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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 to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates 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
Schedule 14D-9 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, October 5, 1998, January 9,
1999, June 6, 1999 and July 9, 1999 (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 Schedule 14D-9 relates to the tender offer disclosed in the Schedule
14D-1, dated July 16, 1999 (the "Schedule 14D-1"), of the bidder, RHI AG, an
Austrian stock corporation ("Parent"), to purchase, through an indirect,
wholly-owned subsidiary, Heat Acquisition Corp., a Delaware corporation
("Purchaser" and together with Parent, the "Bidder"), all of the outstanding
Shares at a price per Share of $13.00, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated July 16, 1999 (the "Offer to Purchase") and in the related
Letter of Transmittal (together with the Offer to Purchase, the "Offer"). The
Schedule 14D-1 was filed after the Bidder first publicly disclosed on July 12,
1999 its intention to commence the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 12, 1999 (the "Merger Agreement"), by and among the Company,
Purchaser and Parent. The Merger Agreement provides, among other things, that
as soon as practicable after the satisfaction or waiver of the conditions set
forth in the Merger Agreement, following the purchase of Shares pursuant to the
Offer, Purchaser will be merged with and into the Company (the "Merger"), and
each issued and outstanding Share (other than Shares owned by the Company as
treasury stock or Shares owned by Purchaser, Parent or any other subsidiary of
Parent ("Ineligible Shares") or Shares that are held by stockholders exercising
their appraisal rights ("Dissenting Stockholders") pursuant to Section 262 of
the Delaware General Corporation Law (the "DGCL")) will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive, without interest, an amount in cash equal to the
Offer Price or such greater amount which may be paid pursuant to the Offer (the
"Merger Consideration"). As a result of the Merger, the Company will continue
as the surviving corporation (the "Surviving Corporation") and will become a
wholly-owned indirect subsidiary of Parent.
The Offer to Purchase states that the principal executive offices of
Purchaser are located at 500 Halle Building, 1228 Euclid Avenue, Cleveland,
Ohio 44115-1809 and the principal executive offices of Parent are located at
Mommsengasse 35, A-1040 Vienna, Austria 43-1-50213-123.
Item 3. Identity and Background.
(a) The name and business address of the Company, which is the person filing
this Schedule 14D-9, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the best knowledge of the
Company, there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company's executive officers, directors
or affiliates or (ii) Purchaser or Parent or their respective executive
officers, directors or affiliates.
Special Committee
Following the election of Mr. Ronald LaBow, Chairman of WHX Corporation
("WHX"), to the Board of Directors of the Company (the "Board") at the 1999
annual meeting of the Company's stockholders, a special committee (the "Special
Committee") was established to, among other things, evaluate the Offer, the
Merger and the terms of the Merger Agreement in light of the fact that WHX, at
the time, had outstanding a
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competing unsolicited tender offer for the Shares (the "WHX Offer"). The
Special Committee consisted of four Board members, David H. Blake, Richard W.
Vieser, Rawles Fulgham and Graham L. Adelman. The WHX Offer, which was first
publicly announced on December 15, 1998, had been extended by WHX on June 25,
1999 until July 13, 1999 but was not extended after such date. On July 14,
1999, WHX issued a press release announcing the termination of the WHX Offer.
Though the WHX Offer has terminated, Ronald LaBow will remain on the Board.
ARRANGEMENTS WITH PURCHASER, PARENT OR THEIR
RESPECTIVE AFFILIATES
Merger Agreement
The Merger Agreement is summarized in the Offer to Purchase under the
caption "Purpose of the Offer and the Merger; Plans for the Company; and the
Merger Agreement." The Merger Agreement is filed as Exhibit 1 hereto and is
incorporated herein by reference.
ARRANGEMENTS WITH EXECUTIVE OFFICERS,
DIRECTORS AND AFFILIATES OF THE COMPANY
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" and "Executive
Compensation and Other Information" in the Company's Proxy Statement for the
Annual Meeting of Stockholders held on June 7, 1999 (the "Proxy Statement"). A
copy of the relevant portions of the Proxy Statement is filed as Exhibit 2
hereto and is incorporated herein by reference.
On June 6, 1999, the Board approved an amendment to the change in control
severance agreements that are described in the disclosure contained in the
portions of the Proxy Statement filed as Exhibit 2 hereto. The amendment
provides that if the Company has entered into an agreement and the consummation
of the transactions contemplated by such agreement would result in a "Change in
Control," the notice set forth in Paragraph 3 of the severance agreements may
not be given until the earlier of the consummation of such transactions and the
date such agreement is terminated.
The foregoing description does not purport to be complete and is qualified
in its entirety by reference to the complete text of the form of amendment
approved by the Board on June 6, 1999, a copy of which is filed as Exhibit 3
hereto and is incorporated herein by reference.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Special Committee and the Board of Directors
After numerous meetings of the Board at which the Board considered the
Company's financial alternatives, including a possible business combination
with Parent, and following the contacts and negotiations between Parent and the
Company more fully set forth in the Offer to Purchase under the heading
"Background of the Offer; Contacts with the Company," the Special Committee
convened on July 12, 1999 to evaluate the terms of the Merger Agreement, the
transactions contemplated thereby, including the Offer and the Merger, and
other matters, including presentations by the Company's legal and financial
advisors. At a subsequent meeting of the Board held on July 12, 1999, the
Special Committee delivered its recommendation to the Board that the Board
authorize, approve, adopt and declare advisable the Merger Agreement and the
transactions contemplated thereby.
At the July 12, 1999 meeting, the Board (with director Ronald LaBow
abstaining), after receiving advice from its management and professional
advisors, (i) determined that the Merger Agreement and the transaction
contemplated thereby are fair to and in the best interests of the Company and
the Company's stockholders,(ii) authorized, approved, adopted and declared
advisable the Merger Agreement and the transactions contemplated thereby and
(iii) resolved to recommend that the Company's stockholders accept the Offer
and tender their Shares to Purchaser pursuant to the Offer and approve and
adopt the Merger Agreement.
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THE BOARD RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS TENDER THEIR SHARES
TO PURCHASER PURSUANT TO THE OFFER.
