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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(NAME OF SUBJECT COMPANY)
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.25
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
379335 10 2
(CUSIP NUMBER OF CLASS OF SECURITIES)
JEANETTE H. QUAY, ESQ.
VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
2121 SAN JACINTO STREET, SUITE 2500
DALLAS, TEXAS 75201
(214) 953-4500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
JAMES C. MORPHY, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Global Industrial Technologies, Inc., a
Delaware corporation (the "Company"). The principal executive offices of the
Company are located at 2121 San Jacinto Street, Suite 2500, Dallas, Texas,
75201. The class of equity securities to which this statement relates is the
Common Stock, par value $0.25 per share (the "Common Stock"), together with
the Rights (as defined in Item 8(a) below) issued pursuant to the Rights
Agreement, dated as of October 31, 1995, as amended on February 16, 1998,
September 18, 1998 and October 5, 1998 (the "Rights Agreement"), between the
Company and The Bank of New York, as Rights Agent (the Common Stock, together
with the Rights, are hereinafter referred to as the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in the Schedule 14D-1,
dated December 17, 1998 (the "Schedule 14D-1"), of the bidder, WHX
Corporation, a Delaware corporation ("Parent"), to purchase, through its
wholly-owned subsidiary, GT Acquisition Corp., a Delaware corporation ("Sub"
and together with Parent, the "Bidder"), all of the outstanding Shares at a
price per Share of $10.50 (the "Offer Price") net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 17, 1998 and in the related Letter of Transmittal (together,
the "Offer"). The Schedule 14D-1 was filed after the Bidder first publicly
disclosed on December 15, 1998 its intention to commence the Offer. The Offer
to Purchase states that the principal executive offices of Parent and Sub are
located at 110 East 59th Street, New York, New York 10022.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements, or understandings
between the Company and its executive officers, directors or affiliates are
described in the sections entitled "Security Ownership of Certain Beneficial
Owners and Management," "Report of Executive Compensation Committee,"
"Executive Compensation and Other Information," "Approval of Amended and
Restated Stock Option Plan for Non-Employee Directors" and "Approval of
Amendments to 1992 Stock Compensation Plan" in the Company's Proxy Statement
for the Annual Meeting of Stockholders held on March 18, 1998 (the "Proxy
Statement"). A copy of the relevant portions of the Proxy Statement is filed
as Exhibit 1 hereto and the portions of such Proxy Statement referred to above
are incorporated herein by reference.
The Company has entered into change in control severance agreements with
certain executives of the Company. Generally, the form of severance agreement
(the "Form of Severance Agreement") provides that if the Company terminates
the executive's employment under circumstances constituting a "Qualifying
Termination" during a specified period following a "Change in Control" of the
Company (the "Period"), the executive will be entitled to receive an amount in
cash (the "Severance Payment") equal to the result of multiplying a certain
number (the "Multiplier") by the executive's total annual compensation, which
includes: (a) the highest annual rate of base salary during the twelve-month
period immediately prior to the executive's date of termination and (b) an
amount equal to the target bonus opportunity of the executive for the fiscal
year of the Company in which the date of termination occurs or, if greater, in
which a Change in Control occurs. In addition, the Company will pay the
executive a lump-sum payment in an amount equal to the value of the additional
benefits that would have been payable under the Company's pension and
retirement plans if the executive had continued in the employ of the Company
for the number of years equal to the Multiplier and had been compensated at
the rate of base salary and bonus in effect as of his date of termination
(assuming that the Company would have made the maximum contributions permitted
under any Company savings programs). The Company will also continue to provide
for the number of years equal to the Multiplier, for the benefit of the
executive and the executive's dependents, the same level of medical, dental,
accident, disability and life insurance benefits to which the executive was
entitled immediately prior to the date of termination, or if more
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favorable, prior to the Change in Control. A "Qualifying Termination" is
defined as a termination by the Company other than for Cause (as defined in
the executive's severance agreement) or a voluntary termination by the
executive for Good Reason (as defined in the executive's severance agreement).
In the event that such payments to certain executives become subject to an
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, those executives shall also be entitled to receive a "gross-up"
payment in respect of the excise and any income and excise taxes on such
gross-up payment. The Form of Severance Agreement also provides for the
reimbursement by the Company of legal fees and related expenses incurred by
the executive in connection with the severance agreement (including interest
thereon) subject to a requirement that the executive repay any such amounts to
the extent that a court issues a final and non-appealable order setting forth
the determination that the position taken by the executive was frivolous or
advanced in bad faith.
For purposes of the Form of Severance Agreement, a "Change in Control"
occurs (A) when individuals who constituted the Board of Directors of the
Company (the "Board") as of the date of the applicable severance agreement
(the "Incumbent Board") and individuals whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of at
least two-thirds of the directors then comprising the Incumbent Board (who
shall after election be considered members of the Incumbent Board unless such
election occurs as a result of an actual or threatened election contest or
other actual or threatened solicitation of proxies or consents by or on behalf
of a person other than the Board) shall cease to constitute a majority of the
Board, (B) when an individual, entity or group acquires beneficial ownership
of 30% or more of the combined voting power of the Company's then-outstanding
securities eligible to vote for the election of the Board (subject to certain
exceptions), (C) upon the consummation of a merger, consolidation or other
similar transaction (subject to certain exceptions), or (D) upon approval by
the stockholders of the Company of a plan of complete liquidation or
dissolution of the Company or the sale of all or substantially all of the
assets of the Company.
The Company has entered into a severance agreement (in the general form as
the Form of Severance Agreement), (i) dated February 23, 1998, with each of
Graham L. Adelman, Juan M. Bravo and Herbert Linser, (ii) dated December 18,
1998, with Rawles Fulgham and (iii) with Alfred L. Williams that will become
effective as of January 15, 1999 when Mr. Williams begins employment with the
Company. Each of these severance agreements provides for a Period equal to 36
months, a Multiplier equal to three (3), and an excise tax gross-up payment as
described above.
The Company has also entered into a severance agreement (in the general form
as the Form of Severance Agreement), (i) dated February 23, 1998, with each of
George W. Pasley, James B. Alleman and Maurice W. Barrett and (ii) dated
December 18, 1998, with each of Jeanette H. Quay and Donna A. Reeves. Each of
these severance agreements provides for a Period equal to 30 months and a
Multiplier equal to two and one-half (2.5). Instead of an excise tax gross-up
payment, these executives would receive an amount equal to the maximum amount
that could be paid to the executive without giving rise to the excise tax if
such amount would be greater than the amount the executive would have received
net of the excise tax.
The foregoing description of the severance agreements for Messrs. Adelman,
Bravo, Linser, Fulgham, Williams, Pasley, Alleman, Barrett, Ms. Quay and Ms.
Reeves does not purport to be complete and is qualified in its entirety by
reference to the severance agreements and Amendment No. 1 and Amendment No. 2
to the severance agreements for Messrs. Adelman, Bravo, Linser, Pasley,
Alleman and Barrett which are filed respectively as Exhibits 2, 3, 4 and 5
hereto and are incorporated herein by reference.
Pursuant to the Company's 1992 Stock Compensation Plan, as amended (i) in
the case of an impending merger, reorganization, or liquidation of the
Company, or sale of substantially all of its business or property, the Board
may, at its discretion and without stockholder approval, declare some or all
outstanding options to be immediately exercisable in full and (ii) in the
event of a change in control of the Company without Board approval, all
restrictions on outstanding restricted stock immediately lapse if the related
option shares have not been disposed of prior to such change in control.
Pursuant to the related forms of stock option agreements, the vesting of
options will accelerate in the event of a change in control or if a tender
offer is made by any "person" within the meaning of Section 14(d) of the
Securities Exchange Act of 1934, as amended, for 30% or more of the Common
Stock. Accordingly, as a result of the Offer, the options granted pursuant to
such agreements have
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become fully vested. The change in control definition is the same as in the
Form of Severance Agreement (see above), except (a) the exception to the
trigger for stockholder approval of the merger is continuing stockholders own
50% of the voting power of the surviving corporation and (b) another exception
to such trigger is a governmental action or investigation seeking to prohibit
or restrain the consummation of merger, in which case all unexercised options
will remain exercisable until the Company receives written notice of the
action or investigation. Such options shall become exercisable on the earlier
of another change in control event, the consummation of the merger, or the
dismissal or settlement of the action or investigation.
The foregoing description of the Company's 1992 Stock Compensation Plan, the
amendment thereto and the forms of stock agreements does not purport to be
complete and is qualified in its entirety by reference to the Company's 1992
Stock Compensation Plan, the amendment thereto and the forms of stock option
agreements which are filed respectively as Exhibits 6, 7, 8, and 9 hereto, and
are incorporated herein by reference.
MANAGEMENT SUCCESSION
At a regularly scheduled Board meeting held on December 14, 1998, the Board
elected Rawles Fulgham as Chairman and Chief Executive Officer, Graham L.
Adelman as President and Chief Operating Officer, Alfred L. Williams as Senior
Vice President and Chief Financial Officer and Jeanette H. Quay as Vice
President, General Counsel and Secretary. At the time of such elections,
executives were granted options to purchase Shares under the Company's 1992
Stock Compensation Plan as follows:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS EXERCISE
NAME GRANTED PRICE
---- --------- --------
<S> <C> <C>
Rawles Fulgham......................................... 200,000 8.09375
Graham L. Adelman...................................... 50,550 8.09375
Alfred L. Williams..................................... 112,250 8.09375
Jeanette H. Quay....................................... 44,217 8.09375
Donna A. Reeves........................................ 15,200 8.09375
</TABLE>
The options granted to Mr. Williams are subject to his commencement of
employment with the Company which is currently expected to commence on or
before January 15, 1999.
(b)(2) To the best knowledge of the Company, there are no material
contracts, agreements, arrangements or understandings or any actual or
potential conflicts of interest, between the Company, its executive officers,
directors or affiliates, on the one hand, and the Bidder, its executive
officers, directors or affiliates, on the other hand.
(c) BACKGROUND OF CONTACTS BETWEEN PARENT AND THE COMPANY.
In May 1998, Marvin Schwartz, a partner in the securities firm Neuberger &
Berman, offered to introduce Mr. LaBow, the Chairman of the Board of Parent,
to Mr. J.L. Jackson, the then-Chairman, President and Chief Executive Officer
of the Company, and suggested that Mr. Jackson discuss with Mr. LaBow
alternatives for enhancing stockholder value. Several weeks thereafter, Mr.
LaBow placed a call to Mr. Jackson. After discussion with the members of the
Board, Mr. Jackson asked a representative from Wasserstein Perella & Co., Inc.
("Wasserstein Perella") to return Mr. LaBow's call on his behalf. The
Wasserstein Perella representative told Mr. LaBow that the Company was in the
process of completing its acquisition of A.P. Green Industries, Inc., was not
interested in discussing a sale of the Company, and accordingly, would not
meet with Mr. LaBow if his purpose was to discuss such a sale.
On October 5, 1998, Parent filed a Schedule 13D (the "Schedule 13D") in
which Parent disclosed that it had purchased approximately 9.9% of the
Company's outstanding Common Stock. In the Schedule 13D filing, the Reporting
Persons (as defined in the Schedule 13D) stated, among other things, that they
were "currently
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assessing whether to propose an acquisition of 100% of the [Shares], or
whether to propose that the Company's Board of Directors consider evaluating
various strategic alternatives aimed at enhancing shareholder value."
After the Parent filed the Schedule 13D, Mr. LaBow had conversations with
representatives of Wasserstein Perella. Such representatives informed Mr.
LaBow that management would be prepared to meet with Mr. LaBow, as it would
with any significant stockholder, to discuss proposals to enhance stockholder
value but that it was not interested in discussing a sale of the Company. Mr.
LaBow indicated that his interest was in acquiring the Company and he did not
have any other ideas to propose.
On October 5, 1998, the Company issued a press release in response to the
Schedule 13D announcing that it had amended its Rights Agreement to reduce the
triggering threshold from 15% to 10%. In such release, Mr. Fulgham stated that
"the directors of Global, all of whom are independent and with long experience
in business matters, are committed to enhancing shareholder value. Having only
recently disposed of our Industrial Tool business, restructured our operations
and completed our acquisition of A.P. Green, we have made significant strides
in repositioning Global for the company's long-term growth. While the
corporate transformation process, our search for a Chief Executive Officer to
lead our company into the future and current global and market conditions have
clearly taken their toll on our stock price, the fact that our stock price is
at such low, and grossly undervalued levels only strengthens our resolve to
prevent anyone from seeking to take advantage of the situation and reap for
itself the significant values inherent in our strategic plan. WHX Corporation
itself noted in its filing that it believes Global's shares are an attractive
investment opportunity due to the recent sharp decline in stock market
prices."
In December 1998, Mr. LaBow had a conversation with another representative
of Wasserstein Perella and suggested that a meeting with management of the
Company be held to discuss proposals to enhance stockholder value. The
Wasserstein Perella representative reported this conversation to Mr. Fulgham,
the then-Chairman and Acting President and Chief Executive Officer of the
Company, and suggested that Mr. Fulgham call Mr. LaBow to ascertain if Mr.
LaBow had any constructive suggestions to enhance stockholder value.
Thereafter, on December 7, 1998, Mr. Fulgham called Mr. LaBow and left a
message for him to return Mr. Fulgham's call. Mr. LaBow returned the call
later that day and spoke with Mr. Fulgham and Mr. Adelman. Mr. LaBow inquired
if there was anything that could be discussed before he started preparing for
the Company's upcoming 1999 annual meeting of stockholders. Mr. Fulgham
indicated that management of the Company was in the process of carrying out
the Company's strategic plan to enhance stockholder value and was willing to
speak with Mr. LaBow about any possible value enhancing proposals -- other
than a sale of the Company -- Mr. LaBow may have. No such proposals were
proffered by Mr. LaBow. In response to a question from Mr. LaBow, he was also
informed that there were no legal impediments to a meeting between the
parties; however, he was also informed that the Company would not discuss
anything with him that was not public. Mr. LaBow indicated that the purpose of
the meeting would be for him to ask questions regarding the balance sheet and
make a proposal to buy the Company for cash at a substantial premium to the
market. Mr. Fulgham told Mr. LaBow that now was not the time to consider a
sale of the Company and reminded Mr. LaBow that the Shares had traded over $18
as recently as May. The call ended shortly thereafter.
On December 15, 1998, Bidder publicly announced its intention to commence
the Offer which was subsequently commenced on December 17, 1998.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At meetings of the Board held on December 21, 22 and 23, 1998, the Board
carefully considered the Company's business, financial condition and
prospects, the terms and conditions of the Offer and other matters, including
presentations by its legal and financial advisors. At the December 23 meeting,
the Board, after receiving advice from its management and professional
advisors, unanimously determined to reject the Bidder's unsolicited Offer.
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AT THE DECEMBER 23 MEETING, THE BOARD UNANIMOUSLY CONCLUDED, AMONG OTHER
THINGS, THAT THE OFFER IS INADEQUATE, OPPORTUNISTIC AND NOT IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS REJECT THE OFFER AND
NOT TENDER THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to stockholders communicating the Board's recommendation
and a form of press release announcing such recommendation are filed as
Exhibits 10 and 11 hereto, respectively, and are incorporated herein by
reference.
(b) In reaching the conclusions referred to in Item 4(a), the Board took
into account numerous factors, including but not limited to the following:
(i) The Board's familiarity with the business, financial condition,
prospects and current business strategy of the Company, the nature of the
industries in which the Company operates and the Company's strong position
in these industries and the Board's belief that the Offer does not reflect
the long-term values inherent in the Company. In this regard, the Board
particularly considered:
-- The fact that since the Company became a publicly traded entity in
August 1992 upon the distribution of the Shares by Dresser
Industries, Inc. to its stockholders, the Company has pursued a long-
term strategy of investing and redeploying capital into its
refractories business and into new businesses that management and the
Board believed presented growth opportunities superior to the
collection of businesses transferred to the Company by Dresser. The
Board noted in particular that all of the non-refractories businesses
transferred by Dresser have been sold or are in the process of being
sold.
-- The Board's belief that the Company's stock price has been adversely
affected in the near term primarily by a combination of this
transformation process, nonrecurring events, and temporary
unfavorable conditions in several of its served markets.
Specifically:
-- operating earnings dropped substantially in the second and third
quarters due to the three month gap between the sale in March of
the Company's profitable Industrial Tool business for $229.2
million and completion of the acquisition in July of A. P. Green,
the refractories operations of which are rapidly being
consolidated with those of the Company's Harbison-Walker
subsidiary,
-- depressed copper ore and oil and gas prices hurt results of the
Company's electrolytic refining cell and pipe flange manufacturing
businesses, and sharp increases in steel imports and weaknesses in
global financial conditions caused lower sales and earnings in
U.S. and overseas refractories operations, and
-- significant expenses incurred starting up the Company's
undercarriage components manufacturing venture incurred during the
year have adversely affected the reported results of the forged
products segment.
-- The fact that by pursuing its business strategy, including five
completed refractories acquisitions, the Company's refractories
market position has substantially increased and improved, and the
Company is now the largest seller of refractory materials in North
America (an estimated $2.5 billion market) and the second largest
seller of refractory materials in South America (an estimated $1.1
billion market).
-- The Board's belief that substantial opportunities remain for
consolidation of the worldwide refractories business which, based
upon the Company's proven record of successful acquisitions,
represent significant potential for revenue and operating earnings
growth for the Company.
-- The fact that the Company has begun to realize, and the Board's
confidence in the Company's ability to continue to achieve,
significant benefits from the acquisition of A.P. Green.
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-- Since the acquisition of A.P. Green in July, the Company has
achieved more synergies more rapidly than it had anticipated--
having already attained approximately $30 million in cost savings
and other synergies on an annualized basis--and anticipates that
approximately $6 million of additional synergies will be attained
by the end of the second quarter of 1999.
-- Significant operating efficiencies are expected to be achieved as
a result of the planned reduction by April 1999 in the worldwide
manufacturing plants of A.P. Green and the Company from 37 to 25.
-- The fact that the Company is continuing to take steps to improve its
near-term operating efficiency and profitability and is in the
process of evaluating further possible asset dispositions as part of
its long-term strategic plan to enhance stockholder value.
-- The Board noted that, although the price of the Shares has suffered
recently, only seven months ago the Shares had traded as high as
$18.625, which represented a 13.2% compounded annual return to
stockholders based upon the price at which the Company's shares began
trading in 1992.
-- The fact that the Company has recently installed a senior management
team that the Board believes will be capable of successfully
implementing the initiatives of the Company's long-term strategic
plan.
(ii) The opinion of the Company's management as to the Company's
prospects for future growth and profitability, based on its knowledge of
the Company's businesses, its views as to the long-term strategic plan, the
various strategic initiatives which have been implemented over the past
several years and the other opportunities available to the Company in the
future, as well as management's view that the Offer Price is inadequate and
that the Offer is an opportunistic attempt to take advantage of short-term
business and market factors.
(iii) The historical trading prices of the Shares, including the Board's
belief, based in part on the factors referred to above, that the trading
price for the Shares immediately prior to the announcement of the Offer did
not fully reflect the long-term value inherent in the Company. In this
regard, the Board noted that, as of December 22, 1998, the Offer Price
represented more than a 43.6% discount from the highest closing price of
the Shares during the immediately preceding twelve-month period and more
than a 21.5% discount from the average of the closing prices of the Shares
during the same period.
(iv) The analysis performed by Wasserstein Perella and J.P. Morgan & Co.,
Inc. ("J.P. Morgan"), the Company's financial advisors, and the opinions of
each of Wasserstein Perella and J.P. Morgan after reviewing with the Board
such analysis and many of the factors referred to herein, that the Offer
Price is inadequate from a financial point of view.
(v) The Board's belief, in light of the Company's inherent earning power
and long-term strategic plan and the short-term nature of the factors
negatively affecting the Company's operations, business and share price,
that now is not the appropriate time to sell the Company.
(vi) The Board's belief, after considering the factors set forth above,
that the interests of the Company, its stockholders and other
constituencies would best be served by the Company continuing as an
independent entity.
