term of this Agreement or to which the Employee
became entitled as a result of the event (including the termination, whether by
the Employee or the Company or automatically as provided in this Section 3, of
the Employee's employment by the Company) that caused the term of this
Agreement to expire.
Section 4. Event of Termination for Cause. An "Event of Termination
for Cause" shall have occurred if, after the Effective Date, the Employee
shall:
(i) willfully and continuously fail to substantially perform
the Employee's duties to the Company (other than any failure that
results from the Employee's having become mentally or physically
disabled or any actual or anticipated failure that results from the
occurrence of an Event of Termination for Good Reason) within 30 days
after notice demanding substantial performance, which notice shall
specifically identify the duties that the Employee has failed to
substantially perform, is given to the Employee by the Company; or
(ii) willfully engages in conduct that the Employee knows to be
materially injurious to the Company.
Section 5. An Event of Termination for Good Reason. An "Event of
Termination for Good Reason" shall have occurred if, after the Effective Date,
the Company shall:
(i) assign to the Employee any duties inconsistent with the
Employee's position (including offices, titles and reporting
requirements), authority, duties or responsibilities with the Company in
effect immediately before the occurrence of the first Change in Control
of the Company;
(ii) remove the Employee from, or fail to re-elect or appoint
the Employee to, any position with the Company that was held by the
Employee immediately before the occurrence of the first Change in
Control of the Company, except that a nominal change in the Employee's
title shall not constitute such an event;
(iii) take any other action that results in a material
diminution in such position, authority, duties or responsibilities;
(iv) reduce the Employee's annual base salary as in effect
immediately before the occurrence of the first Change in Control of the
Company or as the Employee's annual base salary may be increased from
time to time after that occurrence (the "Base Salary");
(v) relocate the Employee's principal office outside of the
metropolitan area of the City of Houston, Texas;
3
<PAGE> 4
(vi) fail to (x) continue in effect any profit sharing,
savings, retirement or pension plan of the Company in which the Employee
was a participant immediately before the occurrence of the first Change
in Control of the Company (including the Company's Employees' Profit
Sharing and Savings Plan), or any substitute plan adopted by the Board
of Directors and in which the Employee was a participant immediately
before the occurrence of the last Change in Control of the Company,
unless an equitable arrangement (embodied in a substitute or alternative
plan) shall have been made with respect to such profit sharing, savings,
retirement or pension plan promptly following the occurrence of the last
Change in Control of the Company, or (y) continue the Employee's
participation in any such plan (or any substitute or alternative plan)
on substantially the same basis, both in terms of the amount of benefits
provided to the Employee and the level of the Employee's participation
relative to other participants, as existed immediately before the
occurrence of the first Change in Control of the Company;
(vii) fail to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of the
Company's other employee benefit plans (the "Other Benefit Plans"),
including life insurance, medical, dental, health, accident or
disability plans, in which the Employee was a participant immediately
before the occurrence of the first Change in Control of the Company;
(viii) take any action that would directly or indirectly
materially reduce any other benefits that were provided to the Employee
by the Company immediately before the occurrence of the first Change in
Control of the Company or deprive the Employee of any material fringe
benefit enjoyed by the Employee immediately before the occurrence of the
first Change in Control of the Company;
(ix) fail to provide the Employee with the number of paid
vacation days to which the Employee was entitled in accordance with the
Company's vacation policy in effect immediately before the occurrence of
the first Change in Control of the Company;
(x) fail to comply with Section 8; or
(xi) purport to terminate the Employee's employment by the
Company unless notice of that termination shall have been given to the
Employee pursuant to, and that notice shall meet the requirements of,
Section 6.
Section 6. Notice of Termination. If a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement, any subsequent termination by the Employee or the Company of the
Employee's employment by the Company, or any determination of the Employee's
Disability, shall be communicated by notice to the other party that shall
indicate the specific paragraph of Section 7 pursuant to which the Employee is
to receive benefits as a result of the termination. If the notice states that
the Employee's employment by the Company has been automatically terminated as a
result of the Employee's Disability, the notice shall (i) specifically describe
the basis for the determination of the Employee's Disability and (ii) state the
date of the determination of the Employee's Disability, which date shall be not
more than ten days before the date such notice is given. If the notice is from
the Company and states that the Employee's
4
<PAGE> 5
employment by the Company is terminated by the Company as a result of the
occurrence of an Event of Termination for Cause, the notice shall specifically
describe the action or inaction of the Employee that the Company believes
constitutes an Event of Termination for Cause. If the notice is from the
Employee and states that the Employee's employment by the Company is terminated
by the Employee as a result of the occurrence of an Event of Termination for
Good Reason, the notice shall specifically describe the action or inaction of
the Company that the Employee believes constitutes an Event of Termination for
Good Reason. Each notice given pursuant to this Section 6 (other than a notice
stating that the Employee's employment by the Company has been automatically
terminated as a result of the Employee's Disability) shall state a date, which
shall be not fewer than 30 days nor more than 60 days after the date such
notice is given, on which the termination of the Employee's employment by the
Company is effective. The date so stated in accordance with this Section 6
shall be the "Termination Date". If a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement, any
subsequent purported termination by the Company of the Employee's employment by
the Company, or any subsequent purported determination by the Company of the
Employee's Disability, shall be ineffective unless that termination or
determination shall have been communicated by the Company to the Employee by
notice that meets the requirements of the foregoing provisions of this Section 6
and the provisions of Section 9.
