<PAGE>
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 30, 1998
Commission File Number 1-11160
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2617871
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
2121 San Jacinto Street
Suite 2500, L. B. 31
Dallas, Texas 75201
- ------------------------------- -------------------
(Address of principal executive (Zip Code)
offices)
(Registrant's telephone number, including area code) (214) 953-4500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X . No. .
----- -----
At June 12, 1998, 22,039,455 shares of Common Stock, par value $0.25, of the
Registrant were outstanding.
<PAGE>
Page 1 of 19
Exhibit Index Appears on Page 19
INDEX
Page
Number
- ------
Part I. Financial Information
Management's Representation 3
Consolidated Condensed Statements of Earnings for
the three and the six months ended April 30, 1998 and
1997 4
Consolidated Condensed Balance Sheets as of
April 30, 1998 and October 31, 1997 5 - 6
Consolidated Condensed Statements of Cash Flows
for the six months ended April 30, 1998 and 1997 7
Notes to Consolidated Condensed Financial Statements 8 -12
Management's Discussion and Analysis 13 -17
Part II. Other Information
Submission of Matters to a Vote of Security Holders 18
Exhibits and Reports on Form 8-K 18
Signature 19
2
<PAGE>
PART I
FINANCIAL INFORMATION
MANAGEMENT'S REPRESENTATION
The consolidated condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed. The Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated condensed financial statements should be read in conjunction
with the financial statements and the notes to consolidated financial statements
included in the Annual Report, Form 10-K for the fiscal year ended October 31,
1997.
In the opinion of the Company, all adjustments have been included that were
necessary to present fairly the financial position of Global Industrial
Technologies, Inc. and subsidiaries as of April 30, 1998; the results of
operations for the three and the six months ended April 30, 1998 and 1997; and
the cash flows for the six months ended April 30, 1998 and 1997. These
adjustments consisted of normal recurring adjustments. The results of
operations for such interim periods do not necessarily indicate the results for
the full year.
3
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
April 30, April 30,
--------------------- --------------------
1998 1997 1998 1997
--------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net sales and operating revenues $ 121.6 $ 124.7 $ 230.0 $ 233.4
Other 0.3 0.3 0.7 0.6
--------- --------- --------- ---------
Total Revenues 121.9 125.0 230.7 234.0
--------- --------- --------- ---------
Costs and Expenses
Cost of sales 94.6 93.1 179.4 173.6
Selling, engineering, administrative and
general expenses 20.7 22.1 44.3 43.8
Interest expense 2.5 2.5 5.1 5.1
Special charges 0.0 20.5
Other - net 3.2 (2.0) 3.9 (0.6)
--------- --------- --------- ---------
Total Costs and Expenses 121.0 115.7 232.7 242.4
--------- --------- --------- ---------
Earnings (loss) from continuing operations
before income taxes 0.9 9.3 (2.0) (8.4)
Income tax (provision) benefit (0.1) (2.2) 0.6 2.2
--------- --------- --------- ---------
Earnings (loss) from continuing operations 0.8 7.1 (1.4) (6.2)
Discontinued operations:
Earnings from discontinued operations less applicable
income taxes of $.8, $1.1, $1.8 and $1.7 2.1 3.1 5.1 5.0
Gain on disposal of discontinued operations
less applicable income taxes of $40.2 86.1 86.1
--------- --------- --------- ---------
Net earnings (loss) $ 89.0 $ 10.2 $ 89.8 $ (1.2)
========= ========= ========= =========
Basic earnings (loss) per common share:
Continuing operations $ 0.03 $ 0.31 $ (0.07) $ (0.27)
========= ========= ========= =========
Discontinued operations $ 4.02 $ 0.14 $ 4.16 $ 0.22
========= ========= ========= =========
Net earnings (loss) $ 4.05 $ 0.45 $ 4.09 $ (0.05)
========= ========= ========= =========
Diluted earnings (loss) per common share:
Continuing operations $ 0.03 $ 0.31 $ (0.07) $ (0.27)
========= ========= ========= =========
Discontinued operations $ 3.99 $ 0.14 $ 4.16 $ 0.22
========= ========= ========= =========
Net earnings (loss) $ 4.02 $ 0.45 $ 4.09 $ (0.05)
========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
April 30, 1998 October 31, 1997
ASSETS (Unaudited)
- ------ -------------- ----------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 46.8 $ 14.9
Notes and accounts receivable
Public 118.1 113.7
Unconsolidated affiliates 4.9 5.1
-------- -------
123.0 118.8
Less allowance for doubtful accounts 5.4 3.2
-------- -------
117.6 115.6
Inventories
Finished products and work in process 46.1 59.1
Raw materials and supplies 49.2 41.6
-------- -------
95.3 100.7
-------- -------
Deferred income taxes 36.3 56.1
Asbestos insurance recoveries receivable 66.8 65.1
Prepaid expenses 10.0 3.7
-------- -------
Total Current Assets 372.8 356.1
Investments in Unconsolidated Affiliates 5.8 5.3
Noncurrent Deferred Income Taxes 35.9 28.7
Goodwill - net 55.0 80.4
Other Assets 90.0 93.5
Property, Plant and Equipment - at cost
Land, land improvements and mineral deposits 35.5 34.0
Buildings 90.8 81.3
Machinery and equipment 333.2 355.9
-------- -------
459.5 471.2
Less accumulated depreciation, depletion and amortization 208.2 228.2
-------- -------
Total properties - net 251.3 243.0
-------- -------
Total Assets $ 810.8 $ 807.0
-------- -------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
April 30, 1998 October 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
- ------------------------------------ -------------- ----------------
<S> <C> <C>
Current Liabilities
Accounts payable $ 41.5 $ 46.2
Notes payable and current portion of long-term debt 3.3 47.2
Advances from customers on contracts 1.5 5.0
Accrued compensation and benefits 12.5 26.6
Insurance reserves 9.9 11.7
Income taxes currently payable 33.1 13.6
Current deferred income taxes 13.2 14.1
Asbestos related liabilities 55.1 56.9
Other accrued liabilities 36.5 24.1
-------- --------
Total Current Liabilities 206.6 245.4
Long-term Debt 104.1 151.8
Pension Plans and Other Retiree Benefits 51.0 47.6
Noncurrent Deferred Income Taxes 17.4 17.0
Other Liabilities 61.2 61.1
Shareholders' Equity
Common stock 6.8 6.8
Capital in excess of par value 381.8 382.1
Retained earnings 115.3 25.5
Cumulative translation adjustment (53.1) (50.3)
Treasury stock, at cost (74.6) (73.7)
Other (5.7) (6.3)
-------- --------
Total Shareholders' Equity 370.5 284.1
-------- --------
Total Liabilities and Shareholders' Equity $ 810.8 $ 807.0
-------- --------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Six months ended
April 30,
--------------------
1998 1997
---------- ---------
(Unaudited)
Cash flows from operating activities
Net earnings (loss) $ 89.8 $ (1.2)
Adjustments to reconcile net earnings to cash flow
Depreciation, depletion and amortization 11.6 10.9
Equity in loss of unconsolidated affiliate 0.5
Deferred income tax benefit (0.8) (0.2)
Gain on sale of discontinued operations (86.1) -
Special charges 20.5
Decrease in receivables 3.7 1.2
Increase in inventories (13.2) (9.8)
Increase in asbestos insurance recoveries receivable (5.3) (2.7)
Decrease in accrued compensation (12.3) (9.7)
Decrease in accounts payable and accrued liabilities (13.4) (3.9)
Increase (decrease) in advances from customers (3.5) 1.0
Increase (decrease) in income taxes payable 0.2 (9.5)
Other - net (7.6) (1.9)
-------- -------
Net cash used by operating activities (36.4) (5.3)
-------- -------
Cash flows from investing activities
Proceeds from sale of discontinued operations 217.5 -
Business acquisitions (8.4) -
Business disposals - 1.7
Liquidation of investment in unconsolidated subsidiary - 14.9
Settlement payment on asset sales (5.3)
Capital expenditures (28.6) (27.5)
-------- -------
Net cash (used) by investing activities 175.2 (10.9)
-------- -------
Cash flows from financing activities
Proceeds from borrowings 75.2 18.1
Reduction of debt (181.3) (1.3)
Options exercised under employee benefit plans 1.9 0.6
Purchase of common shares (2.6) (5.3)
-------- -------
Net cash (used) by financing activities (106.8) 12.1
-------- -------
Effect of translation adjustments on cash (0.1) 0.2
-------- -------
Net increase (decrease) in cash and cash equivalents 31.9 (3.9)
Cash and cash equivalents, beginning of period 14.9 11.5
-------- -------
Cash and cash equivalents, end of period $ 46.8 $ 7.6
======== =======
See accompanying Notes to Consolidated Condensed Financial Statements
7
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1998
NOTE A - INTRODUCTION
The Company, Global Industrial Technologies, Inc. (Global) together with its
subsidiaries and unconsolidated joint ventures conducts its business in five
segments: Specialty Equipment Products, Refractory Products, Minerals, Forged
Products, and Industrial Tool.
NOTE B - INVENTORIES
The determination of inventory values and cost of sales under the LIFO method
for interim financial results are based on management's estimates of expected
year-end inventories.
NOTE C DISCONTINUED OPERATIONS
On March 12, 1998, the Company sold the Industrial Tool segment, including the
common stock of INTOOL, Inc. (the U.S. subsidiary operating in this segment) and
the assets of Industrial Tool operations in Canada, Mexico, the Netherlands and
Germany, for cash consideration of $217.5 million. The Industrial Tool segment
manufactured and sold a completed product line of high-quality pneumatic and
electric tools for industrial applications, including assembly and material
removal. Revenues of the Industrial Tool segment were $14.2 million for the
period from February 1, 1998 to March 12, 1998, $28.6 million for the quarter
ended April 30, 1997, $42.9 million for the period from November 1, 1997 to
March 12, 1998 and $51.9 million for the six months ended April 30, 1997.
In connection with the sale of the Industrial Tool segment, the Company retained
certain pension, and postretirement benefits. The Company also retained
liability for certain legal claims, primarily for known claims of alleged
hearing loss and other injuries associated with the use of the Company's
products, and for one-half of any such additional claims made for a period of
five years following the closing date. See description of these claims in Note
H to the Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1997.
8
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1998
NOTE D - ACQUISITIONS
The Company has outstanding a tender offer to purchase all outstanding shares of
A.P. Green Industries, Inc. at $22 per share, or approximately $195 million.
The offer is pending Federal Trade Commission approval. A.P. Green, with
headquarters in Mexico, Mo., reported sales and operating revenues of $277.9
million for 1997. It has 22 plants located in the U.S., Canada, Mexico,
Colombia, the U.K. and Indonesia, manufacturing refractory products used in the
processing of steel and other materials, chemicals, glass, ceramics, paper and
cement. A.P. Green also produces lime used in the manufacture of steel,
aluminum, pulp and paper processing, soil stabilization for road construction,
and water purification.
NOTE E - CONTINGENCIES
The Company and its subsidiaries are involved in certain legal actions and
claims arising in the ordinary course of business. See NOTE H to Consolidated
Financial Statements contained in the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1997.
NOTE F - EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (FAS 128). The Company
adopted FAS 128 during the quarter ended January 31, 1998, and earnings per
share amounts for all periods presented in the accompanying condensed
consolidated statement of operations are calculated and presented in accordance
with FAS 128. The statement specifies new standards for the computation and
presentation of earnings per share, requiring the presentation of both "basic"
and "diluted" earnings per share. Basic earnings per share is calculated as net
earnings divided by average common shares outstanding. Diluted earnings per
share is calculated including the dilutive effects of potential common shares,
which include the Company's stock options and deferred compensation units.
9
<PAGE>
GOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1998
NOTE F - EARNINGS PER SHARE (Cont'd)
A reconciliation of the numerator and denominator of the calculations for the
three and the six month periods ended April 30, 1998 and 1997 is presented
below.