(vii) The numerous conditions to which the Offer is subject, including
conditions which are in the discretion of the Bidder or subject to external
events not directly related to the Company, such as a 10% decline in the
stock market, and the fact that the Offer is not subject to any minimum
number of Shares being tendered, which, depending on the number of Shares
actually tendered, could allow the Bidder to purchase less than a majority
of the Shares outstanding and nevertheless gain a voting position that
might enable it to block or impede other transactions the Company may want
to consider in the future that could be in the best interests of the
Company and all of its stockholders other than the Bidder.
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(viii) The coercive effect the Offer may have on holders of Shares who
would like to reject the Offer and not have their equity interest in the
Company terminated, but who may feel forced to tender to protect against
the possibility of being left as a minority stockholder in the Company with
less, possibly significantly less, liquidity in the public trading market
for the Shares -- especially if the Bidder is able to purchase a
substantial percentage of the outstanding Shares pursuant to the Offer and
in any subsequent purchases -- and without any binding obligation on the
Bidder to undertake any second-step merger.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive but includes all material factors
considered by the Board. In reaching its determination to recommend rejection
of the Offer, the Board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights
to different factors. Throughout its deliberations, the Board received the
advice of its legal and financial advisors and other advisors who were
retained to advise the Board in connection with the Offer.
The Offer is conditioned upon, among other things, the Rights having been
redeemed by the Board or the Bidder being satisfied, in its reasonable
judgment, that the Rights are invalid or are otherwise inapplicable to the
Offer. In light of the Board's decision discussed above, the Board has
determined not to take any action to redeem the Rights in response to the
Offer. As more fully described under Item 7 below, the Board has adopted a
resolution to delay the "Distribution Date" under the Rights Agreement.
The Offer is also conditioned upon, among other things, the Bidder being
satisfied, in its sole discretion, that the Proposed Merger can be consummated
without the need for a supermajority vote of the Company's stockholders
pursuant to Article VI ("Article VI") of the Amended and Restated Certificate
of Incorporation of the Company (the "Charter"). In light of the Board's
decision discussed above, the Board has determined not to take any action
which would render Article VI inapplicable.
The Offer is also conditioned upon, among other things, the Bidder being
satisfied, in its reasonable judgment, that the provisions of Section 203 of
the Delaware General Corporation Law (the "Delaware Takeover Statute") have
been complied with or are invalid or otherwise inapplicable to the Offer and a
merger or similar business combination with the Bidder (the "Proposed
Merger"). In light of the Board's decision discussed above, the Board has
determined to not take any action which would render the Delaware Takeover
Statute inapplicable. For a summary of the Delaware Takeover Statute see Item
8(c) below.
The Offer is also conditioned upon, among other things, the Company not
having entered into or effectuated any agreement or transaction with any
person or entity (including the Company's stockholders) having the effect of
impairing the Bidder's ability to acquire the Company or otherwise diminishing
the expected economic value to the Bidder of the acquisition of the Company,
or the Company not postponing the Company's 1999 annual meeting of
stockholders (the "Company Annual Meeting") beyond May 31, 1999 or taking any
other action that would impede the Bidder's ability to nominate one or more
directors for election or its ability to make any other proposals to be voted
upon by stockholders at such meeting. In light of the Board's decision
discussed above, the Board may enter into such agreements or transactions,
consistent with the Company's long-term strategic plan, that may cause such
condition not to be satisfied. Moreover, due to the change in the Company's
fiscal year-end from October 31 to December 31, the Company Annual Meeting
will need to be held later than the March 17, 1999 date disclosed in the
Company's 1998 proxy statement (which was fixed prior to the change in fiscal
year-end). At this time, the date of the Company Annual Meeting has not been
fixed by the Board. There can be no assurance that the Board will fix the date
of the Company Annual Meeting so as to satisfy the Bidder's condition.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Wasserstein Perella and J.P. Morgan as the
Company's financial advisors in connection with the evaluation of and response
to the Offer and other matters arising in connection therewith. In
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addition, the Company has retained Kekst and Company ("Kekst") and Morrow &
Co., Inc. ("Morrow") to assist the Company in connection with its
communications with stockholders with respect to, and to provide other
services to the Company in connection with, the Offer.
(a) Wasserstein Perella & Co., Inc.
Pursuant to a letter agreement, dated September 8, 1998, and amended and
restated as of December 18, 1998 (the "Wasserstein Perella Letter Agreement"),
the Company has retained Wasserstein Perella to assist the Company in
implementing and completing its long-term strategic plan and to serve as the
Company's financial advisor with respect to matters relating to takeover
defense. Pursuant to the Wasserstein Perella Letter Agreement, the Company has
agreed to pay Wasserstein Perella: (A) an initial retainer fee of $200,000
payable on the date of the Wasserstein Perella Letter Agreement (which amount
has been paid) and additional retainer fees of $75,000 per month beginning on
January 1, 1999, (B) an additional fee of 0.65% of the aggregate consideration
paid in (i) an acquisition of or similar business combination involving the
Company or a majority of the value of the Company's assets (a "Combination
Proposal") or (ii) a transaction relating to or in response to a Combination
Proposal (an "Alternative Transaction") that includes, among other things, an
acquisition of all or a significant portion of the assets or equity securities
of another entity, a merger or other business combination involving the
Company and one or more third parties, a sale of the Company or significant
portion of its equity securities, assets or businesses to one or more third
parties, a recapitalization or restructuring of the Company, a liquidation of
the Company, a joint venture or other form of strategic transaction (a
"Strategic Transaction"); provided that in any such Alternative Transaction
which consists solely of the sale or disposition of all or a significant
potion of the equity securities or assets of certain businesses of the
Company, such additional fee shall be equal to 1.0% of the aggregate
consideration paid in each such transaction; provided, however, that the
minimum fee payable for any such transaction under this clause (B) shall be
$1.0 million; and provided, further, that in connection with any Alternative
Transaction that involves a public or private sale of equity or debt
securities of the Company, Wasserstein Perella will receive customary
financing fees to be mutually agreed at such time and Wasserstein Perella
shall be offered the right, but will not be obligated, to act as co-manager or
co-agent of any public offering or private placement of the Company's equity
or debt securities, as the case may be, and (C) an additional fee of (i) $2.0
million if no Combination Proposal or Alternative Transaction that is a
Strategic Transaction (other than the sale of certain specified businesses)
has been consummated prior to September 8, 1999, plus (ii) $1.5 million if no
Combination Proposal or Alternative Transaction that is a Strategic
Transaction (other than the sale of certain specified businesses) has been
consummated prior to the earlier of (x) the date of the Company's
stockholders' meeting in 2000 at which the directors of the Company are to be
elected and (y) June 1, 2000. For purposes of the preceding sentence, the
phrase "aggregate consideration" generally means the total amount of cash and
the fair market value of all other property paid or payable in such
transaction and includes the value of any liabilities assumed by the acquiror.
Pursuant to the Wasserstein Perella Letter Agreement, any fees paid to
Wasserstein Perella (i) under clause (A) above will be fully credited against
any fees to be paid to Wasserstein Perella under clauses (B) or (C) above, as
the case may be, (ii) under clause (B) above will be fully credited against
any fees to be paid to Wasserstein Perella under clause (C) above and (iii)
under clause (C) above will be fully credited against any fees to be paid to
Wasserstein Perella under clause (B) above.
The Company has also agreed to reimburse Wasserstein Perella periodically
for its reasonable out-of-pocket expenses, including the fees and
disbursements of legal counsel plus any sales, use or similar taxes (including
additions to such taxes, if any) arising in connection with their engagement
by the Company. In addition, the Company has agreed to indemnify Wasserstein
Perella against certain liabilities, including liabilities under the federal
securities laws.
The Wasserstein Perella Letter Agreement may be terminated at any time by
either party thereto effective upon receipt of written notice by the non-
terminating party. Upon such termination, Wasserstein Perella shall be
entitled to (i) the full retainer fees paid (and then due and payable) under
clause (A) above, (ii) the full fee in the amounts and at the times provided
for or agreed upon under clause (B) above relating to transactions
8
<PAGE>
consummated at any time prior to the expiration of twelve months following
such termination, (iii) the full fee in the amount and at the time provided
under clause (C) above and (iv) reimbursement of expenses accruing prior to
such termination to the extent provided for in the Wasserstein Perella Letter
Agreement. Any such termination will not affect the Company's continuing
obligation to indemnify Wasserstein Perella and certain related persons as
provided for in the Wasserstein Perella Letter Agreement.
(b) J.P. Morgan & Co., Inc.
Pursuant to a letter agreement, dated December 14, 1998 (the "J.P. Morgan
Letter Agreement"), the Company has retained J.P. Morgan to act as the
Company's financial advisor with respect to considering the appropriateness of
various strategic financial alternatives for the Company and assisting the
Company with respect to pursuing any of such alternatives. Pursuant to the
J.P. Morgan Letter Agreement, the Company has agreed to pay J.P. Morgan: (i)
an engagement fee (the "Engagement Fee") of $150,000, payable upon execution
of the J.P. Morgan Letter Agreement, (ii) in connection with the consummation
of a specified transaction, a success fee ("Success Fee #1") of no less than
$1.0 million, less the amount of the Engagement Fee paid by the Company but
not previously credited, (iii) following any unsolicited offer for the
Company, in connection with consummation of another specified transaction, a
success fee ("Success Fee #2") of no less than $1.0 million, less any
remaining amount of the Engagement Fee paid by the Company but not previously
credited, (iv) following any unsolicited offer for the Company, a fee of $3.5
million, less any amount of the Engagement Fee paid by the Company but not
previously credited, and less Success Fee #1 and Success Fee #2 to the extent
they have been paid by the Company, $2.0 million of which shall be payable on
September 30, 1999 and $1.5 million of which shall be payable following the
Company's annual meeting in 2000, if, as of each such date, no person or group
of persons has acquired beneficial ownership of more than 50% of the then-
outstanding common stock of, or combined voting power in, the Company
calculated on a fully-diluted basis, and (v) a fee (the "Transaction Fee") for
any sale, merger, or any other business combination, in one or a series of
transactions, involving all or a substantial portion of the stock, assets, or
business of the Company or any repurchase by the Company of a significant
amount of its securities, any recapitalization of the Company, or any spin-
off, split-off, or other extraordinary dividend of cash, securities, or other
assets to stockholders of the Company. The Transaction Fee shall be in an
amount equal to 0.65% of the Transaction Value (as defined below), less any
remaining amount of the Engagement Fee paid by the Company but not previously
credited and less any fees previously paid pursuant to clause (iv) of this
paragraph.
The "Transaction Value" generally means the aggregate amount of
consideration received by the Company and/or its stockholders in any
transaction, plus the amount of any debt securities or other liabilities
assumed, redeemed, or remaining outstanding or equity securities redeemed or
remaining outstanding in connection with any such transaction, plus, without
duplication, the value of any securities, cash, or other assets distributed to
stockholders of the Company.
The Company has also agreed to reimburse J.P. Morgan for all reasonable
expenses (including, without limitation, travel, communication, and document
production expenses, and the reasonable fees and disbursements of counsel)
incurred by J.P. Morgan in performing its engagement. In addition, the Company
has agreed to indemnify J.P. Morgan against certain liabilities, including
liabilities under the federal securities laws.
The J.P. Morgan Letter Agreement may be terminated by either the Company or
J.P. Morgan at any time upon giving written notice to the other party. No such
termination will affect (i) J.P. Morgan's rights to receive fees accrued prior
to such termination or to receive reimbursement of its expenses, (ii) the
rights of J.P. Morgan or any other indemnified person to receive
indemnification and contribution pursuant to the J.P. Morgan Letter Agreement,
or (iii) certain confidentiality obligations of the Company specified in the
J.P. Morgan Letter Agreement. In addition, if, at any time prior to the
expiration of twelve months (subject to extension) after any such termination
by the Company, a transaction is consummated (as described above under the
first paragraph under this heading in clauses (ii), (iii) or (v)) J.P. Morgan
will be entitled to payment in full of Success Fee #1, Success Fee #2 or a
Transaction Fee, as the case may be.
9
<PAGE>
(c) Kekst and Company and Morrow & Co., Inc.
The Company has also retained Kekst and Morrow to assist the Company in
connection with its communications with stockholders with respect to, and to
provide other services to the Company in connection with, the Offer. The
Company will pay Kekst and Morrow reasonable and customary compensation for
their services and will reimburse Kekst and Morrow for their reasonable out-
of-pocket expenses incurred in connection therewith.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company, other than the
option grants referred to in Item 3(b) above.
(b) To the best of the Company's knowledge, none of the Company's executive
officers, directors, affiliates or subsidiaries presently intends to tender to
the Bidder pursuant to the Offer or sell any Shares that are held of record or
beneficially owned by such persons, but rather such persons presently intend
to continue to hold such securities.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a-b) For the reasons discussed in Item 4 above, the Board has concluded
that the Offer is inadequate, opportunistic and not in the best interests of
the Company and its stockholders and unanimously recommends, in light of the
Company's future prospects, that the Company's stockholders reject the Offer
and not tender their Shares pursuant to the Offer. The Board has also
instructed management, with the assistance of the Company's financial and
legal advisors, to continue to take steps to explore the possible disposition
of certain non-refractory businesses of the Company and the subsequent use of
such proceeds, on a basis consistent with the pursuit of the Company's long-
term business strategy to enhance stockholder value. There can be no
assurance, however, that these activities will result in any transaction being
recommended to the Board or that any transaction which may be recommended will
be authorized or consummated. Except as described herein, the Company is not
now engaged in any negotiations in response to the Offer that relate to or
would result in one or more of the following or a combination thereof: (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any of its subsidiaries; (iii) a
tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of
the Company.
As part of the ongoing corporate transformation process and prior to the
announcement by the Bidder on December 15, 1998 of its intention to commence
the Offer, representatives of the Company have been authorized to provide
materials to third parties relating to the possible disposition of certain
assets of the Company and, based upon responses thereto, to engage in
discussions with third parties with respect thereto, which may also include
discussions and negotiations with various lenders to the Company. Accordingly,
representatives of the Company may in the future engage in negotiations in
furtherance of the Company's long-term strategic plan or in response to the
Offer that could have one of the effects specified in the preceding paragraph
and the Board has determined that disclosure with respect to the parties to,
and the possible terms of, any transactions or proposals of the type referred
to in the preceding paragraph might jeopardize any discussions or negotiations
that the Company may conduct. Accordingly, the Board has adopted a resolution
instructing management not to disclose the possible terms of any such
transactions or proposals, or the parties thereto, unless and until a
definitive agreement or any agreement in principle relating thereto has been
reached or, upon the advice of counsel, as may otherwise be required by law.
At its December 23, 1998 meeting, the Board resolved to delay the
"Distribution Date" under the Rights Agreement (the date after which, among
other things, separate certificates for the Rights are to be distributed)
until such later date as the Board, in its sole discretion, determines to be
in the best interests of the Company and its stockholders. See also Item 8(a)
below.
10
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Rights Agreement.
On October 20, 1995, the Board declared a dividend distribution of one right
to purchase Series A Junior Preferred Stock (a "Right") for each outstanding
share of Common Stock to stockholders of record of the Company on November 1,
1995. Each Right entitles the registered holder to purchase from the Company
one one-hundredth ( 1/100) of a share of a series of preferred shares of the
Company, designated as Series A Junior Preferred Stock at a price of $45 per
one one-hundredth ( 1/100) of a share, subject to certain adjustments. The
description and terms of the Rights are set forth in the Rights Agreement.
Until the close of business on the day which is the earlier to occur of (i)
the tenth day following a public announcement by the Company (by any means) of
the acquisition by any person or group of beneficial ownership of 10 percent
or more of the Company's voting stock (hereinafter, such person or group is
referred to as an "Acquiring Person") and (ii) the tenth business day (or such
later date as may be determined by action of the Board prior to such time as
any person or group becomes an Acquiring Person) after the date of the
commencement or announcement of a person's or group's intention to commence a
tender or exchange offer (other than a tender or exchange offer by the
Company, any subsidiary of the Company or any employee benefit plan or
employee stock plan of the Company or any subsidiary of the Company) the
consummation of which would result in the beneficial ownership of 30 percent
or more of the outstanding shares of the then-outstanding voting stock of the
Company, even if no purchases actually occur pursuant to such offer (the
earlier of such dates being called the "Distribution Date"), the Rights are
evidenced, with respect to any of the Common Stock certificates that were
outstanding as of November 1, 1995, by such Common Stock certificates with a
copy of a summary of Rights attached. The Rights Agreement provides that,
until the Distribution Date, the Rights will be represented by and transferred
with, and only with, the Common Stock. New Common Stock certificates issued
after November 1, 1995, contain a legend incorporating the Rights Agreement by
reference. The Rights are not exercisable until the Distribution Date.
As discussed in Item 7 above, at its December 23, 1998 meeting, the Board
acted to delay the Distribution Date under the Rights Agreement until such
later date as the Board, in its sole discretion, determines to be in the best
interests of the Company and its stockholders.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Rights Agreement as set forth in the Company's Form 8-B, dated October 31,
1995, the Company's Form 8-A/A, dated March 12, 1998, the Company's Form 8-
A/A, dated September 18, 1998, and the Company's Form 8-A/A, dated October 5,
1998, each as filed with the Securities and Exchange Commission.
(b) Amendment to By-Laws. On December 14, 1998, pursuant to the Charter and
the By-laws of the Company (the "By-laws"), the Board adopted a resolution to
amend Sections 3 and 7 of Article II of the By-laws (the "By-law Amendment").
The By-law Amendment requires that any stockholder that desires to nominate
persons for election as directors of the Company at any annual meeting must,
subject to certain limitations, give the Secretary of the Company written
notice thereof not less than 50 days prior to the date of the annual meeting.
The advance notice procedures for nomination of directors set forth in the By-
law Amendment are substantially similar to the procedures set forth in the
Charter that mandate advance notice of any stockholder business proposed to be
brought before an annual meeting. The By-law Amendment also prescribes the
form of notice that must be delivered by any stockholder and the method of
delivery of such notice. In addition, the By-law Amendment sets forth certain
arrangements relating to the governance and conduct of meetings of
stockholders. The foregoing summary of the By-law Amendment does not purport
to be complete and is qualified in its entirety by reference to the complete
text of the By-law Amendment as set forth in the Company's Form 8-K, dated
December 16, 1998, as filed with the Securities and Exchange Commission.
(c) Delaware Takeover Statute. The Delaware Takeover Statute may have the
effect of significantly delaying the Bidder's ability to acquire the entire
equity interest in the Company.
11
<PAGE>
In general, the Delaware Takeover Statute prevents an "Interested
Stockholder" (as defined below) from engaging in a "Business Combination"
(defined as a variety of transactions, including a merger) with the Company
for a period of three years following the time such person became an
Interested Stockholder, unless: (i) before the time such person became an
Interested Stockholder, the Board either approved the Business Combination or
the transaction in which such person became an Interested Stockholder; (ii)
upon consummation of the transaction which resulted in such person becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the Company outstanding at the time the transaction commenced
(excluding for purposes of determining the number of shares outstanding those
shares owned by directors who are also officers and employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or (iii) at or following the time at which such person became
an Interested Stockholder, the Business Combination is (A) approved by the
Board and (B) authorized at a meeting of stockholders by an affirmative vote
of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding voting stock of the Company not owned by the Interested
Stockholder. Additionally, under the Delaware Takeover Statute, the
restrictions described above do not apply to certain Business Combinations
proposed by an Interested Stockholder following the announcement or
notification, but prior to the consummation or abandonment of, one of certain
extraordinary transactions involving the Company and a person who had not been
an Interested Stockholder during the three years preceding the date of the
proposed Business Combination or who became an Interested Stockholder with the
approval of a majority of the Board or who became an Interested Stockholder
during the period in which the restrictions of the Delaware Takeover Statute
did not apply.
