<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
GIDDINGS & LEWIS, INC.
(Name of Subject Company)
GIDDINGS & LEWIS, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
375048-10-5
(CUSIP Number of Class of Securities)
------------------------
TODD A. DILLMANN, ESQ.
CORPORATE COUNSEL AND SECRETARY
142 DOTY STREET
FOND DU LAC, WISCONSIN 54935
(414) 921-4100
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of the person(s) filing statement)
------------------------
WITH A COPY TO:
CHARLES W. MULANEY, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 W. WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 401-0700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Giddings & Lewis, Inc., a Wisconsin
corporation (the "Company"). The address of the principal executive offices of
the Company is 142 Doty Street, Fond du Lac, Wisconsin 54935. The title of the
class of equity securities to which this Statement relates is the common stock,
par value $0.10 per share (the "Common Stock"), of the Company, including the
associated preferred share purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of August 23, 1995 (the "Rights Agreement"), between
the Company and Firstar Trust Company, as Rights Agent. References herein to the
"Shares" means shares of the Common Stock and shall, unless the context requires
otherwise, include the Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer made by DSFA Corporation
("DSFA"), a Delaware corporation and wholly owned subsidiary of Harnischfeger
Industries, Inc., a Delaware corporation ("HII"), to purchase all outstanding
Shares at a price of $19 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated April 28, 1997 (the "HII Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "HII Offer"), as disclosed
in a Tender Offer Statement on Schedule 14D-1 filed by DSFA and HII with the
Securities and Exchange Commission (the "Commission") on April 28, 1997, as
amended by Amendment No. 1, dated May 1, 1997 (as so amended, the "HII Schedule
14D-1"). Neither DSFA nor any of its affiliates are affiliated with the Company
and the HII Offer was not solicited by the Company.
On April 28, 1997, HII and DSFA filed preliminary solicitation materials
with the Commission in connection with the solicitation of written demands to
call a Special Meeting of shareholders of the Company. Also on April 28, 1997,
HII and DSFA filed preliminary proxy materials with the Commission relating to
the solicitation of proxies by HII and DSFA for use at such Special Meeting to:
(i) remove all of the current members of the Board of Directors of the Company
(the "Board") and any person or persons elected or designated prior to the
Special Meeting to fill any vacancy or newly created directorship; (ii) repeal
any By-Law changes adopted by the Board of Directors of the Company after March
28, 1997 (or adopted on or prior to that date but not filed by the Company as an
exhibit to any reports filed with the Commission on or prior to March 28, 1997);
(iii) amend Article III of the Company's By-Laws to fix the number of directors
of the Company at three; and (iv) elect three persons designated as nominees of
HII as the directors of the Company.
According to the HII Schedule 14D-1, the address of the principal executive
offices of DSFA and HII is 3600 South Lake Drive, St. Francis, Wisconsin
53235-3716.
THIS SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 DOES NOT
CONSTITUTE A SOLICITATION OF PROXIES FOR USE AT ANY MEETING OF THE COMPANY'S
SHAREHOLDERS OR OTHERWISE. ANY SUCH SOLICITATION WHICH THE COMPANY MAY MAKE WILL
BE MADE ONLY BY MEANS OF SEPARATE PROXY MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b)(1) GENERAL. Reference is made to the information contained under the
captions "Board of Directors--Director Compensation," "Principal
Shareholders--Management," "Executive Compensation--Summary Compensation
Information," "--Stock Options," "--Management Stock Purchase Program,"
"--Pension Plan Benefits," "--Agreements with Named Executive Officers" and
"--Executive
1
<PAGE>
Relocations" in the Company's Proxy Statement, dated March 21, 1997, relating to
the Company's Annual Meeting of Shareholders. The relevant sections thereof are
filed as Exhibit 1 hereto and are incorporated herein by reference. Except as
described herein or incorporated herein by reference, to the knowledge of the
Company as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between the Company or its affiliates and (i) its executive officers, directors
or affiliates or (ii) DSFA, its executive officers, directors or affiliates.
(b)(2) SEVERANCE AND RELATED MATTERS.
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS. The Company maintains
Key Executive Employment and Severance Agreements ("KEESAs") with 12 executives
("Executives"), including Messrs. Arndt, Isles, Barnett, Melzer, Dillmann,
Bosco, Ciarlo, Kelley, Peterson and Simon. These agreements provide for the
payment of certain severance and other benefits upon certain qualifying
terminations of the employment of such executives within five years after a
Change in Control (as defined therein) of the Company. The acquisition of more
than 20% of the Shares pursuant to the HII Offer will constitute a Change in
Control for purposes of the KEESAs. On April 30, 1997, the Board approved the
offering to the Executives of amended and restated KEESAs ("New KEESAs"). The
New KEESAs will differ from the respective original KEESAs primarily as follows:
(i) whereas the original KEESAs limited the total payments and benefits that
could be received by the Executive to the highest amount that would not be
subject to an excise tax under Section 4999 of the Code and would not be
nondeductible to the Company under Section 280G of the Code, the New KEESAs
eliminate such limitation and provide for an additional "gross-up" payment to
ensure that the Executive receives the after-tax benefit he would have received
had the payments not been subject to the excise tax; (ii) as an additional
severance benefit, each Executive will receive a lump sum payment equal to the
present value of the benefits the Executive would have received had he continued
to participate in the Company's retirement plans until reaching age 65; (iii)
termination by Mr. Isles due to the fact that he fails to continue to serve as
Chief Executive Officer and Chairman of the Board of the Company constitutes a
qualifying termination of employment under his agreement; (iv) the New KEESAs
provide for certain additional benefits upon a qualifying termination, including
relocation benefits (and, for Mr. Isles only, the repurchase of his home at
cost), the right to purchase the Company provided car for $1.00 and
reimbursement for legal and tax planning assistance; (v) the severance benefits
payable to certain Executives have been reduced from three in each case, to
three, two or one, as applicable, times the sum of the Executive's annual base
salary and highest annual bonus with respect to the three most recent years
preceding termination of employment (or target bonus for the year of termination
if the Executive had not then completed a full fiscal year of employment); and
(vi) the provision that termination by the Executive during a 30-day period
immediately following the first anniversary of the Change in Control constitutes
a qualifying termination of employment under his agreement has been eliminated
for the five operations Executives. A copy of the form of Key Executive
Employment and Severance Agreement is attached as Exhibit 2 hereto.
MANAGEMENT STOCK PURCHASE PROGRAM. On April 30, 1997, the Board approved
the amendment of the Management Stock Purchase Program ("MSPP") to eliminate the
provision of such program requiring that a participant forfeit 50% of the gain
with respect to stock purchased thereunder in cases of certain sales in order to
eliminate such forfeiture with respect to a sale following, or in connection
with, a Change in Control. A copy of the MSPP, as amended and restated, is
attached as Exhibit 3 hereto.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. On April 30, 1997, the Board
approved the amendment of the Supplemental Executive Retirement Plan to provide
for a vesting schedule which is the same as that set forth in the Company's
qualified defined benefit plan and for immediate vesting of benefits thereunder
upon a Change in Control. A copy of the amendment to the Supplemental Executive
Retirement Plan is attached as Exhibit 13 hereto.
2
<PAGE>
1989 STOCK OPTION PLAN, 1989 RESTRICTED STOCK PLAN. On April 30, 1997, the
Board approved the amendment of the 1989 Stock Option Plan and the 1989
Restricted Stock Plan (copies of such amendments are attached hereto as Exhibits
4 and 5, respectively) to provide for accelerated vesting of stock options and
restricted stock granted pursuant to these plans upon a Change in Control.
1993 STOCK AND INCENTIVE PLAN. On April 30, 1997, the Board approved the
amendment of agreements relating to performance-based restricted stock awards
granted pursuant to the 1993 Stock and Incentive Plan to provide that such
awards vest upon a Change in Control at a target level rather than at the
(higher) maximum award level. A copy of the form of amendment to such agreements
is attached as Exhibit 6 hereto.
EMPLOYMENT AGREEMENT. On April 30, 1997, the Board authorized an employment
agreement with Joseph R. Coppola and delayed by one year the effective date of
Mr. Coppola's Executive Consulting Agreement, dated December 1, 1996 (the
"Consulting Agreement"). During the one-year term of the employment agreement,
Mr. Coppola will be employed by the Company as Vice Chairman of the Board at his
current level of compensation. If his employment terminates following a Change
in Control, Mr. Coppola shall receive, in a lump sum, the total compensation
payable with respect to the remainder of the employment term, as well as the
consulting fees payable pursuant to the Consulting Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE HII OFFER IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS, AS DESCRIBED IN MORE DETAIL BELOW. ACCORDINGLY,
THE BOARD UNANIMOUSLY RECOMMENDS THAT ALL SHAREHOLDERS OF THE COMPANY REJECT THE
HII OFFER AND NOT TENDER THEIR SHARES TO HII.
The Board has directed management and the Company's advisors to explore
strategic alternatives and to report back to the Board promptly with respect
thereto.
A copy of the letter to the Company's shareholders communicating the Board's
recommendation and the press release relating thereto are filed as Exhibits 7
and 8, respectively, to this Schedule 14D-9 and are incorporated herein by
reference.
(b) REASONS FOR THE RECOMMENDATION.
In reaching the conclusions with respect to the HII Offer referred to in
Item 4(a), the Board considered numerous factors, including, but not limited to:
(i) the Board's familiarity with the business, financial condition,
prospects and current business strategy and opportunities of the Company,
the nature of the industries in which the Company operates and the Company's
strong position in these industries;
(ii) presentations by the Company's management relating to the Company's
financial performance and future opportunities and prospects and the opinion
of the Company's management that the proposed consideration in the HII Offer
is inadequate;
(iii) presentations by Credit Suisse First Boston Corporation ("CSFB"),
financial advisor to the Company, concerning the HII Offer;
(iv) the written opinion, dated May 7, 1997, of CSFB that, as of such
date, the consideration of $19 per Share offered to the shareholders of the
Company pursuant to the HII Offer was inadequate from a financial point of
view to the holders of Shares other than DSFA and HII; the full text of the
opinion of CSFB is included as Exhibit 9 hereto and should be read in its
entirety; and
3
<PAGE>
(v) the Board's belief, based in part on the factors referred to above,
that the $19.00 per Share price pursuant to the HII Offer does not reflect
the current value inherent in the Company and that the shareholders'
interests would be best served if the Company were to continue active
exploration of its strategic alternatives.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the HII Offer, the Board
did not find it practicable to and did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendation. In addition, individual members of the Board may have given
different weight to different factors. The Board viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it.
BACKGROUND. On April 21, 1997, Jeffery T. Grade, Chairman and Chief
Executive Officer of HII, and John N. Hansen, President and Chief Operating
Officer of HII, arranged an afternoon meeting with Marvin L. Isles, Chief
Executive Officer and a director of the Company. Prior to meeting with Mr.
Isles, Messrs. Grade and Hansen and Francis M. Corby, Jr., Executive Vice
President for Finance and Administration and Chief Financial Officer of HII met
with John A. Becker, a director of the Company and President and Chief Operating
Officer of Firstar Corporation, which has banking relationships with HII, and
informed Mr. Becker that Mr. Grade intended to present Mr. Isles with HII's
offer to acquire the Company.
Later that afternoon Messrs. Grade and Hansen met with Mr. Isles and Douglas
E. Barnett, Vice President and Controller of the Company, at the Company's
offices. During this meeting, Mr. Grade delivered to Mr. Isles a letter in which
HII proposed to acquire the Company at a price of $19.00 per Common Share (the
"Proposal").
The text of the letter delivered by Mr. Grade to Mr. Isles on April 21, 1997
is as follows:
April 21, 1997
Mr. Marvin L. Isles
Giddings & Lewis, Inc.
President and Chief Executive Officer
142 Doty Street
Fond du Lac, WI 54936-0590
Dear Marv:
Harnischfeger's Board of Directors has authorized me to propose to you the
combination of our two companies in a transaction that would provide Giddings &
Lewis share holders with $19 per share in cash for all of their
shares--approximately a 40% premium to Friday's closing price.
Harnischfeger views Giddings & Lewis as a company with significant
strengths--manufacturer of highly engineered, custom-designed machine tools and
industrial automation products with strong positions in general manufacturing
markets ranging from small job shops to the world's largest automakers, and with
a long-standing reputation for customer service and aftermarket support. With
access to Harnischfeger's strategic, operational and financial resources, the
combination of Giddings & Lewis and our existing material handling business will
make an excellent platform from which to implement Harnischfeger's Industrial
Products & Services (IP&S) strategy. That strategy--formally endorsed by
Harnischfeger's Board of Directors--is to leverage Harnischfeger's proven skills
in "life-cycle management", which have helped our customers in the mining and
papermaking industries improve their operating efficiency, capacity utilization
rates and profitability, by applying those skills to the industrial workplace
generally.
We believe that by combining Giddings & Lewis with Harnischfeger and integrating
Giddings & Lewis into our IP&S strategy, we will create the growth platform that
enables us to pay the substantial premium we
4
<PAGE>
are proposing. We are a shareholder of Giddings & Lewis and we believe that
Giddings & Lewis cannot, on its own, achieve the value we are offering. We
believe that Giddings & Lewis shareholders will be highly receptive to a cash
transaction that offers them immediate cash realization of a premium price for
their shares.
Harnischfeger, like Giddings & Lewis, is based in Wisconsin. Consistent with our
deep and long-standing commitment to our state and region, Harnischfeger
believes the proposed transaction will provide significant employment and growth
opportunities for Giddings & Lewis over time.
Harnischfeger is also the ideal partner for Giddings & Lewis because the
combination of the two companies will unite Giddings & Lewis with a company that
has consistently demonstrated its ability to successfully integrate strategic
acquisitions, manage product transitions, meet the evolving needs of its
customers, grow its business, and build value for its shareholders, customers,
business partners, employees and communities. Indeed, once written off as a
"Rust Belt" company that could not possibly measure up against its international
competitors, Harnischfeger today is a global leader whose dramatic growth and
operational and financial success vividly demonstrate the competitiveness, skill
and determination of American industry.
We want to work with you and your Board towards the prompt consummation of a
negotiated transaction. We are available to address any questions or issues your
Board may have, and we are prepared to move quickly. We see no reason why a
definitive agreement could not be reached within days. We have arranged all the
necessary financing. A transaction with Harnischfeger would not be subject to
financing or to any other significant contingencies.
Because we firmly believe this combination will be in the best interests of both
Harnischfeger's and Giddings & Lewis' shareholders and their respective other
constituencies, we are firmly committed to making it a reality. In light of the
highly complementary strategic fit between our two companies, and our belief
that Giddings & Lewis shareholders would strongly favor the transaction we
propose, we hope you will recognize and acknowledge the strategic, operational
and financial merits of the transaction and agree to enter into serious
discussions leading to a definitive merger agreement. Delay will not be in
anyone's interest. I urge you to respond to me promptly so we can commence
negotiations.
I look forward to hearing from you.
Sincerely,
Jeffery T. Grade
On Tuesday, April 22, 1997, Mr. Grade called Mr. Isles to elaborate on
certain points of HII's Proposal. Mr. Isles stated that he was arranging a
meeting of the Board to discuss the Proposal and would call Mr. Grade the next
day.
On Wednesday, April 23, 1997, Mr. Isles called Mr. Grade to inform him that
the Company would respond to the Proposal on Friday, April 25. During the April
23 call, Messrs. Grade and Isles briefly discussed various aspects of the
Proposal.
On Friday, April 25, 1997, Mr. Isles called Mr. Grade and informed him that
the Company would be willing to enter into discussions with HII if HII agreed to
enter into a confidentiality and standstill agreement. Mr. Grade informed Mr.
Isles that he would reflect on these matters and would respond to him. Later
that afternoon, without any further discussion of the matters or even a request
to do so, Mr. Grade sent Mr. Isles a letter indicating that DSFA intended to
commence the HII Offer. The text of the letter was included in a press release
that was issued by HII that afternoon. HII and DSFA also commenced litigation
that afternoon against the Company and certain of its directors described under
Item 8 below.
5
<PAGE>
The text of the letter delivered by Mr. Grade to Mr. Isles on April 25, 1997
is as follows:
April 25, 1997
Mr. Marvin L. Isles
President and Chief Executive Officer
Giddings & Lewis, Inc.
P.O. Box 590
142 Doty Street
Fond du Lac, Wisconsin 54936-0590
Dear Marvin:
I appreciated the opportunity to discuss with you over the last week
Harnischfeger's vision of combining our two companies on a basis that would
maximize the value of Giddings & Lewis, Inc. for all G & L shareholders and
bring significant strategic, operational and financial benefits to the
shareholders, customers, suppliers, business partners and employees of the
combined enterprise.
As I indicated during our discussions, Harnischfeger views G & L as a company
with significant strengths-- a manufacturer of highly engineered,
custom-designed machine tools and industrial automation products with strong
positions in general manufacturing markets ranging from small job shops to the
world's largest automakers, and with a long-standing reputation for customer
service and aftermarket support.
We believe that as part of Harnischfeger, with access to our strategic,
operational and financial resources, the combination of G & L and our existing
complementary material handling business will make an excellent platform from
which to implement our Industrial Products & Services (IP&S) strategy. As we
discussed, that strategy--formally endorsed by our Board of Directors--is to
leverage Harnischfeger's proven skills in "life-cycle management," which have
helped our customers in the mining and papermaking industries improve their
operating efficiency, capacity utilization rates and profitability, by applying
those skills to the industrial workplace generally.
In light of the strategic fit between our two companies, with which you
concurred, and of our belief that many G & L shareholders would strongly favor
the transaction we propose, we had hoped you would recognize and acknowledge the
merits of that transaction and agree to enter into immediate meaningful
discussions leading to a definitive merger agreement. Instead, we interpret your
response as a rejection of our good faith proposal.
Faced with that response, and having thoroughly evaluated the business
combination we are proposing based on public information, we have decided that
the best interests of the shareholders, customers, suppliers, business partners
and employees of both companies, and of our communities and other
constituencies, would be served by taking our offer directly to your
shareholders. Accordingly, Harnischfeger is offering to acquire all Giddings &
Lewis shares outstanding in a transaction in which G & L shareholders would
receive $19, in cash, for each of their G & L shares.
In considering this offer, you should bear in mind the following:
- The $19 per share offer price represents a premium of approximately 40%
over G & L's current market price. We are a shareholder of G & L and we
believe that G & L cannot, on its own, achieve the value we are offering.
We also believe G & L's shareholder base will be highly receptive to a
cash transaction that offers them immediate cash realization of a premium
price for their G & L shares.
- Harnischfeger, like G & L, is based in Wisconsin. Consistent with our deep
and long-standing commitment to our state and region, Harnischfeger
believes the proposed transaction will provide significant employment and
growth opportunities for G & L over time.
6
<PAGE>
- Harnischfeger is also the ideal partner for G & L because the combination
of the two companies will unite G & L with a company that has consistently
demonstrated its ability to successfully integrate strategic acquisitions,
manage product transition, meet the evolving needs of its customers, grow
its business, and build value for its shareholders, customers, suppliers,
business partners, employees and communities. Indeed, once written off as
a "Rust Belt" company that could not possibly measure up against its
international competitors, Harnischfeger today is a global leader whose
dramatic growth and operational and financial success vividly demonstrate
the competitiveness, skill and determination of American industry.
We would still prefer to work with you and your board towards the prompt
consummation of a negotiated transaction. Our offer is not subject to financing
or any other significant contingencies other than removal of your takeover
defenses. In that regard, we are taking steps to elect directors who will remove
these impediments to our offer if the incumbent board fails to do so. We are
confident that G & L shareholders will be supportive of these efforts.
We firmly believe that this combination will be in the best interests of both
Harnischfeger's and G & L's shareholders and their respective other
constituencies, and are committed to making this combination a reality.
Sincerely,
Jeffery T. Grade
cc: Members of the Board of Directors of Giddings & Lewis, Inc.
On April 28, 1997, HII commenced the HII Offer.
On April 29, April 30 and May 7, 1997, the Board met with its legal and
financial advisors to, among other things, review the HII Offer, resulting in
the recommendation set forth above. At the May 7, 1997 meeting, the Board also
fixed May 16, 1997 as the record date (the "Demand Record Date") for determining
shareholders entitled to demand that a Special Meeting of the Company's
shareholders be called. On May 8, 1996 the Company issued press releases
announcing its recommendation set forth above and the fixing of the Demand
Record Date, copies of which are filed as Exhibits 8 and 12, respectively, to
this Schedule 14D-9 and incorporated herein by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained CSFB to act as its exclusive financial advisor with
respect to the HII Offer pursuant to a letter agreement, dated April 25, 1997
(the "CSFB April Engagement Letter"), between CSFB and the Company. The CSFB
April Engagement Letter provides for the payment to CSFB of a retainer advisory
fee of $500,000, payable upon execution of the letter, and a transaction fee,
payable upon the consummation of a Sale (as defined in the CSFB April Engagement
Letter) within twelve months after the date of the CSFB April Engagement Letter,
in an amount equal to 1.5% of the equity value of the Sale. The retainer
advisory fee would be fully creditable (to the extent paid) against the
transaction fee. The Company has also agreed to reimburse CSFB for CSFB's
out-of-pocket expenses, including fees and expenses of CSFB's legal counsel. In
the event that the Company remains independent for one year after the date of
the CSFB April Engagement Letter, the Company has agreed to pay CSFB a fee of
$1.5 million. In addition, the Company agreed to indemnify CSFB against certain
liabilities, including liabilities arising under federal securities laws.
Pursuant to a letter agreement dated March 7, 1997 (the "CSFB March
Engagement Letter"), between CSFB and the Company, the Company had earlier
retained CSFB to act as its financial advisor for a period of three years
(beginning March 7, 1997) with respect to the Company's preparations for
responding to any acquisition or business combination proposals involving the
Company that the Company may receive, or any other attempts to effect a change
in control of the Company through a merger, tender
7
<PAGE>
or exchange offer, purchase of all or a portion of its stock, assets or debt,
proxy contest or consent solicitation, open market accumulation program or any
similar action. The CSFB March Engagement Letter provides for the payment to
CSFB of a financial advisory fee of $75,000 annually, payable upon the execution
of the CSFB March Engagement Letter and on each of the two subsequent annual
anniversaries of the CSFB March Engagement Letter. The Company also agreed that,
in the event of the occurrence of any of the proposals or events described
above, the Company would engage CSFB as its exclusive financial advisor with
regard to such proposals or events and pay CSFB customary fees to be mutually
agreed upon. The Company also agreed to reimburse CSFB for CSFB's out-of-pocket
expenses, including fees and expenses of CSFB's legal counsel. In addition, the
Company agreed to indemnify CSFB against certain liabilities, including
liabilities arising under federal securities laws.
CSFB has provided certain investment banking services to the Company from
time to time for which CSFB has received customary compensation. In the ordinary
course of its business, CSFB and its affiliates may actively trade the debt and
equity securities of both the Company and HII for their own accounts and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
The Company has retained D. F. King & Co., Inc. to distribute information
(including this Statement on Schedule 14D-9) on behalf of the Company in
connection with the HII Offer and related matters. The Company has also retained
The Abernathy MacGregor Group Inc. as public relations advisor in connection
with the HII Offer and related matters. Such firms will receive customary
compensation for services rendered and also will be reimbursed for their
out-of-pocket expenses.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any persons to make solicitations
or recommendations to shareholders with respect to the HII Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of the Company, except as set forth below, no
transactions in the Common Stock have been effected during the past 60 days by
the Company or any executive officer, director, affiliate or subsidiary of the
Company.
On March 13, 1997, the Company adopted the MSPP pursuant to which certain
members of the Company's senior management team and other key employees
purchased an aggregate of 282,355 shares of Common Stock. The number of Shares
purchased under the MSPP by each executive officer of the Company participating
therein is set forth under the caption "Executive Compensation--Management Stock
Purchase Program" in the Company's Proxy Statement, dated March 21, 1997,
relating to the Company's Annual Meeting of Shareholders, the relevant section
of which is contained in Exhibit 1 hereto and is incorporated herein by
reference.