<TABLE>
<CAPTION>
Three months ended Six months ended
April 30 April 30
-------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Earnings (loss) from continuing operations $ .8 $ 7.1 $ (1.4) $ (6.2)
Earnings from discontinued operations 88.2 3.1 91.2 5.0
------- ------- ------- -------
Net earnings (loss) $ 89.0 $ 10.2 $ 89.8 $ (1.2)
======= ======= ======= =======
Denominator:
Weighted average shares outstanding 21.9 22.5 21.9 22.6
------- ------- ------- -------
Potential common shares:
Stock options 0.2 0.3 - -
Deferred compensation units - - - -
------- ------- ------- -------
Total potential common shares 0.2 - - -
------- ------- ------- -------
Denominator for diluted earnings (loss) per common share 22.1 22.8 21.9 22.6
------- ------- ------- -------
Basic earnings (loss) per common share:
Continuing operations $ 0.03 $ 0.31 $ (0.07) $ (0.27)
======= ======= ======= =======
Discontinued operations $ 4.02 $ 0.14 $ 4.16 $ 0.22
======= ======= ======= =======
Net earnings (loss) $ 4.05 $ 0.45 $ 4.09 $ (0.05)
======= ======= ======= =======
Diluted earnings (loss) per common share:
Continuing operations $ 0.03 $ 0.31 $ (0.07) $ (0.27)
======= ======= ======= =======
Discontinued operations $ 3.99 $ 0.14 $ 4.16 $ 0.22
======= ======= ======= =======
Net earnings (loss) $ 4.02 $ 0.45 $ 4.09 $ (0.05)
======= ======= ======= =======
</TABLE>
10
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1998
NOTE F - EARNINGS PER SHARE (Cont'd)
Outstanding options to purchase 539,400 shares were excluded from the three and
the six months ended April 30, 1998 diluted earnings per share calculation as
the exercise prices associated with the options exceeded the average market
value of the Company's common shares. Deferred compensation units representing
234,450 potential common shares were excluded from the April 30, 1998 diluted
earnings per share calculations for the three and the six months, as the effect
of inclusion in the calculation would be anti-dilutive.
11
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1998
NOTE G - INFORMATION BY INDUSTRY SEGMENT
Sales and operating profit results are presented below for the three and the six
months ended April 30, 1998 and 1997.
<TABLE>
<CAPTION>
Three months ended Six months ended
April 30 April 30
-------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------
(In Millions)
<S> <C> <C> <C> <C>
Sales and operating revenues:
Refractory Products $ 87.6 $ 84.0 $ 165.1 $ 157.7
Minerals 11.3 13.6 21.2 26.7
Specialty Equipment Products 11.9 18.7 24.3 31.9
Forged Products 15.0 14.8 26.5 27.5
Intersegment sales (4.2) (6.4) (7.1) (10.4)
------- ------- ------- -------
Total sales and operating revenues $ 121.6 $ 124.7 $ 230.0 $ 233.4
======= ======= ======= =======
Operating Profit (Loss):
Refractory Products $ 8.2 $ 8.6 $ 12.5 $ 13.4
Minerals .5 1.7 0 3.6
Specialty Equipment Products (1.6) 1.6 (1.8) 1.5
Forged Products .5 3.3 1.6 6.2
Equity in net loss of affiliate (.5) 0 (.5) 0
------- ------- ------- -------
Subtotal $ 7.1 $ 15.2 $ 11.8 $ 24.7
------- ------- ------- -------
General corporate expenses (6.2) (5.9) (13.8) (12.6)
Special charges (20.5)
------- ------- ------- -------
Earnings (loss) from continuing operations
before income taxes $ .9 $ 9.3 $ (2.0) $ (8.4)
======= ======= ======= =======
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
- ---------------------
The financial results for the three months and six months ended April 30, 1998
reflect a more focused strategy for the Company on four major business segments,
refractory products, minerals, forged products and specialty equipment. On
March 12, 1998, the Company partially implemented this strategy by selling all
of its interest in INTOOL, Inc. for $217.5 million to Cooper Industries and
exiting the industrial tool business. On March 3, 1998 the Company signed an
Agreement and Plan of Merger with A.P. Green Industries, Inc. ("Green") pursuant
to which it made on March 6, 1998, a tender offer to purchase all of the
outstanding shares of common stock of Green, a U.S. refractory products and
services company with annual revenues of $277.9 million. The purchase of Green,
combined with the Company's existing refractory operations will create a
refractory and minerals business with annual revenues of approximately $650
million. The Company also made the decision to close manufacturing facilities in
Wakefield, England. Further, costs incurred to start up production of
undercarriage products at Ameri-Forge in Houston continued throughout the second
quarter of 1998.
The Company reported a net loss of $1.4 million, or $.07 per share, from
continuing operations for the first six months of 1998 compared to a net loss of
$6.2 million, or $.27 per share for the prior year. The six months ended April
30, 1997, included a $20.5 million pre-tax charge to earnings related to the
divestiture of three businesses. Excluding the effect of the pre-tax charge to
earnings in 1997, earnings from continuing operations were down from the prior
year primarily due to lower sales volume from the Corrosion Technology business
associated with a drop in copper prices from Asian economic conditions, start-up
expenses for the Ameri-Forge undercarriage division, production delays in the
minerals segment, and a charge to close down the Wakefield, England
manufacturing operations. Discontinued operations, including the $86.1 million
gain on the sale of the Industrial Tool segment, contributed $91.2 million, or
$4.16 per share for the six months. In the prior year, the Industrial Tool
contribution was $5.0 million, or $.22 per share.
For the quarter ended April 30, 1998, earnings from continuing operations were
$.8 million, or $.03 per share compared to $7.1 million, or $.31 per share, for
the same period in 1997. The decrease from the prior year was also due to lower
sales volume from the Corrosion Technology business, start-up costs for the
undercarriage division of Ameri-Forge, and the charge to close down the
Wakefield, England manufacturing operations. Selling, general & administrative
costs decreased from the same period last year due primarily to fixed cost
reductions in the refractory operation. Discontinued operations' earnings for
the 1998 second quarter were $88.2 million, or $4.02 basic earnings per share,
and $3.99 per share on a diluted basis, due to the gain on the sale of INTOOL,
Inc. Second quarter earnings for discontinued operations in 1997 were $3.1
million or $.14 per share.
Revenues of $230 million were slightly less than the $233.4 million reported for
the same period in 1997. The decrease occurred in the quarter ending April 30,
1998, in which revenues of $121.6 million were reported compared to $124.7
million for the second quarter of the prior year. Segment operating profit of
$11.8 million for the first six months of 1998, decreased 52.2% or $12.9
million, from the 1997 $24.7 million amount. Segment operating profit in the
second quarter of $7.1 million was 53.2% below the prior year second quarter
operating profit of $15.2 million. See the segment results for further
information.
Total costs and expenses for the six months of 1998 were $232.7 million, down
$9.7 million, or 4%, from $242.4 million for the same period in 1997. Costs of
sales were $179.4 million, or 3% higher than the prior year period. Selling,
engineering and administrative and general expenses of $44.3 million for the six
months of 1998 were slightly higher when compared to $43.8 million for 1997. The
expense of $3.9 million in other - net for the first half of 1998, compares to
income of $.6 million for the same period of 1997. The 1998 expense includes a
$2.4 million provision for closing the processing equipment manufacturing
operations in Wakefield, England and $.5 million in losses from a joint venture
in the Minerals segment; reported under the equity method.
13
<PAGE>
RESULTS OF OPERATIONS (cont'd)
- ------------------------------
Global's consolidated backlog of unshipped orders was $126.6 million at April
30, 1998, compared to $138.1 million at October 31, 1997 and $147.1 million at
April 30, 1997. The decrease primarily relates to a reduction in the number of
new orders received from Corrosion Technology's international customers in the
copper industry and in refractory products exported to Southeast Asia.
SEGMENT RESULTS
- ---------------
Refractory Products
- -------------------
Revenues for the six months of fiscal 1998 of $165.1 million were up 4.7%
compared to 1997 revenues of $157.7 million for the same period. For the second
quarter, revenues of $87.6 million increased 4%, from $84.0 million for the
prior year second quarter. The increase in sales is primarily due to the
contribution from the Aken and Lota Green acquisitions which were not reflected
in 1997 results. However, the increase was partially offset by lower sales in
the North American division than in the first six months of the prior year. Last
year's results for the same period included partial shipments on the largest
order ever received by Harbison-Walker Refractories Company, which was completed
in October, 1997. In addition, economic conditions in Asia adversely affected
international sales in the second quarter.
Operating profit for the first six months in 1998 was $12.5 million, which was
down $.9 million, or 6.7%, from $13.4 million in 1997. For the second quarter,
operating profit of $8.2 million was 5% less than the $8.6 million reported in
the 1997 quarter. While revenues were higher for the periods presented,
operating profit was adversely affected by exchange losses in Mexico and Chile
of $.5 million and slightly lower margins in the U.S. when compared to the same
period in 1997.
Minerals
- --------
Minerals revenues of $21.2 million for the first six months of 1998 were down
21% from $26.7 million for the same period of 1997; and down $2.3 million, or
17%, at $11.3 million in the second 1998 quarter compared to $13.6 million in
1997. Operating earnings were down $3.6 million from the prior year six month
profit of $3.6 million; and down $1.2 million, or 70%, at $.5 million in the
second 1998 quarter from $1.7 million for the year earlier quarter. Revenues and
earnings for both the quarter and six-month period reflect lower magnesite sales
to Europe and Southeast Asia compared to the prior year. Further, the
unfavorable exchange rates between the U. S. Dollar and European currencies had
an adverse impact on the ability to competitively price exports. Production
interruptions for the new Spinel product contributed to reduced operating
profits for the quarter, but have now been resolved.
14
<PAGE>
Specialty Equipment Products
- ----------------------------
The Specialty Equipment Products segment consists of Corrosion Technology
International (CTI) and the Global Processing Group. Revenues for the six
months of $24.3 million are down $7.6 million, or 24%, from $31.9 million in
1997. For the quarter, revenues were $6.8 million, or 36%, less at $11.9 million
than the 1997 second quarter $18.7 million. Operating losses in the six months
of 1998 of $1.8 million were down from $1.5 million in earnings for the first
half of 1997. The second quarter $1.6 million operating loss for 1998 compared
to profits of $1.6 million in 1997.
The significant drop in copper, zinc and nickel commodity prices during the
first quarter of fiscal 1998 had a material adverse effect on results for the
first six months. Also, economic conditions in Asia stalled sales of nonferrous
metals refining equipment and, as a result, depressed CTI sales and operating
profits. CTI has taken steps to decrease its dependency on the nonferrous metals
markets by forming a business alliance with Anticorrosivos Industriales Ltda.
("ANCOR"), which will enhance the development of broader polymer concrete
applications and markets including pulp and paper, food processing, municipal
infrastructure, and chemical processing. This new alliance will encompass
operating facilities in the United States, Europe, Asia, Australia and Latin
America, effective May 1, 1998. However, it is not expected to have a material
impact on the Company's results of operations for the remainder of fiscal
1998.
Processing Equipment revenues and operating profits are slightly below prior
year to date and second quarter levels primarily due to the timing of new
machine shipments. The Company decided at the beginning of the second quarter to
close its processing equipment manufacturing operation in Wakefield, England
which incurred losses of $.2 million in the first quarter of 1998. A pre-tax
charge of $2.4 million has been provided for closing the manufacturing
operations, and is included in the segment results for the second quarter and
six months of 1998.
Forged Products
- ---------------
Revenues for the Forged Products segment remained level for the six months and
second quarter at $26.5 million and $15.0 million, respectively, compared to
1997 figures of $27.5 million and $14.8 million. Operating profits for the six
month period of $1.6 million compared unfavorably to $6.2 million from the prior
year due in part to significant costs incurred to start production of
undercarriage products. In addition, the industrial flange division experienced
lower production this year due to equipment maintenance problems. For the second
quarter, the segment reported operating profits of $.5 million compared to $3.3
million for the same period in 1997. The decrease from the prior year for the
quarter is primarily due to start-up costs in the undercarriage division.
15
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
- ----------------------------------------------------
Cash and cash equivalents were $46.8 million at April 30, 1998, $31.9 million
higher than at October 31, 1997. The net cash used by operating activities was
$36.4 million for the first six months of fiscal 1998, which consists mostly of
a decrease in accounts payable and accrued liabilities during the period of
$13.4 million, a decrease in accrued compensation of $12.3 million and an
increase in inventories of $13.2 million. The investing activities consisted of
$217.5 million in proceeds from the sale of the Industrial Tool segment; $28.6
million for capital expenditures at the operating units; a $5.3 million purchase
price adjustment on the sale in 1997 of the surface mining equipment assets;
$4.5 million for the acquisition of the previously mentioned German refractory
operation; and $3.9 million in expenditures related to the pending acquisition
of A.P. Green. Also, a portion of the proceeds from the Industrial Tool sale
provided funds for a net repayment of Company debt of $106.1 million.