For purposes of the Delaware Takeover Statute the term "Interested
Stockholder" generally means a person who beneficially owns 15% or more of the
Company's outstanding voting stock, other than any person who owns shares in
excess of the 15% limitation on, or acquired such shares pursuant to a tender
offer commenced prior to, December 23, 1987, or pursuant to an exchange offer
announced prior to December 23, 1987 and commenced within 90 days thereafter
and either (A) continued to own shares in excess of such 15% limitation or
would have but for action by the Company or (B) is an affiliate or associate
of the Company and so continued (or so would have continued but for action by
the Company) to be the owner of 15% or more of the outstanding voting stock of
the Company at any time within the 3-year period immediately prior to the date
on which it is sought to be determined whether such person is an Interested
Stockholder.
The foregoing summary of the Delaware Takeover Statute does not purport to
be complete and is qualified in its entirety by reference to the provisions of
the Delaware Takeover Statute.
There are currently two lawsuits pending against the Company, both filed in
the Chancery Court of Delaware on October 7, 1998, challenging certain aspects
of the Board's exercise of its fiduciary responsibilities, including the
decision by the Board to reduce the triggering threshold under the Rights
Agreement from 15% to 10%. The actions have been consolidated and are
currently in the preliminary stages of discovery.
12
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit 1 -- Excerpts from the Company's Proxy Statement for the Annual
Meeting of Stockholders held on March 18, 1998.
Exhibit 2 -- Severance Agreement dated February 23, 1998 by and between the
Company and Mr. Graham L. Adelman (Severance Agreements with Mr.
Juan M. Bravo and Mr. Herbert Linser, respectively, are
identical to the Severance Agreement filed as this Exhibit,
except as to the name of party and the Severance Agreement dated
December 18, 1998 with Mr. Rawles Fulgham is identical to the
Severance Agreement filed as this Exhibit, except as to the name
of party and the date).
Exhibit 3 -- Severance Agreement dated February 23, 1998 by and between the
Company and Mr. George W. Pasley (Severance Agreements with Mr.
James B. Alleman and Mr. Maurice W. Barrett, respectively, are
identical to the Severance Agreement filed as this Exhibit,
except as to the name of party; and Severance Agreements dated
December 18, 1998 with Ms. Jeanette H. Quay and Ms. Donna A.
Reeves, respectively, are identical to the Severance Agreement
filed as this Exhibit except as to the name of party and the
date).
Exhibit 4 -- Form of Amendment No. 1 dated September 18, 1998 to the
Severance Agreements dated February 23, 1998 by and between the
Company and Mr. Graham L. Adelman, Mr. Juan M. Bravo, Mr.
Herbert Linser, Mr. George W. Pasley, Mr. James B. Alleman and
Mr. Maurice W. Barrett, respectively.
Exhibit 5 -- Form of Amendment No. 2 dated October 27, 1998 to the Severance
Agreements dated February 23, 1998 by and between the Company
and Mr. Graham L. Adelman, Mr. Juan M. Bravo, Mr. Herbert
Linser, Mr. George W. Pasley, Mr. James B. Alleman and Mr.
Maurice W. Barrett, respectively.
Exhibit 6 -- The Company's 1992 Stock Compensation Plan.
Exhibit 7 -- Amendment to the Company's 1992 Stock Compensation Plan, adopted
March 18, 1998.
Exhibit 8 -- Form of Incentive Stock Option Agreement, dated September 18,
1998.
Exhibit 9 -- Form of Nonqualified Stock Option Agreement, dated September 18,
1998.
Exhibit 10 -- Letter to Stockholders of the Company, dated December 23, 1998.*
Exhibit 11 -- Text of Press Release, dated December 23, 1998.
</TABLE>
This document and the exhibits attached hereto may contain certain
statements that are not strictly historical and are considered "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, cyclicity
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 reports filed with the Securities
and Exchange Commission including quarterly reports on Form 10-Q, annual
reports on Form 10-K and reports on Form 8-K.
- --------
* Included in copies mailed to stockholders.
13
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
/s/ Graham L. Adelman
By: _________________________________
Name: Graham L. Adelman
Title:President
Dated: December 23, 1998
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit 1 -- Excerpts from the Company's Proxy Statement for the Annual
Meeting of Stockholders held on March 18, 1998.
Exhibit 2 -- Severance Agreement dated February 23, 1998 by and between the
Company and Mr. Graham L. Adelman (Severance Agreements with Mr.
Juan M. Bravo and Mr. Herbert Linser, respectively, are identical
to the Severance Agreement filed as this Exhibit, except as to
the name of party and the Severance Agreement dated December 18,
1998 with Mr. Rawles Fulgham identical to the Severance Agreement
filed as this Exhibit, except as to the name of party and the
date).
Exhibit 3 -- Severance Agreement dated February 23, 1998 by and between the
Company and Mr. George W. Pasley (Severance Agreements with Mr.
James B. Alleman and Mr. Maurice W. Barrett, respectively, are
identical to the Severance Agreement filed as this Exhibit,
except as to the name of party; and Severance Agreements dated
December 18, 1998 with Ms. Jeanette H. Quay and Ms. Donna A.
Reeves, respectively, are identical to the Severance Agreement
filed as this Exhibit except as to the name of party and the
date).
Exhibit 4 -- Form of Amendment No. 1 dated September 18, 1998 to the
Severance Agreements dated February 23, 1998 by and between the
Company and Mr. Graham L. Adelman, Mr. Juan M. Bravo, Mr. Herbert
Linser, Mr. George W. Pasley, Mr. James B. Alleman and Mr.
Maurice W. Barrett, respectively.
Exhibit 5 -- Form of Amendment No. 2 dated October 27, 1998 to the Severance
Agreements dated February 23, 1998 by and between the Company and
Mr. Graham L. Adelman, Mr. Juan M. Bravo, Mr. Herbert Linser, Mr.
George W. Pasley, Mr. James B. Alleman and Mr. Maurice W.
Barrett, respectively.
Exhibit 6 -- The Company's 1992 Stock Compensation Plan.
Exhibit 7 -- Amendment to the Company's 1992 Stock Compensation Plan, adopted
March 18, 1998.
Exhibit 8 -- Form of Incentive Stock Option Agreement, dated September 18,
1998.
Exhibit 9 -- Form of Nonqualified Stock Option Agreement, dated September 18,
1998.
Exhibit 10 -- Letter to Stockholders of the Company, dated December 23, 1998.*
Exhibit 11 -- Text of Press Release, dated December 23, 1998.
</TABLE>
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* Included in copies mailed to stockholders.
<PAGE>
Exhibit 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of January 15, 1998, certain information
regarding those persons believed by the Company to have been the owners on such
date of more than 5% of the Common Stock then outstanding.
NAME AND ADDRESS OF NUMBER OF SHARES OF PERCENT
BENEFICIAL OWNER COMMON STOCK OWNED OF CLASS
------------------- ------------------- --------
Prudential Insurance Company of America............ 2,491,600(1) 11.27%
19 Prudential Plaza
Newark, New Jersey 07102
Pioneering Management Corporation.................. 1,987,900(2) 9.01%
60 State Street
Boston, Massachusetts 02109
Neuberger & Berman................................. 1,279,720(3) 5.79%
605 Third Avenue
New York, New York 10158
- --------
(1) Based upon a Form 13F filed with the Securities and Exchange Commission on
or about September 30, 1997.
(2) Based upon an amendment dated January 5, 1998 to a Schedule 13G filed with
the Securities and Exchange Commission.
(3) Based upon a Form 13F filed with the Securities and Exchange Commission on
or about September 30, 1997.
The following table states the number of shares of Common Stock of the Company
owned by each current Director and nominee and by all Directors and officers as
a group as of December 31, 1997. No Director or officer beneficially owned more
than 1% of the Common Stock outstanding on such date. The number of shares
beneficially owned by all Directors and officers as a group represented 2.8% of
the Common Stock that would then have been outstanding if all options
exercisable by such persons before March 1, 1998 had been exercised. Except as
otherwise indicated, each individual named has sole investment and voting power
with respect to the securities shown.
NAMES SHARES OWNED(1) STOCK UNITS(2)
- ----- --------------- --------------
J. L. Jackson.................................. 249,742 58,963
Richard W. Vieser.............................. 51,633 0
Rawles Fulgham................................. 22,000 0
David H. Blake................................. 17,000 0
Samuel B. Casey, Jr............................ 16,699 0
Juan M. Bravo.................................. 43,732 8,569
Graham L. Adelman.............................. 51,778 9,433
Thomas R. Hurst................................ 59,329 20,613
Gary G. Garrison............................... 61,315 8,053
George W. Pasley............................... 20,500 1,863
All Directors, nominees and officers as a group
(12 persons).................................. 614,296 108,032
- --------
(1) Includes the following shares subject to options and related restricted
incentive stock awards granted to persons included in the table under
various incentive compensation plans of the Company which are exercisable on
or within sixty days after January 1, 1998; 239,550 shares for Mr. Jackson;
39,000 shares for Mr. Bravo; 22,900 shares for Mr. Adelman; 59,100 shares
for Mr. Hurst; 58,100 shares for Mr. Garrison; 20,500 shares for Mr. Pasley;
16,000 shares for each of Messrs. Blake, Casey, Fulgham and Vieser; and
522,050 shares for all Directors and officers as a group.
<PAGE>
Such shares are considered to be beneficially owned under the rules of the
Securities and Exchange Commission and are considered to be outstanding for
the purpose of calculating percentage ownership.
(footnotes continue on next page)
(2) Stock Units represent shares of Common Stock which may be distributable
after termination of employment to persons included in the table who have
deferred payment of annual incentive compensation pursuant to the Company's
Deferred Compensation Plan. Stock Units represent an additional exposure of
such persons to changes in the value of Common Stock which is not reflected
in the column "Shares Owned." See "Report of Executive Compensation
Committee--Policies Applicable to All Executive Officers-- Stock Ownership
Requirements."
The Board of Directors adopted a Stock Ownership Requirements Policy in
January 1994 (see "Report of Executive Compensation Committee"). At December 31,
1997, the total Shares Owned and Stock Units of the 12 persons included in the
Directors and officers group was 722,328 or approximately 180% of the 401,010
Shares Owned and Stock Units of the 14 persons who were in the Director and
officer group on December 31, 1993.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
GENERAL
The Executive Compensation Committee is responsible for all components of the
compensation program for executive management of the Company, including the
named executive officers. The Committee is comprised solely of outside directors
and administers and reviews Global's executive compensation plans and
arrangements.
The purpose of the Global executive compensation program is to enable the
Company to recruit, motivate, reward and retain the caliber of executive talent
necessary to provide shareholders and employees a long-term growth opportunity.
The competitiveness of the compensation program is reviewed by the Executive
Compensation Committee using external sources of market information and analysis
provided by outside compensation consultants. Changes to the programs are made
from time to time by the Board of Directors in order to maintain competitive
compensation levels and to better link the interests of management and the
shareholders.
The Committee considers an officer's total compensation package whenever a
change is made to any individual component. Base salary levels affect an
officer's target award under an annual incentive plan and the number of shares
for which stock options are granted under the long-term incentive plan of the
Company.
POLICIES APPLICABLE TO ALL EXECUTIVE OFFICERS
STOCK OWNERSHIP REQUIREMENTS
As a means to develop significant officer and management ownership in the
Company, the Board of Directors approved the Company's Stock Ownership
Requirements Policy in January 1994. This policy establishes stock ownership and
retention levels for officers and other managers which are stated as multiples
of their base salaries. The Stock Ownership Requirements Policy also provides
that at least 50% of any annual incentive payment to which an officer is
entitled must be either invested in Common Stock or credited in the form of
Stock Units under the Company's Deferred Compensation Plan until such time as
the officer's ownership requirements are satisfied. In addition, at least 25% of
any shares acquired by an officer upon exercise of stock options must be
retained until such requirements have been met. After having attained the
required ownership, an officer must continue to meet the requirement until
retirement or termination.
The required ownership level for the Chairman and Chief Executive Officer is
3.5 times annual base salary. Accordingly, Mr. Jackson is required to acquire
and retain, until retirement or termination, ownership of Common Stock or Stock
Units with a market value equivalent to $1,925,000. Because the price of the
Common Stock was higher on December 31, 1996 than December 31, 1997, his
ownership in relation to this requirement declined during
-2-
<PAGE>
calendar 1997 from 80% to 61%. Other executive officers have ownership levels
ranging from 1.5 to 2.5 times their annual base salaries, or $2,257,000 in
aggregate. As of December 31, 1997, 66% of this requirement had been met, in
aggregate, by executive officers other than Mr. Jackson.
BASE SALARY AND ANNUAL BONUS
Each of the Company's executive officers receives a base salary and has an
opportunity to earn an annual incentive payment. Under the Company's Incentive
Compensation Plan for Officers and Headquarters Staff ("Headquarters Plan"),
payments, if any, to participants are based upon attainment during the fiscal
year of Company financial performance objectives and individual performance
objectives. Under the Division Executive Incentive Plan ("Division Plan"),
payments to officers who are also Division Presidents are determined based
primarily upon financial performance objectives for the Company's major business
units.
It has been the policy of the Committee to establish a base salary range for
each executive officer position and a midpoint for the range which would place
the base salary of that position in approximately the 50th percentile of market
salary. In considering base salary changes, the Committee reviews the
performance of each named officer, the recent financial performance of the
Company, and the position of the officer's current salary in the established
range. None of the named officers received a salary adjustment during fiscal
1997 other than one to whom additional responsibilities were assigned. While the
Company participates in several compensation surveys, the primary survey used to
determine the salary range and midpoint for executive officers is prepared by a
major consulting firm with data from 300 U.S. manufacturing corporations,
including approximately half of the Fortune 500. Survey data is reviewed both on
a consolidated industry basis, as well as more specific industry groupings of
multiple industry companies and metalworking fabricating companies. The
Committee also determines annually a target incentive opportunity for each
executive officer which would place that officer at about the 50th percentile of
market annual incentive compensation determined by reference to these surveys.
The Headquarters Plan and Division Plan enable the Committee to provide
incentives for participants to contribute each year to growth in Company
earnings and to accomplishment of other financial and nonfinancial goals.
Pursuant to Board authorization, funds available for distribution for 1997 under
the Headquarters Plan could equal up to 4% of the Company's net after tax
profit, adjusted for unusual items. Financial performance objectives for 1997
under the Headquarters Plan related to return upon shareholders' equity for the
fiscal year. For 1997, funds equal to 6% of net after tax profits, adjusted for
unusual items, were authorized for payments under the Division Plan. Business
unit financial performance objectives for 1997 were based upon proposals
submitted to the Committee by the Chief Executive Officer, which, in turn,
reflected the annual operating plans prepared for the business units.
Performance objectives may be adjusted by the Committee to reflect
unanticipated, significant changes in the Company's businesses during a plan
year.
In addition to 8 executive officers, 74 other employees participated in the
annual incentive Plans during 1997. The amount earned by each participant was
related to the extent to which the financial and nonfinancial criteria
established by the Committee were achieved. For 1997, the minimum financial
objectives for the Headquarters Plan were not achieved and no incentive payments
were made for this portion of the officer incentives. Individual objective
incentive payments for the executive officers in the Headquarters Plan resulted
in payments aggregating less than 7% of the total targeted incentive opportunity
for 1997. Under the Division Plans, payments ranged from 21% to 120% of the
targeted individual incentive opportunities.
At least 50% of any payments to which officers are entitled under the
Headquarters or Division Plans must be invested in Company Stock or Stock Units
until such time as their ownership requirements are met. Such ownership levels
must be maintained until retirement or termination.
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<PAGE>
STOCK OPTION PROGRAM
Executive officers are eligible to receive stock option grants under the
Company's 1992 Stock Compensation Plan ("Stock Plan") which is intended to
encourage them to take actions which will result in realization by shareholders
of an attractive return on their Common Stock investment. The Committee believes
that stock option grants, in combination with the Company's Stock Ownership
Requirements Policy, are an effective means of aligning executive compensation
with shareholder interests. Although, the Committee generally grants options to
executive officers for a number of shares which is above the average level of
other companies of similar size because of Global's stock ownership
requirements, reduced grants may be made for good reason as determined in the
discretion of the Committee.
The Committee granted executive officers options during 1997 under the Stock
Plan to purchase, in aggregate, 74,000 shares of Common Stock, 66,000 of which
were made at $20.00 per share, which was approximately $2.20 above the fair
market value of the Common Stock on the date of grant. An additional option
grant of 8,000 shares was granted to one officer upon hire at the fair market
value of the Common Stock on the date of hire. The options are fully exercisable
six months after the grant date and expire ten years after the date of grant.
Although reduced by the Committee, the number of shares for which options were
granted to each executive officer was related to the officer's position, base
salary, and individual performance. The number of shares subject to outstanding
options previously granted to a Stock Plan participant are not taken into
consideration.
CHIEF EXECUTIVE OFFICER COMPENSATION
No incentive payments were made to Mr. Jackson for fiscal 1997 and, as noted
above, the base salaries of Mr. Jackson and the other named executive officers,
other than one to whom additional responsibilities were assigned, were not
changed during the year.
Mr. Jackson was granted a stock option for 25,000 shares in August 1997 at an
exercise price approximately $2.20 over the trading price of the Common Stock on
the date of grant. Consistent with options granted to other employees at such
time, the number of shares for which Mr. Jackson's option was granted was
substantially reduced by the Committee.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally limits the corporate tax
deduction for compensation paid during a year to a public company's chief
executive officer and its four other most highly compensated executed officers
to $1 million, unless specified conditions are met. Certain performance-based
compensation is not subject to the deduction limitation. Although the Company
did not have nondeductible compensation expense during 1997 and is not expected
to have such in 1998, the 1992 Stock Compensation Plan, as amended, would limit
the number of shares for which options may be granted in any consecutive
three-year period to a participant in order to maximize the amount of
compensation expense that may be deductible to the Company under Section 162(m).
Members of the Executive Compensation
Committee:
R. W. Vieser, Chairman
David H. Blake
Samuel B. Casey, Jr.
Rawles Fulgham
The foregoing Report on Executive Officer Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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<PAGE>
There were no committee interlocks.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table reflects the cash and non-cash compensation paid or
accrued for the Chief Executive Officer and named executive officers of the
Company for fiscal 1997.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION(1) YEAR ($) ($) ($)(2) # ($)(3)
------------------ ---- -------- -------- ------------ --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. L. Jackson........... 1997 $550,000 $ 0 $ 0 25,000 $ 1,917
Chairman and Chief 1996 $541,672 $350,000 $ 56,349 34,250 $ 20,967
Executive Officer, 1995 $491,667 $500,000 $112,300 72,800 $ 36,900
President and Chief
Operating Officer
Juan M. Bravo........... 1997 $240,000 $ 30,500 $ 10,880(4) 10,000 $ 2,520
Vice President-- 1996 $229,000 $160,000 $ 53,023(4) 24,000 $ 10,380
Subsidiary
President 1995 $204,000 $ 68,000 $ 8,209 5,000 $ 2,301
Graham L. Adelman....... 1997 $216,667 $ 20,000 $ 6,665 9,400 $ 3,625
Senior Vice President, 1996 $200,000 $ 82,400 $ 29,333 13,500 $ 5,603
General Counsel & 1995 $ 53,846 $ 30,000 $ 10,659 26,800 $ 1,980
Secretary
Thomas R. Hurst......... 1997 $187,000 $135,000 $ 27,003 6,400 $ 1,830
Vice President-- 1996 $185,833 $125,000 $ 27,322 11,500 $ 8,805
Subsidiary President 1995 $177,600 $116,000 $ 42,144 15,200 $ 11,118
Gary G. Garrison........ 1997 $170,000 $ 0 $ 0 5,800 $ 2,170
Vice President-- 1996 $167,667 $ 67,500 $ 12,228 12,500 $ 5,191
Finance, Chief 1995 $153,333 $ 93,600 $ 16,908 10,000 $ 4,614
Financial Officer and
Treasurer
George W. Pasley........ 1997 $160,000 $ 15,000 $ 5,002 5,500 $ 0
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Vice President-- 1996 $ 26,667 $ 10,500 $ 3,729 15,000 $ 693
Communications 1995 $ 0 $ 0 $ 0 0 $ 0
</TABLE>
- --------
(1) Mr. Jackson was elected President and Chief Operating Officer in February
1997. Mr. Bravo was hired in October 1994 as President of Refractarios
Mexicanos, S.A. de C.V. and in March 1996 was elected a Vice President of
the Company. Mr. Adelman became an employee and officer of the Company in
July 1995. Mr. Pasley became an employee and officer of the Company in
September 1996.