Section 7. Benefits Payable on Change in Control and Termination. If
(x) a Change in Control of the Company shall have occurred before the
expiration of the term of this Agreement and (y) the Employee's employment by
the Company is terminated (whether by the Employee or the Company or
automatically as provided in Section 3) after the occurrence of that Change in
Control of the Company, the Employee shall be entitled to the following
benefits:
(i) If the Employee's employment by the Company is terminated
(x) by the Company as a result of the occurrence of an Event of
Termination for Cause or (y) by the Employee before the occurrence of an
Event of Termination for Good Reason, then the Company shall pay to the
Employee the Base Salary accrued through the Termination Date but not
previously paid to the Employee.
(ii) If the Employee's employment by the Company is
automatically terminated as a result of the Employee's death, the
Employee's Disability or the Employee's Retirement, then (x) the Company
shall pay to the Employee the Base Salary accrued through the date of
the occurrence of that event but not previously paid to the Employee and
(y) the other benefits to be paid to the Employee as a result of that
occurrence shall be determined in accordance with the Other Benefit
Plans in effect at that date.
(iii) If the Employee's employment by the Company is terminated
(x) by the Company otherwise than as a result of the occurrence of an
Event of Termination for Cause or (y) by the Employee after the
occurrence of an Event of Termination for Good Reason, then the Employee
shall be entitled to the following benefits:
(1) the Company shall pay to the Employee the Base
Salary accrued through the Termination Date but not previously
paid to the Employee;
(2) the Company shall pay to the Employee, as a lump
sum, an amount (the "Severance Payment") equal to two and
one-half times the sum of:
5
<PAGE> 6
(A) the amount of the Base Salary that would
have been paid to the Employee during the fiscal year of
the Company in which the Termination Date occurs based on
the assumption that the Employee's employment by the
Company had continued throughout that fiscal year at the
Base Salary equal to the greater of (I) the Base Salary in
effect at the beginning of that fiscal year and (II) the
Base Salary in effect immediately before any reduction in
the Base Salary that constituted an Event of Termination
for Good Reason, plus
(B) the amount of any cash bonus paid or payable
by the Company to the Employee for services rendered
during the immediately preceding fiscal year, regardless
of whether that bonus was paid, or is payable, after the
end of such immediately preceding fiscal year, plus
(C) the amount of any income that (I) is or was
includable, for federal income tax purposes, in the
Employee's gross income for any period and (II) is
attributable to the exercise of options that were (X)
granted to the Employee pursuant to any of the Company's
existing or future stock option plans and (Y) exercised at
any time during the 365-day period that ends on the day
immediately following the Termination Date.
provided that the amount of the Severance Payment shall be
subject to reduction pursuant to Section 11; and
(3) the Company (at its sole expense) shall take the
following actions:
(A) throughout the Relevant Period, the Company
shall maintain in effect, and not materially reduce the
benefits provided by, each of the Other Benefit Plans in
which the Employee was a participant immediately before
the Termination Date; and
(B) the Company shall arrange for the Employee's
uninterrupted participation throughout the Relevant Period
in each of such Other Benefit Plans,
provided that if the Employee's participation after the
Termination Date in any such Other Benefit Plan is not permitted
by the terms of that Other Benefit Plan, then throughout the
Relevant Period, the Company (at its sole expense) shall provide
the Employee with substantially the
6
<PAGE> 7
same benefits that were provided to the Employee by that Other
Benefit Plan immediately before the Termination Date.