Over the course of the past 60 days (i) the Company has withheld restricted
Shares to pay taxes incurred in connection with the lapse of restrictions in the
ordinary course and (ii) non-discretionary investments in the Company Stock Fund
under the Company sponsored 401(k) plan of less than $1,400 in the aggregate
have been made by executive officers of the Company.
(b) To the best knowledge of the Company, its executive officers, directors,
affiliates and subsidiaries do not presently intend to tender, pursuant to the
HII Offer, any Shares which are held of record or are beneficially owned by such
persons or to otherwise sell any such Shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) At the meetings of the Board held on April 23, April 29, April 30 and
May 7, 1997, the Board considered and reviewed the feasibility and desirability
of exploring possible alternative transactions to the HII Offer. As stated in
Item 4 above, the Board believes that the interests of the Company's
shareholders
8
<PAGE>
would be best served if the Company were to actively explore its strategic
alternatives. These alternatives could lead to and involve negotiations which
may result in (i) an extraordinary transaction, such as a merger or
reorganization involving the Company or any of its subsidiaries, (ii) a
purchase, sale or transfer of material assets of the Company or its subsidiaries
or of a third party, (iii) a tender offer for or other acquisition of securities
by or of the Company or (iv) a material change in the present capitalization or
dividend policy of the Company. In this regard, the Company has had preliminary
discussions with other parties regarding their potential interest in a possible
transaction involving the Company of the types described above, and has entered
into confidentiality agreements concerning the furnishing of confidential
information to parties indicating an interest in such a transaction and
responded to due diligence inquiries.
In the opinion of the Board, disclosure at this time of the possible terms
of any transaction of the type described above or the parties thereto might
jeopardize the initiation or continuation of such discussions or negotiations.
Accordingly, the Board has adopted a resolution instructing management not to
disclose the possible terms of any such transactions, or the parties thereto,
unless and until an agreement in principle relating thereto has been reached.
There can be no assurance that any of the foregoing will result in any
transaction, or that a transaction other than one of the types described herein
will not be authorized or consummated. The initiation or continuation of any of
the foregoing may also be dependent upon the future actions of DSFA with respect
to the HII Offer. The proposal, authorization, announcement or consummation of
any transaction of the type referred to in this Item 7 could adversely affect or
result in withdrawal of the HII Offer.
(b) Except as described above and under Item 4 above, the Company is not
engaged in any negotiation in response to the HII Offer which relates to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization involving the Company or any of its subsidiaries, (ii) a
purchase, sale or transfer of a material amount of the assets of the Company or
any of its subsidiaries, (iii) a tender offer for or other acquisition of
securities by or of the Company or (iv) a material change in the present
capitalization or dividend policy of the Company.
There are no transactions, board resolutions, agreements in principle or
signed contracts, in response to the HII Offer that relate to or would result in
one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) BOARD OF DIRECTORS. At the April 30, 1997 meeting, the Board increased
the number of directors of the Company from six to seven and appointed Clyde H.
Folley and Joseph R. Coppola to fill the vacancies created by this increase and
the resignation of Benjamin F. Garmer, III. As a result of such increase, as
provided in the Company's By-Laws, the Board has been reclassified from three
classes of two directors each, to three classes of directors, two consisting of
two members and the other consisting of three members. In light of the Board's
ongoing review of strategic alternatives and the pending HII Offer, the Board
determined that it would be in the best interests of the shareholders to retain
the knowledge and experience of Messrs. Folley and Coppola as directors. Messrs.
Coppola and Folley had intended to retire from the Board at this year's annual
meeting.
(b) RIGHTS AGREEMENT. Each Right issued pursuant to the Rights Agreement
initially entitles the registered holder thereof to purchase one one-hundredth
of a share of Class A Preferred Stock, Series B, $.10 par value (the "Preferred
Shares"), of the Company at a price of $60 per one one-hundredth of a Preferred
Share, subject to adjustment. On the earlier of (i) the tenth day after the
acquisition by a person or group of affiliated or associated persons (an
"Acquiring Person") of beneficial ownership of 20% or more of the outstanding
Shares or (ii) the tenth business day (or such later date as may be determined
by action of the Company's Board of Directors prior to the time any person
becomes an Acquiring Person) after a person has commenced a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of such outstanding Shares (the
earlier of such date being the "Distribution Date") the Rights become
exercisable and trade separately from the
9
<PAGE>
Common Stock. In the event that a person becomes an Acquiring Person (and in
certain other circumstances specified in the Rights Agreement), each holder of a
Right (other than the Acquiring Person) will thereafter have the right to
receive, upon exercise of a Right, Common Stock having a market value of two
times the exercise price of the Right. The Rights may be redeemed at a price of
$.01 per Right at any time prior to a person becoming an Acquiring Person.
At a meeting held on May 7, 1997, the Board resolved that the Distribution
Date shall not occur until the earlier of (i) the date on which an Acquiring
Person becomes such and (ii) such date as may be determined by action of the
Board prior to the time any person or group becomes an Acquiring Person. As a
result of such action, the commencement of the HII Offer will not, in and of
itself, result in the occurrence of a Distribution Date.
For a more complete description of the Rights Agreement, see the Company's
Form 8-A, dated August 23, 1995, and the Company's Current Report on Form 8-K,
dated as of August 23, 1995, each as filed with the Commission.
(c) LITIGATION. On April 25, 1997, HII and DSFA commenced an action in the
United States District Court for the Eastern District of Wisconsin against the
Company and certain of the Company's directors (the "Action"). Harnischfeger
Indus., Inc. v. Isles, et al., C.A. No. 97-C-0488. In the complaint in the
Action, HII and DSFA allege, among other things, that the defendants have
violated the disclosure requirements of the Exchange Act, and the rules and
regulations promulgated by the Commission thereunder, by making false or
misleading statements, or omitting to state facts required to be disclosed in
order to prevent other statements from being misleading, in connection with: (i)
disclosures in the Company's Annual Proxy Statement describing the Company's
MSPP; (ii) disclosures in such Annual Proxy Statement concerning the number of
nominees the Company has nominated for election at its April 30, 1997 Annual
Meeting and the provisions of the By-Laws concerning Board size and composition;
and (iii) disclosures in the Company's public filings concerning the Rights
Agreement. In addition, HII and DSFA allege in the complaint in the Action that
the defendants are now violating, and threaten to violate, their fiduciary
duties to the Company's shareholders in connection with the consideration of
HII's acquisition proposal and in connection with the proxy contest described
herein. Among other things, HII and DSFA allege that, under the circumstances
present here, defendants have a fiduciary duty to redeem the Rights and/or to
cause them to be inapplicable to the HII Offer.
This summary is qualified by reference to the text of the complaint, a copy
of which is filed as Exhibit 10 hereto.
On May 6, 1997, a putative class action was filed against the Company and
certain of its directors in the Circuit Court of Milwaukee County, Wisconsin,
entitled CHARLES MILLER, ET AL. V. GIDDINGS & LEWIS, INC., ET AL., No. 97 CV
003823 (the "Milwaukee Action"). The complaint in the Milwaukee Action alleges,
among other things, that the director defendants breached their fiduciary duties
to the public shareholders of the Company by refusing to consider the HII Offer,
using their positions to thwart other attempts to acquire the Company, and
trying to entrench themselves in their positions with the Company. As relief,
the complaint seeks, among other things (i) a declaration that the action be
certified as a proper class action; (ii) injunctive relief requiring that the
director defendants cooperate fully with any entity or person, including HII,
having a BONA FIDE interest in proposing any transactions that would maximize
shareholder value, and take all appropriate steps to maximize shareholder value;
and (iii) damages, costs, and attorneys' fees.
This summary is qualified by reference to the text of the complaint, a copy
of which is filed as Exhibit 11 hereto.
(d) WISCONSIN BUSINESS COMBINATION LAW. Section 1141 of the Wisconsin
Business Combination Law prohibits certain business combination transactions,
including a merger, between a Wisconsin resident domestic corporation (such as
the Company) and any "Interested Shareholder" (defined generally as any person
that, directly or indirectly, beneficially owns or, subject to certain
exceptions, has the right to
10
<PAGE>
exercise 10% or more of the voting power of the outstanding voting stock of a
Wisconsin resident domestic corporation) for a period of three years after the
date the person becomes an Interested Shareholder. After such three-year period,
a business combination transaction between a Wisconsin resident domestic
corporation and such Interested Shareholder is prohibited unless (i) the
transaction meets certain requirements as to price and terms, (ii) the business
combination transaction is approved by the vote of the holders of a majority of
the voting stock not beneficially owned by the Interested Shareholder or (iii)
the acquisition of stock resulting in such shareholder becoming an Interested
Shareholder was approved by the corporation's board of directors prior to the
relevant acquisition date. The Wisconsin Business Combination Law restrictions
do not apply to a business combination transaction with an Interested
Shareholder within three years of the date such shareholder became an Interested
Shareholder if either (x) the Interested Shareholder's acquisition of the
corporation's shares on the date the Interested Shareholder became an Interested
Shareholder or (y) the business combination transaction is approved by the board
of directors of the corporation prior to the date on which the Interested
Shareholder became an Interested Shareholder.
(e) REGULATORY FILING. On May 8, 1997, the Company filed its Notification
and Report Form with respect to the HII Offer under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Parent filed a
Notification and Report Form with respect to the HII Offer on April 29, 1997.
Under the provisions of the HSR Act applicable to the HII Offer, the purchase of
shares pursuant to the HII Offer may not be consummated until the expiration of
a 15-calendar day waiting period following Parent's filing under such HSR Act.
Accordingly, assuming the filing made by Parent was not deficient, the waiting
period with respect to the HII Offer will expire at 11:59 p.m., New York City
time, on May 14, 1997, unless Parent receives a request for additional
information or documentary material or the Antitrust Division and the Federal
Trade Commission terminate the waiting period prior thereto.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
Exhibit 1 Excerpts from the Company's Proxy Statement, dated March 21, 1997, relating to the Company's 1997
Annual Meeting of Shareholders.
Exhibit 2 Amended and Restated Key Executive Employment and Severance Agreement.
Exhibit 3 Company's Management Stock Purchase Program, as Amended and Restated, dated April 30, 1997.
Exhibit 4 Amendment to Company's 1989 Stock Option Award Agreement, dated April 30, 1997.
Exhibit 5 Amendment to Company's 1989 Restricted Stock Award Agreement, dated April 30, 1997.
Exhibit 6 Form of Amendment to Company's 1993 Restricted Stock Award Agreement, dated April 30, 1997.
*Exhibit 7 Letter to Shareholders of the Company, dated May 8, 1997.
Exhibit 8 Press Release issued by Giddings & Lewis, Inc., dated May 8, 1997.
*Exhibit 9 Opinion of Credit Suisse First Boston Corporation, dated May 7, 1997.
Exhibit 10 Complaint seeking Declaratory and Injunctive Relief filed in the United States District Court for
the Eastern District of Wisconsin on April 25, 1997.
Exhibit 11 Class Action seeking Declaratory and Injunctive Relief filed in the Circuit Court of Milwaukee
County, Wisconsin, on May 6, 1977.
Exhibit 12 Press Release issued by Giddings & Lewis, Inc., dated May 8, 1997.
Exhibit 13 Resolutions Authorizing Amendment of the Supplemental Executive Retirement Plan, dated April 30,
1997.
</TABLE>
- ------------------------
* Included with the Schedule 14D-9 mailed to shareholders.
11
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
GIDDINGS & LEWIS, INC.
By: /s/ DOUGLAS E. BARNETT
-----------------------------------------
Name: Douglas E. Barnett
Title: Vice President and Corporate
Controller
Dated: May 8, 1997
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------------------------------- -----
<S> <C> <C>
Exhibit 1 Excerpts from the Company's Proxy Statement, dated March 21, 1997, relating to the Company's
1997 Annual Meeting of Shareholders.
Exhibit 2 Amended and Restated Key Executive Employment and Severance Agreement.
Exhibit 3 Company's Management Stock Purchase Program, as Amended and Restated, dated April 30, 1997.
Exhibit 4 Amendment to Company's 1989 Stock Option Award Agreement, dated April 30, 1997.
Exhibit 5 Amendment to Company's 1989 Restricted Stock Award Agreement, dated April 30, 1997.
Exhibit 6 Amendment to Company's 1993 Restricted Stock Award Agreement, dated April 30, 1997.
*Exhibit 7 Letter to Shareholders of the Company, dated May 8, 1997.
Exhibit 8 Press Release issued by Giddings & Lewis, Inc., dated May 8, 1997.
*Exhibit 9 Opinion of Credit Suisse First Boston Corporation, dated May 7, 1997.
Exhibit 10 Complaint seeking Declaratory and Injunctive Relief filed in the United States District
Court for the Eastern District of Wisconsin on April 25, 1997.
Exhibit 11 Class Action seeking Declaratory and Injunctive Relief filed in the Circuit Court of
Milwaukee County, Wisconsin, on May 6, 1977.
Exhibit 12 Press Release issued by Giddings & Lewis, Inc., dated May 8, 1997.
</TABLE>
- ------------------------
* Included with the Schedule 14D-9 mailed to shareholders.
<PAGE>
Exhibit 99.1
BOARD OF DIRECTORS
GENERAL
The Board has standing Audit, Compensation, and Executive/Nominating
Committes. The Audit Committee recommends to the Board the appointment of
independent auditors, approves the scope of the annual audit activities of
the auditors, approves the audit fee payable to the auditors, reviews the
adequacy of internal audit procedures and reviews audit results. Dr. Davis
and Messrs. Folley (Chairman) and Guffey are members of the Audit Committee.
Th Audit Committee held three meetings in 1996. The Compensation Committe
(i) reviews and recommends to the Board the compensation structure for the
Company's directors, officers and other managerial personnel, including
salary rates, participation in any incentive bonus plans, fringe benefits,
non-cash perquisites and other forms of compensation, and (ii) administers
the Company's 1989 Restricted Stock Plan (the "1989 Restricted Stock Plan"),
1989 Stock Option Plan (the "1989 Stock Option Plan"), 1993 Stock and
Incentive Plan (the "1993 Plan"), and Independent Director Stock Based
Incentive Plan (the "Independent Director Plan"). Messrs. Becker (Chairman),
Garmer and Stuart are members of the Compensation Committee. The
Compensation Committee held four meetings in 1996. The Executive/Nominating
Committee may exercise all of the powers of the Board when the Board is not
in session, except as otherwise provided by law or the Company's By-laws.
The Executive/Nominating Committee also recommends persons to be nominated by
the Board for election as directors of the Company and recommends persons to
fill vacancies on the Board Messrs. Coppola (Chairman), Becker, Folley and
Stuart are members of the Executive/Nominating Committee. The
Executive/Nominating Committee did not meet in 1996. The
Exectuvie/Nominating Committee will consider nominees recommended by
shareholders, but has no established procedures which shareholders must follow
to make a recommendation. The Company's By-laws also provide for shareholder
nomination of candidates for election as directors. These provisions require
such nominations to be made pursuant to timely notice (as specified in the
By-laws) in writing to the Secretary of the Company. The shareholder's
notice of nomination must contain information relating to the nominee which
is required to be disclosed by the Company's By-laws and the Securities
Exchange Act of 1934.
The Board held six meetings in 1996. Each director attended at least 75%
of the aggregate of (i) the total number of meetings of the Board and (ii)
the total number of meetings held by all committees of the Board on which
such director served during the year.
DIRECTOR COMPENSATION
RETAINER AND FEES. Directors who are officers or employees of the Company
receive no compensation for service as members of the Board. Directors who
are not officers or employees of the Company or any affiliate of the Company
("non-employee directors") are paid an annual retainer fee of $17,000 plus a
fee of $1,000 for each Board meeting attended and a fee of $1,000 ($1,200 for
the committee chairman) for each committee meeting attended. Payment of
director fees may be deferred, in whole or in part, at the option of a
non-employee director, under the Company's Deferred Compensation Plan for
Non-Employee Directors (the "Deferred Compensation Plan"). The Deferred
Compensation Plan provides that any fees deferred thereunder shall be credited
at the end of each quarter to (i) a share account, which allows for the
purchase of share units that represent shares of Common Stock, (ii) a cash
account, which pays interest at a rate based on the ninety-day Treasury bill
rate over the past twelve months, or (iii) a combination of both. The amount
deferred under the Deferred Compensation Plan will be paid, at
the non-employee director's option, in a lump sum, or over a ten-year period
commencing, on the first business day of the calendar year following the year
during which the non-employee director ceases to be a director of the Company.
4
<PAGE>
STOCK BASED PLANS. The Company maintains the Independent Director
Plan for its non-employee directors. Under the Independent Director Plan, on
each date on which a non-employee director is elected or re-elected
(whichever the case may be)(the "Election Date") to serve on the Board,
such non-employee director will automatically receive options to purchase
1,000 shares of Common Stock. Options granted under the Independent Director
Plan are not exercisable until such non-employee director's term as a
director (which began as of the Election Date for which such options were
granted) has expired; PROVIDED, HOWEVER, that if a non-employee director's
status as a director terminates due to such non-employee director's death or
disability or retirement after reaching age 65, the options will become
immediately exercisable in full. The purchase price at which shares of Common
Stock may be purchased under the Independent Director Plan will be equal to
the closing price of a share of Common Stock on the Election Date (or if such
day is a day for which no closing price is set forth, the next preceding day
for which a closing price is so set forth). Stock options granted under the
Independent Director Plan will terminate on the earlier of ten years
following a non-employee director's Election Date; six months after the
non-employee director ceases to be a director of the Company by reason of
death, disability or retirement; or the time at which the non-employee
director ceases to be a director of the Company for any reason other than by
reason of death, disability or retirement. All stock options granted under
the Independent Director Plan are non-qualified stock options for purposes of
the Internal Revenue Code. The aggregate number of shares of Common Stock
eligible for issuance to non-employee directors upon the exercise of stock
options under the Independent Director Plan is 50,000. On April 24, 1996,
each of Dr. Davis and Mr. Garmer were granted options to purchase 1,000
shares of Common Stock at a per share exercise price of $18. The options will
become exercisable upon the expiration of the current terms of each of said
non-employee directors. No options granted to the non-employee directors
under the Independent Director Plan were exercised in 1996.
The non-employee directors of the Company are also eligible to
receive automatic grants of shares of restricted Common Stock under the 1993
Plan. Under the terms of the 1993 Plan, each non-employee director of the
Company will automatically be granted, on the date of the Company's annual
meeting of shareholders in each year during the existence of the 1993 Plan,
such number of shares of restricted stock (rounded to the next highest whole
number) equal to 50% of such director's annual retainer fee for serving as a
director of the Company divided by the closing price of the Common Stock on
the day preceding the date of grant (or if such day is a day for which no
closing price is set forth, the next preceding date for which a closing price
is set forth). The annual retainer fee used in making the foregoing
determination is the annual retainer fee in effect on the date of grant,
exclusive of committee, attendance or other fees to which the non-employee
director may otherwise be entitled. Shares of restricted stock granted to a
non-employee director will not be eligible to be sold or otherwise
transferred while the non-employee director remains a director of the Company
and thereafter such restrictions will lapse. However, in the event the
non-employee director has not served as a director of the Company for at
least three calendar years at the time his or her service as a director ends,
the shares of restricted stock held by such non-employee director will be
forfeited to the Company. The non-employee directors are entitled to exercise
full voting rights and receive any dividends or other distributions paid with
respect to their shares of restricted stock. On April 24, 1996, 476 shares of
restricted stock were awarded under the 1993 Plan to each of Dr. Davis and
Messrs. Becker, Folley, Garmer, Guffey and Stuart.
5
<PAGE>
PRINCIPAL SHAREHOLDERS
MANAGEMENT
The following table sets forth information, as of March 1, 1997, regarding
beneficial ownership of Common Stock by each director and nominee, each of the
executive officers named in the Summary Compensation Table set forth below, and
all of the directors, nominees and executive officers (including the executive
officers named in the Summary Compensation Table) as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OF
OWNERSHIP(1)(2) CLASS
-------------------- -------
<S> <C> <C>
NAME OF BENEFICIAL OWNER
John A. Becker........................ 4,896 *
Joseph R. Coppola..................... 344,430(3) 1.0%
Ruth M. Davis......................... 2,696 *
Clyde H. Folley....................... 7,339(4)(5) *
Benjamin F. Garmer, III............... 4,696 *
John W. Guffey, Jr.................... 4,984 *
Marvin L. Isles....................... 110,000 *
Ben R. Stuart......................... 3,696 *
Heinz G. Anders....................... 88,000 *
Stephen M. Peterson................... 87,517 *
Philip N. Ciarlo...................... 64,000 *
Richard C. Kleinfeldt................. 125,566(6) *
All directors, nominees and executive
officers as a group (18 persons)... 1,301,377 3.8%
</TABLE>
*Less than one percent.
(1) Includes the following shares subject to stock options which are currently
exercisable or exercisable within 60 days of March 1, 1997: Mr. Becker,
2,000 shares; Mr. Coppola, 291,000 shares; Dr. Davis, 1,000 shares; Mr.
Folley, 2,000 shares; Mr. Garmer, 2,000 shares; Mr. Stuart, 1,000 shares;
Mr. Anders, 31,000 shares; Mr. Peterson, 31,367 shares; Mr. Ciarlo, 13,000
shares; Mr. Kleinfeldt, 62,287 shares; and all directors, nominees and
executive officers as a group, 623,334 shares.
(2) Includes the following restricted shares of Common Stock granted under
either the 1989 Restricted Stock Plan or the 1993 Plan over which the
holders have sole voting but no investment power: Mr. Becker, 1,696 shares;
Mr. Coppola, 357 shares; Dr. Davis, 1,696 shares; Mr. Folley, 1,339 shares;
Mr. Garmer, 1,696 shares; Mr. Guffey, 984 shares; Mr. Isles, 75,000 shares;
Mr. Stuart, 1,696 shares; Mr. Anders, 51,000 shares; Mr. Peterson, 45,000
shares; Mr. Ciarlo, 51,000 shares; Mr. Kleinfeldt, 36,000 shares; and all
directors, nominees and executive officers as a group, 498,064 shares. The
shares of restricted stock reflected in the table include shares granted to
the executive officers in February 1997.
(3) Mr. Coppola's current term as a director will expire in April 1997.
(4) Mr. Folley's current term as a director will expire in April 1997.
(5) Mr. Folley shares voting and investment power over 4,000 shares of his
Common Stock with his wife.
(6) Mr. Kleinfeldt retired as Vice President-Finance and as a director of the
Company in December 1996.
6
<PAGE>
OTHER BENEFICIAL OWNERS
The following table sets forth information, as of December 31, 1996,
regarding beneficial ownership by the only persons known to the Company to own
more than 5% of the outstanding Common Stock. The beneficial ownership set forth
below has been reported on filings made on Schedule 13G with the Securities and
Exchange Commission by the beneficial owners.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP AGGREGATE CLASS
- ------------------- ----------------------- --------- -------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
VOTING POWER INVESTMENT POWER
------------ ----------------
SOLE SHARED SOLE SHARED
---- ------ ---- ------
<S> <C> <C> <C>
State of Wisconsin Investment Board 3,120,000 --0-- 3,120,000 --0-- 3,120,000 9.4%
P.O. Box 7842
Madison, Wisconsin 53707
Sanford C. Bernstein & Co., Inc. 1,446,450 27,950 1,710,200 --0-- 1,710,200 5.2%
767 Fifth Avenue
New York, New York 10153
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information concerning compensation
paid for the last three fiscal years to certain executive officers of the
Company, including the Company's Chief Executive Officer. The persons named in
the table are sometimes referred to herein as the ''named executive officers.''