(2) Represents a discount on Stock Units deemed purchased with incentive
compensation deferred under the Company's Deferred Compensation Plan. The
Deferred Compensation Plan provides that Stock Units, which have an
individual value equivalent to a share of Common Stock, may be deemed
purchased with deferred incentive plan payouts for 75% of the average
closing price of Common Stock over a specified period of time prior to an
annual purchase date. Stock Units are not distributable until retirement or
termination. Distributions must be made in shares of Common Stock. This
column does not include the value of perquisites and other personal benefits
because the aggregate value of such compensation did not exceed the lesser
of $50,000 or 10% of the total amount of annual salary and bonus.
(3) Represents Company contributions under its Deferred Savings Plan to match
contributions made by these officers in 1997. Prior to 1997, this column
also included a pension benefit on amounts deferred under the Deferred
Compensation Plan. The Deferred Compensation Plan was amended in 1997 to
eliminate pension benefit credits.
(4) Includes payments made as a result of Mr. Bravo's relocation from Mexico.
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes options granted during fiscal 1997 to the
executive officers named in the Summary Compensation Table, and the potential
value of the shares subject to such options upon their expiration in August
2007.
<TABLE>
<CAPTION>
POTENTIAL
NUMBER OF % OF TOTAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE 5% 10%
---- ---------- ------------ ------------ ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. L. Jackson........... 25,000 13.8% $20.00 8-12-2007 $ 226,642 $ 657,056
Juan M. Bravo........... 10,000 5.5% $20.00 8-12-2007 $ 90,657 $ 262,822
Graham L. Adelman....... 9,400 5.2% $20.00 8-12-2007 $ 85,217 $ 247,053
Thomas R. Hurst......... 6,400 3.5% $20.00 8-12-2007 $ 58,020 $ 168,206
Gary G. Garrison........ 5,800 3.2% $20.00 8-12-2007 $ 52,581 $ 152,437
George W. Pasley........ 5,500 3.0% $20.00 8-12-2007 $ 49,861 $ 144,552
All Shareholders(3)..... 21,913,207 $ 233,417,350 $ 591,525,393
</TABLE>
- --------
(1) Options granted on August 13, 1997, and exercisable in full on February 13,
1998.
(2) The exercise price was approximately $2.20 higher than the fair market value
on the date of grant. The Potential Realizable Value is based on the Assumed
Annual Rates of Stock Price Appreciation being applied to the above market
exercise price.
(3) The Potential Realizable Value for All Shareholders represents the aggregate
value at the end of 10 years of all Common Stock outstanding on December 31,
1997, which then had a value of $16.9375, assuming the same rates of
appreciation used to calculate the Potential Realizable Value of
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<PAGE>
shares subject to the stock options summarized in the table. Such
information is shown for comparison purposes only and does not represent an
estimate or prediction of future Company stock price.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE TABLE
The following table summarizes the value at October 31, 1997, of all shares
subject to options granted to the named executive officers of the Company to the
extent not then exercised, and information concerning option exercises, if any,
during fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
ACQUIRED ON VALUE ------------------------------ -------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. L. Jackson........... 0 $ 0 214,550 25,000 $592,625 $ 0
Juan M. Bravo........... 0 $ 0 29,000 10,000 $ 6,250 $ 0
Graham L. Adelman....... 0 $ 0 13,500 9,400 $ 0 $ 0
Thomas R. Hurst......... 0 $ 0 52,700 6,400 $171,937 $ 0
Gary G. Garrison........ 0 $ 0 52,300 5,800 $217,538 $ 0
George W. Pasley........ 0 $ 0 15,000 5,500 $ 0 $ 0
</TABLE>
- --------
(1) The fiscal year end value of the Common Stock was $17.06 per share.
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<PAGE>
RETIREMENT PLANS
The estimated total annual retirement benefits payable at age 65 under pension
plans in which Messrs. Jackson, Bravo, Adelman, Hurst, Garrison and Pasley
participate are set forth below. Messrs. Hurst and Garrison would receive
amounts slightly higher than those shown in the pension plan table set forth
below due to Messrs. Hurst's and Garrison's participation in a prior benefit
plan which allows for the inflation proofing of such benefit. The retirement
benefits of Mr. Jackson, who became an employee of the Company in 1993, Mr.
Bravo, who became an employee in 1994, Mr. Adelman, who became an employee in
1995, and Mr. Pasley who became an employee in 1996, will not become vested
until they complete 5 years of vesting service. The chart illustrates benefits
accrued to October 31, 1997.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
ANNUAL ------------------------------------------------------------------------
COMPENSATION 5 15 25 35
$ $ $ $ $
------------ ------ ------- ------- -------
<S> <C> <C> <C> <C>
200,000 14,897 44,692 74,487 104,282
400,000 30,897 92,692 154,487 216,282
600,000 46,897 140,692 234,487 328,282
800,000 62,897 188,692 314,457 440,282
1,000,000 78,897 236,692 394,487 552,282
1,200,000 94,897 284,692 474,487 664,282
</TABLE>
Less than 10% of the amounts shown in the "Salary" and "Bonus" columns of the
Summary Compensation Table for each of the named individuals is excluded in
determining benefits. Years of credited service for the individuals named in the
Summary Compensation Table are as follows: Mr. Jackson 4 years, Mr. Bravo 1.83
years, Mr. Adelman 2.25 years, Mr. Hurst 34.75 years, Mr. Garrison 32.83 years,
and Mr. Pasley 1.17.
Benefits are computed as straight-life annuity amounts that may be paid in
various forms. Amounts shown in the pension plan table reflect a deduction for
estimated Social Security benefits and are not subject to further deduction for
Social Security or other offset amounts.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Pursuant to the Company's 1992 Stock Compensation Plan, in the event of an
impending merger, reorganization, or liquidation of the Company, or sale of
substantially all of its business or property, the Board may, at its discretion
and without shareholder approval, declare some or all outstanding options to be
immediately exercisable in full (except for required abatements in the case of
combinations of options) without regard to prescribed vesting periods.
Pursuant to the 1992 Stock Compensation Plan, in the event of a change in
control of the Company without approval of a majority of the members of the
Board of Directors in office immediately prior to the event, all restrictions on
outstanding shares of restricted stock, if any, immediately lapse if related
option shares have not been disposed of prior to such change in control. At
October 31, 1997, 1276 shares of restricted stock were outstanding. Restricted
stock awards have not been made since December 1993.
In January 1997, the Company entered into an arrangement with Mr. Hurst, Vice
President of the Company and President of INTOOL, Incorporated, a wholly- owned
subsidiary of the Company, regarding the severance compensation he would receive
if the shares or substantially all of the assets of INTOOL, Incorporated are
sold prior to November 1, 1998 and his employment by Global is terminated. In
such event, Mr. Hurst would receive installment payments equal to two times his
1997 base salary and bonus, less compensation he might receive from an acquiring
entity.
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<PAGE>
2. APPROVAL OF AMENDED AND RESTATED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
The Board of Directors adopted the Company's 1993 Directors Stock
Incentive/Retirement Plan, on December 15, 1993. The purpose of the plan is to
align the financial interests of the shareholders of the Company and its
independent Directors. Directors who exercise options granted under the Plan
must retain 50% of the shares so acquired for 10 years or, if earlier, six
months after the Directors service on the Board ends.
On February 19, 1997, subject to approval by the shareholders, the plan was
amended and restated to provide for the limited transferability of options
granted thereunder and to increase the number of shares subject to the plan by
180,000. At the same time, the plan was renamed the Stock Option Plan for Non-
Employee Directors (the "Directors Stock Plan" or "Plan").
The following is a summary of the principal provisions of the amended and
restated Plan, a copy of which is attached to this proxy statement as Exhibit A.
This summary is qualified in its entirety by reference to the complete text of
the amended and restated Directors Stock Plan.
ADMINISTRATION AND ELIGIBILITY
The Board of Directors or a committee of the Board to which such
responsibility has been delegated administers the Directors Stock Plan. The
Board of Directors is authorized to interpret the Plan and make all
determinations necessary for its administration. Its determinations are final
and binding on all parties.
PLAN PARTICIPANTS; PRIOR GRANTS; AVAILABLE SHARES
The only persons who may participate in the Plan are Directors of the Company
who are not also its employees. At the time it was adopted, 120,000 shares of
Common Stock were available for issuance under the Directors Stock Plan. Of that
number, options for 64,000 shares, having a weighted average exercise price of
$16.83 per share and a current market value of approximately $134,000, have been
granted and remain outstanding. Subject to shareholder approval, the number of
shares available for issuance was increased in February 1997 by 180,000. If the
amended and restated Plan is approved at the 1998 Annual Meeting of
Shareholders, options for up to 236,000 shares may be granted under its terms
from February 1997 until expiration of the Plan in 2002. Shares issued upon
exercise of an option may be either authorized and unissued shares or treasury
shares. In the event an option expires or is canceled, the remaining shares are
forfeited and become available for new option grants under the Directors Stock
Plan.
TERMS OF AWARDS
Subject to shareholder approval of the amended and restated Plan, (i) each
non-employee Director of the Company was granted an option in February 1997 to
purchase 5,000 shares of Common Stock at a price of $17.875 per share, the fair
market value of the Common Stock on that date, (ii) any person who becomes a
non-employee Director of the Company will automatically be granted an option to
purchase 5,000 shares on the date service on the Board begins, and (iii) once
each calendar year, beginning in 1998, each non-employee Director, who has been
such for at least six months, may be granted an additional option to purchase
5,000 shares. All options granted under the Plan must have an exercise price
equal to not less than 100% of the fair market value of the Common Stock on the
day of grant. The time at which the right to exercise an option becomes vested,
in full or in installments, is determined by the Board in its discretion at the
time of grant.
Under the Plan as amended, an option granted to a non-employee Director may be
exercised until the earlier of (i) ten years after the date of grant, or (ii)
five years after the Director's service on the Board ends, other than for cause.
Options may be exercised by payment in full of the exercise price by check or by
delivery to the Company of shares of Common Stock (not acquired through prior
option exercises) having a value equal to the aggregate exercise price.
-9-
<PAGE>
ADJUSTMENTS
The number of shares subject to the Plan and to outstanding options granted
under the Plan will be adjusted in the event of stock splits, stock dividends,
spin-offs, exchanges or other capital changes for which holders of Common Stock
are not required to deliver consideration (other than their shares) as though
such shares were issued and outstanding on the date of any such change. The
aggregate purchase price upon the future exercise of options so adjusted shall
be the same as if the option had continued to be for the shares for which it
originally had been granted. The issuance by the Company of shares for
consideration shall not result in such adjustments. In the event of a merger,
the Board may elect to terminate options outstanding under the Plan and pay
optionees an amount equal to the excess of the fair market value of the shares
subject to the option on the day preceding the merger over the per share
exercise price of the option.
TRANSFERABILITY
If the Plan as amended and restated is approved by the shareholders, options
granted thereunder may be transferred by the Directors if, and only to the
extent, such is expressly permitted by the agreements with the Company that
evidence their options. The options granted in February 1997 are governed by
agreements which provide that the rights of optionees thereunder may be
transferred, subject to the obligations of the optionees under the Plan, to (i)
members of their immediate family (spouse, children, grandchildren or parents),
(ii) trusts of which the only beneficiaries are immediate family members, and
(iii) partnerships of which the only partners are immediate family members.
AMENDMENT AND TERMINATION
The Directors Stock Plan may be amended by the Board from time to time and
will remain in effect until April 1, 2002, unless sooner terminated by the Board
of Directors.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The grant of a stock option under the Directors Stock Plan will create no
income tax consequences to the optionee or the Company. A Director who is
granted a stock option would generally recognize ordinary income at the time of
exercise in an amount equal to the excess of the fair market value of the Common
Stock at such time over the exercise price. The Company will be entitled to a
deduction in the same amount and at the same time as ordinary income is
recognized by a Director as a result of an exercise. A subsequent disposition of
the securities so acquired will give rise to capital gain or loss to the extent
the amount realized from the sale differs from the tax basis in the securities
sold, i.e., their fair market value on the date of exercise. The length of time
that the securities are held after the date of exercise controls whether this
capital gain or loss will be characterized as long-term or short-term for
federal income tax purposes.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voted at the Annual Meeting with respect to the Directors
Stock Plan is required to approve the Plan. Any shares not voted at the Annual
Meeting with respect to the Directors Stock Plan (whether as a result of broker
non-votes or otherwise, except abstentions) will have no effect upon the result
of the vote. Shares of Common Stock as to which holders abstain from voting will
be treated as votes against the Directors Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS STOCK PLAN.
SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED "FOR" THE DIRECTORS STOCK PLAN.
3. APPROVAL OF AMENDMENTS TO 1992 STOCK COMPENSATION PLAN
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<PAGE>
The 1992 Stock Compensation Plan (the "1992 Plan") was adopted on July 31,
1992 by the sole shareholder of the Company's predecessor prior to public
distribution of the Common Stock. The Board of Directors is recommending that
the shareholders approve amendments to the 1992 Plan at the 1998 Annual Meeting
which would (i) increase the total number of shares of Common Stock for which
options may be granted by 800,000 and (ii) provide that no employee may receive
grants under the 1992 Plan with respect to more than 750,000 shares over any
consecutive three-year period.
The primary features of the 1992 Plan are summarized below. The full text of
the amendment for which shareholder approval is required is set forth as Exhibit
B to this Proxy Statement. This summary is qualified in its entirety by
reference to the complete text of the 1992 Plan.
ADMINISTRATION
The 1992 Plan is administered by the Board of Directors or a committee of the
Board (the "Committee"), no member of which is eligible to participate in the
1992 Plan. The Board or such Committee is authorized to interpret the provisions
of the 1992 Plan and make all rules relating to its operation.
PLAN PARTICIPANTS; PRIOR GRANTS; AVAILABLE SHARES
Officers and key employees of the Company and its present and future
subsidiaries shall be eligible to participate in the 1992 Plan subject to
approval of the Committee. Awards may be granted in the form of Nonqualified
Options, Phantom Options, Restricted Stock, Performance Units and Incentive
Stock Options (all as defined in the 1992 Plan). Shares issued under the 1992
Stock Plan may be either authorized but unissued shares or issued shares
acquired by the Company. Eight executive officers and seventy-eight other key
employees were granted options under the 1992 Plan in 1997. The 1992 Plan
permits the grant of options through July 30, 2002.
At October 31, 1997, options had been granted under the 1992 Plan for
2,075,397 shares of Common Stock of which 543,518 shares had been purchased
pursuant to option exercises, 1,425,489 shares remained subject to options, and
106,390 shares had been forfeited. Of the 2.7 million shares available under the
1992 Plan when it was adopted, 730,993 shares are currently available for stock
option grants. On January 19, 1997, the Board of Directors amended the 1992
Plan, subject to shareholder approval, to increase by 800,000 the number of
shares of Common Stock for which options may be granted. None of those shares
may be made the subject of Restricted Stock or other types of awards. If this
amendment is approved by the shareholders, a total of 1,530,993 shares will be
available for issuance pursuant to the exercise of options which may be granted
under the 1992 Plan. In addition, if the shareholders approve this amendment, no
individual employee may receive grants under the 1992 Plan of Nonqualified
Options, Phantom Options, Restricted Stock or Incentive Stock Options, or any
combination thereof, for more than 750,000 shares over any consecutive
three-year period.
TERM OF OPTIONS
At the time of grant, the Committee determines the duration of the option,
which may not exceed ten years.
OPTION PRICE
The 1992 Plan provides that the price at which options may be granted cannot
be less than 100% of the fair market value of the Common Stock on the date of
grant. Fair market value is the average of the reported highest and lowest
prices per share of the Common Stock as reported on the New York Stock Exchange
on the grant date. Payment by an employee upon exercise of an option may be made
in cash or Common Stock having a fair market value equal to the exercise price.
The Company may not reprice options granted under the 1992 Plan without
shareholder approval.
VESTING
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<PAGE>
The 1992 Plan provides that (i) no option may be exercised prior to the lapse
of at least a six month period from the date of grant, and (ii) all unexercised
options granted to an employee are cancelled upon the employee's termination for
any reason other than death, disability or approved retirement. The 1992 Plan
permits the Board of Directors to accelerate the vesting of options under
certain circumstances and also provides that the right to exercise a vested
Option expires on the earlier of ten years from the date on which such Option is
granted or five years after retirement, whichever is earlier.
TRANSFERABILITY
Options granted under the 1992 Plan may be transferred by an employee if, and
only to the extent, such is expressly permitted by the agreement with the
Company that evidences the options. Such agreements currently provide that the
rights of optionees may be transferred, subject to continuation of the
obligations of the optionees, under the 1992 Plan to (i) members of their
immediate family (spouse, children, grandchildren or parents), (ii) trusts of
which the only beneficiaries are immediate family members, and (iii)
partnerships of which the only partners are immediate family members.
ADJUSTMENTS
The number of shares subject to the 1992 Plan and to outstanding awards
granted under the 1992 Plan will be adjusted in the event of stock splits, stock
dividends, spin-offs, exchanges or other capital changes for which holders of
Common Stock are not required to provide consideration (other than their shares)
as though such shares were issued and outstanding on the date of any such
change. The aggregate purchase price of shares subject to options which have
been so adjusted shall be the same as if the option had continued to be for the
shares for which it originally had been granted. Issuance by the Company of
shares for consideration shall not result in such adjustments.
CERTAIN FEDERAL TAX CONSEQUENCES
The following statements are based on current interpretations of existing
federal income tax law. The law is technical and complex and the statements
represent only a general summary of some of the applicable provisions.
While there are no federal income tax consequences to either the employee or
the Company on the grant of an option, the employee will have taxable ordinary
income on the exercise of a non-qualified option equal to the excess of the fair
market value of the shares on the exercise date over the option price. The
Company is entitled to a corresponding deduction.
If the shareholders approve the amendments to the 1992 Plan, the Company
believes that it will be entitled to a deduction for all compensation
attributable to an employee's exercise of non-qualified options and rights.
Under Section 162(m) of the Internal Revenue Code, a limitation was placed on
tax deductions of any publicly-held company for individual compensation paid to
certain key executives exceeding $1,000,000 in any taxable year, unless such
compensation is performance-based. Subject to shareholder approval, the 1992
Plan has been amended to meet the performance-based compensation exception to
the limitation on deductions. The 1992 Plan meets the first requirement of this
exception because options are awarded and priced at not less than the fair
market value of the Common Stock on the date of grant. In addition, the
administration of the 1992 Plan by the Executive Compensation Committee
satisfies a second requirement for exemption from the $1,000,000 cap. As the
1992 Plan has already been approved by the shareholders of the Company, this
third requirement has been met. If the 1992 Plan amendment is approved at the
1998 Annual Meeting, the last requirement for exemption from the cap, that there
be a limitation upon the number of shares that may be granted to any single
employee, will be satisfied.
AMENDMENTS
The Board of Directors is authorized to amend the 1992 Plan at any time.
However, shareholders must approve amendments which (i) increase the total
number of shares which may be issued under the 1992 Plan (other than due to an
adjustment as described above),
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(ii) change the class of employees eligible to receive options, (iii) change the
provisions regarding option price, or (iv) lengthen option periods or the time
in which options may be granted under the 1992 Plan. A copy of the 1992 Plan is
on file with the Securities and Exchange Commission.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voted at the Annual Meeting with respect to the 1992 Plan
is required to approve the amendments to the 1992 Plan. Any shares not voted at
the Annual Meeting with respect to the 1992 Plan (whether as a result of broker
non-votes or otherwise, except abstentions) will have no effect upon the result
of the vote. Shares of Common Stock as to which holders abstain from voting will
be treated as votes against the amendments to the 1992 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO THE 1992
PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED "FOR" THE AMENDMENTS TO THE 1992 PLAN.