Upon payment by the Company to the Employee of the amounts and other benefits
required to be paid pursuant to the foregoing provisions of this Section 7, the
Company shall no longer be obligated to pay any other amounts or benefits to
the Employee, other than benefits that, at the time of termination of the
Employee's employment by the Company, had vested in the Employee as a result of
the Employee's participation in any profit sharing, savings, retirement, or
pension plan of the Company. If the Employee's employment by the Company shall
have been terminated as a result of the Employee's death, the benefits
otherwise required to be paid to the Employee pursuant to the foregoing
provisions of this Section 7 shall be paid to the executor or administrator of
the estate of the Employee. Each payment required to be made to the Employee
pursuant to the foregoing provisions of this Section 7 (i) shall be made by
check drawn on an account of the Company at a bank located in the United States
of America and (ii) shall be paid (x) if the Employee's employment by the
Company was terminated as a result of the Employee's death, the Employee's
Disability or the Employee's Retirement, not more than 30 days immediately
following the date of the occurrence of that event, and (y) if the Employee's
employment by the Company was terminated for any other reason, not more than 10
days immediately following the Termination Date.
Section 8. Successors. If a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement,
(i) the Company shall not, directly or indirectly, consolidate
with, merge into or sell or otherwise transfer its assets as an entirety
or substantially as an entirety to, any person, or permit any person to
consolidate with or merge into the Company, unless immediately after
such consolidation, merger, sale or transfer, the Successor shall have
assumed in writing the Company's obligations under this Agreement, and
(ii) not fewer than 10 days before the consummation of any
consolidation of the Company with, merger by the Company into, or sale
or other transfer by the Company of its assets as an entirety or
substantially as an entirety to, any person, the Company shall give the
Employee notice of that proposed transaction.
Section 9. Notice. Notices required or permitted to be given by
either party pursuant to this Agreement shall be in writing and shall be deemed
to have been given when delivered personally to the other party or when
deposited with the United States Postal Service as registered mail with postage
prepaid and addressed:
(i) if to the Employee, at the Employee's address last shown
on the Company's records, and
(ii) if to the Company, at 9753 Pine Lake Drive, Houston, Texas
77055, directed to the attention of the Chief Executive Officer,
or, in either case, to such other address as the party to whom or which such
notice is to be given shall have specified by notice given to the other party.
7
<PAGE> 8
Section 10. Withholding Taxes. The Company may withhold from all
payments to be paid to the Employee pursuant to this Agreement all taxes that,
by applicable federal or state law, the Company is required to so withhold.
Section 11. Conditional Reduction of Severance Payment. If all or any
portion of the amount of any Change in Control Payment would not be deductible
for federal income tax purposes by a Tax Affiliate (or other person who made or
is required to make such Change in Control Payment) by reason of the
application of section 280G of the Code, the Severance Payment shall be reduced
until (i) no portion of the total amount of all Change in Control Payments is
not deductible by a Tax Affiliate (or other person who made or is required to
make such Change in Control Payment) by reason of the application of that
section or (ii) the Severance Payment is reduced to zero. For purposes of
determining whether all or any portion of the amount of any Change in Control
Payment would not be deductible for federal income tax purposes by a Tax
Affiliate (or other person who made or is required to make such Change in
Control Payment) by reason of the application of that section,
(i) no portion of the total amount of all Change in Control
Payments the receipt or enjoyment of which the Employee shall have
effectively waived, for purposes of section 280G of the Code, before the
date of payment of the Severance Payment shall be taken into account,
(ii) no portion of the total amount of all Change in Control
Payments shall be taken into account that, in the opinion of tax counsel
selected by the Company's independent accountants and acceptable to the
Employee (the "Tax Counsel"), does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code,
(iii) no portion of the total amount of all Change in Control
Payments shall be taken into account that, in the opinion of Tax
Counsel, (x) constitutes reasonable compensation for services rendered
within the meaning of section 280G(B)(4) of the Code and (y) is not
considered in the calculation of a "parachute payment" or is considered
in that calculation but does not cause an excess "parachute payment",
and
(iv) the value of any noncash benefit or any deferred payment
or benefit included in the total amount of all Change in Control
Payments shall be determined by the Company's independent accountants in
accordance with sections 280G(d)(3) and 280G(d)(4) of the Code.
Section 12. Expenses of Enforcement. If a Change in Control of the
Company shall have occurred before the expiration of the term of this
Agreement, then, upon demand by the Employee made to the Company, the Company
shall reimburse the Employee for the reasonable expenses (including attorneys'
fees and expenses) incurred by the Employee in enforcing or seeking to enforce
the payment of any amount or other benefit to which the Employee shall have
become entitled pursuant to this Agreement, except to the extent that the
reimbursement of such expenses would not be, or would cause any other portion
of the total amount of all Change in Control Payments not to be, deductible for
federal income tax purposes by a Tax Affiliate (or other person who made or is
required to make such Change in Control Payment) by reason of the application
of section 280G of the Code.