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
----------------------- ------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL SALARY BONUS STOCK STOCK ALL OTHER
POSITION YEAR ($) ($)(2) AWARDS($)(3) OPTIONS(#) COMPENSATION ($)(4)
- ------------------ ---- -------- --------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Coppola 1996 $475,008 $269,439 $ 450,000 -- $62,022
Chairman, Chief Executive 1995 424,992 240,771 -- 70,000 53,478
Officer and Director(5) 1994 399,996 188,158 968,750 105,000 50,112
Marvin L. Isles 1996 247,919 200,000 249,375 30,000 35,416
President and Chief 1995 -- -- -- -- --
Operating Officer(5) 1994 -- -- -- -- --
Heinz G. Anders 1996 246,700 40,000 225,000 15,000 --
Group Vice President and 1995 253,200 28,969 190,500 12,000 --
General Manager-- 1994 185,690 45,161 149,400 18,000 7,077
European Operations
Stephen M. Peterson 1996 190,008 77,000 180,000 12,000 1,125
Group Vice President 1995 187,008 70,545 142,875 9,000 1,125
and General Manager-- 1994 165,000 47,000 -- 8,000 1,125
Fadal Engineering
Philip N. Ciarlo 1996 187,238 110,000 375,000 15,000 36,223
Group Vice President 1995 147,982 68,740 190,500 12,000 1,125
and General Manager-- 1994 74,842 41,666 -- -- 1,125
Integrated Automation
Richard C. Kleinfeldt(6) 1996 227,004 85,000 270,000 18,000 1,125
1995 216,996 78,485 285,750 18,000 1,125
1994 207,996 63,563 -- 12,000 1,125
</TABLE>
(1) Certain personal benefits provided by the Company and its subsidiaries to
the named executive officers are not included in the table. The aggregate
amount of such personal benefits for each named executive officer in each
year reflected in the table did not exceed the lesser of $50,000 or 10% of
the sum of such officer's salary and bonus in each respective year.
(2) For 1996, consists of awards under the Company's Management Incentive
Compensation Plan, which is a performance-based plan.
<PAGE>
(3) The amounts in the table reflect the market value on the date of
grant (net of any consideration paid by the named executive officer) of
restricted shares of Common Stock awarded under the 1989 Restricted
Stock Plan and the 1993 Plan. The number of shares of restricted Common
Stock held by the named executive officers and the market value of such
shares (net of any consideration paid by the named executive officers)
as of December 31, 1996, were as follows: Mr. Coppola, 80,357 shares
($1,034,596); Mr. Isles, 15,000 shares ($193,125); Mr. Anders, 29,000
shares ($373,375); Mr. Peterson, 21,000 shares ($270,375); Mr. Ciarlo,
37,000 shares ($476,375); and Mr. Kleinfeldt, 36,000 shares ($463,500).
During 1996, Messrs. Coppola, Isles, Anders, Ciarlo, Peterson and
Kleinfeldt were awarded 30,000, 15,000, 15,000, 15,000, 12,000 and
18,000 shares of restricted stock, respectively, which, except for
Mr. Isles' and Mr. Coppola's shares, will vest following the release of
financial statements for the year ended December 31, 1998 assuming
certain performance criteria are achieved. Mr. Isles' award will vest in
increments of 5,000 shares on June 1, 1997, 1998 and 1999. Mr. Coppola's
award was subject to vesting based on performance criteria for the year
ended December 31, 1996. Based on such performance criteria, 14,000
shares of Mr. Coppola's 1996 restricted stock grant vested and the
remaining shares were forfeited. During 1996, Mr. Ciarlo received an
additional grant of 10,000 shares of restricted stock, which shares were
subject to vesting based on certain performance criteria for the year
ended December 31, 1996. All of such shares were forfeited by Mr.
Ciarlo. A portion of the shares of restricted stock granted to each
named executive officer in 1995 will vest following the release of
financial statements for the year ended December 31, 1997 assuming that
certain performance criteria are achieved. During 1994, Mr. Coppola was
awarded 12,000 shares of restricted stock which vested on January 31,
1997 and 38,000 shares of restricted stock which by their terms were
subject to vesting on January 31, 1997 based on certain performance
criteria. Of such 38,000 restricted shares, 8,000 shares vested on
January 31, 1997 and the remaining shares were forfeited. Holders of
shares of restricted Common Stock are entitled to receive dividends on
such shares.
(4) The amounts reflected in the table for fiscal 1996 consist of
the following: (a) for Mr. Coppola, a $60,897 contribution (including
accrued interest) credited to his account under his supplemental pension
arrangement, see "Pension Plan Benefits," and a Company matching
contribution of $1,125 under the Giddings & Lewis Savings Plan (the
"Savings Plan"), which is a profit sharing plan under Section 401(k)
of the Internal Revenue Code; (b) for Mr. Isles, a $35,416 transfer
allowance paid by the Company in connection with Mr. Isles' appointment
as President and Chief Operating Officer; (c) for Mr. Ciarlo, a $35,098
transfer allowance paid by the Company in connection with Mr. Ciarlo's
appointment as Group Vice President and General Manager of the Company's
Integrated Automation Group and a Company matching contribution of
$1,125 under the Savings Plan; and (d) for all other named executive
officers (except Mr. Anders), Company matching contributions under the
Savings Plan.
(5) Mr. Coppola retired as Chief Executive Officer of the Company on March 17,
1997. Mr. Isles was appointed as Chief Executive Officer on that date to
succeed Mr. Coppola.
(6) Mr. Kleinfeldt retired as Vice President-Finance and as a director of the
Company in December 1996.
-9-
<PAGE>
STOCK OPTIONS
The Company has in effect the 1989 Stock Option Plan and the 1993 Plan
pursuant to which options to purchase Common Stock may be granted to key
employees (including officers) of the Company and its subsidiaries. The
following table presents certain information as to grants of stock options
made during fiscal 1996 to each of the named executive officers.
OPTION GRANTS IN 1996 FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES OF STOCK
-------------------------------------------------------- PRICE APPRECIATION FOR OPTION
NUMBER OF TERM(2)
SECURITIES PERCENT OF -----------------------------
UNDERLYING TOTAL OPTIONS AT 0% AT 5% AT 10%
OPTIONS GRANTED TO EXERCISE OR ANNUAL ANNUAL ANNUAL
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION GROWTH GROWTH GROWTH
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE RATE RATE RATE
- ---- --------- ------------ ---------- ---------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph R. Coppola ..... -- -- -- -- -- -- --
Marvin L. Isles........ 30,000 10.8% $ 16.625 6/1/06 $0 $313,661 $794,879
Heinz G. Anders........ 15,000 5.4 15.00 2/2/06 0 141,501 358,592
Stephen M. Peterson.... 12,000 4.3 15.00 2/2/06 0 113,201 286,874
Philip N. Ciarlo....... 15,000 5.4 15.00 2/2/06 0 141,501 358,592
Richard C. Kleinfeldt.. 18,000 6.5 15.00 2/2/06 0 169,802 430,310
</TABLE>
(1) The options reflected in the table (which are non-qualified options for
purposes of the Internal Revenue Code) were granted in the case of
Mr. Isles on June 1, 1996 and on February 2, 1996 in the case of the other
named executive officers and vest ratably over a three-year period from the
date of grant.
(2) This presentation is intended to disclose the potential value which would
accrue to the optionee if the option were exercised the day before it would
expire and if the per share value had appreciated at the compounded annual
rate indicated in each column. The assumed rates of appreciation of 5% and
10% are prescribed by the rules of the Securities and Exchange Commission
regarding disclosure of executive compensation. The assumed annual rates of
appreciation are not intended to forecast possible future appreciation, if
any, with respect to the price of the Common Stock.
-10-
<PAGE>
The following table sets forth information regarding the fiscal year-end
value of unexercised options held by the named executive officers. No options
were exercised by the named executive officers during fiscal 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN
NUMBER OF SECURITIES -THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
(#) ($)(1)
--------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Joseph R. Coppola 171,000 35,000 $ 938 0
Marvin L. Isles -- 30,000 -- 0
Heinz G. Anders 16,000 29,000 0 0
Stephen M. Peterson 24,067 20,666 0 0
Philip N. Ciarlo 4,000 23,000 0 0
Richard C. Kleinfeldt 46,287 34,000 117,500 0
</TABLE>
(1) The dollar values are calculated by determining the difference between the
fair market value of the underlying Common Stock and the exercise price of
the options at fiscal year-end.
MANAGEMENT STOCK PURCHASE PROGRAM
On March 13, 1997, the Company adopted a Management Stock Purchase Program
pursuant to which certain members of the Company's senior management team and
other key employees purchased an aggregate of 282,355 shares of Common Stock.
The program is intended to align more closely the interests of management and
shareholders. Under the terms of the voluntary program, the participants used
personal full-recourse loans to exercise options to purchase Common Stock
granted under the 1993 Plan with an exercise price of $14.125 per share, which
was the fair market value of the Common Stock on the grant date as determined by
the Compensation Committee of the Board. The loans, which were arranged through
a commercial bank, are the personal obligations of the participants. The Company
has agreed to guarantee repayment to the bank in the event of a default by a
participant. The Company has also agreed to pay the interest on the loans (net
of dividends received on the purchased shares) on behalf of the participants. Of
the named executive officers participating in the program, Messrs. Isles,
Peterson and Ciarlo purchased 114,285, 25,000 and 14,000 shares, respectively.
Other executive officers of the Company who purchased shares under the program
include: Douglas E. Barnett, Vice President and Corporate Controller (19,000
shares); Carmine F. Bosco, Group Vice President and General Manager-Automation
Measurement and Control (25,000 shares); Todd A. Dillmann, Corporate Counsel and
Secretary (16,570 shares); Robert N. Kelley, Vice President-Administration
(22,000 shares); and James B. Simon, Group Vice President and General Manager-
Automation Technology (10,000 shares). Since the shares purchased under the
program were acquired after March 1, 1997, they are not reflected in the
ownership information presented under "Principal Shareholders" above.
Under the terms of the program, no participant may sell any portion of the
purchased shares unless all principal, interest and prepayment fees, if any, due
on the loan have been paid or all sale proceeds are simultaneously applied first
to the payment of such amounts. The program also incorporates risk and benefit
sharing provisions. Under these provisions, if any portion of the purchased
shares is sold before the third anniversary of the exercise date, the
participant will be
-11-
<PAGE>
responsible for 100% of any loss, and will be entitled to receive 50% of any
gain, on that portion of the purchased shares. If any portion of the
purchased shares is sold on or after the third anniversary of the exercise
date while the loan remains outstanding, the participant will be responsible
for 50% of any loss, and will be entitled to receive 100% of any gain, on
that portion of the purchased shares. In the event of a participant's death
or disability, the participant will not be responsible for any loss on the
purchased shares and will be entitled to the entire amount of any gain on the
sale of such shares. In the event a participant is terminated for cause (as
defined in the program), the gain sharing provision will continue to apply,
but the participant will not be entitled to receive any benefit of the loss
sharing provision.
PENSION PLAN BENEFITS
The following table shows at different levels of remuneration and years
of credited service the estimated annual benefits payable as a straight life
annuity to a covered participant (assuming retirement at age 65) under the
Giddings & Lewis Retirement Plan as presently in effect (the "Retirement
Plan") and under the Company's unfunded supplemental benefit pension plan,
which provides benefits that would otherwise be denied participants by reason
of certain limitations imposed by the Internal Revenue Code on qualified plan
benefits (the "excess benefit plan").
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ----------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ -------- ------- -------- -------- -------- -------- --------
<C> <S> <S> <S> <S> <S> <S>
$ 75,000 $ 6,188 $12,375 $ 18,563 $ 24,750 $ 30,938 $ 37,125 $43,313
150,000 12,375 24,750 37,125 49,500 61,875 74,250 86,625
200,000 16,500 33,000 49,500 66,000 82,500 99,000 115,500
300,000 24,750 49,500 74,250 99,000 123,750 148,500 173,250
400,000 33,000 66,000 99,000 132,000 165,000 198,000 231,000
450,000 37,125 74,250 111,375 148,500 185,625 222,750 259,875
500,000 41,250 82,500 123,750 165,000 206,250 247,500 288,750
</TABLE>
Remuneration covered by the plans is a participant's salary and bonus, as
shown in the Summary Compensation Table, whether or not such compensation has
been deferred at the participant's election. Benefits are based on a
participant's average remuneration for the five consecutive of the last ten
calendar years for which such average is the highest, or in the case of a
participant who has been employed for less than five full calendar years, the
period of his employment covered by the plans. Under the Retirement Plan, only
salary, as shown in the Summary Compensation Table, up to the limits imposed by
the Internal Revenue Code, is taken into account. The 1996 compensation limit
applicable to the Retirement Plan was $150,000. The number of years of credited
service as of December 31, 1996 that will be recognized for certain of the named
executive officers is as follows: Mr. Isles, 1 year; Mr. Peterson, 28 years; and
Mr. Ciarlo, 2 years. At the time of his retirement as an executive officer, Mr.
Kleinfeldt had 32 years of credited service. Benefits under the plans include a
Social Security offset only for benefits attributable to service before 1989. No
benefits are payable under the plans unless a participant has at least five
years of service. Mr. Coppola and Mr. Anders do not participate in the
Retirement Plan and the excess benefit plan.
The Company also has in effect an unfunded supplemental pension arrangement
for the benefit of Mr. Coppola. This arrangement provides for an annual benefit
accrual to be credited to Mr. Coppola's account in an amount equal to 8% of his
salary and bonus. Mr. Coppola is fully vested under this arrangement and will be
entitled to receive the amounts credited to his account upon retirement plus
credited earnings thereon.
-12-
<PAGE>
In addition, a subsidiary of the Company has an agreement with Mr. Anders
pursuant to which he will be employed as Managing Director of such subsidiary
until May 31, 1998, subject to voluntary termination by Mr. Anders and
termination for cause under German law. Mr. Ander's employement agreement
provides for a minimum annual base salary of DM 350,000 (approximately
$206,955) and is subject to upward adjustment. He is eligible to participate
in the Company's Management Incentive Compensation Plan and receive certain
other perquisites. The employment agreement provides that the subsidiary
will pay one-half of Mr. Anders' obligations with respect to certain social
security contributions required by German law and will pay to Mr. Anders or
his beneficialy six months' salary in the event of his disability and three
months' salary in the event of his death. The employment agreement also
contains a covenant not to compete which extends for a period of two years
after termination of such agreement.
EXECUTIVE RELOCATIONS
In connection with the relocation of executive officers at the Company's
request, the Company from time to time offers an interest-free advance to
allow an executive officer to finance the purchase of a new home while the
executive is in the process of selling his existing home. In April 1996, Mr.
Ciarlo, Group Vice President and General Manager of the Company's Integrated
Automation Group, received a $100,000 advance from the Company in connection
with his transfer to the Company's Fraser, Michigan facility. Mr. Ciarlo
repaid the amount advanced in July 1996.
In connection with the hiring of Mr. Isles as the Company's President and
Chief Operating Officer, the Company in August 1996 purchased Mr. Isles'
former residence in Akron, Ohio for $690,000, which purchase price was based
on third-party appraisals of the property obtained by the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for all aspects of
the Company's compensation package offered to its corporate officers,
including the named executive officers. The following report was prepared by
the members of the Compensation Committee.
The Compensation Committee determines the compensation of the Chief
Exective Officer, and sets the policy for, reviews, and approves the
recommendations of management (subject to such adjustments as may be deemed
appropriate by the Compensation Committee and subject to the Committee's sole
discretion regarding awards of stock options and restricted shares) with
respect to the compensation awarded to other corporate officers (including
the other named executive officers). The key elements of the Company's
executive compensation program consist of base salary, annual bonus
opportunity, and grants of stock options and restricted stock.
The Compensation Committee's policies with respect to each of these
compensation program elements, including the basis for the compensation
awarded to the Company's Chief Executive Officer, are discussed below. While
the elements of compensation described below are considered separately, the
Compensation Committee takes into account the full compensation package
offered by the Company to the individual, including pension benefits,
supplemental retirement benefits, severance plans, life insurance, and other
welfare benefits and perquisites consistent with prevailing industry
practices as well as the programs described below.
The Company's executive compensation program is designed to be closely
linked to corporate performance and returns to shareholders. To this end,
the Company has developed an overall compensation strategy and specific
compensation plans that tie a significant portion of executive compensation
to the Company's success in meeting specified performance goals and to
appreciation in the Company's stock price. The overall objectives of
14
<PAGE>
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company has entered into an executive consulting agreement with
Mr. Coppola. Pursuant to the terms of the agreement, Mr. Coppola will,
following his retirement, be retained by the Company as senior consultant
for a three-year period, at annual compensation of $200,000 for the first
twelve months of his consultancy, $150,000 for the second twelve months and
$100,000 for the third twelve months. Additionally, the Company purchased
Mr. Coppola's residence in Fond du Lac, Wisconsin for $715,000 in accordance
with an option contained in the consulting agreement requiring the Company to
effect such purchase. Mr.Coppola exercised the option requiring the purchase
in January 1997. Mr. Coppola's cost basis in his Fond du Lac residence, which
was built in 1994, was $785,000. The consulting agreement also contains
certain noncompetition and confidentiality provisions applicable to
Mr. Coppola. The Company may only terminate the agreement for cause, which
includes theft, dishonesty, fraudulent misconduct, gross dereliction of duty
or other grave misconduct on the part of Mr. Coppola which is substantially
injurious to the Company.
The Company has also entered into a retirement agreement with
Mr. Kleinfeldt in connection with his retirement as Vice President-Finance and
as a director of the Company in December 1996. Pursuant to the terms of the
agreement, Mr. Kleinfeldt has agreed to remain as an employee of the Company
until April 1, 1997. Mr. Kleinfeldt's agreement further provides, among other
things, that from his retirement as an employee through the first to occur of
March 31, 1999 or his death, Mr. Kleinfeldt will serve as a consultant to the
Company. During his tenure as a consultant, Mr. Kleinfeldt will be treated as an
employee of the Company for purposes of the Company's employee benefit plans and
fringe benefits, but will not be eligible to participate in any management
incentive compensation plans. Mr. Kleinfeldt's annual compensation as a
consultant will be equal to his base salary for 1996 ($227,000 per year) and
will also include certain other perquisites provided to Mr. Kleinfeldt while he
was an executive officer of the Company. Pursuant to the terms of the retirement
agreement, Mr. Kleinfeldt is subject to certain noncompetition, nonsolicitation,
and confidentiality provisions for the term of the agreement.
The Company also has employment and severance agreements with certain of
its executive officers, including Messrs. Coppola, Isles, Peterson and Ciarlo.
The agreements provide that each executive officer is entitled to benefits if,
within five years after a "change in control of the Company," the officer's
employment is ended through (i) termination by the Company, other than by reason
of death or disability or for cause (as defined in the agreements), or
(ii) termination by the officer following the first anniversary of the change
in control or due to a breach of the agreement by the Company or a significant
change in the officer's responsibilities. The benefits provided are: (i) a cash
termination payment of up to three times the sum of the executive officer's
annual salary and his highest annual bonus during the three years before the
termination and (ii) continuation for up to five years of equivalent hospital,
medical, dental, accident, disability and life insurance coverage as in effect
at the time of termination. Among other situations, a "change in control of the
Company" will be deemed to have occurred for purposes of the agreements if:
(i) a person (other than with respect to an employee benefit plan of the
Company) becomes the beneficial owner of 20% or more of the voting power of the
Company's securities; (ii) at any time one-third or more of the directors of
the Company are not Continuing Directors (as defined in the agreements);
(iii) a merger is consummated in which the Company is not the surviving
corporation or pursuant to which shares of Common Stock are converted into
cash, securities or other property, unless the holders of Common Stock
maintain their same proportionate ownership in the surviving corporation;
(iv) the Company sells or otherwise disposes of all or substantially all of
its assets; or (v) the shareholders of the Company approve a plan of
liquidation or dissolution for the Company. Each agreement provides that
if any portion of the benefits under the agreement or under any other
agreement for the officer would constitute an "excess parachute payment"
for purposes of the Internal Revenue Code, benefits will be reduced so that
the officer will be entitled to receive $1 less than the maximum amount
which he could receive without becoming subject to the 20% excise tax imposed
by the Code, or which the Company may pay without loss of deduction under the
Code.
-13-
<PAGE>
EXHIBIT 99.2
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th of April, 1997,
by and between Giddings & Lewis, Inc., a Wisconsin corporation (hereinafter
referred to as the "Company"), and _______________________________ (hereinafter
referred to as the "Executive").
WITNESSETH
WHEREAS, the Executive is employed by the Company in a key executive
capacity and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Executive possesses intimate knowledge of the business
and affairs of the Company and has acquired certain confidential information and
data with respect to the Company;
WHEREAS, the Company desires to insure, insofar as possible, that it
will continue to have the benefit of the Executive's services and to protect its
confidential information and goodwill;
WHEREAS, the Company recognizes that circumstances may arise in which
a change in control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty about the Executive's future employment with the
Company without regard to the Executive's competence or past contributions which
uncertainty may result in the loss of valuable services of the Executive to the
detriment of the Company and its shareholders, and the Company and the Executive
wish to provide reasonable security to the Executive against changes in the
Executive's relationship with the company in the event of any such change in
control;
<PAGE>
WHEREAS, the Company and the Executive are desirous that any proposal
for a change in control or acquisition of the Company will be considered by the
Executive objectively and with reference only to the best interests of the
Company and its shareholders; and
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable security, as
provided in this Agreement, against altered conditions of employment which could
result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. DEFINITIONS.
(a) ACT. For purposes of this Agreement, the term "Act" means the
Securities Exchange Act of 1934, as amended.
(b) AFFILIATE AND ASSOCIATE. For purposes of this Agreement, the
terms "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations of the Act.
(c) BENEFICIAL OWNER. For purposes of this Agreement, a Person shall
be deemed to be the "Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the
2
<PAGE>
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, (A) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person
or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase, or (B) securities issuable upon
exercise of Rights issued pursuant to the terms of the Company's Rights
Agreement with Firstar Trust Company, dated as of August 23, 1995, as
amended from time to time (or any successor to such Rights Agreement), at
any time before the issuance of such securities;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Act), including pursuant to any
agreement arrangement or understanding; PROVIDED, HOWEVER, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if the agreement,
arrangement or understanding: (A) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules
and regulations under the Act and (B) is not also then reportable on a
Schedule 13D under the Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting
3
<PAGE>
(except to a revocable proxy as described in Subsection 1(c)(ii) above) or
disposing of any voting securities of the Company.
(d) CAUSE. "Cause" for termination by the Company of the Executive's
employment after a Change of Control of the Company shall, for purposes of this
Agreement, be limited to (i) the engaging by the Executive in intentional
conduct not taken in good faith which has caused demonstrable and serious
financial injury to the Company, as evidenced by a determination in a binding
and final judgment, order or decree of a court or administrative agency of
competent jurisdiction, in effect after exhaustion or lapse of all rights of
appeal, in an action, suit or proceeding, whether civil, criminal,
administrative or investigative; (ii) conviction of a felony (as evidenced by
binding and final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion of all rights of appeal) which
substantially impairs the Executive's ability to perform his duties or
responsibilities; and (iii) continuing willful and unreasonable refusal by the
Executive to perform the Executive's duties or responsibilities (unless
significantly changed without the Executive's consent).
(e) CHANGE IN CONTROL OF THE COMPANY. For purposes of this
Agreement, a "Change in Control of the Company" shall mean a change in control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Act. Without limiting the
inclusiveness of the definition in the preceding sentence, a Change in Control
of the Company shall be deemed to have occurred if:
(i) any Person (other than any employee benefit plan of the
Company or any subsidiary of the Company, any entity holding securities of
the Company for or pursuant to the terms of any such plan or any trustee,
administrator or fiduciary of such
4
<PAGE>
a plan) is or becomes the Beneficial Owner of securities of the Company
representing at least 30% of the combined voting power of the Company's
then outstanding securities;
(ii) a Section 11(a)(ii) Event shall have occurred under the
Rights Agreement (or a similar event shall have occurred under any
successor to such Rights Agreement) at any time any Rights are issued and
outstanding thereunder;
(iii) one-third or more of the members of the Board are not
Continuing Directors;
(iv) there shall be consummated (x) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would
be converted into cash, securities or other property, other than a merger
of the Company in which the holders of the Company's Common Stock
immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or
(y) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets
of the Company; or
(v) the shareholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
(f) CODE. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, including any amendments thereto or successor tax
codes thereof.