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EXHIBIT 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 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 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.
<PAGE>
(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:
(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;
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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, that the event described in this
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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
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
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<PAGE>
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
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 deemed to occur upon a change in duties or
responsibilities that is solely and
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<PAGE>
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 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).
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<PAGE>
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,
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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.
(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).
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<PAGE>
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,
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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).
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
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<PAGE>
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
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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 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.
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<PAGE>
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 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.
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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 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
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<PAGE>
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 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
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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,
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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
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Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
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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.
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.
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
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<PAGE>
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 3
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.
(b) "Board" means the Board of Directors of the Company.
<PAGE>
(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:
(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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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 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;
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<PAGE>
(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;
(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
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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 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.
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<PAGE>
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).
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
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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 copayment 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
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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) 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.
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<PAGE>
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
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
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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 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
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<PAGE>
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.
(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
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<PAGE>
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:
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
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<PAGE>
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, 1 0(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
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<PAGE>
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: /s/ J.L. Jackson
---------------------------
J.L. Jackson
Title: Chairman and
Chief Executive Officer
By: /s/ George W. Pasley
---------------------------
George W. Pasley
Title: Vice President - Communications
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<PAGE>
EXHIBIT 4
FORM OF AMENDMENT NO. 1 TO SEVERANCE AGREEMENT
AMENDMENT NO. 1, entered into as of September 18, 1998 ("Amendment"), to
Severance Agreement, dated as of February 23, 1998 (the "Agreement"), by and
between Global Industrial Technologies, Inc., a Delaware corporation (the
"Company"), and __________________ ("Executive").
Company and Executive hereby agree, pursuant to Section 17 of the Agreement
and for and in consideration of the premises and the mutual covenants and
agreements contained herein, to amend the Agreement in the following respects:
1. Paragraph 1(a), "Average Bonus Fraction," is deleted in its entirety.
2. Paragraphs 1(b) through (l) are redesignated as Paragraphs 1(a)
through (k).
3. Paragraph 1(b) as redesignated is amended by restatement in its
entirety to read as follows:
(c) "Bonus Amount" means the 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) multiplied by the percentage of
base pay designated by the Executive Compensation Committee of the Board
for purposes of establishing the "target" bonus opportunity of the
Executive (pursuant to the annual incentive compensation plan in which the
Executive participates) for the fiscal year of the Company in which the
Date of Termination occurs (or, if greater, in which a Change in Control
occurs).
4. Defined terms used in this Amendment shall have the meanings assigned
to them in the Agreement.
5. The Agreement is only amended as expressly set forth herein.
EXECUTED as of the day and year first above written by the undersigned duly
authorized officer of the Company and the Executive.
Global Industrial Technologies, Inc.
By: ___________________________ By: ___________________________
Rawles Fulgham [name]
Chairman [title]
<PAGE>
EXHIBIT 5
FORM OF AMENDMENT NO. 2 TO SEVERANCE AGREEMENT
AMENDMENT NO. 1, entered into as of October 27, 1998 ("Amendment"), to
Severance Agreement, dated as of February 23, 1998 (the "Agreement"), as amended
on September 18, 1998, by and between Global Industrial Technologies, Inc., a
Delaware corporation (the "Company"), and [executive] ("Executive").
Company and Executive hereby agree, pursuant to Section 17 of the Agreement
and for and in consideration of the premises and the mutual covenants and
agreements contained herein, to amend the Agreement in the following respects:
1. Paragraph 1(h)(l) of the Agreement is hereby amended to read in
its entirety as follows:
(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 duties, responsibilities (including direct
reporting responsibilities) or status 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); 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;"
2. Defined terms used in this Amendment shall have the meanings
assigned to them in the Agreement.
3. The Agreement is only amended as expressly set forth herein.
EXECUTED as of the day and year first above written by the undersigned duly
authorized officer of the Company and the Executive.
Global Industrial Technologies, Inc.
By: ___________________________ By: ___________________________
Rawles Fulgham Name of Executive
Chairman [title]
<PAGE>
EXHIBIT 6
THE GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
1992 STOCK COMPENSATION PLAN
NAME AND GENERAL PURPOSE OF PLAN
The name of the Plan is the GLOBAL INDUSTRIAL TECHNOLOGIES, INC. 1992
Stock Compensation Plan. The purpose of the Plan is to afford selected officers
and key employees of GLOBAL INDUSTRIAL TECHNOLOGIES, INC. (the Company) and its
Subsidiaries the opportunity to share in future appreciation in the share value
of the Company's Stock with the purpose of thereby creating an additional
incentive for outstanding performance by these employees through whom the
corporate objective of maximizing the return on the shareholders' investment
over the long run may be achieved. The possibility for sharing in Stock
appreciation is designed to create an identity of interest between the
shareholders and the managing employees, and to attract and retain superior
executive personnel.
The total number of shares of common stock of the Company reserved and
available for issuance under the Plan shall be 2.7 million (with no more than
750,000 of such shares to be issued as Restricted Stock) subject to appropriate
adjustment for any change in the stock due to merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
in excess of 2% or other change in corporation structure. Such shares of stock
may consist of previously issued shares reacquired by the Company, authorized
but unissued shares or shares purchased on the open market, or any combination
thereof, as determined by the Board of Directors of the Company.
To the extent that (a) a stock option expires or is otherwise
terminated, canceled or surrendered without being exercised (including without
limitation, in connection with the grant of a replacement option) or (b) any
restricted incentive stock award or performance stock unit award granted
hereunder expires or is otherwise terminated or canceled, the shares of stock
underlying such stock option or subject to such restricted incentive stock award
or performance stock unit award shall again be available for issuance in
connection with future awards under the Plan.
The Plan may be terminated or amended at any time by the Board of
Directors of the Company, except as otherwise provided in the programs that are
a part of this Plan.
<PAGE>
PART A. STOCK OPTION PROGRAM
Section 1. Specific Purpose
The specific purpose of this Program is to grant to selected officers
and key employees Nonqualified Options, Incentive Stock Options and Phantom
Options.
Section 2. Definitions for purposes of this Program:
(a) "Affiliated Company" means a business organization in which the Company has
a substantial equity interest.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Executive Compensation Committee of the Board, which
shall consist of not less than three members of the Board who shall be
appointed by and serve at the pleasure of the Board and who shall be
"disinterested" within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(d) "Company" means GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(e) "Effective Date" means the date of the adoption of the Plan by the Board,
subject to the approval thereof by the shareholders of the Company.
(f) "Employee" means any individual who has been granted an Option under this
Program and, except as used in paragraph (q) of Section 2, paragraphs (a),
(g) and (n) of Section 5, the first lines of paragraphs (p) and (p)(ii) of
Section 5, and the tenth line of paragraph (p)(iii) of Section 5, any
person to who such individual has transferred an Option if such transfer is
expressly permitted pursuant to, and such transfer is made in accordance
with, the terms and conditions of a written agreement between the Company
and such individual.
(g) "Fair Market Value" means the average of the reported highest and lowest
prices per share for the Stock on the New York Stock Exchange on the
designated date or, if there are no such reported sales on that date, the
reported closing price per share for the Stock on the New York Stock
Exchange for the last day prior to the date in question for which sales of
the Stock were reported.
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(h) "Incentive Stock Option" means the right to purchase Stock at the Option
Price which meets the requirements set forth in this Program and meets the
definition of an incentive stock option as set forth in Section 422 of the
Internal Revenue Code of 1986, as amended.
(i) "Nonqualified Option" means an option to purchase Stock which meets the
requirements set forth in this Program but does not meet the definition of
an Incentive Stock Option set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.
(j) "Option" means collectively, unless otherwise specifically limited under
any provision of this Program, Incentive Stock Option, Nonqualified Option
and Phantom Option.
(k) "Option Date" means the date on which the Option is deemed granted, as
provided in Section 5(h) of this Program.
(l) "Phantom Option" means a right, subject to the General and Special Rules of
Sections 5 and 6 and Section 7 of the Program, under which the Company pays
to an Employee in cash, or in shares of Stock at its then Fair Market
Value, or a combination of both, the amount by which the Fair Market Value
of one share of Stock on a designated date exceeds the Fair Market Value of
such share on the Option Date, times the number of shares (not in excess of
those with respect to which such right is then exercisable) designated by
the Employee.
(m) "Program" means this Stock Option Program, a part of the GLOBAL INDUSTRIAL
TECHNOLOGIES, INC. 1992 Stock Compensation Plan.
(n) "Spread" means the difference between the Fair Market Value of a share of
Stock on the date of exercise of an Option and the Option Price of a share
of Stock on the Option Date of such Option multiplied by the number of
shares exercised.
(o) "Stock" means the Common Stock of the Company.
(p) "Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations, beginning with the Company, if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
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<PAGE>
(q) "Termination for Cause" means a termination of employment that results from
willful insubordination or circumstances that reasonably lead the Committee
to believe that the Employee has:
(i) embezzled or stolen money or other valuable property from the
Company, a subsidiary or Affiliated Company, their customers or
suppliers, or his fellow employees;
(ii) committed industrial espionage for or willfully revealed trade
secrets or other protected confidential information to a competitor
of the Company or a Subsidiary or Affiliated Company; or
(iii) committed or allowed other acts involving his own moral turpitude
relating to the Company or a Subsidiary or Affiliated Company, their
customers or suppliers, or his fellow employees.
Section 3. Eligibility.
Officers and key employees of the Company and its present and future
Subsidiaries shall be eligible to receive Options under this Program, provided
that no Option may be granted to any Committee member or to anyone who on the
Option Date is not an active, full-time officer or key employee of the Company
or a Subsidiary.
Section 4. Types of Participation.
The Program provides for the issuance of Nonqualified Options, Phantom
Options and Incentive Stock Options. Any Option may be granted separately or
granted in combination with one or more other Options, provided that, when so
combined the exercise of one Option in such combination shall result in the
surrender of corresponding rights to the other related Option or Options in the
combination.
Section 5. General Rules.
(a) Option Price. The option price will be as recommended by the Committee,
but not less than 100% of the Fair Market Value on the Option Date except
in the following situation. Any options that are issued to replace options
that were granted by Dresser Industries, Inc. and were terminated due to an
employee's becoming an employee of the Company or a Subsidiary may have an
option price less than the Fair Market Value on the Option Date, provided
that on a share by share comparison, the ratio of the option price to the
fair market value of the stock subject to the option immediately after the
replacement is no more favorable to the Employee than the ratio of the
option price to the fair market value of the stock
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<PAGE>
subject to the Dresser option immediately before such replacement, and
provided further that the excess of the aggregate fair market value over
the aggregate option price of the stock subject to the replacement option
is not greater than the excess of the aggregate fair market value over the
aggregate option price of the stock subject to the replaced option.
(b) Adjustments. If after the Effective Date of the Program, or the Option
Date, there occurs a change in the number of outstanding shares of Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, or other change in the capital structure of the Company, there will
be made an appropriate adjustment to the Option Price and the number of
shares then subject to any outstanding Options, all in a manner as shall be
determined by the Committee.
(c) "Disability or Disabled" means (i) A physical or mental condition which, in
the judgment of the Committee based on competent medical evidence
satisfactory to the Committee, including, if required by the Committee,
medical evidence obtained by an examination conducted by a physician
selected by the Committee, renders an individual unable to engage in any
substantial gainful activity for the Company, a Subsidiary, or an
Affiliated Company, and which impairment is likely to result in death or to
be of long continued and indefinite duration, or (ii) a judicial
declaration of incompetence.
(d) Duration. No Option shall be exercisable after the expiration of ten years
from the Option Date (or other period as may be provided under the section
of the Internal Revenue Code that deals with incentive stock options). No
Incentive Stock Option may be granted under this Plan more than ten years
after the approval of this Plan by the shareholders of the Company or after
this Plan is adopted, whichever is earlier (or other period as may be
provided under the section of the Internal Revenue Code that deals with
incentive stock options).
(e) Payment. Stock purchased upon the exercise of an Incentive Stock Option or
a Nonqualified Option must be paid for in full at the time of exercise
either (1) in cash, or (2) by the surrender to the Company at Fair Market
Value shares of Stock owned by the Employee (other than shares subject to
restrictions that have not lapsed), or (3) by any combination of cash and
surrendered Stock, as the Employee may elect.
(f) Nontransferability. Options granted under this Program shall only be
transferable (i) if an agreement between the Company and the Employee
evidencing an Option so provides, in which event such Option shall only be
transferable in accordance with, and subject to the terms and conditions
set forth in, such agreement, and (iii) by will or, if the Employee dies
intestate, by the governing laws of descent and
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<PAGE>
distribution (or, if binding on this Program, pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986,
as amended, or Title 1 of the Employee Retirement Income Security Act of
1974, as amended, or regulations promulgated thereunder.
(g) Employment. Nothing in this Program will confer on any Employee any right,
either expressed or implied, to remain in the employ of the Company, any
Subsidiary or any Affiliated Company for any period.
(h) Option Date. Each Option will be deemed to have been granted on the date
of the resolution of the Board granting such Option, unless a later date is
specified in such resolution.
(i) Exercise. Incentive Stock Options and Nonqualified Options shall be
exercised upon receipt by the Company of notice in writing of such
exercise, which notice specifies the number of shares, and which type of
Option is being exercised and encloses the required payment. A stock
certificate will be issued as soon as practical after exercise and payment,
and the Employee will have no rights as a shareholder regarding such shares
until such certificate is issued. Phantom Options will be exercised on
such form as is prescribed by the Committee and on a date or dates
specified by the Employee, during a specific period or periods, or after a
date but prior to the expiration of such Phantom Option, as specified by
the Committee in its sole discretion. The Employee may elect at the time
of exercise the form of payment in settlement of the exercise of a Phantom
Option provided that the Committee may require that any cash payment in
full or partial settlement thereof be with the consent of the Committee.
Each Option may be exercisable in such cumulative installments as may be
determined by the Committee, which may accelerate the exercise of any
installment of an Option then outstanding. An Option is exercisable during
an Employee's lifetime only by the Employee except that in case of
incompetence or disability of an Employee an Option may be exercised on
behalf of the Employee by his guardian or legal representative.
(j) Reorganization. In case the Company is merged or consolidated with another
corporation or in case the property or stock of the Company is acquired by
another corporation, or in case of any other reorganization of the Company,
the Board of Directors of the acquiring company, or the Board of Directors
of any corporation assuming the obligations of the Company hereunder, will
make appropriate provisions for the protection of any outstanding
Options, either by the assumption of such Options or by the substitution on
an equitable basis of replacement Options by the acquiring company or the
otherwise reorganized corporation, in such a
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manner as will in the case of Incentive Stock Options qualify under Section
422 of the Internal Revenue Code of 1986, as amended, or by other
appropriate means. In the case of an impending merger, reorganization, or
liquidation of the Company, or of a sale of substantially all of its
business or property, the Board may at its discretion and without
shareholder approval, declare some or all outstanding Options to be
immediately exercisable in full (except for required abatements in the case
of combinations of Options), without regard for prescribed waiting periods
contained in said Options.
(k) Form and Agreement. Options granted under this Program will be evidenced
on such forms as may be approved from time to time by the Committee or by
such agreements between the Company and an Employee as the Committee or the
Board may from time to time approve.
(l) Legality. No Options may be granted or shares issued pursuant to the
exercise of an Option unless and until counsel for the Company is satisfied
that the grant or issuance of shares will not be in violation of any State
or Federal law or regula tions issued thereunder. The Committee shall
determine in its sole discretion whether any compliance, approval or
consent of any governmental or regulatory body is necessary or desirable as
a condition of or in connection with granting an Option or issuing shares
pursuant to the exercise of an Option. If the Committee deems such
compliance, approval or consent is necessary or desirable, no Option may be
granted or exercised, nor shall shares be issued, until such compliance,
approval or consent has been obtained free of any conditions not acceptable
to the Committee. Specifically, and without limitation upon the foregoing,
it is a condition to the exercise of any Option that either (i) a
Registration Statement under the Securities Act of 1993, as amended
("Securities Act") with respect to such Option and the shares subject
thereto is effective and current at the time of exercise or (ii), in the
opinion of counsel to the Company, there shall be an exemption from
registration under the Securities Act of the offering of such Option or the
shares subject thereto. Nothing herein shall be construed as requiring
the Company to register the offering of Options or shares subject to the
Plan to or by Employees.
(m) Withholding Tax. The Company shall have the right to withhold from any
cash payment to an Employee sufficient amounts to cover withholding and
employment tax or other taxes, relating to the operations of this Program,
or to require cash payment or other security by the Employee prior to
delivery of any stock certificates in a sufficient amount to satisfy
withholding and employment taxes or other taxes related to the issuance of
such Stock. Alternatively, an Employee may surrender to the Company at
Fair Market Value shares of Stock owned by the Employee to cover tax
requirements, or the number of shares of
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Stock to be issued from the exercise of an Option may be reduced to cover
tax requirements.
(n) Military Service. The Committee may make provisions to preserve the rights
under this Program of any Employee entering military service of the United
States or who renders services to the United States or an agency thereof.
(o) No Obligation to Exercise. Granting of an Incentive Stock Option or
Nonqualified Option shall impose no obligation on the Employee to exercise
such Option. However, a Phantom Option shall be deemed exercised on the
last date it could have been exercised if the Employee otherwise entitled
to exercise such Phantom Option fails to exercise such Phantom Option as
provided in Section 5(i) of this Program, unless such exercise would
subject the holder to liability to the Company under Section 16(b) of the
Securities Act of 1934. Such deemed exercise of a Phantom Option shall be
for cash or shares at the option of the Committee.
(p) Termination of Employment. In the event of a termination of an Employee's
employment with the Company, a Subsidiary or an Affiliated Company under
any circumstances other than those circumstances, as described in (i), (ii)
or (iii) below, all rights of the Employee pursuant to his Option
(including rights thereunder which have accrued but which then remain
unexercised) will forthwith cease and terminate.
(i) Death. In the event of the death of any Employee while employed by
the Company, a Subsidiary or an Affiliated Company his Option will be
exercisable in full at any time (notwithstanding any installment
schedule) prior to the expiration date thereof or within five years
after the date of death, whichever is the shorter period, but only by
the person or persons to whom such Employee's rights under such
Option passes by such Employee's will, or if the Employee dies
intestate, by the laws of descent and distribution of the state of
his domicile at the time of his death.
(ii) Retirement. In the event the employment of an Employee with the
Company, all of its Subsidiaries and Affiliated Companies is
terminated by retirement (other than for permanent disability) and
after attainment of Age 55, where such retirement is not a
Termination For Cause, such Employee will be entitled prior to the
expiration date of the Option period or within five years after the
date of his retirement, whichever is the shorter period, to exercise
all previously vested, unexpired Options. Provided, however, the
Committee, in its sole discretion, may accelerate vesting of any or
all non-vested installments of an Option, in which case
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they too may be exercised any time prior to the expiration of the
Option period or within five years after the date of his retirement,
whichever is the shorter period. Provided further, any vested
Incentive Stock Options (whether by normal or accelerated vesting)
that are not exercised within the three (3) month period after
retirement (or other period as may be provided under the section of
the Internal Revenue Code that deals with incentive stock options)
shall thereafter be treated as Nonqualified Options for the same
number of shares and may be exercised at any time prior to the
expiration of ten years from the Option Date or within five years
after the date of his retirement, whichever is the shorter period.
(iii) Termination for Disability. In the case of employment termination for
Disability, the Employee will be entitled to fully exercise his
Option at any time (notwithstanding any installment schedule) prior
to the expiration date thereof or within five years after the date of
such termination, whichever is the shorter period. Provided however,
any Incentive Stock Options that are not exercised within the one
year period after termination for Disability (or other period as may
be provided under the section of the Internal Revenue Code that deals
with incentive stock options) shall thereafter be treated as
Nonqualified Options for the same number of shares and may be
exercised at any time prior to the expiration date thereof or within
five years after the date of such termination, whichever is the
shorter period. In the event of death of an Employee while Disabled,
the one year (or parenthetical alternative) period described in this
Paragraph (iii) shall continue from the date of termination for
Disability and shall not commence or recommence from the date of
death.