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
August 12, 1999, unless Purchaser extends the period of time for which the
Offer is open. A copy of the letter to stockholders communicating the Board's
recommendation and the text of the press release announcing such recommendation
are filed as Exhibits 4 and 5 hereto, respectively, and are incorporated herein
by reference.
(b) Reasons for the Company Board's Recommendation
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the Board of
Directors of the Company considered a number of factors, including but not
limited to the following:
1. The Board's knowledge of the business, financial condition,
prospects, current business strategy of the Company, the nature of the
markets in which the Company operates, the Company's position in such
markets, and the efforts by the Company's management, with the advice and
assistance of its legal and financial advisors, to explore other possible
transactions involving the Company;
2. The presentations and views expressed at a number of meetings of the
Board of Directors of the Company held on or prior to July 12, 1999
regarding, among other things: (a) management's view with respect to the
financial condition, results of operations, cash flows, business and
prospects of the Company, including the prospects of the Company if it were
to remain independent and the strategic alternatives believed to be
available to the Company; (b) the WHX Offer and discussions held with other
parties concerning a possible sale of the Company; and (c) the
recommendation of the Offer and the Merger by the management of the
Company;
3. The oral and written presentations and analysis of each of
Wasserstein Perella & Co., Inc. ("Wasserstein Perella") and J.P. Morgan
Securities Inc. ("J.P. Morgan") at the meeting of the Special Committee
held on July 12, 1999 and the fairness opinions of each of Wasserstein
Perella and J.P. Morgan, to the effect that, as of the date of such
opinions and based upon and subject to the matters stated in such opinions,
the $13.00 per Share to be offered to the stockholders of the Company
(other than holders of Ineligible Shares) pursuant to Offer and the Merger
is fair, from a financial point of view, to such stockholders. The full
text of the opinions of Wasserstein Perella and J.P. Morgan, each dated as
of July 12, 1999, which sets forth the assumptions made, matters considered
and limitations on the review undertaken by each of Wasserstein Perella and
J.P. Morgan are attached hereto as Schedules II and III, respectively, and
are filed as Exhibits 6 and 7, respectively, and are incorporated herein by
reference;
4. The fact that Parent's proposal contemplating the Offer and the
Merger resulted from an active solicitation by Wasserstein Perella and J.P.
Morgan, on behalf of the Company, of bids from a number of prospective
purchasers with respect to an acquisition of the Company (the
"Solicitation");
5. The history of the Company's discussions with other parties thought
to be the most likely candidates to have an interest in acquiring the
Company, including without limitation, the ample opportunity provided to
other parties, pursuant to the Solicitation and otherwise, to submit a
superior proposal to the Company, noting that the Company has been "in
play" since the WHX Offer was publicly announced on December 15, 1998 and
that the $13.00 price at which the Company and Parent were negotiating was
announced on June 7, 1999, almost six weeks prior to the July 12, 1999
meeting of the Board;
6. The fact that the Offer Price and the Merger Consideration represent
a premium over the price per Share offered by WHX pursuant to the WHX
Offer;
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7. The current and historical market prices and trading volumes for the
Shares, including the relationship of the Offer Price and the Merger
Consideration to the likely range of prices within which the Shares would
trade in the absence of a possible acquisition transaction;
8. That the Offer and the Merger provide for a prompt Offer for all
Shares, to be followed by the Merger for the same consideration, thereby
enabling all of the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares;
9. The fact that pursuant to the Merger Agreement, the Board has the
right, prior to payment for the Shares pursuant to the Offer, to (i)
provide information in response to a request by a person who has made an
unsolicited bona fide written Acquisition Proposal (as defined in the
Merger Agreement) if the Board receives from such person an executed
confidentiality agreement with customary terms and (ii) engage in
negotiations or discussions with any person with any person who has made
such unsolicited Acquisition Proposal, in each case, if the Board
determines in good faith, after consultation with outside legal counsel,
that such action is necessary in order for the Board to comply with its
fiduciary duties under applicable law, and (with respect to clause (ii))
the Board determines in good faith (based on the advice of its financial
advisors) that such Acquisition Proposal would, if consummated, result in a
more favorable transaction than the Offer and the Merger;
10. The fact that, pursuant to the Merger Agreement, the Board has the
right to terminate the Merger Agreement if, prior to the purchase of
Shares, a third party shall have made an Acquisition Proposal that the
Company Board determines in good faith, after consultation with its
financial advisors, is a Superior Proposal upon five business days' notice
thereof and payment to Parent of either a $5.0 or $10.0 million termination
fee, depending upon certain circumstances (and Parent's actual, documented
and reasonable out-of-pocket expenses of up to $1.5 million plus after
Parent has entered into one or more definitive agreements with respect to
the Financing (as defined in the Merger Agreement), actual documented and
reasonable out-of-pocket expenses of Parent not in excess of $1.5 million
relating to or incurred in connection with the Financing); and
11. The fact that, pursuant to the Merger Agreement, unless the
Financing Condition (as defined in the Merger Agreement) is irrevocably
waived in writing by Parent prior to July 30, 1999, Parent will pay the
Company $5.0 million. The Company will also have the right to terminate the
Merger Agreement if Parent has not irrevocably waived in writing the
Financing Condition prior to July 30, 1999, unless Parent notifies the
Company prior to July 30, 1999 that Parent has determined to extend the
termination of the Merger Agreement until October 31, 1999, in which case
Parent will pay the Company an additional $10.0 million, unless the
Financing Condition is irrevocably waived by Parent prior to such
termination by the Company or the Net Debt (as defined in the Merger
Agreement) of the Company as of October 31, 1999 is greater than $250
million.
The foregoing discussion of information and factors considered by the Board
is not intended to be exhaustive. In view of the variety of factors considered
in connection with its evaluation of the Offer and the Merger, the Board did
not find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendations. In addition, individual members of the Board may have given
different weights to different factors.
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 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 retained Wasserstein Perella to assist the
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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
portion 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 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 Securities Inc.