(g) CONTINUING DIRECTOR. For purposes of this Agreement, the term
5
<PAGE>
"Continuing Director" means any member of the Board of Directors of the Company
who was a member of such Board on the date this Agreement is executed, and any
successor of a Continuing Director who is recommended to succeed a Continuing
Director by a majority of the Continuing Directors then on such Board.
(h) COVERED TERMINATION. For purposes of this Agreement, the term
"Covered Termination" means any termination of the Executive's employment where
the Termination Date is any date prior to the end of the Employment Period.
(i) EMPLOYMENT PERIOD. For purposes of this Agreement, the term
"Employment Period" means a period commencing on the date of a Change in Control
of the Company, and ending at 11:59 p.m. Milwaukee Time on the earlier of the
fifth anniversary of such date or the Executive's Normal Retirement Date.
(j) GOOD REASON. For purposes of this Agreement, the Executive shall
have a "Good Reason" for termination of employment after a Change in Control of
the Company in the event of:
(i) any breach of this Agreement by the Company, including
specifically any breach by the Company of its agreements contained in
Sections 4, 5 or 6 hereof;
(ii) the removal of the Executive from, or any failure to
reelect or reappoint the Executive to, any of the positions held with the
Company on the date of the Change in Control of the Company or any other
positions with the Company to which the Executive shall thereafter be
elected, appointed or assigned, except in the event that such removal or
failure to reelect or reappoint relates to the termination by the Company
6
<PAGE>
of the Executive's employment for Cause or by reason of disability pursuant
to Section 12 hereof;
(iii) a good faith determination by the Executive that there has
been a significant adverse change, without the Executive's written consent,
in the Executive's working conditions or status with the Company from such
working conditions or status in effect immediately prior to the Change in
Control of the Company, including but not limited to (A) a significant
change in the nature or scope of the Executive's authority, powers,
functions, duties or responsibilities, or (B) a significant reduction in
the level of support services, staff, secretarial and other assistance,
office space and accouterments;
(iv) failure by the Company to obtain the Agreement referred to
in Section 17(a) hereof as provided therein; or
(v) any voluntary termination of employment by the Executive
where the Notice of Termination is delivered within the thirty (30) day
period immediately following the first anniversary of the Change in Control
of the Company.
(k) NORMAL RETIREMENT DATE. For purposes of this Agreement, the term
"Normal Retirement Date" means "Normal Retirement Date" as defined in the
Giddings & Lewis, Inc. Retirement Plan, or any successor plan, as in effect on
the date of the Change in Control of the Company.
(l) PERSON. For purposes of this Agreement, the term "Person" shall
mean any individual, firm, partnership, corporation or other entity, including
any successor (by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert.
7
<PAGE>
(m) TERMINATION DATE. For purposes of this Agreement, except as
otherwise provided in Section 10(b) and Section 17(a) hereof, the term
"Termination Date" means (i) if the Executive's employment is terminated by the
Executive's death, the date of death; (ii) if the Executive's employment is
terminated by reason of voluntary early retirement, as agreed in writing by the
Company and the Executive, the date of such early retirement which is set forth
in such written agreement; (iii) if the Executive's employment is terminated for
purposes of this Agreement by reason of disability pursuant to Section 12
hereof, the earlier of thirty days after the Notice of Termination is given or
one day prior to the end of the Employment Period; (iv) if the Executive's
employment is terminated by the Executive voluntarily (other than for Good
Reason), the date the Notice of Termination is given; and (v) if the Executive's
employment is terminated by the Company (other than by reason of disability
pursuant to Section 12 hereof) or by the Executive for Good Reason, the earlier
of thirty days after the Notice of Termination is given or one day prior to the
end of the Employment Period. Notwithstanding the foregoing:
(A) If termination is for Cause pursuant to Section 1(d)(iii)
of this Agreement and if the Executive has cured the conduct constituting
such Cause as described by the Company in its Notice of Termination within
such thirty day or shorter period, then the Executive's employment
hereunder shall continue as if the Company had not delivered its Notice of
Termination.
(B) If the Company shall give a Notice of Termination for
Cause or by reason of disability and the Executive in good faith notifies
the Company that a dispute exists concerning the termination within the
applicable period following receipt thereof, then the Executive may elect
to continue his employment (or, if the Executive ceased
8
<PAGE>
performing his duties hereunder at the request of the Company at the time
of delivery of Notice of Termination, resume and continue employment)
during such dispute and the Termination Date shall be determined under this
paragraph. If the Executive so elects and it is thereafter determined that
Cause or disability (as the case may be) did exist, the Termination Date
shall be the earliest of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 23 hereof, (2) the date of the Executive's death,
or (3) one day prior to the end of the Employment Period. If the Executive
so elects and it is thereafter determined that Cause or disability (as the
case may be) did not exist, then the employment of the Executive hereunder
shall continue after such determination as if the Company had not delivered
its Notice of Termination and there shall be no Termination Date arising
out of such Notice. In either case, this Agreement continues, until the
Termination Date, if any, as if the Company had not delivered the Notice of
Termination except that, if it is finally determined that the Company
properly terminated the Executive for the reason asserted in the Notice of
Termination, the Executive shall in no case be entitled to a Termination
Payment (as hereinafter defined) arising out of events occurring after the
Company delivered its Notice of Termination.
(C) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen day period
following receipt thereof, then the Executive may elect to continue his
employment during such dispute and the Termination Date shall be determined
under this paragraph. If the Executive so elects and it is thereafter
9
<PAGE>
determined that Good Reason did exist, the Termination Date shall be the
earliest of (1) the date on which the dispute is finally determined, either
(x) by mutual written agreement of the parties or (y) in accordance with
Section 23 hereof, (2) the date of the Executive's death or (3) one day
prior to the end of the Employment Period. If the Executive so elects and
it is thereafter determined that Good Reason did not exist, then the
employment of the Executive hereunder shall continue after such
determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues,
until the Termination Date, if any, as if the Executive had not delivered
the Notice of Termination except that, if it is finally determined that
Good Reason did exist, the Executive shall in no case be denied the
benefits described in Sections 8(b) and 9 hereof (including a Termination
Payment) based on events occurring after the Executive delivered his Notice
of Termination.
(D) Except as provided in Paragraph (B) and (C) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the appropriate period
following receipt thereof and it is finally determined that the reason
asserted in such Notice of Termination did not exist, then (1) if such
Notice was delivered by the Executive, the Executive will be deemed to have
voluntarily terminated his employment and the Termination Date shall be the
earlier of the date fifteen days after the Notice of Termination is given
or one day prior to the end of the Employment Period and (2) if delivered
by the Company, the Company will be deemed to have terminated the Executive
other than by reason of death,
10
<PAGE>
disability or Cause.
2. TERMINATION OR CANCELLATION PRIOR TO CHANGE IN CONTROL. The
Company and the Executive shall each retain the right to terminate the
employment of the Executive at any time prior to a Change in Control of the
Company. In the event the Executive's employment is terminated prior to a
Change in Control of the Company, this Agreement shall be terminated and
canceled and of no further force and effect and any and all rights and
obligations of the parties hereunder shall cease.
3. EMPLOYMENT PERIOD. If a Change in Control of the Company occurs
when the Executive is employed by the Company, the Company will continue
thereafter to employ the Executive during the Employment Period, and the
Executive will remain in the employ of the Company, in accordance with and
subject to the terms and provisions of this Agreement.
4. DUTIES. During the Employment Period, the Executive shall, in
the same capacities and positions held by the Executive at the time of the
Change in Control of the Company or in such other capacities and positions as
may be agreed to by the Company and the Executive in writing, devote the
Executive's best efforts and all of the Executive's business time, attention and
skill to the business and affairs of the Company, as such business and affairs
now exist and as they may hereafter be conducted. The services which are to be
performed by the Executive hereunder are to be rendered in the same metropolitan
area in which the Executive was employed at the time of such Change in Control
of the Company, or in such other place or places as shall be mutually agreed
upon in writing by the Executive and the Company from time to time. Without the
Executive's consent the Executive shall not be required to be absent from such
metropolitan area more than 45 days in any fiscal year of the Company.
11
<PAGE>
5. COMPENSATION. During the Employment Period, the Executive shall
be compensated as follows:
(a) The Executive shall receive, at reasonable intervals (but not
less often than monthly) and in accordance with such standard policies as may be
in effect immediately prior to the Change in Control of the Company, an annual
base salary in cash equivalent of not less than the Executive's annual base
salary as in effect immediately prior to the Change in Control of the Company
(which base salary shall, unless otherwise agreed in writing by the Executive,
include the current receipt by the Executive of any amounts which, prior to the
Change in Control of the Company, the Executive had elected to defer, whether
such compensation is deferred under Section 401(k) of the Code or otherwise),
subject to adjustment as hereinafter provided.
(b) The Executive shall receive fringe benefits at least equal in
value to those provided for the Executive immediately prior to the Change in
Control of the Company, and shall by reimbursed, at such intervals and in
accordance with such standard policies as may be in effect immediately prior to
the Change in Control of the Company, for any and all monies advanced in
connection with the Executive's employment for reasonable and necessary expenses
incurred by the Executive on behalf of the Company, including travel expenses.
(c) The Executive shall be included, to the extent eligible
thereunder (which eligibility shall not be conditioned on the Executive's salary
grade or on any other requirement which excludes persons of comparable status to
the Executive unless such exclusion was in effect for such plan or an equivalent
plan immediately prior to the Change in Control of the Company), in any and all
plans providing benefits for the Company's salaried employees in general,
including but not limited to group life insurance, hospitalization, medical,
dental, profit sharing and stock bonus plans; PROVIDED, THAT in no event shall
the aggregate level of benefits under such plans in which the Executive is
included be less than the aggregate level of benefits under plans of the Company
of the type referred to in this Section 5(c) in which the Executive was
participating immediately prior to the Change in Control of the Company.
(d) The Executive shall annually be entitled to not less than the
amount of paid vacation and not fewer than the number of paid holidays to which
the Executive was entitled annually immediately prior to the Change in Control
of the Company or such greater amount of paid vacation and number of paid
holidays as may be made available annually to other executives of the Company of
comparable status and position to the Executive.
(e) The Executive shall be included in all plans providing additional
benefits to executives of the Company of comparable status and position to the
Executive, including but not limited to deferred compensation, split-dollar life
insurance, supplemental retirement, stock option, stock appreciation, stock
bonus and similar or comparable plans; PROVIDED, THAT in no event shall the
aggregate level of benefits under such plans be less than the aggregate level of
benefits under plans of the Company of the type referred to in this Section 5(e)
in which the Executive was participating immediately prior to the Change in
Control of the Company; and PROVIDED, FURTHER, that the Company's obligation to
include the Executive in bonus or incentive compensation plans shall be
determined by Subsection 5(f) hereof.
(f) To assure that the Executive will have an opportunity to earn
incentive compensation after a Change in Control of the Company, the Executive
shall be included in a bonus plan of the Company which shall satisfy the
standards described below (such plan, the
12
<PAGE>
"Bonus Plan"). Bonuses under the Bonus Plan shall be payable with respect to
achieving such financial or other goals reasonably related to the business of
the Company as the Company shall establish (the "Goals"), all of which Goals
shall be attainable, prior to the end of the Employment Period, with
approximately the same degree of probability as the goals under the Company's
bonus plan as in effect immediately prior to the Change in Control of the
Company (the "Company Bonus Plan") and in view of the Company's existing and
projected financial and business circumstances applicable at the time. The
amount of the bonus (the "Bonus Amount") that the Executive is eligible to earn
under the Bonus Plan shall be no less than the amount of the Executive's maximum
award provided in such Company Bonus Plan (such bonus amount herein referred to
as the "Targeted Bonus"), and in the event the Goals are not achieved such that
the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a
payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably
related to that portion of the Goals which were achieved. Payment of the Bonus
Amount shall not be affected by any circumstance occurring subsequent to the end
of the Employment Period, including termination of the Executive's employment.
6. ANNUAL COMPENSATION ADJUSTMENTS. During the Employment Period,
the Board of Directors of the Company (or an appropriate committee thereof) will
consider and appraise, at least annually, the contributions of the Executive to
the Company, and in accordance with the Company's practice prior to the Change
in Control of the Company, due consideration shall be given to the upward
adjustment of the Executive's base compensation rate, at least annually, (i)
commensurate with increases generally given to other executives of the Company
of comparable status and position to the Executive, and (ii) as the scope of the
Company's
13
<PAGE>
operations or the Executive's duties expand.
7. TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If there is a
Covered Termination for Cause or due to the Executive's voluntarily terminating
his employment other than for Good Reason (any such termination to be subject to
the procedures set forth in Section 13 hereof), then the Executive shall be
entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof.
8. TERMINATION GIVING RISE TO A TERMINATION PAYMENT. (a) If there
is a Covered Termination by the Executive for Good Reason, or by the Company
other than by reason of (i) death, (ii) disability pursuant to Section 12
hereof, or (iii) Cause (any such terminations to be subject to the procedures
set forth in Section 13 hereof), then the Executive shall be entitled to
receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of
further base salary for periods following the Termination Date, as liquidated
damages and additional severance pay and in consideration of the covenant of the
Executive set forth in Section 14(a) hereof, the Termination Payment pursuant to
Section 9(b) hereof.
(b) If there is a Covered Termination and the Executive is entitled
to Accrued Benefits and the Termination Payment, then the Executive shall be
entitled to the following additional benefits:
(i) The Executive shall receive, at the expense of the
Company, outplacement services, on an individualized basis at a level of
service commensurate with the Executive's status with the Company
immediately prior to the Change in Control of the Company (or, if higher,
immediately prior to the termination of the Executive's employment),
provided by a nationally recognized executive placement firm selected by
14
<PAGE>
the Company.
(ii) Until the earlier of the end of the Employment Period or
such time as the Executive has obtained new employment and is covered by
benefits which in the aggregate are at least equal in value to the
following benefits, the Executive shall continue to be covered, at the
expense of the Company, by the same or equivalent life insurance,
hospitalization, medical and dental coverage as was required hereunder with
respect to the Executive immediately prior to the date the Notice of
Termination is given.
(iii) In addition to the retirement benefits to which the
Executive is entitled under the Giddings & Lewis Retirement Plan and the
Executive's Supplemental Executive Retirement Plan (each, a "Pension Plan")
or any successor plan thereto, the Company shall pay the Executive, within
ten business days following the Termination Date, a lump sum amount, in
cash, equal to the excess of (i) the actuarial equivalent of the aggregate
retirement pension (determined as a straight life annuity commencing at age
65 which the Executive would have accrued under the terms of all Pension
Plans (without regard to any amendment to any Pension Plan made subsequent
to a Change in Control of the Company, which amendment adversely affects in
any manner the computation of retirement benefits thereunder), determined
as if the Executive were fully vested thereunder and had accumulated (after
the Termination Date) the number of additional months of service credit
thereunder equal to the number of months remaining from the Termination
Date until the Executive's 65th birthday, and had been credited under each
Pension Plan during such period with compensation equal to the Executive's
Annual Cash Compensation (as defined in Section 9(b) (i)), over (ii) the
actuarial equivalent of the
15
<PAGE>
aggregate retirement pension (taking into account any early retirement
subsidies associated therewith and determined as a straight life annuity
commencing at the date (but in no event earlier than the Termination Date)
as of which the actuarial equivalent of such annuity is greatest) which the
Executive had accrued pursuant to the provisions of the Pension Plans as of
the Termination Date. For purposes of this Section 8(b) (iii), "actuarial
equivalent" shall be determined using the same assumptions utilized under
the Giddings & Lewis Retirement Plan immediately prior to the Termination
Date or, if more favorable to the Executive, immediately prior to the
Change in Control of the Company.
(iv) Notwithstanding any provisions of the Bonus Plan to the
contrary but without duplication, the Company shall pay to the Executive a
lump sum amount, in cash, equal to a pro rata portion to the Termination
Date of the aggregate value of all incentive compensation awards to the
Executive for all then uncompleted periods under such plan, calculated in a
manner set forth in the plan which is applicable to "involuntary
termination without cause" thereunder.
(v) In addition, the Executive, upon a Covered Termination,
shall be provided (and may avail himself of at any time during the
remainder of the Employment Period) the same relocation benefits, including
the Home Purchase Program, as were available to Executive and Vice
President level employees immediately prior to the Change in Control of the
Company, and shall have the right to purchase the Company car then assigned
to him for $1.00. The Company shall also, for the remainder of the
Employment Period, (A) reimburse the Executive for monthly membership dues
and
16
<PAGE>
assessments (and initiation fee, if applicable) to the country club
selected by the Executive, (B) reimburse the Executive for professional
legal and tax planning assistance, up to a maximum of $10,000, and (C)
continue to provide the Executive with an annual physical examination by a
physician on the same basis as immediately prior to the Change in Control
of the Company.
9. PAYMENTS UPON TERMINATION.
(a) ACCRUED BENEFITS. For purposes of this Agreement, the
Executive's "Accrued Benefits" shall include the following amounts, payable as
described herein: (i) all base salary for the time period ending with the
Termination Date; (ii) reimbursement for any and all monies advanced in
connection with the Executive's employment for reasonable and necessary expenses
incurred by the Executive on behalf of the Company for the time period ending
with the Termination Date; (iii) any and all other cash earned through the
Termination Date and deferred at the election of the Executive or pursuant to
any deferred compensation plan then in effect; (iv) a lump sum payment of the
bonus or incentive compensation otherwise payable to the Executive with respect
to the year in which termination occurs under all bonus or incentive
compensation plan or plans in which the Executive is a participant; and (v) all
other payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may be
entitled as compensatory fringe benefits or under the terms of any benefit plan
of the Company, including severance payments under the Company's severance
policies and practices as in effect immediately prior to the Change in Control
of the Company. Payment of Accrued Benefits shall be made promptly in
accordance with the Company's prevailing practice with respect to
Subsections (i) and (ii) or,
17
<PAGE>
with respect to Subsections (iii), (iv) and (v), pursuant to the terms of the
benefit plan or practice establishing such benefits.
(b) TERMINATION PAYMENT.
(i) The Termination Payment shall be an amount equal to (A)
the Executive's annual base salary, as in effect immediately prior to the
Change in Control of the Company, as adjusted upward, from time to time,
pursuant to Section 6 hereof, plus (B) the amount of the highest annual
bonus award (determined on an annualized basis for any bonus award paid for
a period of less than one year) paid to the Executive with respect to the
three complete fiscal years preceding the Termination Date (the aggregate
amount set forth in (A) and (B) hereof shall hereafter be referred to as
"Annual Cash Compensation"), times (C) the lesser of (1) three and (2) the
number of years or fractional portion thereof remaining in the Employment
Period determined as of the Termination Date; PROVIDED, HOWEVER, THAT such
amount shall not be less than the amount of the Executive's Annual Cash
Compensation. The Termination Payment and the Gross-Up Payment (as defined
below) if any, shall be paid to the Executive in cash equivalent ten
business days after the Termination Date. Such Termination Payment shall
not be reduced by any present value or similar factor, and the Executive
shall not be required to mitigate the amount of the Termination Payment (or
any other payments or benefits provided under this Agreement) by securing
other employment or otherwise, nor will such Termination Payment (or any
other payments or benefits provided under this Agreement) be reduced by
reason of the Executive securing other employment or for any other reason.
The Termination Payment shall be in addition to the Executive's
18
<PAGE>
normal post-termination compensation and benefits, determined under, and
paid in accordance with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements as in effect
immediately prior to the Termination Date or, if more favorable to the
Executive, as in effect immediately prior to the Change in Control of the
Company. Such benefit and compensation plans will include, but shall not
be limited to, the Company's 1993 Stock and Incentive Plan.
(ii) (A) Whether or not the Executive becomes entitled to the
Termination Payment, if any of the payment or benefits received or to be
received by the Executive in connection with a Change in Control of the
Company or the Executive's termination of employment (whether pursuant to
the terms of this Agreement or any other plan, arrangement or agreement
with the Company, any Person whose actions result in a Change in Control of
the Company or any Person affiliated with the Company or such Person) (such
payments or benefits excluding the Gross-Up Payment (as hereinafter
defined), being hereinafter referred to as the "Total Payments") will be
subject to any excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) all of the Total Payments shall be treated as "parachute payments"
(within the meaning of
19
<PAGE>
section 280G(b) (2) of the Code) unless, in the opinion of tax counsel
("Tax Counsel") reasonably acceptable to the Executive and selected by the
accounting firm which was, immediately prior to the Change in Control of
the Company, the Company's independent auditor (the "Auditor"), such
payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b) (4) (A) of the Code, (ii)
all "excess parachute payments" within the meaning of section 280G(b) (1)
of the Code shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole or in
part) are not subject to the Excise Tax, and (iii) the value of any non-
cash benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d) (3) and (4)
of the Code. For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes
at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Termination Date (or if there is no
Termination Date, then the date on which the Gross-Up Payment is calculated
for purposes of this Section 9(b) (ii)), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state
and local taxes.
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of
20
<PAGE>
the Gross-Up Payment attributable to such reduction (plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being
repaid by the Executive), to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for purposes of federal, state and
local income and employment taxes, plus interest on the amount of such
repayment at 120% of the rate provided in section 1274(b) (2) (B) of the
Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including
by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceeding concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
10. DEATH. (a) Except as provided in Section 10(b) hereof, in the
event of a Covered Termination due to the Executive's death, the Executive's
estate, heirs and beneficiaries shall receive all the Executive's Accrued
Benefits through the Termination Date.
(b) In the event the Executive dies after a Notice of Termination is
given (i) by the Company or (ii) by the Executive for Good Reason, the
Executive's estate, heirs and
21
<PAGE>
beneficiaries shall be entitled to the benefits described in Section 10(a)
hereof and, subject to the provisions of this Agreement, to such Termination
Payment as the Executive would have been entitled to had the Executive lived.
For purposes of this Subsection 10(b), the Termination Date shall be the earlier
of thirty days following the giving of the Notice of Termination, subject to
extension pursuant to Section 1(m) hereof, or one day prior to the end of the
Employment Period.
11. RETIREMENT. If, during the Employment Period, the Executive and
the Company shall execute an agreement providing for the early retirement of the
Executive from the Company, or the Executive shall otherwise give notice that he
is voluntarily choosing to retire early from the Company, the Executive shall
receive Accrued Benefits through the Termination Date; PROVIDED, THAT if the
Executive's employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Section 8(a) hereof.
12. TERMINATION FOR DISABILITY. If, during the Employment Period, as
a result of the Executive's disability due to physical or mental illness or
injury (regardless of whether such illness or injury is job-related), the
Executive shall have been absent from the Executive's duties hereunder on a
full-time basis for a period of six consecutive months and, within thirty days
after the Company notifies the Executive in writing that it intends to terminate
the Executive's employment (which notice shall not constitute the Notice of
Termination contemplated below), the Executive shall not have returned to the
performance of the
22
<PAGE>
Executive's duties hereunder on a full-time basis, the Company may terminate the
Executive's employment for purposes of this Agreement pursuant to a Notice of
Termination given in accordance with Section 13 hereof. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, the Executive shall receive Accrued Benefits in accordance
with Section 9(a) hereof and shall remain eligible for all benefits provided by
any long term disability programs of the Company in effect at the time of such
termination.