8
<PAGE> 9
Section 13. Employment by Subsidiaries. If, at the Effective Date,
the Employee is an employee of a subsidiary of the Company, references in this
Agreement to the Employee's employment by the Company shall be to the
Employee's employment by the subsidiary.
Section 14. No Obligation to Mitigate. The Employee shall not be
required to mitigate the amount of any payment or other benefit required to be
paid to the Employee pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other
benefit be reduced on account of any compensation earned by the Employee as a
result of employment by another person.
Section 15. Confidential Information. From the Effective Date until
the expiration of the term of this Agreement, the Employee shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, that shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and that shall not have become public knowledge (other
than as a result of acts by the Employee in violation of this Section 15). The
Company shall not withhold or reduce any amount or other benefit payable to the
Employee pursuant to the terms of this Agreement or otherwise on the grounds
that the Employee has breached or threatened to breach the foregoing provisions
of this Section 15, and the sole remedy of the Company for a breach or
anticipated breach of those provisions shall be injunctive relief.
Section 16. Amendment and Waiver. No provision of this Agreement may
be amended or waived unless that amendment or waiver is by written instrument
signed by the parties hereto. No waiver by either party of any breach of this
Agreement shall be deemed a waiver of any other or subsequent breach.
Section 17. Governing Law. The validity, interpretation, construction
and enforceability of this Agreement shall be governed by the laws of the State
of Texas.
Section 18. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
Section 19. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute the same instrument.
Section 20. Assignment. This Agreement shall inure to the benefit of
and be enforceable by the Employee's legal representative. The Company may not
assign any of its obligations under this Agreement unless (i) such assignment
is to a Successor and (ii) the requirements of Section 8 are fulfilled.
Section 21. Arbitration. Any dispute between the parties arising out
of this Agreement, whether as to this Agreement's construction, interpretation
or enforceability or as to any party's breach or alleged breach of any
provision of this Agreement, shall be submitted to arbitration in accordance
with the following procedures:
(i) Either party may demand such arbitration by giving notice
of that demand to the other party. The notice shall state (x) the
matter in controversy and (y) the name of the arbitrator selected by the
party giving the notice.
9
<PAGE> 10
(ii) Not more than 15 days after such notice is given, the
other party shall give notice to the party who demanded arbitration of
the name of the arbitrator selected by the other party. If the other
party shall fail to timely give such notice, the arbitrator that the
other party was entitled to select shall be named by the Arbitration
Committee of the American Arbitration Association. Not more than 15
days after the second arbitrator is so named, the two arbitrators shall
select a third arbitrator. If the two arbitrators shall fail to timely
select a third arbitrator, the third arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association.
(iii) The dispute shall be arbitrated at a hearing that shall be
concluded within 10 days immediately following the date the dispute is
submitted to arbitration unless a majority of the arbitrators shall
elect to extend the period of arbitration. Any award made by a majority
of the arbitrators (x) shall be made within 10 days following the
conclusion of the arbitration hearing, (y) shall be conclusive and
binding on the parties, and (z) may be made the subject of a judgment of
any court having jurisdiction.
(iv) All expenses of the arbitration shall be borne by the
Company.
The agreement of the parties contained in the foregoing provisions of this
Section 21 shall be a complete defense to any action, suit or other proceeding
instituted in any court or before any administrative tribunal with respect to
any dispute between the parties arising out of this Agreement.
Section 22. Interpretation.
(a) As used in this Agreement, the following terms and phrases have
the indicated meanings:
(i) "Base Salary" has the meaning assigned to that term in
Section 5.
(ii) "Board of Directors" means the Board of Directors of the
Company.
(iii) "Change in Control of the Company" has the meaning
assigned to that phrase in Section 2.
(iv) "Change in Control Payment" means a payment or other
benefit, including the Severance Payment, received or to be received by
the Employee from any Tax Affiliate in connection with a Change in
Control of the Company or the termination of the Employee's employment
by the Company, whether that payment or other benefit has been paid or
is payable pursuant to this Agreement or otherwise.
(v) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(vi) "Commission" means the United States Securities and
Exchange Commission or any successor agency.
(vii) "Company" has the meaning assigned to that term in the
recitals to this Agreement. The term "Company" shall also include any
Successor, whether the liability
10
<PAGE> 11
of such Successor under this Agreement is established by contract or
occurs by operation of law.
(viii) "Effective Date" has the meaning assigned to that term in
the recitals to this Agreement.