Pursuant to a letter agreement, dated December 14, 1998 (the "J.P. Morgan
Letter Agreement"), the Company retained J.P. Morgan to act as the Company's
financial advisor with respect to considering the
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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") based
on the value of such transaction but 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")
based on the value of such transaction but 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, consolidation, 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 the
Transaction Fee, as the case may be.
(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.
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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.
(b) Except as described in the following sentence, to the best of the
Company's knowledge, all of the Company's executive officers, directors,
affiliates or subsidiaries presently intend to tender to the Bidder any Shares
which are held of record or beneficially owned by such persons, pursuant to the
Offer (other than Shares issuable upon exercise of Options and Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended). Director Ronald LaBow informed the Company on July 14, 1999 that he
and his affiliates have not yet made a determination as to whether to tender
their Shares, sell such Shares in the open market or otherwise hold such
Shares, and reserve all rights with respect to the foregoing.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) 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.
The Company is in discussions with a number of parties concerning the
potential sale of the assets of the Jeffrey Division (Woodruff, South Carolina)
of Global Processing Systems, Inc., a subsidiary of the Company.
(b) Except as described in Item 3(b) and Item 4 above and Item 8 below,
there are no transactions, board resolutions, agreements in principle or signed
contracts in response to the Offer which relate or would result in one or more
of the matters referred to in paragraph (a) of this Item 7.
Item 8. Additional Information to be Furnished.
Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal, filed as Exhibit 8 hereto, and each is incorporated herein by
reference.
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% 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% 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
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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.
On February 9, 1999, the Company amended its Rights Agreement by adoption of
the Fourth Amendment to the Rights Agreement, dated as of February 9, 1999 (the
"Fourth Amendment"). The Fourth Amendment amended various provisions of the
Rights Agreement to, among other things, eliminate references to Continuing
Directors. The Fourth Amendment was adopted by the Company in light of a
decision by the Delaware Supreme Court in a case unrelated to the Company with
respect to the validity of "Continuing Director" provisions in shareholder
rights plans.
On June 6, 1999, the Company amended the Rights Agreement by adoption of the
Fifth Amendment to the Rights Agreement, dated as of June 6, 1999 (the "Fifth
Amendment"). The Fifth Amendment amended various provisions of the Rights
Agreement to, among other things, revise the definition of "Stock Acquisition
Date" to mean the earlier of (i) the first date on which there is a public
announcement by the Company that a person has become an Acquiring Person or
(ii) the first time a person who has made a tender or exchange offer for 15% or
more of the outstanding Shares shall become an Acquiring Person as a result of
the purchase of Shares pursuant to such tender or exchange offer or at any time
during the 60 day period after the termination or expiration thereof.
In connection with the Merger Agreement, the Board approved the Sixth
Amendment to the Rights Agreement, dated as of July 9, 1999 (the "Sixth
Amendment") which provides that (i) neither Parent nor Purchaser, nor any of
their respective affiliates or associates, shall be deemed to be an Acquiring
Person as a result of the transactions contemplated by the Merger Agreement
being approved or becoming effective and (ii) a Distribution Date shall not
occur by reason of the approval or execution of the Merger Agreement or the
consummation of the transactions contemplated by the Merger Agreement.
Amendment No. 6 further provides that if the Merger Agreement is terminated for
any reason in accordance with its terms or otherwise, (a) the exclusion of
Parent and Purchaser from the designation as an Acquiring Person and (b) the
preclusion of the transactions contemplated by the Merger Agreement from
causing the occurrence of a Distribution Date shall cease to be effective as of
the date of such termination.
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, the Company's Form 8-A/A, dated October 5, 1998, the
Company's Form 8-A/A, dated February 17, 1999 and the Company's Form 8-A/A,
dated June 7, 1999 and the Company's Form 8-A/A, dated July 12, 1999, each as
filed with the Securities and Exchange Commission.
Information Statement
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Parent, pursuant to the terms of
the Merger Agreement, of certain persons to be appointed to the Board other
than at a meeting of the company's stockholders.
Item 9. Material to be Filed as Exhibits.
<TABLE>
<C> <S>
Exhibit 1 --Agreement and Plan of Merger, dated as of July 12, 1999, by and
among Global Industrial Technologies, Inc., RHI AG and Heat
Acquisition Corp.
Exhibit 2 --Excerpts from the Company's Proxy Statement for the Annual Meeting
of Stockholders held on June 7, 1999.
Exhibit 3 --Form of Amendment to severance agreements approved by the Board of
Directors of the Company on June 6, 1999.
</TABLE>
8
<PAGE>
<TABLE>
<C> <S>
Exhibit 4 --Letter to Stockholders of the Company, dated July 16, 1999.*
Exhibit 5 --Text of Press Release, dated July 12, 1999.
Exhibit 6 --Opinion of Wasserstein Perella & Co., Inc., dated as of July 12,
1999.*
Exhibit 7 --Opinion of J.P. Morgan Securities Inc., dated as of July 12,
1999.*
Exhibit 8 --Offer to Purchase dated July 16, 1999 and related Letter of
Transmittal.+
</TABLE>
This document and the exhibits attached hereto may contain certain
statements that are not strictly historical and are considered "forward-
looking" statements. 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. The safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 with respect to forward-looking statements are
not available to statements made in connection with a tender offer.
- --------
* Included in copies mailed to stockholders of the Company.
+ Filed as an exhibit to RHI AG's and Heat Acquisition Corp.'s Tender Offer
Statement on Schedule 14D-1 dated July 16, 1999 and incorporated herein by
reference.
9
<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.
Dated: July 16, 1999
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
/s/ Jeanette H. Quay
By: _________________________________
Name: Jeanette H. Quay
Title: Vice President-General
Counsel and Secretary
10
<PAGE>
SCHEDULE I
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
2121 SAN JACINTO STREET, SUITE 2500
DALLAS, TEXAS 75201
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
General
This Information Statement is being mailed on or about July 16, 1999 as part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Global Industrial Technologies, Inc. (the "Company"). Capitalized
terms used herein and not otherwise defined shall have the meaning set forth in
the Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated (the "Parent Designees") by
RHI AG ("Parent") to the Company's Board of Directors (the "Board"). Pursuant
to the terms of the Merger Agreement, the Company will take all actions
necessary to cause the Parent Designees to become directors of the Company so
that the total number of such persons equals the product of the total number of
directors on the Board multiplied by the percentage that the aggregate number
of Shares beneficially owned by Parent, Purchaser or any of their affiliates
bears to the number of Shares then outstanding. Notwithstanding the foregoing,
until the Effective Time of the Merger, the Board will have at least two
directors who were directors on the date of the Merger Agreement and who are
not employees of the Company or affiliated with Parent as members of the Board.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action in connection with
this Information Statement.