The Company's current ratio at April 30, 1998 of 1.8 to 1 improved, primarily as
a result of the reduction in notes payable, from the October 31, 1997 ratio of
1.45 to 1. The Company had outstanding debt of $107.4 million at April 30, 1998
compared to $199 million at October 31, 1997. In January of this year, the
Company purchased all of the outstanding shares of Magnesitwerk Aken GmbH for 15
million deutsche marks (approximately USD$8.4 million), and assumed 25.4 million
deutsche marks (approximately USD$14.2 million) in non-recourse debt. Also,
approximately $35 million of Green debt will be either assumed or refinanced
upon the merger of Green with a subsidiary of the Company, through existing
credit lines of the Company.
The Company had $30.1 million in cash and cash equivalents on hand at April 30,
1998, and committed and discretionary unused lines of credit aggregating an
additional $260 million. The Company intends to use its cash balances and unused
credit lines to fund its tender offer for Green, cash-out stock options of Green
employees which are vested at the date of merger, and pay transaction and
other post-acquisition integration expenses.
16
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------
Statements the Company may publish that are not strictly historical are
"forward-looking" statements under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Although the Company believes the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
realized. Forward-looking statements involve known and unknown risks which may
cause the Company's actual results and corporate developments to differ
materially from those expected. Factors that could cause results and
developments to differ materially from the Company's expectations include,
without limitation, changes in manufacturing and shipment schedules, delays in
completing plant construction and acquisitions, currency exchange rates, new
product and technology developments, competition within each business segment,
cyclicality of the markets for the products of a major segment, litigation,
significant cost variances, the effects of acquisitions and divestitures, and
other risks described from time to time in the Company's SEC reports including
quarterly reports on Form 10-Q, annual reports on Form 10-K and reports on Form
8-K.
17
<PAGE>
PART II
OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
(a) The annual meeting of shareholders of the Registrant was held on
March 18, 1998.
(b) At the meeting, David H. Blake and Richard W. Vieser were elected
Directors to serve for terms expiring at the annual meeting of
shareholders to be held in 2001. Samuel B. Casey, Jr., Rawles
Fulgham and J.L. Jackson continued in office as Directors after
the meeting.
Nominees: For Withheld Non-Votes
--------- --- -------- ---------
David H. Blake 19,518,654 469,940 0
Richard W. Vieser 19,504,552 484,042 0
(c) The shareholders voted at the meeting upon a proposal to amend and
restate the Stock Option Plan for Non-Employee Directors to, among
other things, provide for the limited transferability of options
granted thereunder and to increase the number of shares subject to
the plan by 180,000. The results of the voting on such proposal
were as follows:
Shares Shares Number
Voted Voted of
For Against Abstentions
--- ------- -----------
18,907,438 987,852 93,304
The shareholders also voted at the meeting upon a proposal to
approve certain amendments to the Registrant's 1992 Stock
Compensation Plan to, among other things, increase the total
number of shares of Common Stock for which options may be granted
by 800,000 and provide a limit upon the number of shares for which
an employee may receive grants under the plan over any consecutive
three-year period. The results of the voting on such proposal were
as follows:
Shares Shares Number
Voted Voted of
For Against Abstentions
--- ------- -----------
18,762,591 1,141,052 84,951
Item 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2 Agreement and Plan of Merger with A.P. Green Industries, Inc.
and BGN Acquisition, Inc., a wholly owned subsidiary of the
Company (Incorporated by reference to Exhibit (c)(1) of
the Company's Schedule 14D-1, filed March 6, 1998).
2.1 Purchase and Sale Agreement dated March 3, 1998 among Cooper
Power Tools, Inc. and GPX Corp. and Cooper Industries, Inc.
and the Company (Incorporated by reference to Exhibit 2 to
Form 8-K, Current Report, dated March 30, 1998).
2.2 Amendment to Purchase and Sale Agreement dated March 12, 1998
among Cooper Power Tools, Inc. and GPX Corp. and Cooper
Industries, Inc. and the Company (Incorporated by
reference to Exhibit 2.1 to Form 8-K, Current Report, dated
March 30, 1998).
4 First Amendment to Rights Agreement, dated as of February 16,
1998, between the Company and the Rights Agent
(Incorporated by reference to Exhibit 1 to Form 8-A/A, For
Registration of Certain Classes of Securities Pursuant to
Section 12(B) or 12(G) of the Securities Exchange Act of
1934, dated March 12, 1998).
10 Severance Agreement dated February 23, 1998 by and between
the Company and J.L. Jackson.
10.1 Severance Agreement dated February 23, 1998 by and between
the Company and Mr. Graham L. Adelman (Severance Agreements
dated February 23, 1998 by and between the Company and
Messrs. Juan M. Bravo and Herbert Linser, omitted and
identified on a Schedule to Omitted Documents filed
herewith).
10.2 Severance Agreement dated February 23, 1998 between the
Company and George W. Pasley (Severance Agreements dated
February 23, 1998 between the Company and James B. Alleman
and Maurice W. Barrett omitted and identified on a Schedule
of Omitted Documents, filed herewith.).
(b) During the second quarter ended April 30, 1998, the Company filed
(i) a Current Report on Form 8-K, dated March 3, 1998, reporting
that the Company's wholly-owned subsidiary BGN Acquisition, Inc.
entered into an Agreement and Plan of Merger with A.P. Green
Industries, Inc. and (ii) a Current Report on Form 8-K, dated
March 30, 1998, reporting that the Company had completed the sale
of its industrial tool business, including the shares of its
INTOOL, Incorporated subsidiary, to Cooper Power Tools, Inc., a
subsidiary of Cooper Industries, Inc. pursuant to a Purchase and
Sale Agreement dated March 3, 1998, as amended March 12, 1998. The
Current Report on Form 8-K, dated March 30, 1998 contained an
Unaudited Proforma Consolidated Condensed Balance Sheet as of
January 31, 1998 of the Company and its subsidiaries, and an
Unaudited Proforma Consolidated Condensed Statement of Earnings of
the Company and its subsidiaries.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBAL INDUSTRIAL TECHNOLOGIES, Inc.
By: /s/ DONNA A. REEVES
------------------------------------------
Donna A. Reeves
Vice President - Controller
(Authorized Officer and
Chief Accounting Officer)
Dated: June 22, 1998
19
<PAGE>
EXHIBIT 10
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 23rd day of February, 1998 by
and between Global Industrial Technologies, Inc. a Delaware corporation (the
"Company"), and J. L. Jackson ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to secure Executive's
continued services and to ensure Executive's continued dedication to his duties
in the event of any threat or occurrence of a Change in Control (as defined in
Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
-----------
have the respective meanings set forth below:
(a) "Applicable Period" means (i) three (3) years if Executive's
Date of Termination occurs prior to January 1, 1999, (ii) two (2) years if
Executive's Date of Terminations occurs after January 1, 1999, but prior to
January 1, 2000 and (iii) one (1) year if Executives Date of Termination's
occurs after January 1, 2000, but prior to January 1, 2001.
(b) Average Bonus Fractions means a fraction, where the numerator
is the aggregate bonus compensation Executive has received during the
lesser of (i) the two (2) year period immediately preceding the year in
which the Date of Termination occurs or (ii) Executive's period of
employment immediately preceding the year in which the Date of Termination
occurs and the denominator is the aggregate amount of base salary that
Executive has received during the relevant period in clause (i) or (ii)
above, as the case may be.
<PAGE>
denominator is the aggregate amount of base salary that Executive has
received during the relevant period in clause (i) or (ii) above, as the may
be.
(c) "Board" means the Board of Directors of the Company.
(d) "Bonus Amount" means the product of (i) Executive's current
annual rate of base salary on the Date of Termination (or, if greater, the
base salary in effect on the date of a Change in Control) and (ii) the
Average Bonus Fraction.
(e) "Cause" means (i) the willful and continued failure of
Executive to perform substantially his duties with the Company (other than
any such failure resulting from Executive's incapacity due to physical or
mental illness or any such failure subsequent to Executive being delivered
a Notice of Termination without Cause by the Company (or delivering a
Notice of Termination for Good Reason to the Company) after a written
demand for substantial performance is delivered to Executive by the Board
which specifically identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties, or (ii) the
willful engaging by Executive in illegal conduct or gross misconduct which
is demonstrably and materially injurious to the Company or its affiliates.
For purpose of this paragraph (e), no act or failure to act by Executive
shall be considered "willful" unless done or omitted to be done by
Executive in bad faith and without reasonable belief that Executive's
action or omission was in the best interests of the Company or its
affiliates. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board, based upon the advice of counsel
for the Company or upon the instructions of the Company's chief executive
officer or another senior officer of the Company shall be conclusively
presumed to be done, or omitted to be done, by Executive in good faith and
in the best interests of the Company. Cause shall not exist unless and
until the Company has delivered to Executive a copy of a resolution duly
adopted by three-quarters (3/4) of the entire Board (excluding Executive if
Executive is a Board member) at a meeting of the Board (after reasonable
notice to Executive and an opportunity for Executive, together with
counsel, to be heard before the Board at such meeting), finding that in the
good faith opinion of the Board an event set forth in clauses (1) or (2)
has occurred and specifying the particulars thereof in detail. The Company
must notify Executive of any event constituting Cause within ninety (90)
days following the Company's knowledge of its existence or such event shall
not constitute Cause under this Agreement.
(f) "Change in Control" means the occurrence of any one of the
following events:
(i) individuals who, on February 23, 1998, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a
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<PAGE>
majority of the Board, provided that any person becoming a director
subsequent to February 23, 1998, whose election or nomination for
election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of
the proxy statement of the Company in which such person is named as a
nominee for director, without written objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
-------- -------
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be
deemed to be an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in this
-------- -------
paragraph (ii) shall not be deemed to be a Change in Control by virtue
of any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Qualifying Transaction (as
defined in paragraph (iii)), or (E) pursuant to any acquisition by
Executive or any group of persons including Executive (or any entity
controlled by Executive or any group of persons including Executive);
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company
or any of its Subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities
in the transaction (a "Business Combination"), unless immediately
following such Business Combination: (A) 60% or more of the total voting
power of (x) the corporation resulting from such Business Combination
(the "Surviving Corporation"), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of 100%
of the voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by Company Voting
Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such Business
-3-
<PAGE>
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit
plan (or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the beneficial
owner, directly or indirectly, of 30% or more of the total voting power
of the outstanding voting securities eligible to elect directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation of
the Business Combination were Incumbent Directors at the time of the
Board's approval of the execution of the initial agreement providing for
such Business Combination (any Business Combination which satisfies all
of the criteria specified in (A), (B) and (C) above shall be deemed to
be a "Non-Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company
shall not be deemed to occur solely because any person acquires beneficial
ownership of more than 30% of the Company Voting Securities as a result of
the acquisition of Company Voting Securities by the Company which reduces
the number of Company Voting Securities outstanding; provided, that, if
after such acquisition by the Company such person becomes the beneficial
owner of additional Company Voting Securities that increases the percentage
of outstanding Company Voting Securities beneficially owned by such person,
a Change in Control of the Company shall then occur.
(g) "Date of Termination" means (i) the effective date on which
Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the
other, delivered pursuant to Section 13 or (ii) if Executive's employment
by the Company terminates by reason of death, the date of death of
Executive.
(h) "Disability" means termination of Executive's employment by the
Company due to Executive's absence from Executive's duties with the Company
on a full-time basis for at least one hundred eighty (180) consecutive days
as a result of Executive's incapacity due to physical or mental illness.