To the extent that an Option or any installment thereof is not exercised within
the limited period provided in Paragraphs (i), (ii) or (iii) above, whichever is
applicable, all further rights pursuant to such Options will cease and terminate
at the expiration of such period.
(q) Limitation on Exercise. Notwithstanding any other provision of this
Program to the contrary, no Option may be exercised prior to the lapse of
at least a six month period from the date of grant.
Section 6. Special Rules.
(a) Additional Terms of Options. The Committee may, in its discretion, subject
the right to exercise any Option to any other condition not specifically
provided in this Program which is consistent with the purpose of this
Program.
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(b) Combining Options. No Option shall be combined with an Incentive Stock
Option if the effect of such combination at the time of the grant combining
such other Option with the Incentive Stock Option is to disqualify the
Incentive Stock Option so granted as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended.
(c) Incentive Stock Option. The aggregate Fair Market Value at time of grant
of stock subject to an Incentive Stock Option that is exercisable for the
first time by an Employee in any calendar year shall not exceed $100,000,
as prescribed in Section 422(d) of the Internal Revenue Code of 1986, as
amended.
Section 7. Administration.
This Program shall be administered by the Committee. The Committee
shall periodically review with management the key employees of the Company and
its Subsidiaries and recommend to the Board the names of those employees to be
granted Options and the type or types and number of shares covered by the Option
or Options to be granted to each key employee, including (where applicable) any
terms or conditions regarding such Options, such as a schedule for installments
as to exercisability. No Option may be granted by the Board other than those
recommended by the Committee. No Option may be granted to Committee members or
to anyone who on the Option Date is not an active, full-time key employee
(including employees who are Officers) of the Company or a Subsidiary. The
Committee shall have full and sole authority, subject only to the express
provisions of this Program, to make or rescind all rules, and administrative,
interpretative and other determinations with respect to the Program and Options
granted under this Program and all such determinations shall be final and
conclusive upon all persons including the Company, shareholders and Program
participants. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Program or Plan or in any Option granted in
any manner and to the extent the Committee deems desirable.
Section 8. Amendment or Termination of Program.
The Board may, by resolution, amend or terminate the Program at any
time; provided, however, that to the extent shareholder approval of Program
amendments is required to exempt transactions pursuant to the Program from the
operation of Section 16(b)of the Securities Exchange Act of 1934, as amended,
the Board may not amend the Program without approval by vote of a majority of
the shares of stock represented at a meeting of stockholders called for that
purpose. Provided further, that no such action will in any way impair the
rights of an Employee under any Option theretofore granted under the Program and
provided further that, unless first duly approved by the shareholders of the
Company entitled to vote thereon at a meeting (which may be the annual meeting)
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duly called and held for such purpose, no amendment shall be made to the Program
or Plan (a) increasing the total number of shares which may be issued under
Program or the Plan; (b) changing the class of employees eligible to receive
Options; (c) reducing the minimum Option Price hereinbefore specified for
Options; (d) lengthening Option Periods or the time in which Options may be
granted under the Program, as hereinbefore specified; or (e) materially
increasing the benefits accruing to Employees under the Program.
PART B. RESTRICTED INCENTIVE STOCK PROGRAM
Section 1. Specific Purpose.
The specific purpose of this Program is to grant to selected
management employees shares of restricted Stock in accordance with the terms and
conditions set forth herein to encourage such employees to acquire and hold a
proprietary interest in the Company.
Section 2. Definitions for purposes of this Program:
(a) "Affiliated Company" means a business organization in which the Company has
a substantial equity interest.
(b) "Approved Retirement" means any termination of employment with the Company,
with a Subsidiary, or with a joint venture organization in which the
Company has a substantial equity interest, after attainment of age 65
(except termination for cause) or any retirement before age 65 with the
approval of the Board.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the Executive Compensation Committee of the Board, which
shall consist of not less than three members of the Board who shall be
appointed by and serve at the pleasure of the Board and who shall be
"disinterested" within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(e) "Company" means GLOBAL INDUSTRIAL TECHNOLOGIES, INC., a Delaware
corporation.
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(f) "Disability or Disabled" means (i) A physical or mental condition which, in
the judgment of the Committee based on competent medical evidence
satisfactory to the Committee, including, if required by the Committee,
medical evidence obtained by an examination conducted by a physician
selected by the Committee, renders an individual unable to engage in any
substantial gainful activity for the Company, a Subsidiary, or an
Affiliated Company, and which impairment is likely to result in death or to
be of long continued and indefinite duration, or (ii) a judicial
declaration of incompetence.
(g) "Eligible Employee" means any officer of the Company elected by the Board,
while such individual holds the office and any other employee of the
Company who receives a distribution from the Incentive Compensation Plan
for the Officers and Headquarters' Staff of GLOBAL INDUSTRIAL TECHNOLOGIES,
INC.
(h) "Fair Market Value" means the average of the reported highest and lowest
prices per share for the Stock on the New York Stock Exchange on the
designated date, or, if there are no such reported sales on that date, the
reported closing price per share for the Stock on the New York Stock
Exchange for the last day prior to the date in question for which sales of
the Stock were reported.
(i) "Option Shares" means shares of Stock received by a Participant as the
result of exercising nonqualified or incentive stock options granted to
such Participant under the Part A. Stock Option Program of this 1992 Stock
Compensation Plan.
(j) "Participant" for purposes of this Program means an individual to whom a
Restricted Incentive Stock Award is granted.
(k) "Program" means The Restricted Incentive Stock Program of the Company as
described herein.
(l) "Restricted Incentive Stock Award or Award" means a grant described in
Article II of the Program which is made by the Company and approved by the
Committee under and pursuant to the Program.
(m) "Restricted Stock" means shares of Stock issued pursuant to a Restricted
Incentive Stock Award.
(n) "Stock" means the Common Stock of the Company.
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(o) "Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations, beginning with the Company, if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
(p) "Incentive Plan" means The Incentive Compensation Plan for the Officers and
Headquarters' Staff of GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(q) "Section 16 Grantee" means a person subject to potential liability under
Section 16(b) of the 1934 Act with respect to transactions involving equity
securities of the Company.
Section 3. General
(a) Administration. The Program shall be administered by the Committee.
Subject to all the applicable provisions of the Program, the Committee is
authorized to construe and interpret the Program, to prescribe, amend, and
rescind rules and regulations relating to the Program, and to make all
determinations and to take all actions necessary or advisable for the
Program's administration. The Committee shall act by vote or written
consent of a majority of its members. Whenever the Program authorizes or
requires the Committee to take any action, make any determination or
decision, or form any opinion, then any such action, determination,
decision or opinion by or of the Committee shall be in the absolute
discretion of the Committee and shall be final and binding upon all persons
in interest, including the Company, its shareholders, and all Eligible
Employees.
(b) Employment. In the absence of any specific agreement to the contrary, no
grant of a Restricted Incentive Stock Award to a Participant under the
Program shall affect any right of the Company, any Subsidiary or Affiliated
Company to terminate, with or without cause, the Participant's employment
at any time.
Section 4. Restricted Stock
The Committee may, at its discretion, grant Restricted Incentive Stock
Awards to Eligible Employees, hereunder, to encourage Eligible Employees to hold
shares of stock following the exercise of Stock Options, to create significant
equity positions for Eligible Employees through the use of Restricted Incentive
Stock Awards, and to pay a portion or all of any incentive payment due under the
Incentive Plan.
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(a) Grants of Restricted Incentive Stock Awards.
(i) To encourage Eligible employees to hold shares of stock following the
exercise of stock options, the Committee may grant to Eligible
Employees a Restricted Incentive Stock Award that will entitle an
Eligible Employee to receive, for every five shares of such
nonquailified or incentive stock options granted to such participant,
one share of Restricted Stock upon exercise of the underlying
nonqualified or incentive stock options.
(ii) To create a significant equity position for Eligible Employees, the
Committee may grant Restricted Incentive Stock Awards as follows:
1. To Eligible Employees in such amounts that the market value of any
individual grant does not exceed three times the Eligible Employees'
annual salary determined as of the date of grant. Such grant or
grants will be made at the discretion of the Committee when and to
the extent it deems advisable.
2. To Eligible Employees equal to all or a portion of the amount earned
in any year under the provisions of the Incentive Plan.
(iii) Each Restricted Incentive Stock Award shall contain the following
terms, conditions and restrictions set forth in this section and such
additional terms, conditions and restrictions as may be determined by
the Committee, provided, however, that no Restricted Incentive Stock
Award shall be subject to additional terms, conditions and
restrictions which are more favorable to a Participant than the
terms, conditions and restrictions set forth elsewhere in this
program.
(b) Issuance of Restricted Incentive Stock. Restricted Incentive Stock shall
be issued as follows:
(i) Provided that the Company shall receive written acceptance by the
Participant of the restrictions and other terms and restrictions
described in the Program on the date of the grant, a Participant, at
the Committee's discretion, shall be issued,
1. Pursuant to a Restricted Incentive Stock Award under Section
4(a)(i), one share of Restricted Stock of every five Option
Shares received by the Participant upon option exercise;
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2. Pursuant to a Restricted Incentive Stock Award under Section
4(a)(ii), the number of shares of Restricted Stock specified by
the Committee.
(ii) The Company, at the direction of the Committee, shall hold
certificates evidencing shares of stock granted pursuant to a
Restricted Inventive Stock Award, or alternatively, deliver the
certificates to the Participant. The above, not withstanding, the
Committee will be required to hold any share of restricted stock
together with a stock power executed in blank by the Grantee in
escrow by the Secretary of the Company until such shares become
nonforfeitable or forfeited.
(c) Rights with Respect of Shares of Stock. From and after the date of issue
or transfer of shares of stock awarded to a Participant, as more fully
described in Section 4(b), the Participant shall have absolute ownership of
such Restricted shares, including the right to vote and receive dividends
thereon, subject to the terms, conditions, and restrictions described in
the Program and in the instrument evidencing the grant of the Restricted
Incentive Stock Award.
(d) Restrictions. Until the restrictions imposed on any Restricted Stock shall
lapse, such shares
(i) Shall not be sold, assigned, transferred, pledged, hypothecated, or
otherwise disposed of, and
(ii) Shall, if the Participant's continuous employment with the Company,
any Subsidiary or any Affiliated Company shall terminate for any
reason, except as provided in Section 4(f), be returned to the
Company forthwith, and all the rights of the Participant to such
shares shall immediately terminate. If the Participant's interests in
the Restricted Stock granted pursuant to a Restricted Incentive Stock
Award shall be terminated, such Participant shall forthwith deliver
or cause to be delivered to the Secretary or any Assistant Secretary
of the Company the certificate(s), if any, previously delivered to
the Participant for such shares of Stock accompanied by such
endorsement(s) and/or instrument(s) of transfer as may be required by
the Secretary or any Assistant Secretary of the Company.
(e) Lapse of Restrictions. Except as set forth in Sections 4(f) and 4(g), the
restric tions imposed on any Restricted Stock shall lapse on the date
specified by the Committee or upon any such occurrence as defined by the
Committee but in no event will any restrictions lapse earlier than one (1)
year from the date of grant.
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Provided further, if any Stock received by a Participant from the Stock
Option Program by way of exercise of an option should in turn be used to
exercise another option under the Stock Option Program, any Restricted
Stock awarded in connection with the stock used to exercise the option
shall immediately be forfeited unless the date or the occurrence of
restriction as set by the Committee shall have lapsed.
(f) Termination of Employment by Reason of death, Disability, or Approved
Retirement. Any provisions of Section 4(c) to the contrary
notwithstanding, if a Participant who has been in the continuous employment
of the Company, Subsidiary or any Affiliated Company since the date of
grant of a Restricted Incentive Stock Award to such Participant shall,
while in such employment, be terminated as a result of death, Disability,
or Approved Retirement, then the restrictions imposed on any Restricted
Incentive Stock Award shall lapse as to all shares of Restricted Stock
issued to such Participant pursuant to such Restricted Incentive Stock
Award on the date of such event provided that, if granted pursuant to
Section 4(a)(i) the related Option Shares have not been sold, assigned,
transferred, pledged, hypothecated, or otherwise disposed of prior to
such event.
(g) Change in Control. In the event of a change in control of the Company, all
restrictions on outstanding Restricted Stock shall immediately lapse
provided that, if granted pursuant to Section 4(a)(i), 1. the related
Option Shares have not been sold, assigned, transferred, pledged,
hypothecated, or otherwise disposed of prior to such change in control.
For purposes of this Program, a change in control shall occur if any of the
following occurs.
(i) Any person (as defined in Section 13(d) and 14(d) of the Exchange
Act) shall become the "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.
(ii) There shall be consummated:
1. Any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to
which shares of the Company's Stock would be converted into
cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Stock immediately
prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the
merger, or
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2. Any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially
all, of the assets of the Company.
(iii) The stockholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company, or
(iv) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new Director
whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the Directors then still in office who either were Directors
at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof.
Provided, however, that none of the foregoing events shall be deemed to be
a change in control if the event or events shall have been determined by
the affirmative vote of at least a majority of the members of the Board in
office immediately prior to such event or events not to be a change in
control for purposes of the Program.
(h) Agreement by Participant Regarding Withholding Taxes. Each Participant
granted a Restricted Incentive Stock Award shall be subject to the
following rules (as modified by the provisions of Section 4(i)).
(i) No later than the date as to which the restrictions imposed on any
issued Restricted Stock shall lapse, such Participant must pay to the
Company, or make arrangements satisfactory to the Committee regarding
payment of any federal, state or local taxes of any kind required by
law to be withheld with respect to the Restricted Stock, including
the tendering of shares of Stock at Fair Market Value, and
(ii) The Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct from any payment of any kind otherwise
due to the Participant any federal, state or local taxes of any kind
required by law to be withheld with respect to the Restricted Stock,
and
(iii) The Company and its Subsidiaries may at the direction of the
Committee, pay Participants in cash or in stock an amount equal to
the tax such Participant will incur at the time the restriction on
any Restricted Stock lapses. The amount paid will be equal to the
Participant's tax liability (assuming the highest rate of tax
applicable to any individual taxpayer) in
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the year which restrictions lapse. The actual payment will be made no
later than the end of the first quarter of the calendar year
following the calendar year in which such restrictions lapse.
(iv) With respect to any Section 16 Grantee, the Committee will
automatically withhold in shares any tax liability associated with
the lapse of restrictions on any such Restricted Stock. The minimum
amount to be withheld shall be that amount necessary to satisfy
required federal, state or local withholding tax liability
attributable to the taxable event. The Committee at its discretion
may withhold up to the highest rate of tax applicable to any
individual tax payer.
(i) Election to Recognize Gross Income in the Year of Issue. If any
Participant properly elects within thirty (30) days of the date of issuance
of Restricted Stock, to include in gross income for federal income tax
purposes an amount equal to the fair market value of the Restricted Stock,
such Participant shall pay to the Company, or make arrangements
satisfactory to the Committee to pay to the Company in cash at the time of
such issuance, any federal, state or local taxes required to be withheld
with respect to such shares, or alternatively, surrender to the Company at
Fair Market Value shares of Stock owned by the Participant to cover such
tax requirements. If such Participant shall fail to make such payments,
the Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct from any payment of any kind otherwise due to the
Participant any federal, state or local taxes of any kind required by law
to be withheld with respect to Restricted Stock.
The Company and its Subsidiaries may at the direction of the Board, upon
recommendation by the Committee, pay Participants in cash or in stock an
amount equal to the tax such Participant will incur at the time of the
Participant's election. The amount paid will be equal to the Participant's
tax liability (assuming the highest rate of tax applicable to any
individual taxpayer) in the year in which such restrictions lapse. The
actual payment will be made no later than the end of the first quarter of
the calendar year following the calendar year in which such restrictions
lapse.
(j) Restrictive Legend; Certificates May be Held in Custody. Each certificate
evidencing Restricted Stock issued pursuant to a Restricted Incentive Stock
Award may bear an appropriate legend referring to the terms, conditions and
restrictions described in the Program and in the instrument evidencing the
Restricted Incentive Stock Award. Any attempt to dispose of such shares of
Stock in contravention of such terms, conditions and restrictions shall be
invalid. The Committee may enact rules which provide that the certificates
evidencing
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such shares may be held in custody of a bank or other institution or that
the Company may itself hold such shares in custody, until restrictions
thereon shall have lapsed.
(k) Assignability. Except as provided in Section 4(l), no benefit payable
under or interest in the Program shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance
or change, and any such attempted action shall be void and no such benefit
or interest shall be in any manner liable for or subject to debts,
contracts, liabilities, engagements, or torts of any Participant or
beneficiary. If any Participant or beneficiary shall become bankrupt or
shall attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber or change any benefit payable under or interest in the Program,
then the Committee in its discretion may hold or apply such benefit or
interests or any part thereof to or for the benefit of such Participant or
his beneficiary, his spouse, children, blood relatives, or other
dependents, or any of them, in such manner and in such proportions as the
Committee may consider proper.
(l) Designation of Beneficiary. Each Participant who shall be granted a
Restricted Incentive Stock Award under the Program may designate a
beneficiary or beneficiaries and may change such designation from time to
time by filing a written designation of beneficiaries with the Committee on
a form to be prescribed by it; provided, that no such designation shall be
effective unless received prior to the death of such Participant.
(m) Nontransferability of Award. No Award granted under this Program will be
transferable other than by will or, if the Employee dies intestate, by the
governing laws of the descent and distribution (or if binding on this
Program, pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act, or the rules thereunder).
Section 5. Miscellaneous
(a) Effective Date of the Program. The Plan and its Programs shall become
effective upon its adoption by the Board, subject to the approval thereof
by the stockholders of the Company having at least a majority of the voting
power of all stock of the Company present in person or represented by proxy
and entitled to be voted thereon at the (year) Annual Meeting of
------
Stockholders of the Company.
(b) Duration of Program. Unless sooner terminated, the Program shall remain in
effect for a period of three years following expiration of all options
granted under the Company's 1992 Stock Compensation Plan. Termination of
the Program shall
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not affect any Restricted Stock previously issued pursuant to Restricted
Incentive Stock Awards, which shall remain in effect until their
restrictions shall have lapsed, all in accordance with their terms.
(c) Adjustments Upon Changes in Capitalization. If there shall be any changes
in the Stock subject to the Program or the Stock subject to any Restricted
Incentive Stock Award granted hereunder, through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock
dividend (in excess of 2%) or other change in the corporation structure of
the Company, appropriate adjustments shall be made by the Committee in the
number of shares subject to outstanding Restricted Incentive Stock Awards
in order to preserve, but not to increase, the benefits of the Participant.
If the Company shall not be the surviving corporation in any merger,
consolidation, or reorganization, shares of Stock which are converted
into common stock or other securities of the surviving corporation shall be
subject to the same terms, conditions and restrictions as applicable to
such shares of Stock immediately prior to conversion, unless such terms,
conditions and restrictions have lapsed pursuant to Section 4(f) and (g)
hereof.
For purposes of the foregoing, a change in the Stock subject to the Program
or the Stock subject to any Restricted Incentive Stock Award granted
hereunder shall include an extraordinary dividend or other extraordinary
distribution (whether in cash, property, securities or any combination
thereof) with respect to such Stock. Notwithstanding the first sentence of
this Section 5(c), if the Committee determines that a change (as
hereinabove described) shall have occurred in the Stock subject to the
Program or the Stock subject to any Restricted Incentive Stock Award
granted hereunder, and that adjustments in the aggregate number of shares
subject to the Program and in the number of shares subject to outstanding
Restricted Incentive Stock Awards will not adequately preserve the benefits
of the Participant, then the Committee shall make such other adjustment or
arrangements (including providing for the issuance of cash, property and/or
securities in addition to or in lieu of shares of Stock following such
change) as in its sole judgment will be adequate for such purpose.
(d) Expenses of Program. The expenses of the Program shall be borne by the
Company.