The Offer commenced on July 16, 1999 and is scheduled to expire at 12:00
midnight New York City time, on August 12, 1999 unless extended upon the terms
set forth in the Offer to Purchase.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares constitute the only class of voting securities of the Company
outstanding. Each Share has one vote. As of July 13, 1999, there were
22,412,961 Shares outstanding. The Board currently consists of five members
with no vacancies. Each director holds office until such director's successor
is elected and qualified or until such director's earlier resignation or
removal.
The Board is classified into three classes, with one class standing for
election at each annual meeting of stockholders. Directors in each class serve
for a term of three years and until their successors are elected and qualified
or until their earlier resignation or removal. The Amended and Restated
Certificate of Incorporation of the Company provides that there shall be not
less than three nor more than fifteen directors and that the exact number may
be fixed from time to time by resolution of the Company's Board of Directors
approved by a majority of the entire Board.
DESIGNATION OF DIRECTORS
The Merger Agreement provides that, promptly upon the purchase of and
payment for any Shares by Parent or any of its subsidiaries pursuant to the
Offer, the Company will take all actions necessary to cause the Parent
Designees to become directors of the Company so that the total number of such
persons equals the
Schedule I-1
<PAGE>
product of the total number of directors on the Board multiplied by the
percentage that the aggregate number of Shares beneficially owned by Parent,
Purchaser or any of their affiliates bears to the number of Shares then
outstanding. Notwithstanding the foregoing, the Merger Agreement provides that,
following the election of the Parent Designees in accordance with the foregoing
and prior to the Effective Time, any amendment or termination of the Merger
Agreement by the Company, any amendment of the Certificate of Incorporation or
Bylaws of the Company, any consent by the Company to any extension of the time
for performance of any of the obligations or other acts of Parent or Purchaser
or any waiver by the Company of compliance with any of the covenants or
conditions contained in the Merger Agreement for the benefit of the Company or
any other rights of the Company under the Merger Agreement, will require the
approval of a majority of those directors of the Company then in office who are
neither affiliated with Parent nor employees of the Company.
It is expected that the Parent Designees will assume office promptly
following the purchase by the Purchaser of a majority of the outstanding shares
of Common Stock on a fully diluted basis pursuant to the terms of the Offer.
Proposed Directors
The following table sets forth (i) the name, current business or residence
address, citizenship and present principal occupation or employment and (ii)
material occupations, positions, offices or employments and business addresses
thereof for the past five years, in each case of each proposed director
designated by Parent to serve as directors on the Board following the Offer and
Merger.
Except as otherwise indicated, each occupation set forth opposite a person's
name refers to employment with Parent. No proposed director beneficially owns
any material amount of outstanding Shares.
Schedule I-2
<PAGE>
PERSONS WHO MAY BE DESIGNATED BY PARENT TO SERVE AS DIRECTORS ON THE COMPANY'
BOARD AFTER THE OFFER AND MERGER.
<TABLE>
<CAPTION>
AGE PRESENT PRINCIPAL
AS OF OCCUPATION OR
NAME AND ADDRESS July 1, 1999 CITIZENSHIP EMPLOYMENT HISTORY
- ------------------- ------------ ----------- ------------------------------------
<S> <C> <C> <C>
Georg Obermeier 58 Germany Chairman of the Management Board
RHI AG and Chief Executive Officer since
Mommenpasse 35 July 1999; Chairman of the
A-1040 Vienna Management Board of VIAG AG
from August 1995--June 1998;
Member of the Management Board
of VIAG AG since November 1989
--July 1995.
Jakob Mosser 38 Austria Member of the Management Board of
1228 Euclid Avenue Parent since January 1991; Chief
Cleveland, OH Executive Officer and President of
44115 NARCO since January 1997; Director
of Research and Development of
Veitsch-Radex until December 1996.
John W. Stratman 40 U.S.A. General Counsel of NARCO since
1228 Euclid Avenue November 1997; Associate General
Cleveland, OH Counsel of Wheeling-Pittsburgh Steel
44115 Corp. from July 1989--October 1997.
Frank Guise 53 U.S.A. Vice President of NARCO
1228 Euclid Avenue since September 1975.
Cleveland, OH
44115
John L. Quinlan 44 U.S.A. Chief Financial Officer and
1228 Euclid Ave. Vice President--Finance of NARCO
Cleveland, OH since March 1997; Director
44115 --Managerial Accounting of
Washington Steel Corp.
from March 1987--February 1997.
Larry D. Dilley 50 U.S.A. Vice President--Operations and
1228 Euclid Avenue Materials of NARCO since July 1994.
Cleveland, OH
44115
James Joseph Uchno 49 U.S.A. Vice President--Technology and
1228 Euclid Avenue Marketing of NARCO since 1974.
Cleveland, OH
44115
</TABLE>
Schedule I-3
<PAGE>
Biographical Information of Current Directors of the Company
The following is a brief description of the business experience of each
director of the Company for at least the past five years:
<TABLE>
<CAPTION>
Business Experience During Year First
Past 5 Years and Elected
Name Age Other Information Director
----------------------------- --- ------------------------------- ----------
<C> <C> <S> <C>
Directors--Term Expiring 2000
Rawles Fulgham............... 71 Chairman of the Board and Chief 1992
Executive 1992 Officer, Global
Industrial Technologies, Inc.,
since 1998; Senior Advisor,
Merrill Lynch & Co. Inc., since
1989; Advisor to certain
Committees of the Board of
Directors of Dorchester Hugoton
Limited, since 1995; Executive
Director, Merrill Lynch Private
Capital, Inc., 1982-89.