(i) "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
-4-
<PAGE>
(i) (A) any change in the duties or responsibilities of Executive
that is inconsistent in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the Company
immediately prior to such Change in Control (including any material and
adverse diminution of such duties or responsibilities); provided, however,
-------- -------
that Good Reason shall not be deemed to occur upon a change in duties or
responsibilities that is solely and directly a result of the Company no
longer being a publicly traded entity (other than such change which would
have a material and adverse effect on Executive's duties or
responsibilities) and does not involve any other event set forth in this
paragraph (i) or (B) a material and adverse change in Executive's titles or
offices (including, if applicable, membership on the Board) with the
Company as in effect immediately prior to such Change in Control;
(ii) a reduction by the Company in Executive's rate of annual base
salary or annual target bonus opportunity (including any material and
adverse change in the formula for such annual bonus target) as in effect
immediately prior to such Change in Control or as the same may be increased
from time to time thereafter;
(iii) any requirement of the Company that Executive (A) be based
anywhere more than thirty (30) miles from the office where Executive is
located at the time of the Change in Control or (B) travel on Company
business to an extent substantially greater than the travel obligations of
Executive immediately prior to such Change in Control;
(iv) the failure of the Company to (A) continue in effect any
material employee benefit plan, compensation plan, welfare benefit plan or
fringe benefit plan in which Executive is participating immediately prior
to such Change in Control or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce Executive's
benefits under any such plan, unless Executive is permitted to participate
in other plans providing Executive with substantially equivalent benefits,
or (B) provide Executive with paid vacation in accordance with the most
favorable vacation policies of the Company as in effect for Executive
immediately prior to such Change in Control, including for purposes of both
(A) and (B), the crediting of all service for which Executive had been
credited under such plans and policies prior to the Change in Control;
(v) any refusal by the Company to continue to permit Executive to
engage in activities not directly related to the business of the Company
which Executive was permitted to engage in prior to the Change in Control;
-5-
<PAGE>
(vi) any purported termination of Executive's employment which is
not effectuated pursuant to Section 11(b) (and which will not constitute a
termination hereunder); or
(vii) the failure of the Company to obtain the assumption (and, if
applicable, guarantee) agreement from any successor (and Parent
Corporation) as contemplated in Section 10(b).
An isolated, insubstantial and inadvertent action taken in good
faith and which is remedied by the Company within ten (10) days after receipt of
notice thereof given by Executive shall not constitute Good Reason. Executive's
right to terminate employment for Good Reason shall not be affected by
Executive's incapacities due to mental or physical illness and Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any event or condition constituting Good Reason; provided, however,
-------- -------
that Executive must provide notice of termination of employment within ninety
(90) days following Executive's knowledge of an event constituting Good Reason
or such event shall not constitute Good Reason under this Agreement.
(j) "Qualifying Termination" means a termination of Executive's
employment (i) by the Company other than for Cause or (ii) by Executive for
Good Reason. Termination of Executive's employment on account of death,
Disability or Retirement shall not be treated as a Qualifying Termination.
(k) "Retirement" means Executive's mandatory retirement (not
including any mandatory early retirement) in accordance with the Company's
retirement policy generally applicable to its salaried employees, as in
effect immediately prior to the Change in Control, or in accordance with
any retirement arrangement established with respect to Executive with
Executive's written consent.
(l) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the
election of directors or in which the Company has the right to receive 50%
or more of the distribution of profits or 50% of the assets or liquidation
or dissolution.
(m) "Termination Period" means the period of time beginning with a
Change in Control and ending three (3) years following such Change in
Control. Notwithstanding anything in this Agreement to the contrary, if (i)
Executive's employment is terminated prior to a Change in Control for
reasons that would have constituted a Qualifying Termination if they had
occurred following a Change in Control; (ii) Executive reasonably
demonstrates that such
-6-
<PAGE>
termination (or Good Reason event) was at the request of a third party who
had indicated an intention or taken steps reasonably calculated to effect a
Change in Control; and (iii) a Change in Control involving such third party
(or a party competing with such third party to effectuate a Change in
Control) does occur, then for purposes of this Agreement, the date
immediately prior to the date of such termination of employment or event
constituting Good Reason shall be treated as a Change in Control. For
purposes of determining the timing of payments and benefits to Executive
under Section 4, the date of the actual Change in Control shall be treated
as Executive's Date of Termination under Section 1(g).
2. Obligation of Executive. In the event of a tender or exchange
-----------------------
offer, proxy contest, or the execution of any agreement which, if consummated,
would constitute a Change in Control, Executive agrees not to voluntarily leave
the employ of the Company, other than as a result of Disability, Retirement or
an event which would constitute Good Reason if a Change in Control had occurred,
until the Change in Control occurs or, if earlier, such tender or exchange
offer, proxy contest, or agreement is terminated or abandoned.
3. Term of Agreement. This Agreement shall be effective on the date
-----------------
hereof and shall continue in effect until the first anniversary thereof;
provided, however, that the term of this Agreement shall automatically be
- -------- -------
extended commencing on the first anniversary hereof for successive additional
one (1) year periods unless either party gives written notice not to extend the
term not less than ninety (90) days prior to the then next upcoming expiration
date; provided, further, that notwithstanding the delivery of any such notice,
-------- -------
this Agreement shall continue in effect for a period of three (3) years after a
Change in Control, if such Change in Control shall have occurred during the term
of this Agreement. Notwithstanding anything in this Section to the contrary,
this Agreement shall terminate if Executive or the Company terminates
Executive's employment prior to a Change in Control except as provided in
Section 1(m). Notwithstanding the foregoing, this Agreement shall not be
extended beyond December 31, 2000.
-7-
<PAGE>
4. Payments Upon Termination of Employment.
---------------------------------------
(a) Qualifying Termination. If during the Termination Period the
----------------------
employment of Executive shall terminate prior to January 1, 2001 pursuant to a
Qualifying Termination, then the Company shall provide to Executive:
(i) within ten (10) business days following the Date of
Termination a lump-sum cash amount equal to the sum of (A) Executive's base
salary through the Date of Termination and any bonus amounts which have
become payable, to the extent not theretofore paid or deferred, (B) a pro
---
rata portion of Executive's annual bonus for the fiscal year in which
----
Executive's Date of Termination occurs in an amount at least equal to (1)
Executive's Bonus Amount, multiplied by (2) a fraction, the numerator of
which is the number of days in the fiscal year in which the Date of
Termination occurs through the Date of Termination and the denominator of
which is three hundred sixty-five (365), and reduced by (3) any amounts
paid from the Company's annual incentive plan for the fiscal year in which
Executive's Date of Termination occurs and (C) any accrued vacation pay, in
each case to the extent not theretofore paid; plus
(ii) within ten (10) business days following the Date of
Termination, (A) if such termination occurs prior to January 1, 1999, a
lump-sum cash amount equal to (i) three (3) times Executive's highest
annual rate of base salary during the 12-month period immediately prior to
Executive's Date of Termination, plus (ii) three (3) times Executive's
Bonus Amount, (B) if such termination occurs after January 1, 1999, but
prior to January 1, 2000, a lump-sum cash amount equal to (i) two (2) times
Executive's highest annual rate of base salary during the 12-month period
immediately prior to Executive's Date of Termination, plus (ii) two (2)
times Executive's Bonus Amount and (C) if such termination occurs after
January 1, 2000, but prior to January 1, 2001, a lump-sum cash amount equal
to (i) one (1) times Executive's highest annual rate of base salary during
the 12-month period immediately prior to Executive's Date of Termination,
plus (ii) one (1) times Executive's Bonus Amount.
(b) If during the Termination Period the employment of Executive
shall terminate pursuant to a Qualifying Termination, the Company shall continue
to provide, for the Applicable Period following Executive's Date of Termination,
Executive (and Executive's dependents, if applicable) with the same level of
medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
-------- ----
if Executive cannot continue to participate in the
-8-
<PAGE>
Company plans providing such benefits, the Company shall otherwise provide such
benefits on the same after-tax basis as if continued participation had been
permitted (the Continued Benefits), provided, further, that such Continued
-------- -------
Benefits shall terminate on the date Executive receives substantially equivalent
coverage and benefits, without waiting periods or pre-existing condition
limitations, at the same or lower costs to Executive, taking into consideration
deductibles, premiums, and co-payment requirements, under plans and programs of
a subsequent employer (such coverage, benefits and cost to be determined on a
coverage-by-coverage or benefit-by-benefit basis).
In addition, the Company shall pay to Executive, within ten (10)
business days following his Date of Termination, a lump sum payment in an amount
equal to the sum of (A) and (B), where (A) is the excess, if any, of (i) the
present value of the benefits to which Executive would be entitled under
Company's pension and retirement plans (whether or not intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") if Executive had continued in the employ of the Company for the
Applicable Period following his Date of Termination earning during such
Applicable Period the rate of base salary and Bonus Amount in effect as of his
Date of Termination, over (ii) the present value of the benefit to which
Executive is actually entitled under such pension and retirement plans as of his
Date of Termination and (B) is the present value of the Company contributions
that would have been made under all Company savings programs (whether or not
intended to be qualified under Section 401(a) of the Code) if Executive had
continued in the employ of the Company for the Applicable Period following his
Date of Termination earning during such Applicable Period the rate of base
salary and Bonus Amount in effect as of his Date of Termination, assuming that
the Company would have made the maximum contributions permitted under such
savings programs, and assuming, for purposes of determining the amount of any
Company matching contributions, that Executive would have contributed the amount
necessary to receive the maximum matching contributions available under such
savings programs.
For purposes of the preceding sentence, present value shall be determined as of
the Date of Termination and shall be calculated based upon a discount rate equal
to the applicable Federal rate as provided in Section 1274(b)(2)(B) of the Code
and without reduction for mortality.
(c) If during the Termination Period the employment of Executive
shall terminate other than by reason of a Qualifying Termination, then the
Company shall pay to Executive within thirty (30) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (i) Executive's base
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, and (ii) any accrued
vacation pay, in each case to the extent not theretofore paid.
-9-
<PAGE>
5. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, award, benefit or
distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the Gross-
up Payment in Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made. For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (iii) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-up Payment in the Executive's adjusted gross income.
Notwithstanding the foregoing provisions of this Section 5(a), if it
shall be determined that Executive is entitled to a Gross-Up Payment, but that
the Payments would not be subject to the Excise Tax if the Payments were reduced
by an amount that is less than 10% of the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code, then the amounts
payable to Executive under this Agreement shall be reduced (but not below zero)
to the maximum amount that could be paid to Executive without giving rise to the
Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to
Executive. The reduction of the amounts payable hereunder, if applicable, shall
be made by reducing first the payments under Section 4(a)(ii), unless an
alternative method of reduction is elected by Executive. For purposes of
reducing the Payments to the Safe Harbor Cap, only
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amounts payable under this Agreement (and no other Payments) shall be reduced.
If the reduction of the amounts payable hereunder would not result in a
reduction of the Payments to the Safe Harbor Cap, no amounts payable under this
Agreement shall be reduced pursuant to this provision.
(b) Subject to the provisions of Section 5(a), all determinations
required to be made under Sections 4 and 5, including whether and when a Gross-
Up Payment is required, the amount of such Gross-Up Payment, the reduction of
the Payments to the Safe Harbor Cap and the assumptions to be utilized in
arriving at such determinations, shall be made by a nationally recognized public
accounting firm that is retained by the Company (the "Accounting Firm"). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Executive may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). The Accounting Firm shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from the Company or the Executive that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). All fees and expenses of the Accounting
Firm shall be borne solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection with the performance of
the services hereunder. The Gross-up Payment under this Section 5 with respect
to any Payments shall be made no later than thirty (30) days following such
Payment. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion to such effect, and
to the effect that failure to report the Excise Tax, if any, on Executive's
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. In the event the Accounting Firm determines that
the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive
with a written opinion to such effect. The Determination by the Accounting Firm
shall be binding upon the Company and Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the Determination,
it is possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment") or Gross-up Payments are made by
the Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. In the event the amount of the Gross-up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has
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been made and any such Overpayment (together with interest at the rate provided
in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the
extent he has received a refund if the applicable Excise Tax has been paid to
the Internal Revenue Service) to or for the benefit of the Company. Executive
shall cooperate, to the extent his expenses are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.