(e) Amendment or Termination. The Board may, by resolution, amend or terminate
the Program at any time; provided, however, that to the extent shareholder
approval of Program amendments is required to exempt transactions pursuant
to the Program from the operation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, the Board may not amend the Program
without approval by vote of a majority of the shares of stock represented
at a meeting of stockholders
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<PAGE>
called for that purpose. In the event that a Restricted Incentive Stock
Award has been made to a Participant, then no amendment of the Program
after the date as of which such Restricted Incentive Stock Award was made,
shall adversely affect any right of such Participant with respect to such
Restricted Incentive Stock Award without the written consent of such
Participant.
PART C. PERFORMANCE STOCK UNIT PROGRAM.
------------------------------
Section 1. Specific Purpose.
The specific purpose of this Program is to reward selected Officers and key
employees of the Company with payments in cash and/or Company stock if the
Company meets a specific pre-determined goal during a four year award cycle.
Section 2. Definitions.
(a) "Award" shall mean as to each Officer and key employee selected for
participation in the Program for an Award Cycle, a number of Stock Units
determined by the Committee, as set forth in Section 4.
(b) "Award Cycle" shall mean each period of four consecutive fiscal years of
the Company beginning on November 1, 1993 and each odd-numbered year
thereafter as to which Awards are made.
(c) "Award Date" shall mean the date on which the Committee grants the Award to
a participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Committee" means the Executive Compensation Committee of the Board, which
shall consist of not less than three members of the Board who shall be
appointed by and serve at the pleasure of the Board and who shall be
"disinterested" within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(f) "Company" shall mean GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
(g) "Disability or Disabled" means (i) a physical or mental condition which, in
the judgment of the Committee based on competent medical evidence
satisfactory to the Committee, including if required by the Committee,
medical evidence obtained by an examination conducted by a physician
selected by the Committee,
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<PAGE>
renders an individual unable to engage in any substantial gainful activity
for the Company, a subsidiary, or an affiliated company, and which
impairment is likely to result in death or to be of long continued and
indefinite duration, or (ii) a judicial declaration of incompetence.
(h) "Effective Date" means the date of the adoption of the Plan by the Board,
subject to the approval thereof by the stockholders of the Company.
(i) "Objective" shall mean the performance goal for the Company set by the
Board, at the time each Award in granted, with respect to the related Award
Cycle, as set forth in Section 3.
(j) "Officer" shall mean each corporate officer of the Company elected by the
Board, while such individual holds the office.
(k) "Program" means the Performance Stock Unit Program of the Company as set
forth herein.
(l) "Stock" shall mean the common stock of the Company.
(m) "Stock Unit" shall mean a unit of measurement equal on the Award Date to
one share of Stock.
Section 3. Participation
(a) In January of each even-numbered calendar year beginning with 1994, the
Committee will select the Officers and key employees to participate in the
Award Cycle that began the last preceding November and the number of Stock
Units in the Award to be granted to each. At the meeting held in that same
January the Board will establish the Objective for that same Award Cycle.
The Objective will be a readily determinable goal for performance of the
Company over the Award Cycle to be measured at the completion of such Award
Cycle (e.g., average annual return on investment, earnings per share,
earnings before taxes or other criterion or combination thereof). The
Objective may, but need not, be different in amount or character from one
Award Cycle to another.
(b) In the event that an individual is elected an Officer, or is elected to be
a higher-ranked Officer than before, such individual may be granted an
Award (or an additional Award) in the most recently started Award Cycle, if
such Award is granted in the same month as the individual is elected to
such new office or at the next meeting of the Committee held thereafter, at
the discretion of the Committee.
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<PAGE>
Section 4. Payment
(a) Following the end of an Award Cycle, the Committee shall confirm whether
the Objective was met for such Award Cycle and will confirm the payment of
such Awards in cash, stock, or some combination of both. No payment under
this Program will be made unless the Object was met.
(b) The cash amount of the Award will be computed for each participant by
multiplying the number of Stock Units granted in the Award regarding that
Award Cycle by the lesser of:
(1) the average of the daily closing prices of Stock on the New York Stock
Exchange for the first month of December falling in that Award Cycle,
or
(2) the average of the daily closing prices of Stock on the New York Stock
Exchange for the final month of October within the particular Award
Cycle.
If the Stock is used to make payment, the number of shares will be
calculated by dividing the cash amount determined above by the average of
the daily closing prices of Stock on the New York Stock Exchange for the
month of December following the particular Award Cycle.
(c) One-half of the Award amount is to be paid on or before January 15
following the end of the Award Cycle and the remainder is to be paid one
year later.
(d) In order to receive any payment, the participant must be actively employed
by the Company on that payment date, except as follows: (i) A participant
who retires or becomes Disabled during an Award Cycle will receive that
portion of his Award amount equal to the portion of the Award Cycle that
preceded his Disability or other termination of employment. (ii) A
participant who retires or becomes Disabled after the Award Cycle will
receive the full payment. (iii) A participant whose termination for any
other reason is not for cause and is with the concurrence of the Company
will receive the full payment or a designated portion thereof, if and only
if the Committee determines that such payment is appropriate and in the
best interest of the Company. In the case of a participant who dies during
an Award Cycle or after an Award Cycle (but before the payment date), the
benefit that would have been paid to him had he retired instead of dying
shall be paid to the person or persons to whom such benefits pass by will,
or if the participant dies intestate, under the laws of descent and
distribution of the state of his domicile at the time of his death (or if
binding on this Program, pursuant to a qualified domestic relations order
as defined by the Internal Revenue Code of
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<PAGE>
1986, as amended, or Title I of the Employee Retirement Income Security
Act, or the rules thereunder.)
(e) The Company shall have the right to withhold from any cash payment to a
participant sufficient amounts to cover withholding and employment tax or
other taxes, relating to the operations of this Program, or, if stock is to
be used to make payment, the Company may require cash payment by the
participant prior to delivery of any stock certificates in a sufficient
amount to satisfy withholding and employment taxes or other taxes related
to the issuance of such Stock. Alternatively, the numbers of shares of
Stock to be issued may be reduced to cover tax requirements.
Section 5. Administration
(a) The Committee will have full and sole authority to administer the Program,
and its rules, procedures and interpretations shall be final and conclusive
as to all persons.
(b) The Committee will have the authority to eliminate the amount of any
unusual or non-recurring items of gain or loss which, in the opinion of the
Executive Compensation Committee, should not be considered in appraising
whether the Objective has been met for a particular Award Cycle.
(c) If after an Award Date there occurs a change in the number of outstanding
shares of Stock by reason of any stock split, stock dividend,
recapitalization or combination of shares, or other change in the capital
structure of the Company, there will be made an appropriate adjustment to
the Stock Units in any outstanding Award and in the previous closing prices
for Stock, and, it necessary, in the Objective, in order to preserve the
original intent of the grant.
(d) The Company may make any withholding from payments under this Program
required by federal, state or local law; provided that, if distribution is
to be made in Stock, the participant may be permitted by the Committee to
furnish the Company cash to cover such requirement in lieu of a reduction
in the number of shares to be distributed.
(e) No rights under the Program are assignable or transferrable, or subject to
encumbrances, pledge, or charge of any kind, except as to amounts due to
the Company or as described in section 4(d).
(f) Nothing in this Program will confer on any employee any right, either
express or implied, to remain in the employ of the Company for any period.
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<PAGE>
(g) This Program and all rights hereunder will be governed by the laws of the
State of Texas, except as otherwise provided in Section 4(d), relating to
the death of the participant.
Section 6. Amendment or Termination
The Board, may by resolution, amend or terminate the Program at any time;
provided, however, that to the extent shareholder approval of Program amendments
is required to exempt transactions pursuant to the Program from the operation of
Section 16(b) of the Securities Exchange Act of 1934, as amended, the Board may
not amend the Program without approval by vote of a majority of the shares of
stock represented at a meeting of stockholders called for that purpose.
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<PAGE>
EXHIBIT 7
AMENDMENT TO 1992 STOCK COMPENSATION PLAN
The second paragraph of the Section titled "Name and General Purpose
of Plan" is hereby amended by restatement to read as follows:
"Effective January 19, 1998, the total number of shares of Common Stock of
the Company reserved and available for issuance under the Plan shall be
increased by 800,000 to 3,500,000 (subject to appropriate adjustment for any
change in the stock due to merger, consolidation, reorganization,
recapitalization, reincorporation, stock split, stock dividend in excess of 2%
or other change in corporation structure). The additional 800,000 shares are
only available for stock option grants under Part A of the Plan. The maximum
number of shares of common stock of the Company with respect to which a Plan
award may be granted to any individual may not exceed 750,000 in any consecutive
three-year period. In addition, no more than 750,000 of such shares are to be
issued as Restricted Stock. Such shares may consist of previously issued shares
acquired by the Company, authorized but unissued shares, or any combination
thereof, as determined by the Board of Directors of the Company."
<PAGE>
EXHIBIT 8
FORM OF INCENTIVE STOCK OPTION AGREEMENT
UNDER THE GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
1992 STOCK COMPENSATION PLAN
THIS AGREEMENT, made this 18th day of September, 1998 by and between Global
Industrial Technologies, Inc., a Delaware corporation (the "Company"), and
[Name] (the "Optionee").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Global Industrial Technologies, Inc. 1992 Stock
Compensation Plan (the "Plan"), the Company desires to afford the Optionee the
opportunity to acquire, or enlarge, his/her ownership of the Company's common
stock ("Common Stock"), so that he/she may have a direct proprietary interest in
the Company's success;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. Subject to the term and conditions set forth herein
---------------
and in the Plan, the terms of which are attached as Exhibit A, and to
the agreement in writing of Optionee to cancel all other outstanding
stock option granted to him or her by the Company, the Company hereby
grants to the Optionee, during the period commencing on the date of this
Agreement and ending on the close of business on the day of the tenth
anniversary of the date hereof, September 18, 2008 (the "Termination
Date"), the right and option (the "Option") to purchase from the
Company, at a price of $6.9063 per share (the "Option Price"), an
aggregate of __________________ shares of Common Stock (the "Option
Shares").
2. LIMITATION ON EXERCISE OF OPTION. Subject to the terms and conditions
--------------------------------
set forth herein and the Plan, the Optionee may exercise 50% of the
Option if the average closing price of the Common Stock for any twenty-
one (21) consecutive trading day period during the term (the "Average
Price") equals or exceeds $10.3595, and an additional 50% if the Average
Price equals or exceeds $13.8126 provided, however, that in any event
-------- -------
the Option shall be 100% exercisable after the fifth anniversary of the
date hereof, September 18, 2003.
3. TERMINATION OF EMPLOYMENT. Any Option held by the Optionee upon
-------------------------
termination of employment shall remain exercisable as follows:
(a) If the Optionee's termination of employment is due to death,
disability, or retirement on or after the attainment of age 65
(or such younger age as the Committee may determine in its sole
discretion) all unvested Options shall automatically become
vested and exercisable in full on the date of such termination of
employment and shall be exercisable by the Optionee, by the
Optionee's designated beneficiary, or, if none, the person(s) to
whom such Optionee's rights under the Option are transferred by
will or the laws of descent and distribution for
<PAGE>
2 years following such termination of employment (but in no event
beyond the term of the Option), and shall thereafter terminate.
If exercised following termination of employment this option
shall cease to be an Incentive Stock Option within the meaning of
Section 422 of the Code except, in the case of retirement, if
such exercise takes place within three (3) months following
retirement, or in the case of disability, if such exercise takes
place within one year following termination of employment.
(b) If the Optionee's termination of employment is a Termination for
Cause, the Option shall terminate immediately upon such
termination of employment, regardless of whether the Option was
then exercisable; and
(c) If the Optionee's termination of employment is for any other
reason, all unvested Options shall terminate on the date of
termination and all Options (to the extent exercisable as of the
date of termination) shall be exercisable for a period of 30 days
following such termination of employment (but in no event beyond
the term of the Option), and shall thereafter terminate. An
Optionee's status as an employee shall not be considered
terminated in the case of a leave of absence agreed to in writing
by the Company (including, but not limited to, military and sick
leave); provided, that, if exercised more than 30 days after
-------- ----
commencement of a bona fide leave (or for the period of the
leave if re-employment upon expiration is guaranteed by contract
or statute), the Option shall cease to be an incentive stock
option within the meaning of Section 422 of the Code.
4. METHOD OF EXERCISING OPTION. (a) Options, to the extent vested and
---------------------------
exercisable in accordance with Section 2, may be exercised, in whole
or in part, by giving written notice of exercise to the Company
specifying the number of shares of Common Stock to be purchased. Such
notice shall be accompanied by the payment in full of the Option
Price. Such payment shall be made: (i) in cash, or (ii) by surrender
to the Company at Fair Market Value shares of Common Stock owned by
the holder of the Option, or (iii) by a combination of any such
methods.
(b) At the time of exercise, the Optionee shall pay to the Company
such amount as the Company deems necessary to satisfy its
obligation to withhold Federal, state or local income or other
taxes incurred by reason of the exercise or the transfer of
shares thereupon by tendering to the Company a check in the
amount of such withholding or, if allowed in the sole discretion
of the Committee, by electing to have withheld upon exercise,
shares of Common Stock having a Fair Market Value equal to the
amount of such tax withholding.
5. ISSUANCE OF SHARES. As promptly as practical after receipt of such
------------------
written notification of exercise and full payment of the Option Price
and any required income tax withholding, the Company shall issue or
transfer to the Optionee the number of Option Shares with respect to
which Option have been so exercised (less shares withheld in
satisfaction of tax withholding obligations, if any), and shall
deliver to the Optionee a certificate or certificates therefor,
registered in the Optionee's name.
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<PAGE>
6. COMPANY; OPTIONEE. (a) The term "Company" as used in this Agreement
-----------------
with reference to employment shall include the Company and its
Subsidiaries, as appropriate.
(b) Whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision should
logically be construed to apply to the beneficiaries, the
executors, the administrators, or the person or persons to whom
the Option may be transferred by will or by the laws of descent
and distribution, the word "Optionee" shall be deemed to include
such person or persons.
7. NON-TRANSFERABILITY. The Option is not transferable by the Optionee
-------------------
otherwise than to a designated beneficiary upon death or by will or
the laws of descent and distribution, and are exercisable during the
Optionee's lifetime only by him/her. No assignment or transfer of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except upon death, by
will or the laws of descent and distribution), shall vest in the
assignee or transferee any interest or right herein whatsoever, but
immediately upon such assignment or transfer the Option shall
terminate and become of no further effect.
8. ACCELERATION OF VESTING. Notwithstanding the foregoing, upon the
-----------------------
occurrence of (a) a Change in Control (as defined below) or (b) a
tender offer or exchange offer is made by any "person" within the
meaning of Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") for 30% or more of the Company Voting Securities (as
defined below) other than such a tender offer or exchange offer that
is made by the Company or any affiliate, all Options shall
automatically become vested and immediately exercisable in full.
(a) a Change in Control (as defined below); or
(b) a tender offer or exchange offer is made by any "person" within
the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") for 30% or more of the Company Voting Securities (as
defined below) other than such a tender offer or exchange offer that is
made by the Company or any affiliate, the Option shall automatically become
vested and immediately exercisable in full.
For purposes of this Agreement, "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 majority of the Board, provided that
any person becoming a director subsequent to March 18,
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 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
-------- -------
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<PAGE>
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 shareholders of the Company approve a merger,
consolidation, statutory share exchange, or similar form of
corporate transaction involving the Company or any of its
Subsidiaries, whether for such transaction or the issuance
of securities in the transaction or otherwise (a "Business
Combination"): (A) unless an Action is pending immediately
after such approval or (B) unless immediately following
such Business Combination: (X) 50% or more of the total
voting power of (I) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (II)
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 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, (Y) 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 (Z) 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 (X), (Y) and (Z) above shall be deemed to be a "Non-
Qualifying Transaction").
(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.
For purposes of this Agreement, "Action" shall mean any action,
proceeding, litigation or investigation by any governmental entity
before any court or governmental entity seeking to prohibit or
restrain a Business Combination, seeking to make consummation of a
Business Combination illegal, or seeking to impose material
limitations on the ownership or use of
-4-
<PAGE>
the Company's assets as a result of consummation of a Business
Combination from the date the Company has received written notice
thereof.
Notwithstanding the foregoing; (I) 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; and (II) a Change in Control of the
Company under paragraph (iii) hereof shall be deemed to have occurred
if, after shareholders have approved a Business Combination, an Action
is instituted prior to the consummation of such Business Combination;
in such event, all unexercised Options that became exercisable upon
such shareholder approval shall cease to be exercisable until the date
occurring on the earlier of (a) the time such Options would have
become exercisable pursuant to Section 2 hereof, (b) the consummation
of the Business Combination or (c) the dismissal of settlement of the
Action.
9. RIGHTS AS SHAREHOLDER. The Optionee or a transferee of the Option
---------------------
shall have no rights as a shareholder with respect to any Option
Shares until he/she shall have become the holder of record of such
shares, and no adjustment shall be made for dividends or distributions
or other rights in respect of such shares of Common Stock for which
the record date is prior to the date upon which he shall become the
holder of record thereof.
10. ADJUSTMENTS. In the event of any change in the number of outstanding
-----------
shares of Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, or other change in the
capital structure of the Company, there will be made an appropriate
adjustment to the Option Price and the number of Option Shares then
subject to any outstanding Options, all in a manner as shall be
determined by the Committee.
11. COMPLIANCE WITH LAW. Notwithstanding any of the provisions hereof,
-------------------
the Optionee hereby agrees that he will not exercise the Option, and
that the Company will not be obligated to issue or transfer any shares
to the Optionee hereunder, if the exercise hereof or the issuance or
transfer of such shares shall constitute a violation by the Optionee
or the Company of any provisions of any law or regulation of any
governmental authority. Any determination in this connection by the
Committee shall be final, binding and conclusive. The Company shall
in no event be obliged to register any securities pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) or
to take any other affirmative action in order to cause the exercise of
the Option or the issuance or transfer of shares pursuant thereto to
comply with any law or regulation of any governmental authority.
12. NOTICE. Every notice or other communication relating to this
------
Agreement shall be in writing, and shall be mailed to or delivered to
the party for whom it is intended at such address as may from time to
time be designated by it in a notice mailed or delivered to the other
party as herein provided; provided, that, unless and until some other
-------- ----
address be so designated, all notices or communications by the
Optionee to the Company shall be mailed or delivered to
-5-
<PAGE>
the Company at its principal executive office, and all notices or
communications by the Company to the Optionee may be given to the
Option personally or may be mailed to him at his address as recorded
in the records of the Company.
13. NONQUALIFIED STOCK OPTION. The Option granted hereunder is not
-------------------------
intended to be an incentive stock within the meaning of Section 422 of
the Code.
14. BINDING EFFECT. Subject to Section 7 hereof, this Agreement shall be
--------------
binding upon the heirs, executors, administrators and successors of
the parties hereto.
15. GOVERNING LAW. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State of Delaware.
16. PLAN. The terms and provisions of the Plan are incorporated herein by
----
reference, and the Optionee hereby acknowledges receiving a copy of
the Plan. In the event of a conflict or inconsistency between
discretionary terms and provisions of the Plan and the express
provisions of this Agreement, this Agreement shall govern and control.
In all other instances of conflicts or inconsistencies or omissions,
the terms and provisions of the Plan shall govern and control. All
capitalized terms not defined herein shall have the meaning ascribed
to them as set forth in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Global Industrial Technologies, Inc.
By: __________________________________
James B. Alleman
Vice President - Human Resources
By: __________________________________
[Name]
Optionee
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<PAGE>
EXHIBIT 9
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
1992 STOCK COMPENSATION PLAN
THIS AGREEMENT, made this 18th day of September, 1998 by and between Global
Industrial Technologies, Inc., a Delaware corporation (the "Company"), and
[Name] (the "Optionee").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Global Industrial Technologies, Inc. 1992 Stock
Compensation Plan (the "Plan"), the Company desires to afford the Optionee the
opportunity to acquire, or enlarge, his/her ownership of the Company's common
stock ("Common Stock"), so that he/she may have a direct proprietary interest in
the Company's success;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. Subject to the term and conditions set forth herein
---------------
and in the Plan, the terms of which are attached as Exhibit A, and to
the agreement in writing of Optionee to cancel all other outstanding
stock option granted to him or her by the Company, the Company hereby
grants to the Optionee, during the period commencing on the date of
this Agreement and ending on the close of business on the day of the
tenth anniversary of the date hereof, September 18, 2008 (the
"Termination Date"), the right and option (the "Option") to purchase
from the Company, at a price of $6,9063 per share (the "Option
Price"), an aggregate of __________________ shares of Common Stock
(the "Option Shares").