13. TERMINATION NOTICE AND PROCEDURE. Any Covered Termination by the
Company or the Executive shall be communicated by written Notice of Termination
to the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 24 hereof:
(a) If such termination is for disability, Cause or Good Reason, the
Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company shall have been
approved, prior to the giving thereof to the Executive, by a resolution duly
adopted by a majority of the directors of the Company (or any successor
corporation) then in office.
(c) If the Notice is given by the Executive for Good Reason, the
Executive may cease performing his duties hereunder on or after the date fifteen
days after the delivery of Notice of Termination and shall in any event cease
employment on the Termination Date. If the Notice is given by the Company, then
the Executive may cease performing his duties hereunder on the date of receipt
of the Notice of Termination, subject to the Executive's rights hereunder.
23
<PAGE>
(d) The Executive shall have thirty days, or such longer period as
the Company may determine to be appropriate, to cure any conduct or act, if
curable, alleged to provide grounds for termination of the Executive's
employment for Cause under this Agreement pursuant to Subsection 1(d)(iii)
hereof.
(e) The recipient of any Notice of Termination shall personally
deliver or mail in accordance with Section 24 hereof written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof; PROVIDED, HOWEVER, that if the
Executive's conduct or act alleged to provide grounds for termination by the
Company for Cause is curable, then such period shall be thirty days. After the
expiration of such period, the contents of the Notice of Termination shall
become final and not subject to dispute.
14. FURTHER OBLIGATIONS OF THE EXECUTIVE.
(a) COMPETITION. The Executive agrees that, in the event of any
covered Termination where the Executive is entitled to accrued Benefits and the
Termination Payment, the Executive shall not, for a period of one year after the
Termination Date, without the prior written approval of the Company's Board of
Directors, participate in the management of, be employed by or own any business
enterprise at a location within the United States that engages in substantial
competition with the Company or its subsidiaries, where such enterprise's
revenues from any competitive activities amount to 10% or more of such
enterprise's net revenues and sales for its most recently completed fiscal year;
PROVIDED, HOWEVER, that nothing in this Section 14(a) shall prohibit the
Executive from owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor.
24
<PAGE>
(b) CONFIDENTIALITY. During and following the Executive's employment
by the Company, the Executive shall hold in confidence and not directly or
indirectly disclose or use or copy or make lists of any confidential information
or proprietary data of the Company, except to the extent authorized in writing
by the Board of Directors of the Company or required by any court or
administrative agency, other than to an employee of the Company or a person to
whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of duties as an executive of the Company.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Company.
15. EXPENSES AND INTEREST. The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive (i) in disputing
any issue hereunder relating to the termination of the Executive's employment or
in seeking to obtain or enforce any benefit or right provided by this Agreement
(in each case, unless the Executive is acting in bad faith) or (ii) in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder. Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
The prejudgment interest on any money judgment or arbitration award
25
<PAGE>
obtained by the Executive shall be calculated at the rate of interest announced
by Firstar Bank Milwaukee of Milwaukee, Wisconsin from time to time as its prime
or base lending rate from the date that payments to him should have been made
under this Agreement.
16. PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation during
and after the Employment Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. Except as provided in Section
15 of this Agreement, all amounts payable by the Company hereunder shall be paid
without notice or demand. Each and every payment made hereunder by the Company
shall be final, and the Company will not seek to recover all or any part of such
payment from the Executive, or from whomsoever may be entitled thereto, for any
reason whatsoever.
17. SUCCESSORS. (a) If the Company sells, assigns or transfers
all or substantially all of its business and assets to any Person or if the
Company merges into or consolidates or otherwise combines (where the Company
does not survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. Failure of the Company to obtain
such agreement prior to the effective date of such Sale of Business shall be a
breach of this Agreement constituting "Good Reason"
26
<PAGE>
hereunder, except that for purposes of implementing the foregoing the date upon
which such Sale of Business becomes effective shall be deemed the Termination
Date. In case of such assignment by the Company and of assumption and agreement
by such Person, as used in this Agreement (except in Section 1(e) hereof),
"Company" shall thereafter mean such Person which executes and delivers the
agreement provided for in this Section 18 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law, and this
Agreement shall inure to the benefit of, and be enforceable by, such Person.
The Executive shall, in his discretion, be entitled to proceed against any or
all of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable by
the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15
hereof if the Executive had lived shall be paid, in the event of the Executive's
death, to the Executive's estate, heirs and representatives; PROVIDED, HOWEVER,
that the foregoing shall not be construed to modify any terms of any benefit
plan of the Company, as such terms are in effect on the date of the Change in
Control of the Company, that expressly govern benefits under such plan in the
event of the Executive's death.
18. SEVERABILITY. The provisions of this Agreement shall be regarded
as
27
<PAGE>
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
19. ENTIRE AGREEMENT. This Agreement constitutes the whole agreement
of the Company and the Executive. No agreements or representation, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement have been made by either party which are not expressly set forth in
this Agreement. The Key Executive Employment and Severance Agreement dated
__________________ ____, 19___ between the Company and the Executive is hereby
canceled and superseded by this Agreement.
20. AMENDMENT. This Agreement may not be amended or modified at any
time except by written instrument executed by the Company and the Executive.
21. WITHHOLDING. The Company shall be entitled to withhold from
amounts to by paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; PROVIDED, THAT the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of nationally recognized tax counsel if any question as to the amount
or requirement of any such withholding shall arise.
22. CERTAIN RULES OF CONSTRUCTION. No party shall be considered as
being responsible for the drafting of this Agreement for the purpose of applying
any rule construing ambiguities against the drafter or otherwise. No draft of
this Agreement shall be taken into account in construing this Agreement. Any
provision of this Agreement which requires an agreement in writing shall be
deemed to require that the writing in question be signed by the Executive and an
authorized representative of the Company.
28
<PAGE>
23. GOVERNING LAW; RESOLUTION OF DISPUTES. This Agreement and the
rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Wisconsin. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect (in which
case both parties shall be bound by the arbitration award) or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be Fond du Lac, Wisconsin or, at the
Executive's election, if the Executive is no longer residing or working the Fond
du Lac, Wisconsin metropolitan area, in the judicial district encompassing the
city in which the Executive resides; PROVIDED, THAT if the Executive is not then
residing in the United States, the election of the Executive with respect to
such venue shall be either Fond du Lac, Wisconsin or in the judicial district
encompassing that city in the United States among the thirty cities having the
largest population (as determined by the most recent United States Census data
available at the Termination Date) which is closest to the Executive's
residence. The parties consent to personal jurisdiction in each trial court in
the selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process in
the manner provided hereunder for the giving of notices.
24. NOTICE. Notices given pursuant to this Agreement shall be in
writing and, except as otherwise provided by Section 13(e) hereof, shall be
deemed given when actually received by the Executive or actually received by the
Company's Secretary or any officer of the Company other than the Executive. If
mailed, such notices shall be mailed by United States registered or certified
mail, return receipt requested, addressee only, postage prepaid, if to the
Company, to Giddings & Lewis, Inc., Attention: Secretary (or Chief Executive
Officer, if the
29
<PAGE>
Executive is then Secretary), 142 Doty Street, Fond du Lac, WI 54935, or if the
Executive, at the address set forth below the Executive's signature to this
Agreement, or to such other address as the party to be notified shall have
theretofore given to the other party in writing.
25. NO WAIVER. No waiver by either party at any time of any breach
by the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
26. HEADINGS. The headings herein contained are for reference only
and shall not affect the meaning or interpretation of any provision of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
COMPANY
Giddings & Lewis, Inc. EXECUTIVE
By: ________________________________ _________________________________
Title: _________________________________ _________________________________
(address)
_________________________________
(city, state, zip code)
Attest:
________________________________
Title: _________________________
30
<PAGE>
EXHIBIT 99.3
GIDDINGS & LEWIS, INC.
MANAGEMENT STOCK PURCHASE PROGRAM,
AS AMENDED AND RESTATED
April 30, 1997
1. PURPOSE
The Giddings & Lewis, Inc. Management Stock Purchase Program (the
"Program") is intended to promote the best interests of Giddings & Lewis,
Inc. (the "Company") and its shareholders by providing key employees of the
Company and its Affiliates with an opportunity to acquire a, or increase
their, proprietary interest in the Company. It is intended that the Program
will promote continuity of management and increased incentive and personal
interest in the welfare of the Company by those key employees who are
primarily responsible for shaping and carrying out the long-range plans of
the Company and securing the Company's continued growth and financial
success. The Program is implemented pursuant to the Giddings & Lewis, Inc.
1993 Stock and Incentive Plan (the "1993 Plan"), which was previously
approved by the Board of Directors and shareholders of the Company.
2. DEFINITIONS
Capitalized terms used in the Program and defined in the 1993 Plan
shall have the respective meanings set forth in the 1993 Plan, and for
purposes of the Program the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed as such terms in Rule 12b-2 of the General Rules and Regulations of
the Exchange Act, except that with reference to an Affiliate of the Company,
the term Affiliate shall have the meaning set forth in the 1993 Plan.
(b) "Bank" shall mean National Exchange Bank and Trust, Fond du Lac,
Wisconsin, or another bank or financial institution selected by the Committee.
(c) A Person shall be deemed to be the "Beneficial Owner" of any
securities:
(1) which such Person or any of such Person's Affiliates
or Associates has the right to acquire (whether such right
is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or upon
the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially
own, (x) securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase, or (y) securities issuable upon exercise of Rights
issued pursuant to the terms of the Company's Rights Agreement with
Firstar Trust Company, dated as of August 23, 1995, as amended from
time to time (the "Rights Agreement") (or any successor to such
Rights Agreement), at any time before the issuance of such
securities;
<PAGE>
(2) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act), including pursuant to any agreement, arrangement
or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any
security under this subparagraph (2) as a result of an agreement,
arrangement or understanding to vote such security if the
agreement, arrangement or understanding: (x) arises solely from a
revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the
Exchange Act and (y) is not also then reportable on a Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(3) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of
such Person's Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in
subparagraph (2) above) or disposing of any voting securities of
the Company.
(d) "Cause" shall mean, with respect to a Participating Key Employee:
(i) engaging in intentional conduct not taken in good faith which has caused
demonstrable and serious financial injury to the Company, as evidenced by a
determination in a binding and final judgment, order or decree of a court or
administrative agency of competent jurisdiction, in effect after exhaustion
or lapse of all rights of appeal, in an action, suit or proceeding, whether
civil, criminal, administrative or investigative; (ii) conviction of a felony
(as evidenced by a binding and final judgment, order or decree of a court of
competent jurisdiction, in effect after exhaustion of all rights of appeal)
which substantially impairs the Participating Key Employee's ability to
perform his duties or responsibilities; or (iii) continuing willful and
unreasonable refusal by the Participating Key Employee to perform his duties
or responsibilities (unless such duties or responsibilities have been
significantly changed without the Participating Key Employee's consent).
(e) "Change in Control" shall mean a change in control of the Company
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act. Without
limiting the inclusiveness of the definition in the preceding sentence, a
Change in Control of the Company shall be deemed to have occurred if:
(1) any Person (other than any employee benefit plan of
the Company or any subsidiary or Affiliate of the Company, any
entity holding securities of the Company for or pursuant to the
terms of any such plan or any trustee, administrator or fiduciary
of such plan) is or becomes the Beneficial Owner of securities of
the Company representing at least 30% of the combined voting power
of the Company's then outstanding securities;
(2) a Section 11(a)(ii) Event shall have occurred under
the Rights Agreement (or a similar event shall have occurred under
any successor to such
-2-
<PAGE>
Rights Agreement) at any time any Rights are issued and outstanding
thereunder;
(3) one-third or more of the members of the Company's Board of
Directors are not Continuing Directors;
(4) there shall be consummated (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common
stock, $0.10 par value (the "Stock"), would be converted into cash,
securities or other property, other than a merger of the Company in
which the holders of the Stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Company; or
(5) the shareholders of the Company approve any bid or proposal
for the liquidation or dissolution of the Company.
(f) "Continuing Director" shall mean any member of the Board of
Directors of the Company who was a member of such Board on April 30, 1997,
and any successor of a Continuing Director who is recommended to succeed a
Continuing Director by a majority of the Continuing Directors then on such
Board.
(g) "Disability" shall mean the complete and permanent inability of a
Participating Key Employee to perform all of his duties under the terms of
his employment with the Company or any of its Affiliates, as determined by
the Committee upon the basis of such evidence, including independent medical
reports and data, as the Committee deems appropriate or necessary.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Exercise Date" shall mean the date the Participating Key Employee
notifies the Company that he is exercising the Stock Option or a portion of
the Stock Option.
(j) "Exercise Price" shall mean the aggregate exercise price paid to
the Company for the Purchased Shares by the Participating Key Employee upon
exercise of the Stock Option or a portion of the Stock Option.
(k) "Gain" shall mean the amount, if any, by which the value of the
aggregate consideration received upon sale of the Purchased Shares (without
deducting any discounts or commissions associated with such sale) exceeds the
Exercise Price of the Purchased Shares being sold.
(l) "Interest" shall mean the interest that accrues from time to time
on the unpaid outstanding principal amount of a Note, including any late
charges or penalties that may arise in connection with such interest.
-3-
<PAGE>
(m) "Loss" shall mean the amount, if any, by which the Exercise Price
of the Purchased Shares being sold exceeds the value of the aggregate
consideration received upon sale of the Purchased Shares being sold (without
deducting any discounts or commission associated with such sale).
(n) "Note" shall mean the promissory note made by a Participating Key
Employee to the Bank to finance his payment of the Exercise Price.
(o) "Person" shall mean any individual, firm, partnership, corporation
or other entity, including any successor (by merger or otherwise) of such
entity, or a group of any of the foregoing acting in concert.
(p) "Purchased Shares" shall mean the Shares underlying the Stock
Option or that portion of the Stock Option being exercised by the
Participating Key Employee.
(q) "Stock Option" shall mean options to purchase up to a specified
number of Shares pursuant to the 1933 Plan granted to a Participating Key
Employee by the Committee in connection with the Program.
3. ELIGIBILITY
To be eligible to participate in the Program, the Key Employee must
have been granted a Stock Option by the Committee.
4. PARTICIPATION
To become a Participating Key Employee under the Program, a Key
Employee eligible to participate in the Program must meet the following
requirements within three business days of the grant of the Stock Option:
(a) Submit a completed, signed and irrevocable agreement to exercise all
or a portion of the Stock Option, subject to the terms and conditions of
the 1993 Plan and the applicable stock option award agreement;
(b) Complete and sign all necessary agreements and other documents
relating to the loan described in Section 6 below; and
(c) Satisfy all other conditions of participation specified in the
Program.
The agreements and other documents specified in subsections 4(a), (b) and (c)
must be in such forms and must be submitted at such times and to such Company
officers as specified by the Committee or its designee(s). No Key Employee is
required to participate in the Program.
-4-
<PAGE>
5. PAYMENT OF EXERCISE PRICE
Each Participating Key Employee must deliver in cash 100% of the
Exercise Price within five business days after the Exercise Date. The
Purchased Shares will not be issued to the Participating Key Employee until
the Company has received such payment. The payment must be made at the time
and place and in the manner specified by the Committee or its designee(s).
6. FINANCING
The Company has made arrangements with the Bank to provide a loan to
each Participating Key Employee in an amount equal to the Exercise Price
payable by such Participating Key Employee. Such loan shall be evidenced by a
Note, in such form as may be required by the Bank, which Note will have an
initial term of five years, and automatically extend for an additional
five-year term if the Participating Key Employee is an employee of the
Company or an Affiliate of the Company at the expiration of the initial term.
Interest on the Note will be payable quarterly in arrears. Each Participating
Key Employee will be required to sign a letter of direction which directs all
loan proceeds to be paid directly to the Company in payment of the Exercise
Price. Each Participating Key Employee is responsible for satisfying all of
the lending requirements specified by the Bank to qualify for the loan. Each
Participating Key Employee will be fully obligated to repay to the Bank all
principal, Interest and any other obligations relating to the Note when due
and payable. The Company will guarantee the repayment to the Bank of 100% of
all principal and Interest on the Note as provided in Section 15 hereof.
7. PAYMENT OF INTEREST ON NOTE
At the end of each calendar quarter the Company shall pay directly to
the Bank on behalf of the Participating Key Employee the amount, if any, by
which the Interest payable on the Note for such quarter exceeds the amount of
cash dividends paid to the Participating Key Employee with respect to the
Purchased Shares during such quarter. Interest payments made by the Company
shall accrue for all purposes to the benefit of the Participating Key
Employee.
8. REGISTRATION OF SHARES
The Purchased Shares will be registered in the name of the
Participating Key Employee and certificated. Each certificate will bear a
legend referring to the Program and the agreements between the Participating
Key Employee and the Company relating to the Purchases Shares. The
certificates for the Purchased Shares will be held by the Company until all
restrictions on the Purchased Shares have lapsed. Each Participating Key
Employee must deliver to the Company a stock power endorsed in black with
respect to the Purchased Shares. The Purchased Shares will be subject to the
transfer restrictions set forth in Section 10 hereof.
-5-
<PAGE>
9. SHAREHOLDER RIGHTS
During the period in which the Purchased Shares are subject to
restrictions on transfer, each Participating Key Employee will have all
rights of a shareholder (subject to such transfer restrictions) with respect
to the Purchased Shares, including the right to vote the shares and the right
to receive all dividends paid on the shares. To the extent required by the
Note and other loan agreements and documents identified in subsection 4(b),
the Company will be irrevocably directed to deliver all such dividends
directly to the Bank for payment of Interest. Any dividends in excess of
required Interest payments will be deposited in the Participating Key
Employee's account at the Bank.
10. TRANSFER OF PURCHASED SHARES
A Participating Key Employee may not sell, donate, gift, assign or
otherwise transfer (collectively, "Transfer") any Purchased Shares except as
provided in this Section 10. Each Participating Key Employee is permitted to
Transfer all or any portion of the Purchased Shares, subject to the following
restrictions:
(a) No Participating Key Employee may Transfer any portion of the
Purchased Shares unless all principal, Interest and any other
obligations due on the Note have previously been paid or all proceeds of
a Transfer effected by means of a sale are simultaneously applied first
to the payment of all such principal, Interest and other obligations; and
(b) The Committee has the right to impose such restrictions as
may be required to comply with applicable federal and state securities
laws on the timing, amount and form of any Transfer of the Purchased
Shares by a Participating Key Employee. Each Participating Key Employee
must notify the Company of his intention to Transfer the Purchased
Shares and the proposed terms of such Transfer before such a Transfer is
implemented. In connection with any proposed Transfer, (i) the Company
may elect to allow the Participating Key Employee to effect the
Transfer, including, without limitation, by means of a sale of the
Purchased Shares in the open market, (ii) the Company may repurchase the
Purchase Shares, or (iii) the Company may take other actions as it deems
appropriate. If the Company repurchases the Purchased Shares, the per
share repurchase price will be the average of the high and low sale
prices of a Share on The Nasdaq National Market (or such other market or
exchange on which the Shares are then traded) on the day the Company is
notified of the intention to Transfer.
11. BENEFIT AND RISK SHARING
Subject to the terms of the Program, the following benefit and risk
sharing provisions shall be in effect as specified below.
(a) WITHIN THREE YEARS OF EXERCISE DATE. If the Participating Key
Employee sells all or any portion of the Purchased Shares within three
years of the Exercise Date, the Participating Key Employee (i) is
responsible for 100% of any Loss on such sale and (ii) is entitled to
receive 50% of any Gain on such sale; provided, however, that
notwithstanding the foregoing, the Participating Key Employee will be
entitled to receive 100% of any Gain on such sale if such sale occurs in
connection with or subsequent to a Change in Control of the
-6-
<PAGE>
Company. For purpose of this Section 11, the terms "sale" and "sell"
shall include the disposition of the Purchased Shares in connection with
the transaction or transactions constituting the Change in Control of
the Company.
(b) AFTER THREE YEARS FROM EXERCISE DATE. Unless and until all of
the outstanding principal, Interest and any other obligations relating
to the Note are paid in full, if the Participating Key Employee sells
all or any portion of the Purchased Shares more than three years after
the Exercise Date, the Participating Key Employee (i) is responsible for
50% of any Loss on such sale and (ii) is entitled to 100% of any Gain on
such sale.
12. ACCELERATION OF LOAN IN CERTAIN CASES
If a Participating Key Employee's employment with the Company and all
its Affiliates terminates due to death, Disability, voluntary resignation or
retirement or is terminated for Cause, the Note provided for in Section 6
shall immediately accelerate and become due and payable, and the Company's
payment of Interest on the Note provided for in Section 7 shall immediately
cease. In the event of all other terminations of employment, the loan shall
continue pursuant to its terms and the other terms of the Program shall
remain in full force and effect.
13. BENEFIT AND RISK SHARING IN THE EVENT OF TERMINATION DUE TO DEATH OR
DISABILITY OR FOR CAUSE
(a) With respect to the Purchased Shares sold after a Participating
Key Employee's death or Disability and while his Note under Section 6 remains
unpaid, the Participating Key Employee is not responsible for any Loss but is
entitled to receive 100% of any Gain. This subsection 13(a) has no effect on
a deceased or disabled Participating Key Employee's sale or Purchased Shares
before death or Disability or after all of the principal, Interest and any
other obligations under the Participating Key Employee's Note have been
repaid.
(b) With respect to Purchased Shares sold after a Participating Key
Employee's termination for Cause and (i) while his Note under Section 6
remains unpaid or (ii) in the event such repayment occurred within three
years of the Exercise Date, the benefit sharing provisions of Section 11(a)
shall continue in effect, but the risk sharing provisions of Section 11(b)
shall not apply to such sale. This subsection 13(b) has no effect (i) on the
sale of Purchased Shares by a Participating Key Employee before his
termination for Cause or (ii) after the principal, Interest and any other
obligations under the Participating Key Employee's Note have been repaid
unless such repayment occurs within three years of the Exercise Date in which
case the benefit sharing provisions of Section 11(a) shall apply.
-7-
<PAGE>
14. IMPLEMENTATION OF SHARING ARRANGEMENT
If a Participating Key Employee sells any portion of the Purchased
Shares at a Loss while his Note under Section 6 is outstanding, and if the
Participating Key Employee is responsible for less than 100% of that Loss
under the provisions of the Program, the Company will assume the portion of
the Loss for which such Participating Key Employee is not responsible. The
Company will assume its portion of the Loss by delivering cash equal to such
portion directly to the Participating Key Employee simultaneously with the
repayment of such Participating Key Employee's Note under Section 6.
Additionally, the Company will pay cash equal to 45% of such portion directly
to the Participating Key Employee at the same time in order to partially
mitigate the tax consequences to the Participating Key Employee of the
payment made by the Company with respect to the Loss. If a Participating Key
Employee sells any portion of the Purchased Shares at a Gain, and if the
Participating Key Employee is required to repay to the Company a portion of
such Gain, the Participating Key Employee shall do so by delivering cash
equal to such portion to the Company immediately upon receipt of the sale
proceeds.
15. LOAN GUARANTEE
The Company will guarantee repayment to the Bank of 100% of all
principal and Interest of each Participating Key Employee under the Note
provided for in Section 6. The Company's loan guarantee is a condition to the
loan arrangement the Company has made with the Bank. The terms and conditions
of the guarantee are as agreed by the Company and the Bank. Each
Participating Key Employee is fully obligated to repay to the Bank all
principal, Interest, and any other amounts on the Note when due and payable.
The Company may take any action relating to the Participating Key Employee
and his assets, which the Committee deems reasonable and necessary, to obtain
full reimbursement for amounts the Company pays to the Bank under its
guarantee related to the Note in excess of any amount the Company is
obligated to pay pursuant to Section 14.
16. GENERAL PROVISIONS
(a) RIGHTS AND STATUS OF PARTICIPANTS. Participating in the
Program as a Participating Key Employee shall not be construed as giving such
Participating Key Employee the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or any Affiliate may at any
time dismiss a Participating Key Employee from employment, free from
liability, or any claim under the Program, except as otherwise expressly
provided in the Program or in any Award Agreement. Except for rights accorded
under the Program and under any applicable Award Agreement, Participating Key
Employees shall have no rights except as owners of the Purchased Shares.