Director: BancTec, Inc.;
Dresser Industries, Inc. (prior
to its October 1998 merger with
Halliburton Company);
NCH Corporation.
Graham L. Adelman............ 49 President and Chief Operating 1998
Officer, Global Industrial
Technologies, Inc., since 1998;
Senior Vice President and
General Counsel, 1995-98, and
Secretary, 1996-98, Global
Industrial Technologies, Inc.;
Senior Vice President, General
Counsel and Secretary, The
Western Company of North
America, 1990-95.
Directors--Term Expiring 2001
David H. Blake............... 58 Dean, Graduate School of 1992
Management, University of
California, Irvine, since 1997;
Dean, Edwin L. Cox School of
Business, Southern Methodist
University, 1990-1996; Dean and
Professor, Graduate School of
Management, Rutgers--The State
University of New Jersey, 1983-
89. Director: Procom
Technologies, Inc.
Richard W. Vieser............ 71 Chairman of the Board, 1992
President and Chief Executive
Officer, FL Industries, Inc.,
electrical equipment and high
efficiency industrial and
commercial heating and cooling
equipment, 1985-89; Chairman of
the Board, President and Chief
Executive Officer, Lear
Siegler, Inc., 1987-89;
Chairman of the Board and Chief
Executive Officer, FL Aerospace
Corp., 1986-89. Director:
Ceridian Corporation (formerly
Control Data Corporation);
Harvard Industries, Inc.;
International Wire Holding
Company; Sybron International
Corporation; Viasystems Group
Inc.; Varian Associates, Inc.
Director--Term Expiring 2002
Ronald LaBow................. 64 Chairman of the Board of WHX 1999
Corporation; President,
Stonehill Investment Corp.,
since February 1990. Director:
Regency Equities Corp.
</TABLE>
Schedule I-4
<PAGE>
Security Ownership of Management
The following table sets forth certain information as to the Common Stock
beneficially owned as of July 13, 1999 by (i) each person who is a director or
an executive officer named in the Summary Compensation Table (see below), and
(ii) all current directors and executive officers as a group. Except as
otherwise indicated, each individual named has sole investment and voting power
with respect to the securities shown. All ownership information is as of July
13, 1999.
<TABLE>
<CAPTION>
Shares Owned Approximate
Directly or Stock Percent
Name Indirectly(/1/) Units(/2/) of Class
- --------------------------------------- --------------- ---------- -----------
<S> <C> <C> <C>
Rawles Fulgham......................... 152,000 0 0.68%
David H. Blake......................... 47,000 0 0.21
Ronald LaBow(/3/)...................... 0 0 .00
Richard W. Vieser...................... 81,623 0 0.36
Graham L. Adelman...................... 167,361 9,433 0.79
George W. Pasley....................... 86,206 1,863 0.39
Jeanette H. Quay....................... 28,288 3,161 0.14
Donna A. Reeves........................ 45,333 1,326 0.21
A. L. Williams......................... 56,407 0 0.25
James B. Alleman....................... 79,323 0 0.35
All current directors as of July 13,
1999 and executive officers as a
group................................. 743,541 15,783 3.39
</TABLE>
- --------
(1) Includes the following shares subject to options granted under various
incentive compensation plans which are exercisable within sixty days:
46,000 shares for each of Messrs. Blake and Vieser; 146,000 shares for Mr.
Fulgham; 136,725 shares for Mr. Adelman; 85,250 shares for Mr. Pasley;
27,891 shares for Ms. Quay; 42,400 shares for Ms. Reeves; 56,250 shares for
Mr. Williams; and 79,000 shares for Mr. Alleman; and 665,516 shares for all
current directors and executive officers as a group. 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.
(2) Includes shares of Common Stock which may be distributable after
termination of employment to persons 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."
(3) Does not include Shares held by WHX Corporation of which Mr. LaBow is the
Chairman. Please see the information below under the heading "Security
Ownership of Certain Beneficial Holders" for information concerning WHX
Corporation's ownership of Shares.
Schedule I-5
<PAGE>
Security Ownership of Certain Beneficial Holders
The following table shows, as of July 13, 1999, certain information
regarding those persons known to the Company to have been the owners on such
date of more than 5% of the Common Stock then outstanding.
<TABLE>
<CAPTION>
Number of
Shares of
Common Approximate
Name and Address of Stock Percent
Beneficial Owner Owned of Class
- ---------------------------------------------------- --------- -----------
<S> <C> <C>
WHX Corporation..................................... 2,173,800(/1/) 9.7%
Wheeling-Pittsburgh
Capital Corp.
110 East 59th Street
New York, New York 10022
Franklin Resources, Inc. ........................... 1,715,900(/2/) 7.6%
One Parker Plaza
Ft. Lee, New Jersey 07724
Seneca Capital, L.P. ............................... 1,131,900(/3/) 5.1%
830 Third Avenue, 14th Floor
New York, NY 10022
</TABLE>
- --------
(1) Based upon an amendment dated October 5, 1998, to Schedule 13D filed with
the Securities and Exchange Commission.
(2) Based upon a Form 13G filed with the Securities and Exchange Commission on
or about December 31, 1998.
(3) Based upon a Form 13G filed with the Securities and Exchange Commission on
or about June 4, 1999.
Schedule I-6
<PAGE>
BOARD MEETINGS AND COMMITTEES; COMPENSATION OF DIRECTORS
The Board of Directors has standing Audit and Finance, Executive
Compensation, and Executive Committees and a Committee on Directors. During the
period from November 1, 1997 to December 31, 1997 (the "Transition Period"),
there was one meeting of the Board of Directors; during the 12 months ended
December 31, 1998, there were 18 meetings of the Board, seven of which were
attended by telephone.
All Directors attended 75% or more of the aggregate meetings of the Board
and of the Board Committees on which they serve.
The Audit and Finance Committee consists of Messrs. Casey, Chairman;
Fulgham; Blake; and Vieser. The Committee, which met once during the Transition
Period and twice during the 12 months ended December 31, 1998, reviews the
scope and results of the annual audit activities of the independent accountant
and internal auditors. The Committee also recommends the appointment of the
independent accountant, whose duty it is to audit the books and accounts of the
Company and its subsidiaries, and reviews its services.