6. Confidential Information and Non-Solicitation.
---------------------------------------------
(a) Executive agrees to keep secret and retain in the strictest
confidence all Confidential Information which relates to the Company, its
Subsidiaries and affiliates. "Confidential Information" (a) means
information (i) that is learned by Executive from the Company or any of its
Subsidiaries or affiliates before or after the date of this Agreement
(other than Confidential Information that was known by Executive on a
nonconfidential basis prior to the disclosure thereof), (ii) that is
commercially valuable to the Company and (iii) that is not published or of
public record or otherwise generally known (other than through failure of
Executive to fully perform his obligations hereunder) and (b) includes,
without limitation, customer lists, client lists, trade secrets, pricing
policies and other business affairs of the Company, its Subsidiaries and
affiliates. Executive agrees not to disclose any such Confidential
Information to anyone outside the Company or any of its subsidiaries or
affiliates, whether during or after his period of services with the
Company, except (x) as such disclosure may be required or appropriate in
connection with his service or (y) when required to do so by a court of
law, by any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative body
(including a committee thereof) with apparent jurisdiction to order him to
divulge, disclose or make accessible such information. Executive agrees to
give the Company advance written notice of any disclosure pursuant to
clause (y) of the preceding sentence and to cooperate with any efforts by
the Company to limit the extent of such disclosure. Upon request by the
Company, Executive agrees to deliver promptly to the Company upon
termination of his services from the Company, or at any reasonable time
thereafter as the Company may request, all Company, subsidiary or affiliate
memoranda, notes, records, reports, manuals, drawings, designs, computer
files in any media and other documents (and all copies thereof) relating to
the Company's or any Subsidiary's or affiliates business and all property
of the Company or any Subsidiary or affiliate associated therewith, which
he may then possess or have under his direct control.
(b) Executive hereby covenants and agrees that, at all times during
the term of this Agreement and for a one year period following his Date of
Termination for any reason, Executive shall not employ or seek to employ
any
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person employed at that time by the Company or any of its Subsidiaries or
its affiliates who is engaged in or concerned with or interested in a
business which conducts the same or similar business in any way or degree
in competition with the Company, or otherwise encourage or entice such
person or entity to leave such employment.
7. Withholding Taxes. The Company may withhold from all payments
-----------------
due to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
8. Reimbursement of Expenses. If any contest or dispute shall
-------------------------
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the prime rate of Bank of
America from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from the
date the Company receives Executive's statement for such fees and expenses
through the date of payment thereof, regardless of whether or not Executive's
claim is upheld by a court of competent jurisdiction; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that a court issues a final and non-appealable order setting forth the
determination that the position taken by Executive was frivolous or advanced by
Executive in bad faith.
9. Scope of Agreement. Nothing in this Agreement shall be deemed
------------------
to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as otherwise provided hereunder); provided, however, that any
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termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement.
10. Successors; Binding Agreement.
-----------------------------
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of
this Agreement shall be binding upon the Surviving Corporation, and such
Surviving Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company
unconditionally
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to assume (and for any Parent Corporation in such Business Combination to
guarantee), by written instrument delivered to Executive (or his
beneficiary or estate), all of the obligations of the Company hereunder.
Failure of the Company to obtain such assumption and guarantee prior to the
effectiveness of any such Business Combination that constitutes a Change in
Control, shall be a breach of this Agreement and shall constitute Good
Reason hereunder and shall entitle Executive to compensation and other
benefits from the Company in the same amount and on the same terms as
Executive would be entitled hereunder if Executive's employment were
terminated following a Change in Control by reason of a Qualifying
Termination. For purposes of implementing the foregoing, the date on which
any such Business Combination becomes effective shall be deemed the date
Good Reason occurs, and shall be the Date of Termination if requested by
Executive.
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to such person or persons appointed in writing by Executive
to receive such amounts or, if no person is so appointed, to Executive's
estate.
11. Notice. (a) For purposes of this Agreement, all notices and
------
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
J. L. Jackson
3020 McFarlin Blvd.
Dallas, TX 75205
If to the Company:
Global Industrial Technologies, Inc.
2121 San Jacinto Street, Suite 2500
Dallas, Texas 75201
Attention: General Counsel
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or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) specify the
termination date (which date shall be not less than fifteen (15) (thirty
(30), if termination is by the Company for Disability) nor more than sixty
(60) days after the giving of such notice). The failure by Executive or the
Company to set forth in such notice any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
of Executive or the Company hereunder or preclude Executive or the Company
from asserting such fact or circumstance in enforcing Executive's or the
Company's rights hereunder.
12. Full Settlement. The Company's obligation to make any payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall be in lieu and in full settlement of all other severance
payments to Executive under any other severance or employment agreement between
Executive and the Company, and any severance plan of the Company. The Company's
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Executive or others. In no event shall Executive be obligated to seek
other employment or take other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and, except
as provided in Section 4(b), such amounts shall not be reduced whether or not
Executive obtains other employment.
13. Employment with Subsidiaries. Employment with the Company for
----------------------------
purposes of this Agreement shall include employment with any Subsidiary.
14. Survival. The respective obligations and benefits afforded to
--------
the Company and Executive as provided in Sections 4 (to the extent that payments
or benefits are owed as a result of a termination of employment that occurs
during the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 8, 10(c) and 12 shall survive the termination of this
Agreement.
15. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
-----------------------
PERFORMANCE OF THIS AGREEMENT SHALL BE
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GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS. THE
INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT
AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT,
WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
16. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
17. Miscellaneous. No provision of this Agreement may be modified
-------------
or waived unless such modification or waiver is agreed to in writing and signed
by Executive and by a duly authorized officer of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including without limitation, the right of Executive to terminate employment for
Good Reason, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement. Except as otherwise specifically
provided herein, the rights of, and benefits payable to, Executive, his estate
or his beneficiaries pursuant to this Agreement are in addition to any rights
of, or benefits payable to, Executive, his estate or his beneficiaries under any
other employee benefit plan or compensation program of the Company.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a
duly authorized officer of the Company and Executive has executed this Agreement
as of the day and year first above written.
Global Industrial Technologies, Inc.
By: /s/ Graham L. Adelman
------------------------------------------
Graham L. Adelman
Title: Senior Vice President
General Counsel and Secretary
By: /s/ J.L. Jackson
------------------------------------------
J.L. Jackson
Title: Chairman, Chief Executive Officer
President and Chief Operating Officer
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<PAGE>
Exhibit 10.1
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 23rd day of February, 1998 by and
between Global Industrial Technologies, Inc. a Delaware corporation (the
"Company"), and Graham L. Adelman ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that such
possibility may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined that it is in the
best interests of the Company and its stockholders to secure Executive's
continued services and to ensure Executive's continued dedication to his duties
in the event of any threat or occurrence of a Change in Control (as defined in
Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
-----------
the respective meanings set forth below:
(a) "Average Bonus Fraction" means a fraction, where the numerator is the
aggregate bonus compensation Executive has received during the lesser of (i) the
two (2) year period immediately preceding the year in which the Date of
Termination occurs or (ii) Executive's period of employment immediately
preceding the year in which the Date of Termination occurs and the denominator
is the aggregate amount of base
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salary that Executive has received during the relevant period in clause (i) or
(ii) above, as the case may be.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the product of (i) Executive's current annual rate
of base salary on the Date of Termination (or, if greater, the base salary in
effect on the date of a Change in Control) and (ii) the Average Bonus Fraction.
(d) "Cause" means (i) the willful and continued failure of Executive to
perform substantially his duties with the Company (other than any such failure
resulting from Executive's incapacity due to physical or mental illness or any
such failure subsequent to Executive being delivered a Notice of Termination
without Cause by the Company (or delivering a Notice of Termination for Good
Reason to the Company) after a written demand for substantial performance is
delivered to Executive by the Board which specifically identifies the manner in
which the Board believes that Executive has not substantially performed
Executive's duties, or (ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is demonstrably and materially injurious to the
Company or its affiliates. For purpose of this paragraph (d), no act or failure
to act by Executive shall be considered "willful" unless done or omitted to be
done by Executive in bad faith and without reasonable belief that Executive's
action or omission was in the best interests of the Company or its affiliates.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board, based upon the advice of counsel for the Company or
upon the instructions of the Company's chief executive officer or another senior
officer of the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
Cause shall not exist unless and until the Company has delivered to Executive a
copy of a resolution duly adopted by three-quarters (3/4) of the entire Board
(excluding Executive if Executive is a Board member) at a meeting of the Board
(after reasonable notice to Executive and an opportunity for Executive, together
with counsel, to be heard before the Board at such meeting), finding that in the
good faith opinion of the Board an event set forth in clauses (1) or (2) has
occurred and specifying the particulars thereof in detail. The Company must
notify Executive of any event constituting Cause within ninety (90) days
following the Company's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
(e) "Change in Control" means the occurrence of any one of the following
events:
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<PAGE>
(i) individuals who, on February 23, 1998, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a majority
of the Board, provided that any person becoming a director subsequent to
February 23, 1998, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
written objection to such nomination) shall be an Incumbent Director;
provided, however, that no individual initially elected or nominated as a
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director of the Company as a result of an actual or threatened election
contest with respect to directors or as a result of any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities eligible to vote for the
election of the Board (the "Company Voting Securities"); provided, however,
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that the event described in this paragraph (ii) shall not be deemed to be a
Change in Control by virtue of any of the following acquisitions: (A) by the
Company or any Subsidiary, (B) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph (iii)), or (E) pursuant to any acquisition by Executive or any group
of persons including Executive (or any entity controlled by Executive or any
group of persons including Executive);
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or any
of its Subsidiaries that requires the approval of the Company's stockholders,
whether for such transaction or the issuance of securities in the transaction
(a "Business Combination"), unless immediately following such Business
Combination: (A) 60% or more of the total voting power of (x) the corporation
resulting from such Business Combination (the "Surviving Corporation"), or (y)
if applicable, the ultimate parent corporation that directly or indirectly has
beneficial ownership of 100% of the voting securities eligible to elect
directors of the Surviving Corporation (the "Parent Corporation"), is
represented by Company
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Voting Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or related
trust) sponsored or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or indirectly, of
30% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) and (C) at least a majority of
the members of the board of directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the time
of the Board's approval of the execution of the initial agreement providing
for such Business Combination (any Business Combination which satisfies all of
the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-
Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or substantially
all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 30% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that, if after such acquisition by the
-------- ----
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.
(f) "Date of Termination" means (i) the effective date on which Executive's
employment by the Company terminates as specified in a prior written notice by
the Company or Executive, as the case may be, to the other, delivered pursuant
to Section 13 or (ii) if Executive's employment by the Company terminates by
reason of death, the date of death of Executive.
(g) "Disability" means termination of Executive's employment by the Company
due to Executive's absence from Executive's duties with the Company on a
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full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness.
(h) "Good Reason" means, without Executive's express written consent, the
occurrence of any of the following events after a Change in Control:
(i) any change in the duties or responsibilities of Executive that is
inconsistent in any material and adverse respect with Executive's position(s),
duties, responsibilities or status with the Company immediately prior to such
Change in Control (including any material and adverse diminution of such
duties or responsibilities); provided, however, that Good Reason shall not be
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deemed to occur upon a change in duties or responsibilities that is solely and
directly a result of the Company no longer being a publicly traded entity
(other than such change which would have a material and adverse effect on
Executive's duties or responsibilities) and does not involve any other event
set forth in this paragraph (h) or (B) a material and adverse change in
Executive's titles or offices (including, if applicable, membership on the
Board) with the Company as in effect immediately prior to such Change in
Control;
(ii) a reduction by the Company in Executive's rate of annual base
salary or annual target bonus opportunity (including any material and adverse
change in the formula for such annual bonus target) as in effect immediately
prior to such Change in Control or as the same may be increased from time to
time thereafter;
(iii) any requirement of the Company that Executive (A) be based anywhere
more than thirty (30) miles from the office where Executive is located at the
time of the Change in Control or (B) travel on Company business to an extent
substantially greater than the travel obligations of Executive immediately
prior to such Change in Control;
(iv) the failure of the Company to (A) continue in effect any material
employee benefit plan, compensation plan, welfare benefit plan or fringe
benefit plan in which Executive is participating immediately prior to such
Change in Control or the taking of any action by the Company which would
adversely affect Executive's participation in or reduce Executive's benefits
under any such plan, unless Executive is permitted to participate in other
plans providing Executive with substantially equivalent benefits, or (B)
provide Executive with paid vacation in accordance with the most favorable
vacation policies of the Company as in
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effect for Executive immediately prior to such Change in Control, including
for purposes of both (A) and (B), the crediting of all service for which
Executive had been credited under such plans and policies prior to the Change
in Control;
(v) any refusal by the Company to continue to permit Executive to
engage in activities not directly related to the business of the Company which
Executive was permitted to engage in prior to the Change in Control;
(vi) any purported termination of Executive's employment which is not
effectuated pursuant to Section 11(b) (and which will not constitute a
termination hereunder); or
(vii) the failure of the Company to obtain the assumption (and, if
applicable, guarantee) agreement from any successor (and Parent Corporation)
as contemplated in Section 10(b).