(b) UNFUNDED STATUS OF THE PROGRAM. Unless otherwise determined by
the Committee, the Program shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Program shall
not establish any fiduciary relationship between the Company or the Committee
and any Participating Key Employee or other Person. To the extent any Person
holds any right by virtue of participating under the Program, such right
(unless otherwise determined by the Committee) shall be no greater than the
right of an unsecured general creditor of the Company.
-8-
<PAGE>
(c) GOVERNING LAW. The validity, construction and effect of the
Program and any rules and regulations relating to the Program shall be
determined in accordance with the internal laws of the State of Wisconsin and
applicable federal law.
(d) SEVERABILITY. If any provision of the Program or any Award
Agreement is or becomes or is deemed to be invalid, illegal or unenforceable
in any jurisdiction, or as to any Person, or would disqualify the Program or
any Award Agreement under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Program
or any Award Agreement, such provision shall be stricken as to such
jurisdiction, Person any the remainder of the Program and any such Award
Agreement and any such Award Agreement shall remain in full force and effect.
(e) HEADINGS. Headings are given to the Sections and subsections
of the Program solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Program or any provision thereof.
(f) EFFECT OF PLAN. The operation of the Program is subject to
the provisions of the 1993 Plan.
(g) AMENDMENT. The Committee may amend the Program at any time;
provided, however, that any such amendment that materially reduces or changes
the rights or benefits of a Participating Key Employee shall not be effective
with respect to such Participating Key Employee without his written consent.
-9-
<PAGE>
EXHIBIT 99.4
GIDDINGS & LEWIS, INC.
1989 STOCK OPTION PLAN
AMENDMENT TO
STOCK OPTION AWARD AGREEMENT
This Amendment to Stock Option Award Agreement made as of April 30,
1997 among the undersigned, amends that certain Stock Option Award Agreement,
dated as of _________ (the "Award Agreement"), among Giddings & Lewis, Inc.
(the "Company") and the undersigned employee of the Company and/or one or
more of its subsidiaries (the "Key Employee").
WITNESSETH:
WHEREAS, the Company maintains the Giddings & Lewis, Inc. 1989 Stock
Option Plan (hereinafter the "Stock Option Plan"); and
WHEREAS, an award of stock options has been made to the Key Employee
under the Stock Option Plan pursuant to the Award Agreement; and
WHEREAS, the Award Agreement provides that it may not be modified
except by written consent of the parties thereto; and
WHEREAS, the Company and the Key Employee deem it desirable to amend
the Award Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein set forth, the parties hereby mutually covenant and
agree as follows:
1. DEFINITIONS. All capitalized terms which are not otherwise
defined herein shall have the meanings assigned such terms in the Award
Agreement or the Stock Option Plan, as applicable.
2. AMENDMENTS TO THE AWARD AGREEMENT. From and after the date
hereof, the Award Agreement is hereby amended to include Paragraph 13, which
reads in its entirety as follows:
"13. CHANGE OF CONTROL. (a) Notwithstanding any other provision to
the contrary contained in this Agreement, if a Change in Control of the
Company (as defined below) occurs prior to the Expiration Date, the Option
(to the extent not previously exercised or terminated) shall immediately and
automatically become exercisable as of the date of the Change in Control of
the Company.
(b) The following terms shall have the following meanings when used in
this Paragraph 13:
(i) The term "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
<PAGE>
(ii) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act.
(iii) A Person (as defined herein) shall be deemed to be the
"Beneficial Owner" of any securities:
(A) which such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding, or upon the exercise
of conversion rights, exchange rights, rights, warrants or options,
or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, (x) securities
tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase, or (y)
securities issuable upon exercise of Rights issued pursuant to the
terms of the Company's Rights Agreement with Firstar trust Company,
dated as of August 23, 1995, as amended from time to time (the
"Rights Agreement") (or any successor to such Rights Agreement), at
any time before the issuance of such securities;
(B) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or understanding;
PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security under this
subparagraph (B) as a result of an agreement, arrangement or
understanding to vote such security if the agreement, arrangement or
understanding: (x) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act and (y) is
not also then reportable on a Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(C) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in subparagraph (B)
above) or disposing of any voting securities of the Company.
-2-
<PAGE>
(iv) A "Change in Control of the Company" shall mean a change in
control of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act. Without limiting the inclusiveness of the definition in
the preceding sentence, a Change in Control of the Company shall be
deemed to have occured if:
(A) any Person (other than any employee benefit plan of the
Company or any Participating Company, any entity holding securities
of the Company for or pursuant to the terms of any such plan or any
trustee, administrator or fiduciary of such plan) is or becomes the
Beneficial Owner of securities of the Company representing at least
30% of the combined voiting power of the Company's then outstanding
securities;
(B) a Section 11 (a)(ii) Event shall have occurred under the
Rights Agreement (or a similar event shall have occurred under any
successor to such Rights Agreement) at any time any Rights are
issued and outstanding thereunder;
(C) one-third or more of the members of the Company's Board
of Directors are not Continuing Directors (as hereafter defined);
(D) there shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of Stock would be
converted into cash, securities or other property, other than a
merger of the Company in which the holders of the Stock immediately
prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or
(y) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all,
of the assets of the Company; or
(E) the shareholders of the Company approve any bid or
proposal for the liquidation or dissolution of the Company.
(v) The term "Continuing Director" shall mean any member of the
Board of Directors of the Company who was a member of such Board on
April 5, 1997, and any successor of a Continuing Director who is
recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on such Board.
(vi) The term "Person" shall mean any individual, firm,
partnership, corporation or other entity, including any successor (by
merger or otherwise) of such entity, or a group of any of the foregoing
acting in concert."
-3-
<PAGE>
3. MISCELLANEOUS. (a) Except as otherwise expressly provided in this
Amendment, all of the terms, conditions and provisions of the Award Agreement
remain unaltered and are in full force and effect. The Award Agreement and
this Amendment shall be read and construed as one Agreement.
(b) This Amendment shall be governed and construed in accordance with
the laws of the State of Wisconsin applicable to contracts made and to be
performed therein by and between residents thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer and its corporate seal hereunto
affixed, and the Key Employee has hereunto affixed his hand and seal, all on
the day and year set forth above.
GIDDINGS & LEWIS, INC.
(CORPORATE SEAL)
By
-------------------------------
[Name]
[Title]
---------------------------------
[Name]
Key Employee
-4-
<PAGE>
EXHIBIT 99.5
GIDDINGS & LEWIS, INC.
1989 RESTRICTED STOCK PLAN
AMENDMENT TO
RESTRICTED STOCK AWARD AGREEMENT
This Amendment to Restricted Stock Award Agreement made as of April
30, 1997 among the undersigned, amends that certain Restricted Stock Award
Agreement, dated as of [_____________] (the "Award Agreement"), among Giddings
& Lewis, Inc. (the "Company") and the undersigned employee of the Company
and/or one or more of its subsidiaries (the "Key Employee").
WITNESSETH:
WHEREAS, the Company maintains the Giddings & Lewis, Inc. 1989
Restricted Stock Plan (hereinafter the "Restricted Stock Plan"); and
WHEREAS, an award of restricted stock has been made to the Key
Employee under the Restricted Stock Plan pursuant to the Award Agreement; and
WHEREAS, the Award Agreement provides that it may not be modified
except by written consent of the parties thereto, and
WHEREAS, the Company and the Key Employee deem it desirable to amend
the Award Agreement.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein set forth, the parties hereby mutually
covenant and agree as follows:
1. DEFINITIONS. All capitalized terms which are not otherwise
defined herein shall have the meanings assigned such terms in the Award
Agreement or the Restricted Stock Plan, as applicable.
2. AMENDMENTS TO THE AWARD AGREEMENT. From and after the date
hereof, the Award Agreement is hereby amended to include paragraph 16, which
reads in its entirety as follows:
"16. CHANGE OF CONTROL. (a) Notwithstanding any other provision to
the contrary contained in this Agreement, effective upon a Change in
Control of the Company (as defined below), the restrictions imposed upon
the Restricted Stock (except for any such shares which were previously
forfeited to the Company) by Paragraph 2 of this Agreement shall
immediately be deemed to have lapsed and the Release Date shall be
deemed to have occurred as of the date of the Change in Control of the
Company with respect to such Restricted Stock.
(b) The following terms shall have the following meanings when
used in this Paragraph 16:
<PAGE>
(i) The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(ii) The terms "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations of the Exchange Act.
(iii) A Person (as defined herein) shall be deemed to be
the "Beneficial Owner" of any securities:
(A) which such Person or any of such Person's
Affiliates or Associates has the right to acquire (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding, or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own,
(x) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered
securities are accepted for purchase, or (y) securities
issuable upon exercise of Rights issued pursuant to the
terms of the Company's Rights Agreement with Firstar
Trust Company, dated as of August 23, 1995, as amended
from time to time (the "Rights Agreement") (or any
successor to such Rights Agreement), at any time before
the issuance of such securities;
(B) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding;
PROVIDED, HOWEVER, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security
under this subparagraph (B) as a result of an agreement,
arrangement or understanding to vote such security if the
agreement, arrangement or understanding: (x) arises solely
from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules
and regulations under the Exchange Act and (y) is not also
then reportable on a Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(C) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except pursuant to a revocable
proxy as described in subparagraph (B) above) or disposing
of any voting securities of the Company.
-2-
<PAGE>
(iv) A "Change in Control of the Company" shall mean a
change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act. Without limiting the
inclusiveness of the definition in the preceding sentence, a Change
in Control of the Company shall be deemed to have occurred if:
(A) Any Person (other than any employee benefit plan
of the Company or any Participating Company, any entity
holding securities of the Company for or pursuant to the
terms of any such plan or any trustee, administrator or
fiduciary of such plan) is or becomes the Beneficial Owner
of securities of the Company representing at least 30% of
the combined voting power of the Company's then outstanding
securities;
(B) A Section 11(a)(ii) Event shall have occurred
under the Rights Agreement (or a similar event shall have
occurred under any successor to such Rights Agreement) at
any time any Rights are issued and outstanding thereunder;
(C) one-third or more of the members of the
Company's Board of Directors are not Continuing Directors
(as hereafter defined);
(D) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which
shares of Stock would be converted into cash, securities or
other property, other than a merger of the Company in which
the holders of the Stock immediately prior to the merger
have the same proportionate ownership of common stock of
the surviving corporation immediately after the merger, or
(y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company; or
(E) the shareholders of the Company approve any bid
or proposal for the liquidation or dissolution of the
Company.
(v) The term "Continuing Director" shall mean any member of the
Board of Directors of the Company who was a member of such Board on
April 5, 1997, and any successor of a Continuing Director who is
recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on such Board.
(vi) The term "Person" shall mean any individual, firm,
partnership, corporation or other entity, including any successor
(by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert."
-3-
<PAGE>
3. MISCELLANEOUS. (a) Except as otherwise expressly provided in
this Amendment, all of the terms, conditions and provisions of the Award
Agreement remain unaltered and are in full force and effect. The Award
Agreement and this Amendment shall be read and construed as one Agreement.
(b) This Amendment shall be governed and construed in accordance
with the laws of the State of Wisconsin applicable to contracts made and to
be performed therein by and between residents thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer and its corporate seal hereunto
affixed, and the Key Employee has hereunto affixed his hand and seal, all on
the day and year set forth above.
GIDDINGS & LEWIS, INC.
(CORPORATE SEAL) By________________________________
[Name]
[Title]
__________________________________
[Name]
Key Employee
-4-
<PAGE>
EXHIBIT 99.6
GIDDINGS & LEWIS, INC.
1993 STOCK AND INCENTIVE PLAN
AMENDMENT TO
RESTRICTED STOCK AWARD AGREEMENT
This Amendment to Restricted Stock Award Agreement made as of
April 30, 1997 among the undersigned, amends that certain Restricted Stock
Award Agreement, dated as of _________________ (the "Award Agreement"), among
Giddings & Lewis, Inc. (the "Company") and the undersigned employee of the
Company and/or one or more of its subsidiaries (the "Key Employee").
WITNESSETH:
WHEREAS, the Company maintains the Giddings & Lewis, Inc. 1993 Stock
and Incentive Plan (hereinafter the "1993 Plan"); and
WHEREAS, an award of restricted stock has been made to the Key
Employee under the 1993 Plan pursuant to the Award Agreement; and
WHEREAS, the Award Agreement provides that it may not be modified
except by written consent of the parties thereto; and
WHEREAS, the Company and the Key Employee deem it desirable to amend
the Award Agreement.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein set forth, the parties hereby mutually
covenant and agree as follows:
1. DEFINITIONS. All capitalized terms which are not otherwise
defined herein shall have the meanings assigned such terms in the Award
Agreement or the 1993 Plan, as applicable.
2. AMENDMENT TO THE AWARD AGREEMENT. From and after the date
hereof, Paragraph 8(a) of the Award Agreement is hereby amended and restated
in its entirety as follows:
"(a) If there occurs prior to the Release Date a Change in Control
of the Company (as defined below) the restriction of Paragraph 2
applicable to the number of shares listed opposite the "Target" earnings
per share of Schedule A hereto (except for any such shares which were
previously forfeited to the Company) shall terminate without action by the
Committee on the date of such Change of Control of the Company and such
Restricted Stock shall be free of such restrictions and except as provided
in Paragraph 4 hereof, freely transferable."
3. MISCELLANEOUS. (a) Except as otherwise expressly provided
in this Amendment, all of the terms, conditions and provisions of the Award
Agreement remain unaltered and are in full force and effect. The Award
Agreement and this Amendment shall be read and construed as one Agreement.
<PAGE>
(b) This Amendment shall be governed and construed in accordance
with the laws of the State of Wisconsin applicable to contracts made and to
be performed therein by and between residents thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer and its corporate seal hereunto
affixed, and the Key Employee has hereunto affixed his hand and seal, all on
the day and year set forth above.
GIDDINGS & LEWIS, INC.
(CORPORATE SEAL)
By
----------------------------
[Name]
[Title]
-------------------------------
[Name]
Key Employee
-2-
<PAGE>
GIDDINGS & LEWIS-Registered Trademark-
May 8, 1997
Dear Giddings & Lewis, Inc. Shareholder:
As you may be aware, Harnischfeger Industries, Inc. ("HII"), through its
wholly owned subsidiary DSFA Corporation ("DSFA"), has commenced an unsolicited
tender offer for all outstanding shares of common stock of Giddings & Lewis,
Inc. (the "Company") at a price of $19 per share in cash.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT HII'S OFFER IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT
YOU REJECT THE OFFER AND NOT TENDER YOUR SHARES TO DSFA.
In arriving at its determination and recommendation, the Board gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including the opinion, dated May 7, 1997, of Credit Suisse First
Boston Corporation, the Company's financial advisor, that as of such date, the
offer price of $19 per share was inadequate from a financial point of view to
the Company's shareholders other than DSFA and HII.
The Board concluded that the interests of the Company's shareholders would
be best served by continuing to actively explore all strategic alternatives and
has instructed management and its advisors to do so.
Additional information with respect to the Board's decision and its actions
is contained in the enclosed Schedule 14D-9. We urge you to consider this
information carefully.
Your Board of Directors and I greatly appreciate your continued support and
encouragement.
On behalf of the Board of Directors,
Marvin L. Isles
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
GIDDINGS & LEWIS, INC.
------------------------
GIDDINGS & LEWIS INC
142 DOTY ST PO BOX 590
FOND DU LAC WI 54936-0590 USA
TEL. (414) 921-9400. FAX (414) 929-4522
INTERNET: http://www.giddings.com
<PAGE>
EXHIBIT 99.8
FOR IMMEDIATE RELEASE
FOR INFORMATION:
Douglas E. Barnett Patricia B. Meinecke Mike Pascale/Rhonda Barnat
Giddings & Lewis, Inc. Giddings & Lewis, Inc. Abernathy MacGregor
Vice President and Director of Communications 212/371-5999
Controller 414/929-4212
414/929-4374
NEWS RELEASE
GIDDINGS & LEWIS REJECTS HARNISCHFEGER OFFER
FINDS OFFER INADEQUATE
FOND DU LAC, WI, MAY 8, 1997 -- GIDDINGS & LEWIS, INC. (Nasdaq: GIDL) announced
today that its Board of Directors has unanimously rejected the offer of
Harnischfeger Industries, Inc. to acquire all of the outstanding shares of
Giddings & Lewis common stock at a price of $19.00 in cash per share. The Board
recommends that shareholders not tender any shares to Harnischfeger pursuant to
the tender offer.
The Board concluded that the Harnischfeger offer is inadequate and not in the
best interests of Giddings & Lewis shareholders. In arriving at its
determination, the Board gave careful consideration to a number of factors,
including the May 7, 1997 opinion of Credit Suisse First Boston Corporation, the
company's financial advisor, that, as of that date, the offer by Harnischfeger
was inadequate from a financial point of view to the Giddings & Lewis
shareholders other than Harnischfeger.
The Board also concluded that the interests of company shareholders would best
be served by continuing to actively explore all strategic alternatives and has
instructed management and its financial advisors to do so. The company also
reported having had preliminary discussions with other parties regarding their
potential interest in a possible transaction involving the company, and has
entered into confidentiality and standstill agreements with interested parties
and is responding to due diligence requests.
-more-
<PAGE>
CONFIDENTIAL DRAFT May 7, 1997 10:00 PM EST
Giddings & Lewis, Inc. Page 2
The company also announced today that it is filing with the Securities and
Exchange Commission, and will mail to shareholders, a
Solicitation/Recommendation Statement on Schedule 14D-9 setting forth the
company's recommendation with respect to Harnischfeger's offer. Additional
information with respect to the Board's decision to recommend that shareholders
reject the Harnischfeger offer is contained in the Schedule 14D-9.
Headquartered in Fond du Lac, Wisconsin, Giddings & Lewis is the largest
supplier of industrial automation products and machine tools in North America,
and among the largest in the world. The company serves customers worldwide with
products and services to improve manufacturing productivity.
To receive Giddings & Lewis's latest news at no charge via fax, simply call
Company News On Call, 1-800-758-5804, ext. 119821. Internet address:
http://www.giddings.com
###
<PAGE>
<TABLE>
<S> <C> <C>
[LOGO] CREDIT SUISSE FIRST BOSTON CORPORATION
227 West Monroe Street Telephone 312 750 3000
Chicago, IL 60606-5018
</TABLE>
May 7, 1997
Board of Directors
Giddings & Lewis, Inc.
142 Doty Street
Fond du Lac, Wisconsin 54936-0590
Members of the Board:
On April 28, 1997, DSFA Corporation ("Acquisition"), a wholly owned subsidiary
of Harnischfeger Industries, Inc. ("Parent"), commenced a tender offer for all
outstanding shares of common stock, with a par value of $.10 per share, together
with associated preferred share purchase rights (together, the "Shares"), of
Giddings & Lewis, Inc. (the "Company") for $19.00 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated April 28, 1997 (the "Acquisition Offer to Purchase"), and in the
related letter of transmittal (which together constitute the "Acquisition
Offer"). The Acquisition Offer to Purchase states that Parent and Acquisition
have proposed that following the consummation of the Acquisition Offer,
Acquisition would effect a merger or similar business combination with the
Company, pursuant to which each then outstanding Share (excluding Shares owned
by Acquisition or Parent, Shares held in the treasury of the Company and Shares
owned by shareholders, if any, who perfect dissenters' rights under Wisconsin
Business Corporation Law) would be converted into the right to receive an amount
of cash equal to the price per Share paid pursuant to the Acquisition Offer, and
the Company would become a wholly owned subsidiary of Parent (such subsequent
transaction, together with the Acquisition Offer, being hereinafter referred to
as the "Parent Acquisition Proposal").
You have asked us to advise you with respect to the adequacy of the Parent
Acquisition Proposal to the holders of Shares, other than Acquisition and
Parent, from a financial point of view.
In arriving at our opinion, we have reviewed and considered the Acquisition
Offer to Purchase and the related Tender Offer Statement on Schedule 14D-1 filed
by Parent and Acquisition with the Securities and Exchange Commission (the
"Commission") and a draft dated May 7, 1997 of the Solicitation/Recommendation
Statement on Schedule 14D-9 to be filed by the Company with the Commission. We
have also reviewed certain other information, including financial forecasts,
provided to us by the Company and met with the management of the Company to
discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared that data with similar data for other publicly held
companies in businesses similar to those of the Company. In addition, we have
considered the financial terms of certain other transactions which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which we
deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information, including the
information in the Acquisition Offer to Purchase, and we have relied on its
being complete and accurate in all material respects. With respect to the
financial forecasts,
<PAGE>
we have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the Company's management as
to the future financial performance of the Company. In addition, we have not
made an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company, nor have we been furnished with any
such evaluations or appraisals. Our opinion is necessarily based upon financial,
economic, market and other conditions as they exist and can be evaluated on the
date hereof.
We are acting as financial advisor to the Company in connection with the Parent
Acquisition Proposal and will receive a fee from the Company for our services.
We have also been retained by the Company to act as its financial advisor for a
period of three years (beginning on March 7, 1997) with respect to the Company's
preparations for responding to any acquisition or business combination proposals
involving the Company that the Company may receive, or any other attempts to
effect a change in control of the Company through a merger, tender or exchange
offer, purchase of all or a portion of its stock, assets or debt, proxy contest
or consent solicitation, open market accumulation program or similar action.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and Parent for our and their
own accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Parent
Acquisition Proposal, does not constitute a recommendation to any stockholder as
to whether or not such stockholder should tender Shares pursuant to the
Acquisition Offer and is not to be quoted or referred to, in whole or in part,
in any registration statement, prospectus, or proxy statement, or in any other
written document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Parent Acquisition Proposal is inadequate, from a financial point of
view, to the holders of Shares other than Acquisition and Parent.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
2
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
- ----------------------------------------
HARNISCHFEGER INDUSTRIES, INC., and
DSFA CORPORATION,
Plaintiffs,
- v. - Civil Action No. 97-C-0488
MARVIN L. ISLES, BEN R. STUART,
JOHN A. BECKER, JOHN W. GUFFEY, JR.,
RUTH M. DAVIS, BENJAMIN F. GARNER, III,
and GIDDINGS & LEWIS, INC.,
a Wisconsin corporation,
Defendants.
- ----------------------------------------
COMPLAINT
Plaintiffs Harnischfeger Industries, Inc. ("Harnischfeger"), and DSFA
Corporation ("DSFA"), for their complaint against defendants, allege upon
knowledge as to themselves and otherwise upon information and belief the
following:
BACKGROUND AND NATURE OF THE ACTION
1. This action is brought by plaintiffs Harnischfeger and its
wholly-owned subsidiary, DSFA, to remedy violations of the disclosure
requirements of the federal securities laws by defendant Giddings & Lewis, Inc.
("Giddings") and its directors and to remedy their ongoing and threatened
violations of their fiduciary duties under Wisconsin law.
<PAGE>
2. Plaintiffs have today announced their intention to commence a
nationwide tender offer for the shares of defendant Giddings, pursuant to the
applicable provisions of the Securities Exchange Act of 1934, as amended by the
Williams Act of 1968, codified at 15 U.S.C. (S)(S) 78a SEQ (the "1934 Act"), and
the rules and regulations of the Securities and Exchange Commission ("SEC")
promulgated thereunder. The price plaintiffs are offering is $19 cash per
share, representing a greater than 40% premium over the closing price of
Giddings shares in the marketplace the day before the announcement of
plaintiffs' tender offer. The total value of plaintiffs' tender offer is
approximately $630 million. The tender offer is expected to commence by filing
with the SEC and publication of the terms of the tender offer on Monday,
April 28, 1997.