The Executive Compensation Committee is composed of Messrs. Vieser,
Chairman; Blake; and Casey. The Committee, which met once during the Transition
Period and three times during the 12 months ended December 31, 1998,
administers executive compensation plans, reviews the performance of the Chief
Executive Officer and key employees, and acts in an advisory role on employee
compensation.
The Executive Committee, consisting of Messrs. Fulgham and Vieser, exercises
limited powers on behalf of the Board during intervals between meetings of the
Board. There were no Executive Committee meetings during the Transition Period
or during the 12 months ended December 31, 1998.
The Committee on Directors develops selection criteria and recommends
nominees for election as Directors, including nominees recommended by
shareholders. The Committee, which met once during the 12 months ended December
31, 1998, serves in an advisory role on qualifications for the positions of
Chairman of the Board and Chief Executive Officer. The Committee is composed of
Messrs. Fulgham, Chairman; Blake; Casey; and Vieser.
A Director who is an employee of the Company receives no fees or
remuneration, as such, for services as a member of the Board or any Committee
of the Board. During fiscal 1998, each Director who was not an employee
received an annual retainer of $20,000 for Board membership, $2,500 for each
Committee membership, $1,000 for service as Chairman of a Committee, and $1,000
for each day on which one or more meetings of the Board or any Committee
thereof was attended. A fee of $350 was paid for Board or Committee meetings
attended by telephone. In addition, each non-employee Director may be paid a
fee of $1,000 for each day on which he is engaged in Company business at the
request of the Board or the Chairman of the Board, other than attendance at
meetings of the Board or any Committee.
Under the Global Industrial Technologies, Inc. Stock Option Plan for Non-
Employee Directors ("Directors Plan"), each calendar year each non-employee
Director may be granted, and each person who becomes a non-employee Director
shall be granted, a non-qualified option to purchase 5,000 shares at a price
equal to the fair market value of the shares on the day of grant. Options
granted under this plan become exercisable six months after the date of grant
and expire in ten years or, if earlier, five years following the death,
disability, and/or approved retirement of the Director. In February 1998 the
Company granted each non-employee Director an option to purchase 5,000 shares
upon such terms, exercisable at $15.53 per share. In addition to the above
grants, in May 1998 the Company granted each non-employee Director an option to
purchase 20,000 shares, exercisable at $17.13 per share. The average exercise
price of all options granted to non-employee directors under the Directors Plan
is $16.93. The closing price of the Common Stock on April 8, 1998, was $10.375.
Schedule I-7
<PAGE>
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, comprised solely of outside directors,
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 analyses 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 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 approved the Stock Ownership Requirements Policy in January
1994. This policy establishes for each officer and certain managers stock
ownership and retention levels which are stated as multiples of base salary.
The Stock Ownership Requirements Policy provides that at least 50% of any
annual incentive payment must be invested in Common Stock or credited in the
form of Stock Units under the Company's Deferred Compensation Plan until such
time as ownership requirements are satisfied. In addition, at least 25% of all
shares acquired upon exercise of stock options by these individuals must be
retained until such requirements have been met. Individuals must comply with
this policy until retirement or termination.
The required ownership level for the Chairman and Chief Executive Officer is
3.5 times annual base salary. Accordingly, Mr. Fulgham is required to acquire
and retain, until retirement or termination, ownership of Common Stock or Stock
Units with a market value equivalent to $1,750,000. Mr. Fulgham, who was
appointed Chairman and Chief Executive Officer on December 14, 1998, owns 6,000
shares of Common Stock. Other executive officers have ownership levels ranging
from 1.5 to 2.5 times annual base salaries, or a total of $3,672,500. As of
December 31, 1998, 26.4% of this requirement had been met, in the aggregate, by
executive officers other than Mr. Fulgham.
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 financial performance objectives by the Company and individual
performance objectives. Under the Division Executive Incentive Plan ("Division
Plan"), payments to officers who are also Division Presidents are based
primarily upon financial performance objectives for the Company's major
business units. Additionally, in connection with the acquisition in July 1998
of A. P. Green Industries, Inc. ("A. P. Green"), the Company adopted a
temporary bonus plan which provides incentives to key executives and other
employees to quickly maximize shareholder value through consolidation of the
refractories operations of A. P. Green and the Company, the results of which
will include substantial cost savings and manufacturing efficiencies ("Synergy
Bonus Plan"). The Company estimates that annual synergies realized by the end
of 1999 will exceed
Schedule I-8
<PAGE>
$30 million. Mr. Bravo, President of the Company's Refractory Products and
Minerals business, and other key executives and employees of the Company's
Harbison-Walker Refractories Company subsidiary are eligible to receive
incentive awards under the Synergy Bonus Plan during 1998 and 1999. No payments
were made from the Synergy Bonus Plan for 1998.
The Headquarters Plan and the Division Plan enable the Committee to provide
incentives for participants to contribute each year to growth in Company
earnings and other financial and non-financial goals. Pursuant to Board
authorization, under the Headquarters Plan, funds available for distribution
for 1998 could equal up to 4% of the Company's net-after-tax profit, adjusted
for unusual items. The financial performance objectives for the Headquarters
Plan and the Division Plan for 1998 were sales and earnings before interest,
taxes, depreciation, and amortization ("EBITDA"). For 1998 funds equal to 6% of
net-after-tax profits, adjusted for unusual items, were authorized for payments
under the Division Plan. Performance objectives may be adjusted by the
Committee to reflect unanticipated, significant changes in the Company's
businesses during a plan year. For 1998 the minimum financial objectives for
the Headquarters Plan and the Division Plan were not achieved, and no incentive
payments were made to the executive officers under either plan.
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. 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 United States
manufacturing corporations, including approximately one-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 annually determines 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 and to internal equity.
In 1998 officers received salary increases averaging 6.3%, continuing the
Company's competitive position in the employment market. Three officers
received additional promotional salary increases averaging 20%, and one officer
received a special one-time bonus award of $50,000 relating to the favorable
resolution of certain claims against the Company.