An isolated, insubstantial and inadvertent action taken in good faith and
which is remedied by the Company within ten (10) days after receipt of notice
thereof given by Executive shall not constitute Good Reason. Executive's right
to terminate employment for Good Reason shall not be affected by Executive's
incapacities due to mental or physical illness and Executive's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any event or condition constituting Good Reason; provided, however, that
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Executive must provide notice of termination of employment within ninety (90)
days following Executive's knowledge of an event constituting Good Reason or
such event shall not constitute Good Reason under this Agreement.
(i) "Qualifying Termination" means a termination of Executive's employment (i)
by the Company other than for Cause or (ii) by Executive for Good Reason.
Termination of Executive's employment on account of death, Disability or
Retirement shall not be treated as a Qualifying Termination.
(j) "Retirement" means Executive's mandatory retirement (not including any
mandatory early retirement) in accordance with the Company's retirement policy
generally applicable to its salaried employees, as in effect immediately prior
to the Change in Control, or in accordance with any retirement arrangement
established with respect to Executive with Executive's written consent.
(k) "Subsidiary" means any corporation or other entity in which the Company
has a direct or indirect ownership interest of 50% or more of the total
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combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets or liquidation or dissolution.
(l) "Termination Period" means the period of time beginning with a Change in
Control and ending three (3) years following such Change in Control.
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall be treated as Executive's Date of Termination under Section 1(f).
2. Obligation of Executive. In the event of a tender or exchange offer,
-----------------------
proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, Retirement or an
event which would constitute Good Reason if a Change in Control had occurred,
until the Change in Control occurs or, if earlier, such tender or exchange
offer, proxy contest, or agreement is terminated or abandoned.
3. Term of Agreement. This Agreement shall be effective on the date hereof
-----------------
and shall continue in effect until the first anniversary thereof; provided,
--------
however, that the term of this Agreement shall automatically be extended
- -------
commencing on the first anniversary hereof for successive additional one (1)
year periods unless either party gives written notice not to extend the term not
less than ninety (90) days prior to the then next upcoming expiration date;
provided, further, that notwithstanding the delivery of any such notice, this
- -------- -------
Agreement shall continue in effect for a period of three (3) years after a
Change in Control, if such Change in Control shall have occurred during the term
of this Agreement. Notwithstanding anything in this Section to the contrary,
this Agreement shall terminate if Executive or the Company terminates
Executive's employment prior to a Change in Control except as provided in
Section 1(l).
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4. Payments Upon Termination of Employment.
---------------------------------------
(a) Qualifying Termination. If during the Termination Period the employment
----------------------
of Executive shall terminate pursuant to a Qualifying Termination, then the
Company shall provide to Executive:
(i) within ten (10) business days following the Date of Termination a
lump-sum cash amount equal to the sum of (A) Executive's base salary through
the Date of Termination and any bonus amounts which have become payable, to
the extent not theretofore paid or deferred, (B) a pro rata portion of
--- ----
Executive's annual bonus for the fiscal year in which Executive's Date of
Termination occurs in an amount at least equal to (1) Executive's Bonus
Amount, multiplied by (2) a fraction, the numerator of which is the number of
days in the fiscal year in which the Date of Termination occurs through the
Date of Termination and the denominator of which is three hundred sixty-five
(365), and reduced by (3) any amounts paid from the Company's annual incentive
plan for the fiscal year in which Executive's Date of Termination occurs and
(C) any accrued vacation pay, in each case to the extent not theretofore paid;
plus
(ii) within ten (10) business days following the Date of Termination, a
lump-sum cash amount equal to (A) three (3) times Executive's highest annual
rate of base salary during the 12-month period immediately prior to
Executive's Date of Termination, plus (B) three (3) times Executive's Bonus
Amount.
(b) If during the Termination Period the employment of Executive shall
terminate pursuant to a Qualifying Termination, the Company shall continue to
provide, for a period of (3) years following Executive's Date of Termination,
Executive (and Executive's dependents, if applicable) with the same level of
medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
-------- ----
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same after-
tax basis as if continued participation had been permitted (the Continued
Benefits), provided, further, that such Continued Benefits shall terminate on
-------- -------
the date Executive receives substantially equivalent coverage and benefits,
without waiting periods or pre-existing condition limitations, at the same or
lower costs to Executive, taking into consideration deductibles, premiums, and
co-payment requirements, under plans and programs of a subsequent employer (such
coverage, benefits and cost to be
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<PAGE>
determined on a coverage-by-coverage or benefit-by-benefit basis).
In addition, the Company shall pay to Executive, within ten (10) business days
following his Date of Termination, a lump sum payment in an amount equal to the
sum of (A) and (B), where (A) is the excess, if any, of (i) the present value of
the benefits to which Executive would be entitled under Company's pension and
retirement plans (whether or not intended to be qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the Code) if Executive had
continued in the employ of the Company for an additional three (3) years
following his Date of Termination earning during such three-year period the rate
of base salary and Bonus Amount in effect as of his Date of Termination, over
(ii) the present value of the benefit to which Executive is actually entitled
under such pension and retirement plans as of his Date of Termination and (B) is
the present value of the Company contributions that would have been made under
all Company savings programs (whether or not intended to be qualified under
Section 401(a) of the Code) if Executive had continued in the employ of the
Company for an additional three (3) years following his Date of Termination
earning during such three-year period the rate of base salary and Bonus Amount
in effect as of his Date of Termination, assuming that the Company would have
made the maximum contributions permitted under such savings programs, and
assuming, for purposes of determining the amount of any Company matching
contributions, that Executive would have contributed the amount necessary to
receive the maximum matching contributions available under such savings
programs.
For purposes of the preceding sentence, present value shall be determined as of
the Date of Termination and shall be calculated based upon a discount rate equal
to the applicable Federal rate as provided in Section 1274(b)(2)(B) of the Code
and without reduction for mortality.
(c) If during the Termination Period the employment of Executive shall
terminate other than by reason of a Qualifying Termination, then the Company
shall pay to Executive within thirty (30) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (i) Executive's base
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, and (ii) any accrued
vacation pay, in each case to the extent not theretofore paid.
5. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment, award, benefit or distribution (or any
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acceleration of any payment, award, benefit or distribution) by the Company (or
any of its affiliated entities) or any entity which effectuates a Change in
Control (or any of its affiliated entities) to or for the benefit of Executive
(whether pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Section 5) (the
"Payments") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of
(x) the Excise Tax imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-up Payment in
Executive's adjusted gross income and the highest applicable marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made. For purposes of determining the amount of the Gross-up Payment, the
Executive shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which the
Gross-up Payment is to be made, (ii) pay applicable state and local income taxes
at the highest marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes and
(iii) have otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the inclusion of the
Gross-up Payment in the Executive's adjusted gross income.
Notwithstanding the foregoing provisions of this Section 5(a), if it shall be
determined that Executive is entitled to a Gross-Up Payment, but that the
Payments would not be subject to the Excise Tax if the Payments were reduced by
an amount that is less than 10% of the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code, then the amounts
payable to Executive under this Agreement shall be reduced (but not below zero)
to the maximum amount that could be paid to Executive without giving rise to the
Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to
Executive. The reduction of the amounts payable hereunder, if applicable, shall
be made by reducing first the payments under Section 4(a)(ii), unless an
alternative method of reduction is elected by Executive. For purposes of
reducing the Payments to the Safe Harbor Cap, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of the
amounts payable hereunder would not result in a reduction of the Payments to the
Safe Harbor Cap, no amounts payable under this Agreement shall be
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<PAGE>
reduced pursuant to this provision.
(b) Subject to the provisions of Section 5(a), all determinations required to
be made under Sections 4 and 5, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment, the reduction of the Payments to
the Safe Harbor Cap and the assumptions to be utilized in arriving at such
determinations, shall be made by a nationally recognized public accounting firm
that is retained by the Company (the "Accounting Firm"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). The Accounting Firm shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days
of the receipt of notice from the Company or the Executive that there has been a
Payment, or such earlier time as is requested by the Company (collectively, the
"Determination"). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement requested
by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-up Payment under this Section 5 with respect to any
Payments shall be made no later than thirty (30) days following such Payment. If
the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion to such effect, and to the effect
that failure to report the Excise Tax, if any, on Executive's applicable federal
income tax return will not result in the imposition of a negligence or similar
penalty. In the event the Accounting Firm determines that the Payments shall be
reduced to the Safe Harbor Cap, it shall furnish Executive with a written
opinion to such effect. The Determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-up Payments are made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. In the event the amount of the Gross-up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly
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<PAGE>
paid by Executive (to the extent he has received a refund if the applicable
Excise Tax has been paid to the Internal Revenue Service) to or for the benefit
of the Company. Executive shall cooperate, to the extent his expenses are
reimbursed by the Company, with any reasonable requests by the Company in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
6. Confidential Information and Non-Solicitation.
---------------------------------------------
(a) Executive agrees to keep secret and retain in the strictest confidence all
Confidential Information, which relates to the Company, its Subsidiaries and
affiliates. Confidential Information (a) means information (i) that is learned
by Executive from the Company or any of its Subsidiaries or affiliates before or
after the date of this Agreement (other than Confidential Information that was
known by Executive on a nonconfidential basis prior to the disclosure thereof),
(ii) that is commercially valuable to the Company and (iii) that is not
published or of public record or otherwise generally known (other than through
failure of Executive to fully perform his obligations hereunder) and (b)
includes, without limitation, customer lists, client lists, trade secrets,
pricing policies and other business affairs of the Company, its Subsidiaries and
affiliates. Executive agrees not to disclose any such Confidential Information
to anyone outside the Company or any of its subsidiaries or affiliates, whether
during or after his period of services with the Company, except (x) as such
disclosure may be required or appropriate in connection with his service or (y)
when required to do so by a court of law, by any governmental agency having
supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information. Executive
agrees to give the Company advance written notice of any disclosure pursuant to
clause (y) of the preceding sentence and to cooperate with any efforts by the
Company to limit the extent of such disclosure. Upon request by the Company,
Executive agrees to deliver promptly to the Company upon termination of his
services from the Company, or at any reasonable time thereafter as the Company
may request, all Company, subsidiary or affiliate memoranda, notes, records,
reports, manuals, drawings, designs, computer files in any media and other
documents (and all copies thereof) relating to the Company's or any Subsidiary's
or affiliate's business and all property of the Company or any Subsidiary or
affiliate associated therewith, which he may then possess or have under his
direct control.
(b) Executive hereby covenants and agrees that, at all times during the term
of this Agreement and for a one year period following his Date of Termination
for any reason, Executive shall not employ or seek to employ any person employed
at that
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<PAGE>
time by the Company or any of its Subsidiaries or its affiliates who is engaged
in or concerned with or interested in a business which conducts the same or
similar business in any way or degree in competition with the Company, or
otherwise encourage or entice such person or entity to leave such employment.
7. Withholding Taxes. The Company may withhold from all payments due to
-----------------
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
8. Reimbursement of Expenses. If any contest or dispute shall arise under
-------------------------
this Agreement involving termination of Executive's employment with the Company
or involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the prime rate of Bank of
America from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from the
date the Company receives Executive's statement for such fees and expenses
through the date of payment thereof, regardless of whether or not Executive's
claim is upheld by a court of competent jurisdiction; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that a court issues a final and non-appealable order setting forth the
determination that the position taken by Executive was frivolous or advanced by
Executive in bad faith.
9. Scope of Agreement. Nothing in this Agreement shall be deemed to entitle
------------------
Executive to continued employment with the Company or its Subsidiaries, and if
Executive's employment with the Company shall terminate prior to a Change in
Control, Executive shall have no further rights under this Agreement (except as
otherwise provided hereunder); provided, however, that any termination of
-------- -------
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
10. Successors; Binding Agreement.
-----------------------------
(a) This Agreement shall not be terminated by any Business Combination. In the
event of any Business Combination, the provisions of this Agreement shall be
binding upon the Surviving Corporation, and such Surviving Corporation shall be
treated as the Company hereunder.