2. LIMITATION ON EXERCISE OF OPTION. Subject to the terms and conditions
--------------------------------
set forth herein and the Plan, the Optionee may exercise 50% of the
Option if the average closing price of the Common Stock for any
twenty-one (21) consecutive trading day period during the term (the
"Average Price") equals or exceeds $10.3595, and an additional 50% if
the Average Price equals or exceeds $13.8126 provided, however, that
in any event the Option shall be 100% exercisable after the fifth
anniversary of the date hereof, September 18, 2003.
3. TERMINATION OF EMPLOYMENT. Any Option held by the Optionee upon
-------------------------
termination of employment shall remain exercisable as follows:
(a) If the Optionee's termination of employment is due to health,
disability, or retirement on or after the attainment of age 65
(or such younger age as the Committee may determine in its sole
discretion) all unvested Options shall automatically become
vested and exercisable in full on the date of such termination of
employment and shall be exercisable by the Optionee, any prior
transferee of the Option or by the Optionee's designated
beneficiary, or, if none, the person(s) to whom such Optionee's
rights under the Option are transferred by will or the laws of
descent and distribution
<PAGE>
for 2 years following such termination of employment (but in no
event beyond the term of the Option), and shall thereafter
terminate;
(b) If the Optionee's termination of employment is a Termination for
Cause, the Option shall terminate immediately upon such
termination of employment, regardless of whether the Option was
then exercisable; and
(c) If the Optionee's termination of employment is for any other
reason, all unvested Options shall terminate on the date of
termination and all Options (to the extent exercisable as of the
date of termination) shall be exercisable for a period of 30 days
following such termination of employment (but in no event beyond
the term of the Option), and shall thereafter terminate. An
Optionee's status as an employee shall not be considered
terminated in the case of a leave of absence agreed to in writing
by the Company (including, but not limited to, military and sick
leave).
4. METHOD OF EXERCISING OPTION.
---------------------------
(a) Options, to the extent vested and exercisable in accordance with
Section 2, may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number
of shares of Common Stock to be purchased. Such notice shall be
accompanied by the payment in full of the Option Price. Such
payment shall be made: (i) in cash, or (ii) by surrender to the
Company at Fair Market Value shares of Common Stock owned by the
holder of the Option, or (iii) by a combination of any such
methods.
(b) At the time of exercise, the Optionee shall pay to the Company
such amount as the Company deems necessary to satisfy its
obligation to withhold Federal, state or local income or other
taxes incurred by reason of the exercise or the transfer of
shares thereupon by tendering to the Company a check in the
amount of such withholding or, if allowed in the sole discretion
of the Committee, by electing to have withheld upon exercise,
shares of Common Stock having a Fair Market Value equal to the
amount of such tax withholding.
5. ISSUANCE OF SHARES. As promptly as practical after receipt of such
------------------
written notification of exercise and full payment of the Option Price
and any required income tax withholding, the Company shall issue or
transfer to the Optionee the number of Option Shares with respect to
which Option have been so exercised (less shares withheld in
satisfaction of tax withholding obligations, if any), and shall
deliver to the Optionee a certificate or certificates therefor,
registered in the Optionee's name.
6. COMPANY; OPTIONEE.
-----------------
(a) The term "Company" as used in this Agreement with reference to
employment shall include the Company and its Subsidiaries, as
appropriate.
(b) Whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision should
logically be construed to apply to the
-2-
<PAGE>
beneficiaries, the executors, the administrators, or the person
or persons to whom the Option may be transferred by will or by
the laws of descent and distribution, the word "Optionee" shall
be deemed to include such person or persons.
7. NON-TRANSFERABILITY. The Option is not transferable by the Optionee
-------------------
otherwise than to a designated beneficiary upon death or by will or
the laws of descent and distribution, and are exercisable during the
Optionee's lifetime only by him/her; provided, however, the Optionee
-------- -------
may, subject to such terms and conditions specified by the Committee,
transfer the Option to an Immediate Family Member (or to corporations,
trusts, partnerships, or limited liability companies established
exclusively for such family members); provided, further, that there is
-------- -------
no consideration for such transfer. No assignment or transfer of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except as otherwise
provided by this Section 7 or upon death, by will or the laws of
descent and distribution), shall vest in the assignee or transferee
any interest or right herein whatsoever, but immediately upon such
assignment or transfer the Option shall terminate and become of no
further effect. For purposes of the foregoing, Immediate Family Member
shall mean, except as otherwise determined by the Committee, an
Optionee's children, stepchildren, grandchildren, parents,
stepparents, grandparents, spouse, siblings, in-laws and persons
related by reason of legal adoption.
8. ACCELERATION OF VESTING. Notwithstanding the foregoing, upon the
-----------------------
occurrence of:
(a) a Change in Control (as defined below); or
(b) a tender offer or exchange offer is made by any "person" within
the meaning of Section 14(d) of the Securities Exchange Act of
1934 (the "Exchange Act") for 30% or more of the Company Voting
Securities (as defined below) other than such a tender offer or
exchange offer that is made by the Company or any affiliate, the
Option shall automatically become vested and immediately
exercisable in full.
For purposes of this Agreement, "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 majority of the Board, provided that
any person becoming a director subsequent to March 18,
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.
-3-
<PAGE>
(ii) any "person" (as such term is defined in Section 3(a)(9) of
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 shareholders of the Company approve a merger,
consolidation, statutory share exchange, or similar form of
corporate transaction involving the Company or any of its
Subsidiaries, whether for such transaction or the issuance
of securities in the transaction or otherwise (a "Business
Combination"): (A) unless an Action is pending immediately
after such approval or (B) unless immediately following
such Business Combination: (X) 50% or more of the total
voting power of (I) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (II)
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 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, (Y) 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 (Z) 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
-4-
<PAGE>
specified in (X), (Y) and (Z) above shall be deemed to be a
"Non-Qualifying Transaction").
(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.
For purposes of this Agreement, "Action" shall mean any action,
proceeding, litigation or investigation by any governmental entity
before any court or governmental entity seeking to prohibit or
restrain a Business Combination, seeking to make consummation of a
Business Combination illegal, or seeking to impose material
limitations on the ownership or use of the Company's assets as a
result of consummation of a Business Combination from the date the
Company has received written notice thereof.
Notwithstanding the foregoing; (I) 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; and (II) a Change in Control of the
Company under paragraph (iii) hereof shall be deemed to have occurred
if, after shareholders have approved a Business Combination, an Action
is instituted prior to the consummation of such Business Combination;
in such event, all unexercised Options that became exercisable upon
such shareholder approval shall cease to be exercisable until the date
occurring on the earlier of (a) the time such Options would have
become exercisable pursuant to Section 2 hereof, (b) the consummation
of the Business Combination or (c) the dismissal of settlement of the
Action.
9. RIGHTS AS SHAREHOLDER. The Optionee or a transferee of the Option
---------------------
shall have no rights as a shareholder with respect to any Option
Shares until he/she shall have become the holder of record of such
shares, and no adjustment shall be made for dividends or distributions
or other rights in respect of such shares of Common Stock for which
the record date is prior to the date upon which he shall become the
holder of record thereof.
10. ADJUSTMENTS. In the event of any change in the number of outstanding
-----------
shares of Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, or other change in the
capital structure of the Company, there will be made an appropriate
adjustment to the Option Price and the number of Option Shares then
subject to any outstanding Options, all in a manner as shall be
determined by the Committee.
11. COMPLIANCE WITH LAW. Notwithstanding any of the provisions hereof,
-------------------
the Optionee hereby agrees that he will not exercise the Option, and
that the Company will not be obligated to issue or transfer any shares
to the Optionee hereunder, if the exercise hereof or the issuance or
transfer of such shares shall constitute a violation by the Optionee
or the Company of any provisions of any law or regulation of any
governmental authority. Any determination in this
-5-
<PAGE>
connection by the Committee shall be final, binding and conclusive.
The Company shall in no event be obliged to register any securities
pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended) or to take any other affirmative action in order to
cause the exercise of the Option or the issuance or transfer of shares
pursuant thereto to comply with any law or regulation of any
governmental authority.
12. NOTICE. Every notice or other communication relating to this
------
Agreement shall be in writing, and shall be mailed to or delivered to
the party for whom it is intended at such address as may from time to
time be designated by it in a notice mailed or delivered to the other
party as herein provided; provided, that, unless and until some other
-------- ----
address be so designated, all notices or communications by the
Optionee to the Company shall be mailed or delivered to the Company at
its principal executive office, and all notices or communications by
the Company to the Optionee may be given to the Option personally or
may be mailed to him at his address as recorded in the records of the
Company.
13. NONQUALIFIED STOCK OPTION. The Option granted hereunder is not
-------------------------
intended to be an incentive stock within the meaning of Section 422 of
the Code.
14. BINDING EFFECT. Subject to Section 7 hereof, this Agreement shall be
--------------
binding upon the heirs, executors, administrators and successors of
the parties hereto.
15. GOVERNING LAW. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State of Delaware.
16. PLAN. The terms and provisions of the Plan are incorporated herein by
----
reference, and the Optionee hereby acknowledges receiving a copy of
the Plan. In the event of a conflict or inconsistency between
discretionary terms and provisions of the Plan and the express
provisions of this Agreement, this Agreement shall govern and control.
In all other instances of conflicts or inconsistencies or omissions,
the terms and provisions of the Plan shall govern and control. All
capitalized terms not defined herein shall have the meaning ascribed
to them as set forth in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Global Industrial Technologies, Inc.
____________________________________
By: James B. Alleman
Vice President - Human Resources
By: ____________________________________
[Name]
Optionee
-6-
<PAGE>
EXHIBIT 10
LOGO GLOBAL INDUSTRIAL TECHNOLOGIES
Shareholders, Customers, Employees
December 23, 1998
Dear Fellow Global Industrial Technologies Stockholder:
On December 17, 1998, WHX Corporation began a hostile tender offer to buy
your shares of stock in Global Industrial Technologies, Inc.
It is your Board's unanimous opinion that WHX's offer, which values Global
at $10.50 per share, is too low, and that it is not in your best interests to
tender your shares pursuant to WHX's offer. The WHX move is opportunistic; it
has made its offer at a time when the Board believes Global's share price is
temporarily low as a result of the poor world-wide market conditions that have
been affecting our businesses, and just as the integration of A.P. Green into
our Harbison-Walker operations has made your Company one of the largest and
most cost-effective refractories companies in the world.
Your Board believes that WHX's bid is an attempt to buy Global at the wrong
price and at the wrong time-- just as we are seeing significant improvements
from operations that will make your Company profitable in 1999. We have
provided value to the stockholders in the past--only seven months ago Global's
stock had traded as high as $18.625, which represented a 13.2% compounded
annual return to stockholders based upon the price at which the Company's
shares began trading in 1992--and we are confident we can do so in the future.
To sell Global at this time and at WHX's offered price would benefit WHX and
its stockholders at the expense of your best interests. ACCORDINGLY, YOUR
BOARD STRONGLY RECOMMENDS THAT YOU DO NOT TENDER ANY OF YOUR SHARES INTO WHX'S
OFFER.
In reaching its determination and recommendation to reject WHX's offer, your
Board closely analyzed the offer with the Company's management and independent
outside advisors and considered a variety of factors, including the opinion of
each of Global's financial advisors, Wasserstein Perella & Co., Inc. and J.P.
Morgan & Co., Inc., that WHX's offer is inadequate from a financial point of
view to Global's stockholders. A more detailed description of those reasons
are set forth in the Solicitation/Recommendation Statement on Schedule 14D-9
which we enclose for you. We urge you to read the Schedule 14D-9 carefully and
completely.
Your Board is committed to building stockholder value through the
realization of the strategic plan your Board has set for the Company. To
accomplish this objective, we have:
. Disposed of non-core businesses;
. Acquired five refractories businesses, including A.P. Green, giving
Global a substantially increased and improved market position in North
America and elsewhere;
<PAGE>
. Initiated and, in less than six months, substantially completed a
significant restructuring and integration of our refractory operations,
producing $30 million in annual synergies and cost savings. We anticipate
that an additional $6 million of synergies will be attained by the end of
the second quarter of 1999;
. Ensured that the Board's strategic plan would be implemented as quickly
as possible and with continuity of leadership by putting in place a
management team with an expert and intimate knowledge of Global's
operations; and
. Continued to take steps to improve near-term operating efficiency and
profitability and proceeded to evaluate further possible asset
dispositions as part of our long-term strategic plans to enhance
stockholder value.
The results of these efforts are just beginning to become apparent in our
operational performance. As a result, we fully expect to return to
profitability in the first half of 1999. Our anticipated profitability over
the course of 1999 will be driven by a meaningful improvement in our operating
margins over the course of the year as we gain the full synergistic benefits
of the strategic repositioning we undertook in 1998.
Many of you may have questions about how a hostile tender offer works. You
should know that you are not hurt by taking your time to consider the offer.
WHX's offer cannot expire before January 15, 1999, and given all the
conditions in WHX's offer, it's likely the deadline will be pushed back even
later. Among other things, the Offer is conditioned on the Board taking
several actions to facilitate the Offer. As described in the enclosed Schedule
14D-9, the Board has no intention of taking any such steps. Accordingly, there
is no near-term prospect of WHX purchasing shares pursuant to the Offer.
Global Industrial Technologies has an exciting future which we are just
beginning to realize. This is not the time to sell our Company. WHX is clearly
acting in its own best interests and not in yours.
Thank you for your investment in and support of Global.
Sincerely,
Rawles Fulgham
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 11
PERSONAL AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
FOR IMMEDIATE RELEASE
CONTACT: GEORGE PASLEY
V.P. COMMUNICATIONS
214-953-4510
WEB SITE: PRNEWSWIRE.COM/GIX
GLOBAL BOARD UNANIMOUSLY REJECTS WHX TENDER OFFER
DALLAS, TEXAS, DECEMBER 23, 1998--Global Industrial Technologies, Inc.
(NYSE: GIX) today announced that its Board of Directors voted unanimously to
reject WHX Corporation's (NYSE: WHX) unsolicited tender offer to acquire
Global for $10.50 per share, saying that the WHX offer is "an attempt to buy
Global at the wrong price and at the wrong time--just as we are seeing
significant improvements from operations that will make your Company
profitable in 1999." In a letter to Global stockholders, Global's Chairman and
Chief Executive Officer Rawles Fulgham expressed the Board's unanimous
recommendation that stockholders not tender any of their Global shares into
the WHX offer, and stated that the "WHX move is opportunistic; it has made its
offer at a time when the Board believes Global's share price is temporarily
low as a result of the poor world-wide market conditions that have been
affecting our businesses, and just as the integration of A.P. Green into our
Harbison-Walker operations has made your Company one of the largest and most
cost-effective refractories companies in the world."
In reaching its determination and recommendation to unanimously reject WHX's
offer, the Board considered a variety of factors, including the opinion of
each of Global's financial advisors, Wasserstein Perella & Co., Inc. and J.P.
Morgan & Co., Inc., that WHX's offer is inadequate, from a financial point of
view, to Global's stockholders. A more detailed description of those reasons
are set forth in the Solicitation/Recommendation Statement on Schedule 14D-9,
which Global urges stockholders read carefully and completely.
The full text of Global's letter to its stockholders is attached to this
press release.
Global is a major manufacturer of technologically advanced industrial
products that support high-growth markets around the world. Products include
forged flanges; undercarriage parts for track-mounted vehicles; modular cells
for refining nonferrous metals; premium refractories for lining heat-
containing industrial vessels such as steel furnaces; raw materials used to
make refractory products, processing and recycling equipment.
This document and the attachments hereto may contain certain statements that
are not strictly historical and are considered "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, cyclicity 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 reports with the Securities and
Exchange Commission including quarterly reports on Form 10-Q, annual reports
on Form 10-K and reports on Form 8-K.
<PAGE>
Letter to stockholders follows:
December 23, 1998
Dear Fellow Global Industrial Technologies Stockholder:
On December 17, 1998, WHX Corporation began a hostile tender offer to buy
your shares of stock in Global Industrial Technologies, Inc.
It is your Board's unanimous opinion that WHX's offer, which values Global
at $10.50 per share, is too low, and that it is not in your best interests to
tender your shares pursuant to WHX's offer. The WHX move is opportunistic; it
has made its offer at a time when the Board believes that Global's share price
is temporarily low as a result of the poor world-wide market conditions that
have been affecting our businesses, and just as the integration of A.P. Green
into our Harbison-Walker operations has made your Company one of the largest
and most cost-effective refractories companies in the world.
Your Board believes that WHX's bid is an attempt to buy Global at the wrong
price and at the wrong time--just as we are seeing significant improvements
from operations that will make your Company profitable in 1999. We have
provided value to the stockholders in the past--only seven months ago Global's
stock had traded as high as $18.625, which represented a 13.2% compounded
annual return to stockholders based upon the price at which the Company's
shares began trading in 1992--and we are confident we can do so in the future.
To sell Global at this time and at WHX's offered price would benefit WHX and
its stockholders at the expense of your best interests. ACCORDINGLY, YOUR
BOARD STRONGLY RECOMMENDS THAT YOU DO NOT TENDER ANY OF YOUR SHARES INTO WHX'S
OFFER.
In reaching its determination and recommendation to reject WHX's offer, your
Board closely analyzed the offer with the Company's management and independent
outside advisors and considered a variety of factors, including the opinion of
each of Global's financial advisors, Wasserstein Perella & Co., Inc. and J.P.
Morgan & Co., Inc., that WHX's offer is inadequate from a financial point of
view to Global's stockholders. A more detailed description of those reasons
are set forth in the Solicitation/Recommendation Statement on Schedule 14D-9
which we enclose for you. We urge you to read the Schedule 14D-9 carefully and
completely.
Your Board is committed to building stockholder value through the
realization of the strategic plan your Board has set for the Company. To
accomplish this objective, we have:
. Disposed of non-core businesses;
. Acquired five refractories businesses, including A.P. Green, giving
Global a substantially increased and improved market position in North
America and elsewhere;
. Initiated and, in less than six months, substantially completed a
significant restructuring and integration of our refractory operations,
producing $30 million in annual synergies and cost savings. We anticipate
that an additional $6 million of synergies will be attained by the end of
the second quarter of 1999;
. Ensured that the Board's strategic plan would be implemented as quickly
as possible and with continuity of leadership by putting in place a
management team with an expert and intimate knowledge of Global's
operations; and
<PAGE>
. Continued to take steps to improve near-term operating efficiency and
profitability and proceeded to evaluate further possible asset
dispositions as part of our long-term strategic plans to enhance
stockholder value.
The results of these efforts are just beginning to become apparent in our
operational performance. As a result, we fully expect to return to
profitability in the first half of 1999. Our anticipated profitability over
the course of 1999 will be driven by a meaningful improvement in our operating
margins over the course of the year as we gain the full synergistic benefits
of the strategic repositioning we undertook in 1998.
Many of you may have questions about how a hostile tender offer works. You
should know that you are not hurt by taking your time to consider the offer.
WHX's offer cannot expire before January 15, 1999, and given all the
conditions in WHX's offer, it's likely the deadline will be pushed back even
later. Among other things, the Offer is conditioned on the Board taking
several actions to facilitate the Offer. As described in the enclosed Schedule
14D-9, the Board has no intention of taking any such steps. Accordingly, there
is no near-term prospect of WHX purchasing shares pursuant to the Offer.
Global Industrial Technologies has an exciting future which we are just
beginning to realize. This is not the time to sell our Company. WHX is clearly
acting in its own best interests and not in yours.
Thank you for your investment in and support of Global.
Sincerely,
Rawles Fulgham
Chairman and Chief Executive Officer