In addition to ten executive officers, 72 other employees were eligible to
participate in the annual incentive plans and the Synergy Bonus Plan during
1998. Amounts earned by participants in the Division Plan for 1998, other than
eligible officers, were related to the extent to which financial and non-
financial criteria for division performance established by the Committee were
achieved.
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 actions which will result in the realization by shareholders of an
attractive return on their Common Stock investments. 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. As a result of its Stock Ownership Requirements
Policy, the Committee generally grants options to executive officers in an
amount which exceeds the average level of grants made by other companies of
similar size. However, reduced grants are made from time to time in the
discretion of the Committee.
Under the Stock Plan, on February 23, 1998, the Committee granted executive
officers options to purchase a total of 650,460 shares of Common Stock at
$15.5313 per share. These one-time grants were equivalent to the appropriate
number of shares for which options would normally be granted to each executive
officer over a
Schedule I-9
<PAGE>
three-year period. They vest on the earlier of (i) five years from the date of
grant or (ii) 50% at such time as the average closing price of the Company's
Common Stock equals or exceeds 150% of the grant price for any 21-consecutive
trading day period and the remaining 50% at such time as the price equals or
exceeds 200% of the grant price for any 21-consecutive trading day period.
Due to the depressed price of the Common Stock in the third quarter, the
Company offered all employees an opportunity in September 1998 to exchange
outstanding stock option agreements ("old options") for reissued options for a
reduced number of shares, exercisable at the average market price on September
18, 1998, or $6.91 ("new options"). In exchange for each new option, employees
tendered for cancellation (i) old options granted prior to January 1, 1998, on
a two-for-one share basis; and (ii) old options granted after January 1, 1998,
on a one and one-half-for-one share basis. Additional options were granted at
the same time to certain executive officers.
In total, options to purchase 950,079 shares of Common Stock were granted
under the Stock Plan in September, and previously issued options to purchase
1,083,960 shares of Common Stock were cancelled. The exercise price of the
cancelled options ranged from to $11.00 to $20.00 per share. The new option
grants have the following terms: (1) ten-year expiration date; (2) exercise
price equal to the average of the high and low market prices on grant date, or
$6.91; and (3) vesting on the earlier of (i) one year (for cancelled, non-
performance options which had been granted to non-executive officers) or 5
years (for cancelled performance options which had been granted to executive
officers) from date of grant or (ii) 50% at such time as the average closing
price of the Company's Common Stock equals or exceeds $10.36 per share for any
21-consecutive trading day period, and (iii) the remaining 50% at such time as
the price equals or exceeds $13.81. Vesting of new options was accelerated in
accordance with their terms upon commencement of the WHX Offer.
The following table reflects the cancellation of old options and replacement
with new options described above for named executive officers:
<TABLE>
<CAPTION>
Length of
Number Market Original Option
of Securities Price of Exercise Term Remaining
Underlying Stock at Price at at Date of
Options/SAR's time of Time of Repricing or
Repriced or Repricing or Repricing or New Amendment
Date Amended(#)(1) Amendment(3) Amendment(3) Exercise Price (years)(3)
Name ------- ------------- ------------ ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rawles Fulgham.......... 9/18/98 -- -- -- -- --
Graham L. Adelman....... 9/18/98 97,200 $6,906.25 $16.19 $6,906.25 9.16
Juan M. Bravo........... 9/18/98 129,000 6,906.25 16.20 6,906.25 8.99
George W. Pasley........ 9/18/98 75,500 6,906.25 16.60 6,906.25 9.10
Jeanette H. Quay........ 9/18/98 10,300 6,906.25 17.41 6,906.25 8.70
J.L. Jackson............ 9/18/98 -- -- -- -- --
</TABLE>
(1) Sum of all securities underlying options reissued as follows: (i) 2 old-
for-1 new formula used for options granted prior to 1998; and (ii) 1.5 old-
to-1 new formula used for options granted during 1998.
(2)Average of the high and low market price of Common Stock on cancellation
date.
(3)Weighted average.
Chief Executive Officer Compensation
Mr. Jackson, who served as Chairman and Chief Executive Officer and
President and Chief Operating Officer until July 1, 1998, retired on October
13, 1998, and did not receive a salary increase or any incentive payment for
fiscal 1998. Mr. Jackson did not receive retirement or severance enhancements,
and none of his stock options were cancelled and replaced.
Mr. Fulgham, who served as acting President and Chief Executive Officer from
July 1, 1998, to December 14, 1998, received $1,000 per day for his services.
Upon election as Chairman and Chief Executive Officer on December 14, 1998, the
Board established an annual base salary of $500,000 for his position and
granted Mr. Fulgham an option to purchase 200,000 shares of Common Stock at the
average of the high and low market
Schedule I-10
<PAGE>
price on that date, or $8.09. The option vests at the earlier of 5 years or 50%
when the market price exceeds the exercise price by 50%, and 100% when the
average market price exceeds the exercise price by 100%.
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 executive officers
to $1 million, unless specified conditions are met. Certain performance-based
compensation is not subject to the deduction limitation. The Company did not
have nondeductible compensation expense during the Transition Period and 1998
and is not expected to have such in 1999. The 1992 Stock Compensation Plan
limits the number of shares for which options may be granted in any year to a
participant in order to maximize under Section 162(m) the amount of
compensation expense that may be deductible to the Company.
Members of the Executive Compensation
Committee:
Richard W. Vieser, Chairman
David H. Blake
Samuel B. Casey, Jr.
The foregoing Report on Executive Officer Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation
There were no committee interlocks.