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<PAGE>
(b) The Company agrees that in connection with any Business Combination, it
will cause any successor entity to the Company unconditionally to assume (and
for any Parent Corporation in such Business Combination to guarantee), by
written instrument delivered to Executive (or his beneficiary or estate), all of
the obligations of the Company hereunder. Failure of the Company to obtain such
assumption and guarantee prior to the effectiveness of any such Business
Combination that constitutes a Change in Control, shall be a breach of this
Agreement and shall constitute Good Reason hereunder and shall entitle Executive
to compensation and other benefits from the Company in the same amount and on
the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control by reason of a
Qualifying Termination. For purposes of implementing the foregoing, the date on
which any such Business Combination becomes effective shall be deemed the date
Good Reason occurs, and shall be the Date of Termination if requested by
Executive.
(c) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive shall die
while any amounts would be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Executive to receive such amounts or, if no person is so
appointed, to Executive's estate.
11. Notice. (a) For purposes of this Agreement, all notices and other
------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Graham L. Adelman
2433 Rogers Avenue
Fort Worth, TX 76109
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<PAGE>
If to the Company:
Global Industrial Technologies, Inc.
2121 San Jacinto Street, Suite 2500
Dallas, TX 75201
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the Company or
Executive, as the case may be, to the other, shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
12. Full Settlement. The Company's obligation to make any payments provided
---------------
for in this Agreement and otherwise to perform its obligations hereunder shall
be in lieu and in full settlement of all other severance payments to Executive
under any other severance or employment agreement between Executive and the
Company, and any severance plan of the Company. The Company's obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take other action by way of mitigation of the amounts payable to
Executive under any of the provisions of this Agreement and, except as provided
in Section 4(b), such amounts shall not be reduced whether or not Executive
obtains other employment.
13. Employment with Subsidiaries. Employment with the Company for purposes
----------------------------
of this Agreement shall include employment with any Subsidiary.
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<PAGE>
14. Survival. The respective obligations and benefits afforded to the
--------
Company and Executive as provided in Sections 4 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 8, 10(c) and 12 shall survive the termination of this
Agreement.
15. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
-----------------------
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
16. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
17. Miscellaneous. No provision of this Agreement may be modified or waived
-------------
unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including without limitation, the right of Executive to terminate employment for
Good Reason, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a
duly authorized officer of the Company and Executive has executed this Agreement
as of the day and year first above written.
Global Industrial Technologies, Inc.
By: /s/ J. L. JACKSON
-------------------------------------
J. L. Jackson
Title: Chairman and
Chief Executive Officer
By: /s/ GRAHAM L. ADELMAN
-------------------------------------
Graham L. Adelman
Title: Senior Vice President
General Counsel and Secretary
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<PAGE>
Exhibit 10.2
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 23rd day of February, 1998 by
and between Global Industrial Technologies, Inc. a Delaware corporation (the
"Company"), and George W. Pasley ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to secure Executive's
continued services and to ensure Executive's continued dedication to his duties
in the event of any threat or occurrence of a Change in Control (as defined in
Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
-----------
have the respective meanings set forth below:
(a) "Average Bonus Fraction" means a fraction, where the numerator is
the aggregate bonus compensation Executive has received during the lesser of (i)
the two (2) year period immediately preceding the year in which the Date of
Termination occurs or (ii) Executive's period of employment immediately
preceding the year in which the Date of Termination occurs and the denominator
is the aggregate amount of base salary that Executive has received during the
relevant period in clause (i) or (ii) above, as the case may be.
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<PAGE>
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the product of (i) Executive's current
annual rate of base salary on the Date of Termination (or, if greater, the
base salary in effect on the date of a Change in Control) and (ii) the
Average Bonus Fraction.
(d) "Cause" means (i) the willful and continued failure of Executive
to perform substantially his duties with the Company (other than any such
failure resulting from Executive's incapacity due to physical or mental
illness or any such failure subsequent to Executive being delivered a
Notice of Termination without Cause by the Company (or delivering a Notice
of Termination for Good Reason to the Company) after a written demand for
substantial performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties, or (ii) the
willful engaging by Executive in illegal conduct or gross misconduct which
is demonstrably and materially injurious to the Company or its affiliates.
For purpose of this paragraph (d), no act or failure to act by Executive
shall be considered "willful" unless done or omitted to be done by
Executive in bad faith and without reasonable belief that Executive's
action or omission was in the best interests of the Company or its
affiliates. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board, based upon the advice of counsel
for the Company or upon the instructions of the Company's chief executive
officer or another senior officer of the Company shall be conclusively
presumed to be done, or omitted to be done, by Executive in good faith and
in the best interests of the Company. Cause shall not exist unless and
until the Company has delivered to Executive a copy of a resolution duly
adopted by three-quarters (3/4) of the entire Board (excluding Executive if
Executive is a Board member) at a meeting of the Board (after reasonable
notice to Executive and an opportunity for Executive, together with
counsel, to be heard before the Board at such meeting), finding that in the
good faith opinion of the Board an event set forth in clauses (1) or (2)
has occurred and specifying the particulars thereof in detail. The Company
must notify Executive of any event constituting Cause within ninety (90)
days following the Company's knowledge of its existence or such event shall
not constitute Cause under this Agreement.
(e) "Change in Control" means the occurrence of any one of the
following events:
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<PAGE>
(i) individuals who, on February 23, 1998, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to February 23, 1998, whose election or nomination for election
was approved by a vote of at least two-thirds of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board shall be deemed to be an
Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in this
paragraph (ii) shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (A) by the Company or any Subsidiary,
(B) by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any Subsidiary, (C) by any underwriter temporarily
holding securities pursuant to an offering of such securities, (D) pursuant
to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E)
pursuant to any acquisition by Executive or any group of persons including
Executive (or any entity controlled by Executive or any group of persons
including Executive);
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any of its Subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities in
the transaction (a "Business Combination"), unless immediately following
such Business Combination: (A) 60% or more of the total voting power of (x)
the corporation resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of
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<PAGE>
the voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by Company Voting
Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan
(or related trust) sponsored or maintained by the Surviving Corporation or
the Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 30% or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) and (C)
at least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board's approval of the execution of
the initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B) and
(C) above shall be deemed to be a "Non-Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or substantially
all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 30% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that, if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.
(f) "Date of Termination" means (1) the effective date on which
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or Executive, as the case may be, to the other, delivered
pursuant to Section 13 or (ii) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
-4-
<PAGE>
(g) "Disability" means termination of Executive's employment by the
Company due to Executive's absence from Executive's duties with the Company on a
full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness.
(h) "Good Reason" means, without Executive's express written consent,
the occurrence of any of the following events after a Change in Control:
(i) (A) any change in the duties or responsibilities of Executive that
is inconsistent in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the Company immediately
prior to such Change in Control (including any material and adverse diminution
of such duties or responsibilities); provided, however, that Good Reason shall
not be deemed to occur upon a change in duties or responsibilities that is
solely and directly a result of the Company no longer being a publicly traded
entity (other than such change which would have a material and adverse effect on
Executive's duties or responsibilities) and does not involve any other event set
forth in this paragraph (h) or (B) a material and adverse change in Executive's
titles or offices (including, if applicable, membership on the Board) with the
Company as in effect immediately prior to such Change in Control;
(ii) a reduction by the Company in Executive's rate of annual base
salary or annual target bonus opportunity (including any material and
adverse change in the formula for such annual bonus target) as in effect
immediately prior to such Change in Control or as the same may be increased
from time to time thereafter;
(iii) any requirement of the Company that Executive (A) be based
anywhere more than thirty (30) miles from the office where Executive is
located at the time of the Change in Control or (B) travel on Company
business to an extent substantially greater than the travel obligations of
Executive immediately prior to such Change in Control;
(iv) the failure of the Company to (A) continue in effect any material
employee benefit plan, compensation plan, welfare benefit plan or fringe
benefit plan in which Executive is participating immediately prior to such
Change in Control or the taking of any action by the Company which would
adversely affect Executive's participation in or reduce Executive's
benefits under any such plan, unless Executive is permitted to participate
in other plans providing Executive with substantially equivalent benefits,
or (B) provide Executive with paid vacation in accordance with
-5-
<PAGE>
the most favorable vacation policies of the Company as in effect for
Executive immediately prior to such Change in Control, including for
purposes of both (A) and (B), the crediting of all service for which
Executive had been credited under such plans and policies prior to the
Change in Control;
(v) any refusal by the Company to continue to permit Executive to
engage in activities not directly related to the business of the Company
which Executive was permitted to engage in prior to the Change in Control;
(vi) any purported termination of Executive's employment which is not
effectuated pursuant to Section 11(b) (and which will not constitute a
termination hereunder); or
(vii) the failure of the Company to obtain the assumption (and, if
applicable, guarantee) agreement from any successor (and Parent
Corporation) as contemplated in Section 10(b).
An isolated, insubstantial and inadvertent action taken in good faith
and which is remedied by the Company within ten (10) days after receipt of
notice thereof given by Executive shall not constitute Good Reason. Executive's
right to terminate employment for Good Reason shall not be affected by
Executive's incapacities due to mental or physical illness and Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any event or condition constituting Good Reason; provided, however,
that Executive must provide notice of termination of employment within ninety
(90) days following Executive's knowledge of an event constituting Good Reason
or such event shall not constitute Good Reason under this Agreement.
(i) "Qualifying Termination" means a termination of Executive's
employment (i) by the Company other than for Cause or (ii) by Executive for Good
Reason. Termination of Executive's employment on account of death, Disability or
Retirement shall not be treated as a Qualifying Termination.
(j) "Retirement" means Executive's mandatory retirement (not including
any mandatory early retirement) in accordance with the Company's retirement
policy generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control, or in accordance with any retirement arrangement
established with respect to Executive with Executive's written consent.
-6-
<PAGE>
(k) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets or liquidation or dissolution.
(l) "Termination Period" means the period of time beginning with a
Change in Control and ending three (3) years following such Change in Control.
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall be treated as Executive's Date of Termination under Section 1(f).
2. Obligation of Executive. In the event of a tender or exchange offer,
-----------------------
proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, Retirement or an
event which would constitute Good Reason if a Change in Control had occurred,
until the Change in Control occurs or, if earlier, such tender or exchange
offer, proxy contest, or agreement is terminated or abandoned.
3. Term of Agreement. This Agreement shall be effective on the date
-----------------
hereof and shall continue in effect until the first anniversary thereof;
provided, however, that the term of this Agreement shall automatically be
extended commencing on the first anniversary hereof for successive additional
one (1) year periods unless either party gives written notice not to extend the
term not less than ninety (90) days prior to the then next upcoming expiration
date; provided, further, that notwithstanding the delivery of any such notice,
this Agreement shall continue in effect for a period of three (3) years after a
Change in Control, if such Change in Control shall have occurred during the term
of this
-7-
<PAGE>
Agreement. Notwithstanding anything in this Section to the contrary, this
Agreement shall terminate if Executive or the Company terminates Executive's
employment prior to a Change in Control except as provided in Section 1(l).
4. Payments Upon Termination of Employment.
---------------------------------------
(a) Qualifying Termination. If during the Termination Period the
----------------------
employment of Executive shall terminate pursuant to a Qualifying Termination,
then the Company shall provide to Executive:
(i) within ten (10) business days following the Date of Termination a
lump-sum cash amount equal to the sum of (A) Executive's base salary
through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's annual bonus for the fiscal year in which
Executive's Date of Termination occurs in an amount at least equal to (1)
Executive's Bonus Amount, multiplied by (2) a fraction, the numerator of
which is the number of days in the fiscal year in which the Date of
Termination occurs through the Date of Termination and the denominator of
which is three hundred sixty-five (365), and reduced by (3) any amounts
paid from the Company's annual incentive plan for the fiscal year in which
Executive's Date of Termination occurs and (C) any accrued vacation pay, in
each case to the extent not theretofore paid; plus
(ii) within ten (10) business days following the Date of Termination, a
lump-sum cash amount equal to (A) two and one-half (2.5) times Executive's
highest annual rate of base salary during the 12-month period immediately
prior to Executive's Date of Termination, plus (B) two and one-half (2.5)
times Executive's Bonus Amount.