3. Plaintiffs' decision to commence the aforesaid tender offer
followed Giddings' refusal to engage in meaningful discussions for a consensual
transaction in which Giddings would be combined with Harnischfeger. Individual
defendant Marvin Isles, Giddings' President and Chief Executive Officer, refused
after a series of conversations with Harnischfeger's Chairman and Chief
Executive Officer during the days preceding the filing of this Complaint to
engage in meaningful discussions about a combination of the two firms at the $19
per share price, notwithstanding that, as detailed below, Harnischfeger
-2-
<PAGE>
has enjoyed conspicuous business and financial success over the past three years
while Giddings' results have declined or been stagnant, and notwithstanding that
Giddings stock has LOST nearly half its value during the same three-year period,
while the market generally and Giddings' peer group of companies have
substantial increased in value. Giddings' refusal to engage in meaningful
discussions for a consensual transaction also followed by less than a week its
public announcement that its financial results for the first quarter of 1997
showed steep declines from the same period a year earlier. Plaintiffs have
concluded that Giddings' officers and directors intend to resist a combination
with Harnischfeger despite the manifest benefits of such a transaction for
Giddings' shareholders and its other corporate constituencies.
4. In light of Giddings' failure and refusal to engage in meaningful
discussions with plaintiffs for a consensual combination with Harnischfeger,
plaintiffs as part of their effort to acquire Giddings will also be conducting a
proxy solicitation pursuant to the SEC Proxy Rules, 17 C.F.R. 240.14a ET SEQ.
The purpose of the solicitation, which will be nationwide in scope, is to
obtain, in accordance with Wisconsin law and Giddings By-laws, written demands
sufficient to call a special meeting of Giddings' shareholders at which they
will decide whether to replace the current directors with directors who are
pledged, subject to their fiduciary duties to Giddings'
-3-
<PAGE>
shareholders, to giving such shareholders the opportunity to accept plaintiffs'
offer.
5. The shares of Giddings stock are registered under the 1934 Act,
and are traded on the Nasdaq Stock Market, Inc.'s ("NASDAQ") National Market.
Giddings is required to comply with the disclosure provisions of the federal
securities statutes, and the rules and regulations of the SEC promulgated
thereunder.
6. Giddings is incorporated under the laws of Wisconsin, and has its
headquarters in Fond du Lac, Wisconsin. Based on the information available,
plaintiffs believe that at least three-quarters of the outstanding Giddings
shares are held of record by shareholders residing outside the State of
Wisconsin.
7. As detailed herein, the public disclosures made by Giddings in
various SEC filings are materially deficient in several respects. Current SEC
filings by Giddings, including the Proxy Statement being used by Giddings to
solicit proxies for its April 30, 1997 Annual Meeting of Shareholders:
(a) fail to describe accurately certain material features and effects
of the "Management Stock Purchase Program" adopted by defendants on March 13,
1997, as detailed hereinbelow;
-4-
<PAGE>
(b) fail to disclose that defendants have nominated for election at
the upcoming April 30,1997 Annual Meeting an insufficient number of director
candidates such that, if only such number is elected, Giddings' By-laws will be
violated and Giddings' board will not comply with the Giddings' By-laws (whose
contents are nowhere referenced in the Proxy Statement), as detailed
hereinbelow; and
(c) fail to describe accurately the terms and characteristics of
Giddings' "poison pill" Shareholder Rights Plan, as detailed hereinbelow.
8. In addition to these violations of applicable disclosure laws,
defendants are also violating their fiduciary duties to plaintiffs and to the
public shareholders of Giddings generally. Defendants' propensity to violate
these duties, and their actual violations of such duties, are demonstrated by
(a) their adoption last month of the grossly self-serving management
compensation program known (misleadingly) as the "Management Stock Purchase
Program," which puts the pecuniary interests of management ahead of the
interests of shareholders and which, its name notwithstanding, does not subject
management participants to the economic risks of "stock purchase"; and (b)
defendants' refusal to consider plaintiffs' proposal for a consensual
combination of Giddings and Harnischfeger in good faith and with the due care it
deserves, and to which the public
-5-
<PAGE>
shareholders of Giddings are entitled. As set forth below, defendants are also
likely to respond to plaintiffs' tender offer and special meeting proxy contest
- -- which threaten defendants' entrenchment at Giddings -- with "scorched earth"
defenses involving attempts to alter Giddings' existing By-laws governing
special meetings of shareholders and the adoption of other extreme defensive
measures.
PARTIES AND JURISDICTION
9. Plaintiff Harnischfeger is a Delaware corporation with its
principal place of business in St. Francis, Wisconsin. Harnischfeger is a
leading supplier of capital machinery and services associated with the mining,
pulp and paper, and materials handling industries. In recent years,
Harnischfeger has shown excellent financial results, nearly doubling sales and
more than tripling operating income since the end of 1994. Harnischfeger is one
of the largest corporations based in Wisconsin, employing approximately 3,600
persons in the state and 17,000 persons worldwide. Harnischfeger is the
beneficial owner of 789,600 shares of Giddings stock (including the 1,000 shares
owned by DSFA as described below).
10. Plaintiff DSFA is a Delaware corporation. DSFA is a wholly-owned
subsidiary of plaintiff Harnischfeger; was formed for the purpose of acquiring
Giddings; and conducts and has conducted no business other than to make the
tender offer
-6-
<PAGE>
for shares of Giddings stock which is described in Paragraph 2 of this
Complaint, and to take actions related thereto. DSFA is the beneficial owner
and record holder of 1000 shares of Giddings.
11. Defendant Giddings is a Wisconsin corporation with its principal
place of business in Fond du Lac, Wisconsin. Giddings is a manufacturer of
machine tools, industrial automation and related products. In recent years,
Giddings' financial performance has severely lagged that of other companies in
its peer group. Bookings have consistently decreased, and net income has
declined or shown no significant increase, since 1994. Figures released on
April 17, 1997 for the first quarter of this year show that Giddings' decline
has continued, with sales down more than 20% from a year earlier and net income
more than 25% lower.
12. There are approximately 33,000,000 shares of Giddings stock
issued and outstanding. Giddings stock has entirely missed out on the growth
in value which the general market, Giddings' peer group and Harnischfeger
have enjoyed over the last three years. In that period, Harnischfeger stock
has more than doubled in value, the S&P 500 index has risen by nearly 70%,
Giddings' peer group has risen by more than 50% -- and Giddings has fallen by
nearly 50%.
-7-
<PAGE>
13. The individual defendants are those current director of
Giddings who are expected to continue to serve as directors after Giddings'
April 30, 1997 Annual Meeting. Defendant Isles was appointed President and
Chief Executive Officer of Giddings on March 17, 1997. The directors and
officers of Giddings as a group control no more than 2% of Giddings'
outstanding shares.
14. Because plaintiffs' claims arise under provisions of the 1934
Act, this Court has jurisdiction over the subject matter of this action pursuant
to 28 U.S.C. (S) 1331, and under the jurisdictional provisions of the 1934
Act, 15 U.S.C. (S) 78aa; and this Court also has jurisdiction
under 28 U.S.C. (S)(S) 2201 and 2202. Venue is proper on this Court pursuant to
28 U.S.C. (S) 1391 and 15 U.S.C. (S) 78aa, since the claims arose in this
judicial district.
15. This Court has jurisdiction over the claims pleaded in Count III
of this complaint pursuant to the Court's supplemental jurisdiction.
-8-
<PAGE>
DEFENDANTS' VIOLATIONS OF THE DISCLOSURE
PROVISIONS OF THE FEDERAL SECURITIES LAWS
A. FAILURE TO ACCURATELY DESCRIBE MATERIAL FEATURES AND EFFECTS OF THE
MARCH 13, 1997 "MANAGEMENT STOCK PURCHASE PROGRAM"
16. Notwithstanding the dismal performance of Giddings' stock over the
past three years, on March 13, 1997, Giddings' board adopted a novel form of
stock-based executive compensation and called it the "Management Stock
Purchase Program" ("Management Stock Program"), whose primary feature as
described below is to insulate management participants from much of the
down-side risks of owning Giddings stock. Pursuant to the Management Stock
Program, certain senior Giddings executives were granted and exercised brand
new options to purchase, in the aggregate, 282,355 shares of Giddings stock.
17. Under the Management Stock Program, Giddings facilitates
purported "purchases" by management of Giddings stock. It uses its corporate
credit to permit these executives to obtain loans from a commercial bank to
purchase the Giddings stock; it gives corporate guarantees for the repayment
of the bank loans; and it obligates itself to pay the interest on the
individual's loans. But the favored executives do NOT run the actual market
risk that any other shareholder/purchaser does. The Management Stock Program
permits the participating executives to reap 100% of any GAIN in stock value,
while suffering
-9-
<PAGE>
only 50% of any losses (provided the executive holds the stock at least three
years), I.E., Giddings has agreed to reimburse the executive for 50% of any
decline in value. This preferential treatment of executives is inimical to
the interests of Giddings shareholders generally and is at variance with the
principle of equity investment.
18. In its description of the Management Stock Program in the March
21, 1997 Proxy Statement for the April 30 annual meeting, which has been
filed with the SEC on SEC Schedule 14A and which was mailed to all Giddings
shareholders of record on March 21, 1997, defendants have omitted to state
several material facts and circumstances concerning the Program;
(a) defendants failed to provide any estimate or quantification of
the potential or actual cost to Giddings and its public shareholders of the
Management Stock Program, under which Giddings has obligated itself to (i)
pay the interest on the commercial bank loans taken out by the executives;
(ii) pay 50% of any losses on the shares incurred by the executives (under
the circumstances in which the executives are entitled to reimbursement for
such losses); and (iii) pay the principal of the bank loans as to which the
Giddings guarantees become applicable;
(b) defendants failed to disclose in the Proxy Statement that the
Management Stock Program includes a
-10-
<PAGE>
"grossup" provision under which Giddings will actually reimburse the
executives for certain taxes paid by them on account of Giddings'
indemnification of their losses;
(c) defendants failed to disclose that certain of the payments
authorized under the Management Stock Program may not qualify as deductible
compensation expense, thus imposing an additional burden on the corporate
treasury and the interests of Giddings' shareholders other than the
Management Stock Program participants;
(d) defendants failed to disclose that, because of the economic
interest of Giddings in the shares nominally owned by the executives, including
Giddings' shared interest in potential losses on the stock, the 282,355
shares of Giddings stock which have been "purchased" by the individuals are
not issued-and-outstanding shares for certain purposes. Thus, these 282,355
shares are "treasury stock" and accordingly may not be voted; may not be
counted towards certain calculations (such as the 20% threshold contained in
Giddings' shareholders rights plan), including the calculation of the number
of votes necessary to remove members of the Giddings board; and may not be
counted in calculating earnings per share; and
(e) defendants failed to disclose that, since the 282,355 options
granted in connection with the Management Purchase Program are subject to the
share option provisions of the
-11-
<PAGE>
Giddings 1993 Stock Incentive Plan, the provisions of the Management Purchase
Program effect and amount to a modification and amendment of the 1993 Plan;
in turn, such an amendment by unilateral action of the Giddings board is
invalid because the 1993 Plan was approved by Giddings shareholders and can
be amended in this respect only but a subsequent shareholder vote, which has
not been obtained or sought.
19. In view of the characteristic of the Management Stock Program
described above, which removes much of the normal risk inherent in true
equity ownership, the statement in the Giddings Proxy Statement that the
effect of the Management Stock Program is to "align more closely the interests
of management and shareholders" is thoroughly misleading: manifestly, no
public shareholder of Giddings is being given the opportunity to buy Giddings
stock with company-guaranteed loans, company interest payments and company
indemnification against loss and against tax liability.
B. FAILURE TO DISCLOSE THE NON-COMPLIANCE OF THE 1997
ELECTION PROCEDURES WITH GIDDINGS' EXISTING BY-LAWS
20. The publicly disclosed By-laws of Giddings provide for a
"classified" or "staggered" board of directors, I.E., the directors are
divided into three classes with overlapping terms of office. Section 3.01(b)
of the Giddings Bylaws further provides that "[t]he number of directors of
the
-12-
<PAGE>
Corporation shall be eight (8), divided into three (3) classes of three (3),
three (3) and two (2) directors, respectively.*
21. Despite the foregoing, the Giddings Proxy Statement for the April
30, 1997 Annual Meeting indicates that, following the annual meeting, there
will be only SIX directors comprising the Giddings board, instead of the
eight required by the By-laws, and states that Giddings shareholders are
being asked to vote on only two nominees for director of Giddings (Class of
2000).
22. The Proxy Statement fails to disclose that defendants' plan for
a six-person board violates Giddings' own By-laws, which require an
eight-person board and 3-3-2 classes. The Proxy Statement further fails to
disclose why the Giddings board chose to nominate only two directors for the
class of 2000, while the By-laws require a different board structure. The
Proxy Statement further fails to disclose that the By-laws empower the
directors to fill vacancies and fails to disclose what consideration
defendants have given to filling the two vacancies that will exist after
April 30, 1997 by reason of the defendants' unilateral decision not to permit
the shareholders to fill those seats.
23. Under the foregoing circumstances, the shareholders of Giddings
are being deprived of material information. They are being asked to vote for
nominees to a board which
-13-
<PAGE>
defendants have structured in clear violation of Giddings' Bylaws. No
information has been provided in the Proxy Statement as to why the defendants
have chosen to deviate from the Bylaws. Indeed, the Proxy Statement does not
even make reference to the By-law requirements of an eight-person board and
classes of 3, 3 and 2.
C. ERRORS AND OMISSIONS IN GIDDINGS' PUBLIC DISCLOSURES
CONCERNING THE GIDDINGS "POISON PILL"
24. In 1995, Giddings adopted a "poison pill" shareholder rights
plan under which Giddings distributed a security known as a right to
shareholders (the "Right"). The Right entitles shareholders to purchase shares
of Giddings, under certain circumstances, on economic terms that impose a
substantial economic penalty on would-be acquirors of Giddings. Among the
events that cause the exercisability of the Rights to be triggered is the
acquisition by any person, in a transaction that is not approved by the
Giddings board, of more than 20% of Giddings' stock. The "poison pill" is
thus a defensive measure that, unless voluntarily redeemed by Giddings' board
of directors, can completely prevent an acquisition from occurring, since the
would-be acquiror will be unwilling or unable to purchase shares if such
purchases would trigger the exercise of the rights and thus impose a large
economic penalty on the acquiror.
-14-
<PAGE>
25. The existence of Giddings' rights plan requires plaintiffs to
conduct and win a proxy contest to replace Giddings' existing board if
plaintiffs are to be sure of their ability to consummate the tender offer.
Under the terms of the existing Giddings' poison pill rights plan, the Rights
can be rendered inapplicable to plaintiffs' offer and tender offer either by
Giddings' current directors or by their duly elected successors. At the
special meeting of shareholders which plaintiffs are seeking to convene, the
director nominees proposed by plaintiffs will be pledged to render the Rights
inapplicable to plaintiffs' offer.
26. For the reasons set forth above, the rights plan is a powerful
weapon. It permits the incumbent directors to entrench themselves and prevent
the consummation of plaintiffs' tender offer, even if the non-management
shareholders -- who control 98% of the outstanding shares -- wish to sell
their shares to plaintiffs in their premium tender offer. It permits the
individual defendants to continue the profligate compensation and other
policies that have separated top management's personal economic interests
from those of Giddings' public shareholders and employees.
-15-
<PAGE>
(i.) MISCHARACTERIZATION OF MARKET PRICE
CALCULATION FOR EXERCISE OF FLIP-IN/
FLIP-OVER RIGHTS
27. Because the rights plan is a powerful weapon, which may
powerfully affect the value of Giddings shareholders' investments,
disclosures about it are of great materiality. Giddings' disclosures about
its rights plan are inaccurate in numerous respects. Thus, under the rights
plan, each Right represents the right to purchase one one-hundredth of a
preferred share upon the terms and subject to the conditions set forth in the
Rights Agreement. Upon the occurrence of certain events enumerated in the
Rights Agreement, the Rights become exercisable into the common stock of
Giddings, under certain circumstances, and into the common stock of a
potential acquiring company, under other circumstances, in both cases instead
of preferred shares of Giddings. In either case, the number of shares of such
common stock into which the Right becomes exercisable is determined on the
basis of the "current per share market price" of such common stock.
28. In the Rights Agreement, the phrase "current per share market
price" is defined as the average of the daily closing prices per share of the
common stock for the 30 consecutive trading days immediately prior to the
date the market price is to be determined. However, in Giddings' Registration
Statement on Form 8-A (the "Form 8-A"), filed with the SEC on
-16-
<PAGE>
August 23, 1995 to register the Rights, Giddings gave examples of how to
calculate the conversion of the Rights, explaining that "if at the time of
such transaction the acquiring company's common stock WAS TRADING at $20 per
share. . . ." (emphasis added). This characterization misrepresents the terms
of the Rights Agreement, which provides for a 30-day average for purposes of
calculating a current market value of the common stock, which, under certain
circumstances, could yield a significantly different result.
(ii.) MISLEADING CHARACTERIZATION OF CERTAIN
TRIGGERING EVENTS AS "SELF-DEALING"
29. Section 11 (a)(ii)(C) of the Rights Agreement lists certain
actions by any Acquiring Person (as defined therein) that trigger a
conversion (a "Flip In") of the Rights into a right to receive shares of
common stock of Giddings rather than the Preferred Shares. Such actions
include: (a) merging into or otherwise combining with Giddings; (b) a
transfer of assets to Giddings in exchange for common stock; (c) the sale,
purchase, lease or other disposition to, from or with Giddings of assets on
terms and conditions less favorable to Giddings than Giddings would be able
to obtain through arm's length negotiation with an unaffiliated third party;
(d) receipt of compensation from Giddings other than compensation for
full-time employment as a regular employee at rates in accordance with
Giddings' past practice; and/or (e) receipt of
-17-
<PAGE>
the benefit of any loans, advances or other financial assistance or tax
credits or other tax advantage provided by Giddings.
30. In the Giddings Form 8-A referenced above, Giddings did not
describe or list the aforementioned actions, stating instead that a Flip In
would result if, among other things, an Acquiring Person (as defined in the
Rights Agreement) "engages in one of a number of SELF-DEALING transactions
specified in the Rights Agreement. . . ." (emphasis added). The term
"self-dealing transaction" is nowhere defined in either the Form 8-A or the
Rights Agreement itself. Moreover, the term "self-dealing transaction" is a
misleading and inaccurate description of at least some of the triggering
actions. The mere receipt by an Acquiring Person of compensation on a
part-time basis or pursuant to a consulting arrangement, or the acquisition
by an Acquiring Person of additional stock in connection with a sale of
assets to Giddings, without more, cannot be described under all circumstances
as "self-dealing," but such actions would appear to trigger a Flip In under
the Rights Agreement. Giddings' public filings thus materially misrepresent
the circumstances which may trigger the Rights.
DEFENDANTS' VIOLATION OF THEIR FIDUCIARY DUTIES
31. As directors of Giddings, the individual defendants owe
fiduciary duties to the shareholders of Giddings,
-18-
<PAGE>
including plaintiffs. They are in effect trustees for the shareholders, and
are required to consider the interests of the shareholders (along with any
other considerations appropriate under Wisconsin law) above their own
personal interests. In the context of a proposed change of control, such as
is presented by plaintiffs' tender offer and special meeting proxy contest,
directors face a grave potential conflict of interest, since their wish to
retain the privileges of office may conflict with their obligation
single-mindedly to advance the best interests of their shareholders and other
corporate constituencies.
32. The individual defendants have already demonstrated that they
lack sufficient regard for their fiduciary duties and that, in their zeal to
profit from and retain their control of Giddings, they are unwilling to abide
by their fiduciary responsibilities. Thus:
(a) the individual defendants authorized the Management Purchase
Program, which contains provisions amounting to corporate waste and
demonstrates a greater concern for the financial welfare of insiders and
executives than for the shareholders of Giddings; and
(b) by his reaction to plaintiffs' attempts to discuss a
consensual transaction during the week of April 21, 1997, defendant Isles
demonstrated that he is not prepared to
-19-
<PAGE>
act in furtherance of his fiduciary duties but is motivated by a desire to
remain entrenched in office and more concerned about retaining his executive
perquisites than in fulfilling his responsibilities under Wisconsin law.
33. By virtue of the foregoing facts, Plaintiffs accordingly have
reasonable grounds to believe that defendants will misuse Giddings' "poison
pill" shareholder rights plan -- whose only proper purposes are to protect
shareholders against coercive and illegitimate takeover tactics and unfair or
inadequate offers -- to block shareholder consideration of plaintiffs' offer
- -- notwithstanding that that offer is extended to all Giddings' shareholders
on an equal basis, is fully financed and is for all cash at a very
substantial premium to the market price of Giddings' stock. Plaintiffs' offer
cannot be perceived by any reasonable businessperson or fiduciary as an
unfair or inadequate offer -- particularly in light of Giddings' history of
business reversals and substandard stock performance. Nor -- given that
plaintiffs are giving shareholders an opportunity to vote at a special
meeting for directors pledged to enable shareholders to consider the offer --
can plaintiffs' offer be reasonably perceived as coercive or illegitimate.
Under these circumstances, Giddings and the individual directors are
obligated to redeem the Giddings rights plan for plaintiffs' offer or any
fully financed, all-cash all-share offers at prices of $19 and above. However,
-20-
<PAGE>
defendants have by their conduct indicated that they wrongfully intend not to
do so.
34. Plaintiffs are commencing their effort to convene a special
meeting of Giddings' shareholders in accordance with the By-laws of Giddings
as they presently exist. Those By-law provisions, with which plaintiffs have
fully complied and with which they will continue to comply, detail a lengthy,
tortuous process by which the holders of 10% of Giddings' shares can convene
a special meeting. Plaintiffs are confident that, at such special meeting,
shareholders will vote for democracy and replace the incumbent directors with
plaintiffs' designees.
35. However, for that very reason, and based on the other facts
alleged herein, plaintiffs believe that defendants may either (a) purport to
"interpret" the complex By-law provisions, and/or make determinations about
plaintiffs' good faith attempts to comply therewith, with a view to
precluding or delaying the holding of the special meeting or (b) purport to
amend the By-laws to make it still more difficult to convene such a meeting.
Directors determined to oppose an unsolicited acquisition offer frequently
resort to changes in and/or overly tortured interpretations of, by-laws and
shareholder meeting
-21-
<PAGE>
procedures in their efforts to stymie and defeat the acquisition proposal.
Accordingly, while Giddings has not yet announced any such interpretations or
amendments, upon information and belief, defendants and their advisers are
now considering such measures. Any determination by defendants that the
plaintiffs have not complied with Giddings' existing By-laws would lack a
good faith basis; and any changes to Giddings' By-laws -- whether by
"interpretation" or amendments -- insofar as they may affect the ability of
Giddings' shareholders to change the composition of Giddings' board within
the time periods currently established would serve no legitimate purpose and
would clearly constitute unlawful entrenchment by the individual defendants
in violation of their fiduciary duties.
36. Giddings' response to plaintiffs' offer indicates that
defendants are entrenched in their corporate offices and intend to obstruct
the appropriate and proper consideration of plaintiffs' offer by the Giddings
board and by Giddings' shareholders, including the convening of a special
meeting of Giddings shareholders. By so entrenching themselves, defendants
have violated and are continuing to violate their fiduciary duties.
IRREPARABLE INJURY
37. Plaintiffs' efforts to restore financial strength to Giddings
through a business combination with
-22-
<PAGE>
Harnischfeger is a platform that plaintiffs believe will enjoy enormous and
widespread support among the non-management shareholders of Giddings. The
proxy contest and tender offer are classic instances of shareholder
democracy and are extensively regulated by federal law. Federal law provides
plaintiffs with the federal right to make a nationwide tender offer and close
the offer upon a federally-specified time schedule, and federal law provides
the plaintiffs with the right to solicit proxies nationwide. These federal
provisions are substantive efforts by the federal government to promote
shareholder democracy, to guarantee a free market in corporate control and to
promote the national economic welfare by providing for efficient allocation
of economic resources. To the extent defendants, by improperly manipulating
the corporate machinery of Giddings, seek to impinge upon or frustrate the
exercise of plaintiffs, right to seek to effect a business combination with
Giddings, they will cause irreparable harm to plaintiffs, to all the public
shareholders of Giddings, and to the public interest.