(ix) "Employee's Disability" means:
(x) if no Change in Control of the Company shall have
occurred before the date of determination, the physical or mental
disability of the Employee determined in accordance with the
disability policy of the Company at the time in effect and
generally applicable to its salaried employees; and
(y) if a Change in Control of the Company shall have
occurred at that date, the physical or mental disability of the
Employee determined in accordance with the disability policy of
the Company in effect immediately before the occurrence of the
first Change in Control of the Company and generally applicable
to its salaried employees.
The Employee's Disability, and the automatic termination of the
Employee's employment by the Company by reason of the Employee's
Disability, shall be deemed to have occurred on the date of
determination, provided that if (1) a Change in Control of the Company
shall have occurred before the expiration of the term of this Agreement,
(2) the Company shall have subsequently given notice pursuant to Section
6 of the Company's determination of the Employee's Disability and (3)
the Employee shall have given notice to the Company that the Employee
disagrees with that determination, then (A) whether the Employee's
Disability shall have occurred shall be submitted to arbitration
pursuant to Section 21, and (B) if a majority of the arbitrators decide
that the Employee's Disability had not occurred at the date of
determination by the Company, then (I) the Employee's Disability, and
the automatic termination of the Employee's employment by the Company by
reason of the Employee's Disability, shall be deemed not to have
occurred and (II) on demand by the Employee made to the Company, the
Company shall reimburse the Employee for the reasonable expenses
(including attorneys' fees and expenses) incurred by the Employee in
obtaining that decision.
(x) "Employee's Retirement" means (x) if no Change in Control
of the Company shall have occurred before the date of the Employee's
proposed retirement, the retirement of the Employee in accordance with
the retirement policy of the Company at the time in effect and generally
applicable to its salaried employees and (y) if a Change in Control of
the Company shall have occurred at that date, the retirement of the
Employee from the employ of the Company in accordance with the
retirement policy of the Company in effect immediately before the
occurrence of the first Change in Control of the Company and generally
applicable to its salaried employees.
(xi) "Event of Termination for Good Reason" has the meaning
assigned to that phrase in Section 5.
11
<PAGE> 12
(xii) "Event of Termination for Cause" has the meaning
assigned to that phrase in Section 4.
(xiii) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
(xiv) "Expiration Date" has the meaning assigned to that
term in Section 3.
(xv) "Other Benefit Plans" has the meaning assigned to
that term in Section 4.
(xvi) "person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, limited
partnership, limited liability company, trust, unincorporated
organization, government, or agency or political subdivision of any
government. When the context of this Agreement indicates, the term
"person" also has the meaning assigned to that term in Section 13(d) of
the Exchange Act.
(xvii) "Relevant Period" means a period beginning on the
Termination Date and ending on the first to occur of (x) the third
anniversary of the Termination Date, (y) the date on which the Employee
becomes a full time employee of another person and (z) the Employee's
normal retirement date, determined in accordance with the retirement
policy of the Company in effect on the Termination Date.
(xviii) "Severance Payment" has the meaning assigned to that
term in Section 7.
(xix) "Successor" means a person with or into which the
Company shall have been merged or consolidated or to which the Company
shall have transferred its assets as an entirety or substantially as an
entirety.
(xx) "Tax Affiliate" means the Company, any of its
successors pursuant to Section 8 or otherwise, any person whose actions
result in a Change in Control of the Company, and any person
"affiliated" or that, as a result of the completion of the transactions
that result in a Change in Control of the Company, will become
"affiliated" with the Company within the meaning of section 1504 of the
Code.
(xxi) "Tax Counsel" has the meaning assigned to that term
in Section 7.
(xxii) "Termination Date" has the meaning assigned to that
term in Section 6.
(xxiii) "this Agreement" means this Change in Control
Agreement as it may be amended from time to time in accordance with
Section 16.
(xxiv) "Voting Stock" means shares of capital stock of the
Company the holders of which are entitled to vote for the election of
directors of the Company, but excluding shares entitled to so vote only
upon the occurrence of a contingency unless that contingency shall have
occurred.
12
<PAGE> 13
(b) In the event of the enactment of any successor provision to any
statute or rule cited in this Agreement, references in this Agreement to such
statute or rule shall be to such successor provision.
(c) The headings of Sections of this Agreement shall not control the
meaning or interpretation of this Agreement.
(d) References in this Agreement to any Section are to the
corresponding Section of this Agreement unless the context otherwise indicates.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the Effective Date.
DANIEL INDUSTRIES, INC.
By
---------------------------------
-----------------------------------
[Employee]
13
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