(b) If during the Termination Period the employment of Executive shall
terminate pursuant to a Qualifying Termination, the Company shall continue to
provide, for a period of two (2) years and six (6) months following Executive's
Date of Termination, Executive (and Executive's dependents, if applicable) with
the same level of medical, dental, accident, disability and life insurance
benefits upon substantially the same terms and conditions (including
contributions required by Executive for such benefits) as existed immediately
prior to Executive's Date of Termination (or, if more favorable to Executive, as
such benefits and terms and conditions existed immediately prior to the Change
in Control); provided, that, if Executive cannot continue to participate in the
Company plans providing such benefits, the Company shall otherwise provide such
benefits on the same after-tax basis as if
-8-
<PAGE>
continued participation had been permitted (the Continued Benefits), provided,
further, that such Continued Benefits shall terminate on the date Executive
receives substantially equivalent coverage and benefits, without waiting periods
or pre-existing condition limitations, at the same or lower costs to Executive,
taking into consideration deductibles, premiums, and co-payment requirements,
under plans and programs of a subsequent employer (such coverage, benefits and
cost to be determined on a coverage-by-coverage or benefit-by-benefit basis).
In addition, the Company shall pay to Executive, within ten (10)
business days following his Date of Termination, a lump sum payment in an amount
equal to the sum of (A) and (B), where (A) is the excess, if any, of (i) the
present value of the benefits to which Executive would be entitled under
Company's pension and retirement plans (whether or not intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the Code)
if Executive had continued in the employ of the Company for an additional two
(2) years and six (6) months following his Date of Termination earning during
such two year and six month period the rate of base salary and Bonus Amount in
effect as of his Date of Termination, over (ii) the present value of the benefit
to which Executive is actually entitled under such pension and retirement plans
as of his Date of Termination and (B) is the present value of the Company
contributions that would have been made under all Company savings programs
(whether or not intended to be qualified under Section 401(a) of the Code) if
Executive had continued in the employ of the Company for an additional two (2)
years and six (6) months following his Date of Termination earning during such
two year and six month period the rate of base salary and Bonus Amount in effect
as of his Date of Termination, assuming that the Company would have made the
maximum contributions permitted under such savings programs, and assuming, for
purposes of determining the amount of any Company matching contributions, that
Executive would have contributed the amount necessary to receive the maximum
matching contributions available under such savings programs.
For purposes of the preceding sentence, present value shall be
determined as of the Date of Termination and shall be calculated based upon a
discount rate equal to the applicable Federal rate as provided in Section
1274(b)(2)(B) of the Code and without reduction for mortality.
(c) If during the Termination Period the employment of Executive shall
terminate other than by reason of a Qualifying Termination, then the Company
shall pay to Executive within thirty (30) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (i) Executive's base
-9-
<PAGE>
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, and (ii) any accrued
vacation pay, in each case to the extent not theretofore paid.
5. Certain Additional Payments by the Company.
------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, in the
event it shall be determined that any payment, award, benefit or distribution
(or any acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which effectuates a
Change in Control (or any of its affiliated entities) to or for the benefit of
Executive (whether pursuant to the terms of this Agreement or otherwise) (the
"Payments") would be subject to the excise tax (the "Excise Tax") under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the
amounts payable to Executive under this Agreement shall be the greater of (i)
the Payment, if the result of subtracting the Excise Tax from the Payment is
more than the Safe Harbor Cap and (ii) the Payment, reduced to the maximum
amount as will result in no portion of the Payments being subject to the Excise
Tax (the "Safe Harbor Cap"), reducing first the payments under Section 4(a)(ii),
unless an alternative method of reduction is elected by Executive. For purposes
of reducing the Payments to the Safe Harbor Cap, only amounts payable to
Executive under this Agreement (and no other Payments) shall be reduced, unless
consented to by Executive.
(b) All determinations required to be made under this Sections 4 and 5
shall be made by the nationally recognized public accounting firm that is
retained by the Company (the "Accounting Firm"). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). If payments are reduced to the Safe Harbor Cap, the Accounting
Firm shall provide a reasonable opinion to Executive that he is not required to
report any Excise Tax on his federal income tax return. All fees, costs and
expenses (including, but not limited to, the costs of retaining experts) of the
Accounting Firm shall be borne by the Company. The determination by the
Accounting Firm shall be binding upon the Company and Executive (except as
provided in paragraph (c) below).
(c) If payments are reduced to the Safe Harbor Cap as provided in
Section 5(a)(ii) and if it is established pursuant to a final determination of a
court or an Internal Revenue Service (the "IRS") proceeding which has been
-10-
<PAGE>
finally and conclusively resolved, that Payments have been made to, or provided
for the benefit of, Executive by the Company, which are in excess of the
limitations provided in this Section 5(a)(ii) (hereinafter referred to as an
"Excess Payment"), such Excess Payment shall be deemed for all purposes to be a
loan to Executive made on the date Executive received the Excess Payment and
Executive shall repay the Excess Payment to the Company on demand, together with
interest on the Excess Payment at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of Executive's receipt of such Excess
Payment until the date of such repayment. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the determination, it is
possible that Payments which will not have been made by the Company should have
been made (an "Underpayment"), consistent with the calculations required to be
made under this Section 5. In the event that it is determined (1) by the
Accounting Firm, the Company (which shall include the position taken by the
Company, or together with its consolidated group, on its federal income tax
return) or the IRS or (2) pursuant to a determination by a court, that an
Underpayment has occurred, the Company shall pay an amount equal to such
Underpayment to Executive within ten (10) days of such determination together
with interest on such amount at the applicable federal rate from the date such
amount would have been paid to Executive until the date of payment.
6. Confidential Information and Non-Solicitation.
---------------------------------------------
(a) Executive agrees to keep secret and retain in the strictest
confidence all Confidential Information which relates to the Company, its
Subsidiaries and affiliates. Confidential Information (a) means information (i)
that is learned by Executive from the Company or any of its Subsidiaries or
affiliates before or after the date of this Agreement (other than Confidential
Information that was known by Executive on a nonconfidential basis prior to the
disclosure thereof), (ii) that is commercially valuable to the Company and (iii)
that is not published or of public record or otherwise generally known (other
than through failure of Executive to fully perform his obligations hereunder)
and (b) includes, without limitation, customer lists, client lists, trade
secrets, pricing policies and other business affairs of the Company, its
Subsidiaries and affiliates. Executive agrees not to disclose any such
Confidential Information to anyone outside the Company or any of its
subsidiaries or affiliates, whether during or after his period of services with
the Company, except (x) as such disclosure may be required or appropriate in
connection with his service or (y) when required to do so by a court of law, by
any governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or
-11-
<PAGE>
make accessible such information. Executive agrees to give the Company advance
written notice of any disclosure pursuant to clause (y) of the preceding
sentence and to cooperate with any efforts by the Company to limit the extent of
such disclosure. Upon request by the Company, Executive agrees to deliver
promptly to the Company upon termination of his services from the Company, or at
any reasonable time thereafter as the Company may request, all Company,
subsidiary or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media and other documents (and all copies
thereof) relating to the Company's or any Subsidiary's or affiliate's business
and all property of the Company or any Subsidiary or affiliate associated
therewith, which he may then possess or have under his direct control.
(b) Executive hereby covenants and agrees that, at all times during the
term of this Agreement and for a one year period following his Date of
Termination for any reason, Executive shall not employ or seek to employ any
person employed at that time by the Company or any of its Subsidiaries or its
affiliates who is engaged in or concerned with or interested in a business which
conducts the same or similar business in any way or degree in competition with
the Company, or otherwise encourage or entice such person or entity to leave
such employment.
7. Withholding Taxes. The Company may withhold from all payments due to
-----------------
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
8. Reimbursement of Expenses. If any contest or dispute shall arise
-------------------------
under this Agreement involving termination of Executive's employment with the
Company or involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the prime rate of Bank of
America from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from the
date the Company receives Executive's statement for such fees and expenses
through the date of payment thereof, regardless of whether or not Executive's
claim is upheld by a court of competent jurisdiction; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that a court issues a final and non-appealable order setting forth the
determination that the position taken by Executive was frivolous or advanced by
Executive in bad faith.
-12-
<PAGE>
9. Scope of Agreement. Nothing in this Agreement shall be deemed to
------------------
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company shall terminate prior to a Change
in Control, Executive shall have no further rights under this Agreement (except
as otherwise provided hereunder); provided, however, that any termination of
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
10. Successors; Binding Agreement.
-----------------------------
(a) This Agreement shall not be terminated by any Business Combination.
In the event of any Business Combination, the provisions of this Agreement shall
be binding upon the Surviving Corporation, and such Surviving Corporation shall
be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business Combination,
it will cause any successor entity to the Company unconditionally to assume (and
for any Parent Corporation in such Business Combination to guarantee), by
written instrument delivered to Executive (or his beneficiary or estate), all of
the obligations of the Company hereunder. Failure of the Company to obtain such
assumption and guarantee prior to the effectiveness of any such Business
Combination that constitutes a Change in Control, shall be a breach of this
Agreement and shall constitute Good Reason hereunder and shall entitle Executive
to compensation and other benefits from the Company in the same amount and on
the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control by reason of a
Qualifying Termination. For purposes of implementing the foregoing, the date on
which any such Business Combination becomes effective shall be deemed the date
Good Reason occurs, and shall be the Date of Termination if requested by
Executive.
(c) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive shall die
while any amounts would be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Executive to receive such amounts or, if no person is so
appointed, to Executive's estate.
-13-
<PAGE>
11. Notice. (a) For purposes of this Agreement, all notices and other
------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
George W. Pasley
6738 Lakehurst Avenue
Dallas, TX 75230
If to the Company:
Global Industrial Technologies, Inc.
2121 San Jacinto Street, Suite 2500
Dallas, TX 75201
Attention: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the Company
or Executive, as the case may be, to the other, shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
12. Full Settlement. The Company's obligation to make any payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall be in lieu and in full settlement of all other severance
payments to Executive under any other severance or employment agreement between
Executive and the Company, and any severance plan of the Company. The
-14-
<PAGE>
Company's obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 4(b), such amounts shall not be reduced
whether or not Executive obtains other employment.
13. Employment with Subsidiaries. Employment with the Company for
----------------------------
purposes of this Agreement shall include employment with any Subsidiary.
14. Survival. The respective obligations and benefits afforded to the
--------
Company and Executive as provided in Sections 4 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 8, 10(c) and 12 shall survive the termination of this
Agreement.
15. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
-----------------------
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
16. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
17. Miscellaneous. No provision of this Agreement may be modified or
-------------
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
-15-
<PAGE>
Agreement or to assert any right Executive or the Company may have hereunder,
including without limitation, the right of Executive to terminate employment for
Good Reason, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement. Except as otherwise specifically
provided herein, the rights of, and benefits payable to, Executive, his estate
or his beneficiaries pursuant to this Agreement are in addition to any rights
of, or benefits payable to, Executive, his estate or his beneficiaries under any
other employee benefit plan or compensation program of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by a duly authorized officer of the Company and Executive has executed this
Agreement as of the day and year first above written.
Global Industrial Technologies, Inc.
By:
-------------------------------
J. L. Jackson
Title: Chairman and
Chief Executive Officer
By:
-------------------------------
George W. Pasley
Title: Vice President - Communications
-16-
<PAGE>
Schedule of Omitted Documents
1. Severance Agreement dated February 23, 1998 by and between the Company
and Mr. Juan M. Bravo; identical to the Severance Agreement with Mr. Graham
L. Adelman filed herewith, except as to the party.
2. Severance Agreement dated February 23, 1998 by and between the Company
and Mr. Herbert Linser; identical to the Severance Agreement with Mr. Graham
L. Adelman filed herewith, except as to the party.
3. Severance Agreement dated February 23, 1998 by and between the Company
and Mr. James B. Alleman; identical to the Severance Agreement with George
W. Pasley filed herewith.
4. Severance Agreement dated February 23, 1998 by and between the Company
and Mr. Maurice W. Barrett; identical to the Severance Agreement with George
W. Pasley filed herewith.
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> 4.09
<EPS-DILUTED> 4.09
</TABLE>