38. With respect to the disclosure violation, of defendants,
Gidding shareholders are currently suffering irreparable harm because they
are making investment decisions concerning Giddings, and will shortly be
making voting decisions concerning Giddings, on the basis of misleading or
false information.
-23-
<PAGE>
COUNT I
(Against All Defendants)
39. Plaintiffs repeat and reallege the allegations contained in
paragraphs 1 through 38 herein.
40. By virtue of the foregoing, defendants have violated, and are
continuing to violate, the provisions of the federal securities laws, and the
SEC rules and regulations promulgated thereunder, specifically Sections 10(b)
and 14(a) of the 1934 Act, 15 U.S.C. (S)(S) 78j(b), 78n(a) and SEC Rule 10b-5
and Regulation 14A, 17 C.F.R. (S)(S) 240.10b-5, 240.14a, ET SEQ., requiring
that SEC filings and public statements by an issuer, such as Giddings,
including proxy statements, be accurate in all material respects and contain no
misleading statements or material omissions.
41. Plaintiffs have no adequate remedy at law.
COUNT II
(Against All Individual Defendants)
42. Plaintiffs repeat and reallege the allegations contained in
paragraphs 1 through 38 above.
43. As directors of Giddings, the individual defendants are
controlling persons within the meaning of Section
-24-
<PAGE>
20(a) of the 1934 Act and have the responsibility of insuring that the public
filings of Giddings are accurate in all material respects. Defendants have
failed to discharge this responsibility by affirmatively causing, or
recklessly failing to prevent, the errors and omissions in Giddings' public
disclosures.
44. Plaintiffs have no adequate remedy at law.
COUNT III
45. Plaintiffs repeat and reallege the allegations contained in
paragraphs 1 through 38 above.
46. By virtue of the foregoing, the individual defendants have
breached, are breaching and threaten to breach their fiduciary duties to the
shareholders of Giddings.
47. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment against defendants, as follows:
A. Declaring and decreasing that any proxies obtained by
defendants through the use of the Giddings 1997 Proxy Statement are null and
void, except such proxies as may be obtained following correction,
supplementation and appropriate dissemination of the proxy materials to
correct the defects alleged herein;
-25-
<PAGE>
B. Declaring and decreeing that, in the event no relief is granted
prior to holding of the Giddings 1997 Annual Meeting, the results of the
election be set aside and the Court order a new election to be held upon
accurate and correct proxy disclosures;
C. Granting temporary, preliminary and permanent injunctive relief:
1. Requiring defendants to make full, complete and accurate
disclosure with respect to, INTER ALIA, the Management Stock Purchase Program,
the violation of Giddings' By-laws that would result from the board structure
as proposed in the 1997 Proxy Statement, and the terms and characteristics of
Giddings' "poison pill" Shareholders Rights Plan;
2. Requiring defendants to redeem, or cause the redemption of, the
Giddings share purchase rights (the "poison pill" rights);
3. Prohibiting defendants from amending the Rights Plan in any way
other than to cause its withdrawal or redemption, and prohibiting defendants
from issuing any similar or additional rights having the same or similar
characteristics as the existing Rights; and
-26-
<PAGE>
4. Prohibiting defendants from, without shareholder approval,
amending, deleting or modifying any provision of Giddings' existing By-laws
(including without limitation Sections 2.03, 2.05, 2.06, 2.08, 2.15, 3.01 and
xx.02 thereof) or Restated Articles of Incorporation (including without
limitation Article 5 thereof) that relate to the right of shareholders to
call a Special Meeting and/or to take action at a Special Meeting to amend
Giddings' By-Laws or remove members of Giddings' board of directors; and
-27-
<PAGE>
D. Granting such other and further relief as the Court may deem
just and proper.
Dated: Milwaukee, Wisconsin
April 25, 1997
QUARLES & BRADY
411 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202-4497
(414) 277-5000
By:/s/ W. Stuart Parsons
---------------------------------
W. Stuart Parsons
Bruce Bauer
Attorneys for Plaintiffs
Harnischfeger Industries, Inc.
and DSFA Corporation
Of Counsel:
K. Thor Lundgren
3600 South Lake Drive
St. Francis, Wisconsin 53235
(414) 486-6844
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, NY 10019
(212) 403-1000
-28-
<PAGE>
EXHIBIT 99.11
STATE OF WISCONSIN CIRCUIT COURT MILWAUKEE COUNTY
- --------------------------------------------------------------------------------
CHARLES MILLER
23 Park Circle
Great Neck, NY 11024;
and
BRICKELL PARTNERS,
A Florida Partnership,
Individually and on Behalf of
Those Persons Similarly Situated, CASE NO: 97CV003823
-------------------
Plaintiffs, Other Injunction or
Restraining Order 30704
Declaratory Judgment 30701
v. Unclassified 30703
GIDDINGS & LEWIS, INC.
A Wisconsin Corporation
142 Doty Street
Fond Du Lac, WI 54935;
JOSEPH R. COPPOLA,
Giddings & Lewis
142 Doty Street
Fond Du Lac, WI 54935;
MARVIN L. ISLES,
Giddings & Lewis
142 Doty Street
Fond Du Lac, WI 54935;
RICHARD C. KLEINFELDT, [STAMP]
66 Pheasant Drive
Fond Du Lac, WI 54935;
RUTH M. DAVIS,
The Aerospace Corp.
2350 E. El Segundo Blvd.
El Segundo, CA 90245;
BENJAMIN F. GARMER, III,
Foley & Lardner
Firstar Center
777 East Wisconsin Avenue
Milwaukee, WI 53202
CLYDE H. FOLLEY,
12141 Turtle Beach Road
North Palm Beach, FL 33408;
BEN R. STUART,
Dresser Industries, Inc.
2001 Ross Avenue, Box 718
<PAGE>
Dallas, TX 75221;
JOHN A. BECKER,
114 W. Miller Drive
Mequon, WI 53092
JOHN W. GUFFEY, JR.,
2010 Despond Lane
Charlotte, NC 28226
Defendants.
- -------------------------------------------------------------------------------
CLASS ACTION COMPLAINT
- -------------------------------------------------------------------------------
Plaintiffs, by their attorneys, allege upon personal knowledge as to
their own acts and upon information and belief as to all other matters, as
follows:
NATURE OF THE ACTION
1. This is a stockholders' class action lawsuit brought on behalf of
the public stockholders of Giddings and Lewis, Inc. ("Giddings" or the
"Company") who have been, and continue to be, deprived of the opportunity to
realize fully the benefits of their investment in the Company. The individual
defendants have wrongfully refused to properly consider a BONA FIDE offer for
the Company from Harnischfeger Industries, Inc. ("Harnischfeger"), announced
on April 25, 1997, which presents an excellent opportunity to keep the
Giddings & Lewis jobs in Wisconsin. Their actions constitute unfair dealing
and a breach of fiduciary duty to maximize shareholder value. The individual
defendants are using their fiduciary positions of control over Giddings to
thwart others in their legitimate attempts to acquire the Company, and the
individual defendants are trying to entrench themselves in their positions
with Giddings.
<PAGE>
PARTIES
2. Plaintiffs are and, at all relevant times, have been the owner of
shares of Giddings common stock.
3. Giddings is a corporation duly organized and existing under the
laws of the State of Wisconsin. The Company maintains its principal place of
business at 142 Doty Street, Fond Du Lac, Wisconsin 54935. Giddings designs
and produces large, high-precision industrial automation systems, including
automated machine tools, smart manufacturing systems, and related products.
As of September 29, 1996, Giddings had approximately 33.12 million shares of
common stock outstanding and approximately 2,352 stockholders of record.
Giddings' stock trades on the NASDAQ National Market System.
4. Defendant Joseph R. Coppola ("Coppola"), prior to March 1997, was
the Chief Executive Officer of Giddings. Coppola, prior to April 30, 1997,
was also the Chairman of the Board of Directors and since that time Coppola
has been Vice Chairman of the Company. At all relevant times, Coppola has
been a member of Giddings' board of directors.
5. Defendant Marvin I. Isles ("Isles") has been, at all relevant
times, President and, since March of 1997, Chief Executive Officer of
Giddings. Isles has also served as the Chairman of the Board of Directors
since April 30, 1997.
6. Defendant Richard C. Kleinfeldt ("Kleinfeldt") has been, at all
relevant times, Vice President, Secretary and a director of Giddings.
7. Defendants Ruth M. Davis, Benjamin F. Garmer, III, Clyde H. Folley,
Ben R. Stuart, John A. Becker, and John W. Guffey, Jr., have been, at all
times material hereto, directors of Giddings.
<PAGE>
8. The individuals identified in paragraphs 4 through 7 are
collectively referred to throughout this complaint as the "Individual
Defendants."
9. The Individual Defendants, by reason of their corporate
directorship and/or executive positions, stand in a fiduciary position
relative to the Company's shareholders, which fiduciary relationship, at all
times relevant herein, required the defendants to exercise their best
judgment, and to act in a prudent manner and in the best interests of the
Company's shareholders.
CLASS ACTION ALLEGATIONS
10. Plaintiffs bring this case on their own behalf and as a class
action, pursuant to Wis. Stat. Section 803.08, on behalf of all
stockholders of the Company, except defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants, who will be threatened with injury arising from defendants'
actions as is described more fully below (the "Class").
11. This action is properly maintainable as a class action.
12. The class is so numerous that joinder of all members is
impracticable. The Company has thousands of stockholders who are scattered
throughout the United States.
13. There are questions of law and fact common to the Class including,
INTER ALIA, whether:
a. defendants have breached their fiduciary duties owed by them to
plaintiffs and other members of the Class by failing and refusing to attempt
in good faith to maximize shareholder value in the sale of Giddings;
<PAGE>
b. defendants have breached or aided and abetted the breach of the
fiduciary duties owed by them to plaintiffs and other members of the Class;
c. defendants, through use of a Poison Pill, engaged in a plan and
scheme to thwart and reject BONA FIDE offers and proposals from third
parties, including Harnischfeger; and
d. plaintiffs and the other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if
so, what is the proper remedy and/or measure of damages.
14. Plaintiffs are committed to prosecuting the action and have
retained competent counsel experienced in litigation of this nature.
Plaintiffs' claims are typical of the claims of the other members of the
Class and plaintiffs have the same interests as the other members of the
Class. Plaintiffs are adequate representatives of the Class.
15. The prosecution of separate actions by individual members of the
Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would as a practical matter be
dispositive of the interests of the other members not parties to the
adjudications or substantially impair or impede their ability to protect
their interests.
16. The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary
and final injunctive relief on behalf of the Class as a whole is appropriate.
<PAGE>
SUBSTANTIVE ALLEGATIONS
17. On April 25, 1997, after a failed attempt to negotiate a
transaction directly with Giddings' management, Harnischfeger announced that
it would immediately commence an all-cash tender offer for all outstanding
shares of Giddings (the "Tender Offer").
18. The Tender Offer was priced at $19.00 for each outstanding share of
Giddings stock. The terms of Tender Offer also provided that Harnischfeger
would assume $116 million of Giddings debt. The Tender Offer has a total
transaction value of approximately $747 million and was not subject to any
financing contingencies.
19. The $19.00 per share offering price is approximately 40% over the
Company's unaffected stock price of $13.65 per share on the day prior to the
announcement of the Tender Offer. The premium offered by the Harnischfeger
Tender Offer is even more attractive in light of the fact that the Company's
earnings over the 1996 fiscal year have steadily eroded and the fact that
Giddings took a $64.1 million charge relating to equipment problems at two of
its largest customer's plants.
20. As Harnischfeger's Tender Offer was premised upon publicly
available information, Harnischfeger stated that they would like to continue
to negotiate with the Giddings' board to formulate a mutually agreeable
transaction and invited the Giddings Board to immediately commence
negotiations of a definitive agreement containing mutually agreed upon terms
and conditions.
21. Giddings instead responded to the Tender Offer by urging
shareholders not to tender any shares and arguing that the true value of
Giddings stock was
<PAGE>
not accurately reflected in the marketplace. Giddings has taken no measures
to seriously consider, evaluate or study the Tender Offer.
22. In 1995, Giddings established a preferred stock purchase rights plan
(the "Poison Pill") which made it prohibitively expensive for a company to
acquire Giddings without the blessing of the present management. Under the
Plan, shareholders have the right to purchase one preferred stock purchase
right for each common share held if one person or group acquires more than
20% of the Company stock. In a transaction involving a merger or business
combination, the holder of the preferred stock purchase right would be
entitled to buy a number of the acquiring company's common shares having a
market value of twice the exercise price of each purchase right. As further
evidence of the Individual Defendants' intransigence, Giddings has provided
no assurance that the Poison Pill would be waived even if the public property
tendered their shares to Harnischfeger.
23. Giddings represents a highly attractive acquisition candidate.
Defendants' conduct would ensure their continued positions within the Company
but deprive the Company's public shareholders of the premium that
Harnischfeger is prepared to pay, or of the enhanced premium that further
negotiation or exposure of Giddings to the market could provide.
24. The continual rebuff of Harnischfeger's offers to negotiate and the
wrongful use of the Poison Pill has the force and effect of entrenching the
Individual Defendants in their corporate offices against any real or
perceived threat to their control, and dramatically impairs the rights of
Class members to exercise freedom of choice in a proxy contest or to avail
themselves of a BONA FIDE offer to purchase their shares by an acquiror, such
as Harnischfeger, unfavored by incumbent management.
<PAGE>
25. This fundamental shift of control of the Company's destiny from the
hands of its shareholders to the hands of the Individual Defendants results
in a heightened fiduciary duty of the Individual Defendants to consider, in
good faith, a third party bid, such as Harnischfeger, and further requires
the Individual Defendants to pursue a third party's interest in acquiring the
Company and to negotiate in good faith with a bidder on behalf of the
Company's shareholders.
26. The purpose, intent and effect of the Poison Pill, in the face of a
pending offer for the Company, is to thwart, deter, impede, and delay the
acquisition of Giddings by Harnischfeger or any other suitor.
27. Defendants' recalcitrance to consider and promptly act upon
Harnischfeger's Tender Offer has no valid business purpose, and simply
evidences their disregard for the premium being offered to Giddings'
shareholders. By failing to meet and negotiate or offer to meet and negotiate
with Harnischfeger, defendants are depriving plaintiffs and the Class of the
right to share in the assets and businesses of Giddings and receive the
maximum value for their shares.
28. Defendants owe fundamental fiduciary obligations to Giddings's
stockholders to take all necessary and appropriate steps to maximize the
value of their shares. In addition, the Individual Defendants have the
responsibility to act independently so that the interests of the Company's
public stockholders will be protected, to seriously consider all BONA FIDE
offers for the Company, and to conduct fair and active bidding procedures or
other mechanisms for checking the market to assure that the highest possible
price is achieved. Further, the directors of Giddings must adequately ensure
that no conflict of interest exists between the Individual Defendants' own
interests and their fiduciary
<PAGE>
obligations to maximize stockholder value or, if such conflicts exist, to
insure that all such conflicts will be resolved in the best interests of the
Company's stockholders.
29. Because defendants dominate and control the business and corporate
affairs of Giddings and because they are in possession of private corporate
information concerning Giddings's assets, businesses and future prospects,
there exists an imbalance and disparity of knowledge of economic power
between defendants and the public stockholders of Giddings. This discrepancy
makes it grossly and inherently unfair for defendants to entrench themselves
at the expense of its public stockholders.
30. The Individual Defendants have breached their fiduciary and other
common law duties owed to plaintiffs and other members of the Class in that
they have not and are not exercising independent business judgment and have
acted and are acting to the detriment of the Class.
31. In connection with the conduct described herein, the Individual
Defendants breached their fiduciary duties by, among other things:
a. failing to properly the Harnischfeger Tender Offer without
fully informing themselves about or intentionally ignoring the
future prospects of a combined Giddings/Harnischfeger company,
or the intrinsic worth of Harnischfeger, and
b. failing and refusing to meet with representatives of
Harnischfeger.
32. Defendants have refused to take those steps necessary to ensure
that Giddings's stockholders will receive maximum value for their shares of
Giddings stock. Defendants have thus refused to seriously consider the
pending offer, and have failed to
<PAGE>
announce any active auction or open bidding procedures best calculated to
maximize shareholder value in selling the Company.
33. The Individual Defendants are acting to entrench themselves in
their offices and positions and maintain their substantial salaries and
perquisites, all at the expense and to the detriment of the public
stockholders of Giddings.
34. By the acts, transactions and courses of conduct alleged herein,
the Individual Defendants, individually and as part of a common plan and
scheme in breach of their fiduciary duties and obligations, are attempting
unfairly to deprive plaintiffs and other members of the Class of the premium
they could realize in an acquisition transaction and to ensure continuance
of their positions as directors and officers, all to the detriment of
Giddings's public stockholders. The Individual Defendants have been engaged
in a wrongful effort to entrench themselves in their offices and positions of
control and prevent the acquisition of Giddings except on terms that would
further their own personal interests.
35. As a result of the actions of the Individual Defendants, plaintiffs
and the other members of the Class have been and will be damaged in that they
have not and will not receive their fair proportion of the value of
Giddings's assets and businesses and/or have been and will be prevented from
obtaining a fair and adequate price for their shares of Giddings's common
stock.
36. Plaintiffs seek preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiffs and the Class of their rights to realize a full and fair
value for their stock at a premium over the market price, by unlawfully
entrenching themselves in their positions of control, and to compel
defendants to carry out their fiduciary duties to maximize shareholder value.
<PAGE>
37. Only through the exercise of this Court's equitable powers can
plaintiffs be fully protected from the immediate and irreparable injury which
defendants' actions threaten to inflict. Defendants are precluding the
stockholders' enjoyment of the full economic value of their investment by
failing to proceed expeditiously and in good faith to evaluate and pursue a
premium acquisition proposal that would provide consideration for all shares
at an attractive price.
38. Unless enjoined by the Court, defendants will continue to breach
their fiduciary duties owed to plaintiffs and the members of the Class,
and/or aid and abet and participate in such breaches of duty, and will
prevent the sale of Giddings at a substantial premium, all to the irreparable
harm of plaintiffs and other members of the Class.
39. Plaintiffs and the Class have no adequate remedy at law
WHEREFORE, plaintiffs demand judgment as follows:
(a) Declaring this to be a proper class action and certifying
plaintiffs as class representatives;
(b) Ordering the Individual Defendants to carry out their
fiduciary duties to plaintiffs and the other members of the Class by
announcing their intention to:
(i) cooperate fully with any entity or person, including
Harnischfeger, having a BONA FIDE interest in proposing any transactions that
would maximize shareholder value, including but not limited to, a merger or
acquisition of Giddings;
(ii) immediately undertake an appropriate evaluation of
Giddings's worth as a merger/acquisition candidate;
<PAGE>
(iii) take all appropriate steps to enhance Giddings's value
and attractiveness as a merger/acquisition candidate;
(iv) take all appropriate steps to effectively expose
Giddings to the marketplace in an effort to create an active auction of the
Company;
(v) act independently so that the interests of the
Company's public stockholders will be protected; and
(vi) adequately ensure that no conflicts of interest exist
between the Individual Defendants' own interest and their fiduciary
obligation to maximize shareholder value or, in the event such conflicts
exist, to ensure that all conflicts of interest are resolved in the best
interests of the public stockholders of Giddings;
(c) Ordering the Individual Defendants, jointly and severally to
account to plaintiffs and the Class for all damages suffered and to be
suffered by them as a result of the acts and transactions alleged herein;
(d) Awarding plaintiffs the costs and disbursements of this
action, including a reasonable allowance for plaintiffs' attorneys' and
expert' fees; and
<PAGE>
(e) Granting such other and further relief as may be just and
proper.
Dated: May 6, 1997
Susan LaCava, S.C.
By: /s/ Susan LaCava
-------------------------
Susan LaCava
23 North Pinckney Street
Suite 300
Madison, WI 53703
(608) 258-1335
Wis. Atty No. 1010779
Attorneys for Plaintiff
<PAGE>
OF COUNSEL:
WECHSLER HARWOOD
HALEBIAN & FEFFER LLP
Robert I. Harwood, Esq.
Matthew M. Houston, Esq.
805 Third Avenue
New York, NY 10022
(212) 935-7400
GARWIN, BRONZAFT,
GERSTEIN & FISHER LLP
Scott Fisher, Esq.
1501 Broadway
New York, NY 10036
(212) 398-0055
<PAGE>
Exhibit 99.12
For Immediate Release
FOR INFORMATION:
Douglas E. Barnett Patricia B. Meinecke Mike Pascale/Rhonda Barnat
Giddings & Lewis, Inc. Giddings & Lewis, Inc. Abernathy MacGregor
Vice President and Director of 212/371-5999
Controller Communications
414/929-4374 414/929-4212
NEWS RELEASE
GIDDINGS & LEWIS, INC. SETS RECORD DATE FOR
SHAREHOLDERS ENTITLED TO DEMAND A SPECIAL MEETING
FOND DU LAC, WISCONSIN, May 8, 1997 -- Giddings & Lewis, Inc. (NASDAQ: GIDL)
announced today that its Board of Directors has set the close of business on
May 16, 1997 as the record date for determining shareholders entitled to
demand a special meeting of the company's shareholders. Under the company's
By-laws and the Wisconsin Business Corporation Law, shareholders holding at
least 10% of the company's outstanding common stock are entitled to demand
that a special meeting of the company's shareholders be called. This action
follows the receipt by the company of a notice by Harnischfeger Industries,
Inc. to the company requesting that the Board of Directors of the company fix
such a record date.
Headquartered in Fond du Lac, Wisconsin, Giddings & Lewis, Inc. is the
largest supplier of industrial automation products and machine tools in North
America, and among the largest in the world. The company serves customers
worldwide with products and services to improve manufacturing productivity.
To receive Giddings & Lewis's latest news at no charge via fax, simply call
Company News On Call, 1-800-758-5804, ext. 119821. Internet address:
http://www.giddings.com
<PAGE>
RESOLUTIONS FOR THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS OF GIDDINGS & LEWIS, INC.
I. RESOLUTIONS AUTHORIZING AMENDMENT OF THE SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN.
WHEREAS, the standard Supplemental Executive Retirement Plan ("SERP") in
effect for designated officers and executives of Giddings & Lewis, Inc.
requires modification to clarify when accrued benefits vest under the
SERP, generally, and to coordinate more effectively with the Company's
Key Executive Employment and Severance Agreements in effect for
substantially the same group of Company officers and executives.
NOW, THEREFORE, BE IT RESOLVED, that the Company is authorized to enter
into an agreement amending the SERP of each officer or executive as
follows:
To provide for vesting of accrued SERP benefits concurrently with
vesting of accrued benefits under the Funded Plan (as that term is defined in
the SERP). Such amendment shall modify Section 2 of each SERP by adding new
subparagraph E thereto as follows:
E. VESTING. The Executive's benefits accrued under the Plan shall be
fully vested and nonforfeitable coincident with the vesting of the
Executive's accrued benefits under the Funded Plan.
To provide for full vesting of any nonvested SERP benefit upon a
"Change in Control of the Company" (as that term is defined in the SERP).
Such amendment shall modify Section 3 of each SERP to read in its entirety as
follows:
3. VESTING UPON CHANGE IN CONTROL OF THE COMPANY. Notwithstanding
the provisions of subparagraph E of Section 2, the Executive's benefits
accrued under the Plan shall be fully vested and nonforfeitable coincident
with the date of a Change in Control of the Company.