Schedule I-11
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table reflects the cash and non-cash compensation paid or
accrued for the Chief Executive Officer and named executive officers of the
Company for the years indicated.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------- -----------------------
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options/ Compensation
Position Year ($) (1) ($) ($) (2) SAR's (#) ($) (3)
- ------------------------ ---- -------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Rawles Fulgham.......... 1998 $221,310(4) $ 0 $ 0 200,000 $ 0
Chairman of the Board 1997 -- -- -- -- --
and 1996 -- -- -- -- --
Chief Executive Officer
Graham L. Adelman....... 1998 252,468 0 0 162,000 3,750
President and Chief 1997 220,834 20,000 6,665 9,400 3,625
Operating Officer 1996 200,000 82,400 29,333 13,500 5,603
and Director
Juan M. Bravo........... 1998 265,000 0 0 79,500 2,727
Vice President; 1997 240,000 30,500 10,880 10,000 2,520
President Harbison- 1996 235,000 160,000 53,023 24,000 10,380
Walker Refractories,
Inc.
George W. Pasley........ 1998 180,000 0 0 85,250 2,363
Vice President-- 1997 160,000 15,000 5,002 5,500 0
Communications 1996 53,333 10,500 3,729 15,500 693
Jeanette H. Quay........ 1998 144,152 50,000 0 50,000 3,563
Vice President--General 1997 130,000 16,351 4,998 0 2,940
Counsel and Secretary 1996 102,315 30,000 10,569 0 1,710
J.L. Jackson............ 1998 477,724 0 0 200,000 10,656
Retired Chairman and 1997 550,000 0 0 25,500 1,917
Chief Executive 1996 550,000 350,000 56,349 34,250 20,967
Officer, President and
Chief Operating Officer
</TABLE>
- --------
(1) Information provided for 1997 includes amounts paid during the Transition
Period as follows: Adelman, $37,500; Bravo, $40,000; Pasley, $26,667; Quay,
$22,000; and Jackson, $91,667.
(2) The amounts in this column represent discounts (75% of the average closing
price) given on stock units deemed purchased with incentive compensation
deferred under the Company's Deferred Compensation Plan. This column also
includes amounts paid to Mr. Bravo in 1996 and 1997 related to his
relocation from Mexico. Applicable regulations set certain reporting levels
for certain non-cash compensation.
(3) The amounts shown for 1998 include matching contributions made under the
Company's Deferred Savings Plan as follows: Mr. Adelman, $3,750; Mr. Bravo,
$2,727; Mr. Pasley, $2,363; Ms. Quay, $3,563; and Mr. Jackson, $2,042; and
payment of non-qualified pension benefits as follows: Mr. Jackson, $5,280.
No contributions or payments were made during the Transition Period. Prior
to 1997, this column reflected pension benefits on amounts deferred under
the Deferred Compensation Plan. The Deferred Compensation Plan was amended
in 1997 to eliminate pension benefit credits.
(4) Includes $44,400 paid to Mr. Fulgham as a non-employee Director prior to
his being elected Chairman of the Board and Chief Executive Officer.
Schedule I-12
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table summarizes options granted during the 12 months ended
December 31, 1998, and the potential value of shares subject to such options
upon their expiration in 2008. The Company granted no options during the
Transition Period.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Number of Percent of Total Assumed Annual Rate of
Securities Options/SARs Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (2)
Options/SARs Employees in Base Price Expiration ------------------------
Name Granted (#) Fiscal Year ($/sh) Date 5% 10%
- ------------------------ ------------ ---------------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Rawles Fulgham.......... 5,000 0.31% $15.53 2/23/08 $ 48,838 123,764
20,000 1.23 17.13 5/20/08 215,396 545,857
200,000 12.31 8.09 12/14/08 1,018,023 2,579,871
Graham L. Adelman....... 50,000 3.08 6.91 9/18/08 217,283 550,638
50,000(1) 3.08 6.91 9/18/08 217,283 550,638
50,550 3.11 8.90 12/14/08 283,056 717,319
Juan M. Bravo........... 60,000(1) 3.69 6.91 9/18/08 260,598 660,407
George W. Pasley........ 36,666(1) 2.26 6.91 9/18/08 159,252 403,575
Jeanette H. Quay........ 2,533(1) 0.16 6.91 9/18/08 11,008 27,895
44,217 2.72 8.90 12/14/08 247,594 627,452
J.L. Jackson............ 200,000 12.31 15.53 2/23/08 1,953,510 4,950,578
All Shareholders........ 22,108,853 10.69 148,600,484 376,582,802
</TABLE>
- --------
(1) Reflects options reissued in September 1998 on a 1.5-to-1 ratio on shares
granted earlier in 1998. Does not include grants made on a 2-to-1 ratio in
September 1998 in exchange for the cancellation of options issued prior to
1998, as follows: Mr. Adelman, 11,450 shares; Mr. Bravo, 19,500 shares; Mr.
Pasley, 10,250 shares; and Ms. Quay, 3,250 shares.
(2) 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, 1998, which then had a value of $10.69, assuming the same
rates of appreciation used to calculate the Potential Realizable Value of
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.
Schedule I-13
<PAGE>
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Value Table
The following table summarizes the value at December 31, 1998, of all shares
subject to options granted to the named executive officers of the Company to
the extent not then exercised. No options were exercised during the Transition
Period or the 12 months ending December 31, 1998, by any of the named executive
officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year at Fiscal Year-End
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (#) (#) (#) (#)
- ---------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Rawles Fulgham.............. 46,000 200,000 $ 0 $518,750
Graham L. Adelman........... 111,450 50,550 421,420 131,113
Juan M. Bravo............... 79,500 0 300,609 0
George W. Pasley............ 85,250 0 322,352 0
Jeanette H. Quay............ 5,783 44,217 21,867 114,688
J.L. Jackson................ 439,550 0 0 0
</TABLE>
The year-end value of the Common Stock was $10.6875.
Retirement Plans
The estimated total annual retirement benefits payable at age 65 under
pension plans in which Messrs. Fulgham, Adelman, Bravo, Pasley, and Jackson and
Ms. Quay participate are set forth below. Retirement benefits will not become
vested until the completion of a five-year vesting period, as follows: Mr.
Fulgham, 2003; Mr. Adelman, 2000; Mr. Bravo, 1999; Mr. Pasley, 2001; and Ms.
Quay, 2001. Mr. Jackson retired and began receiving pension benefits under the
plan in 1998.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------------------------------------
Remuneration 5 15 25 35
------------ ------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 150,000 $ 6,486 $ 20,624 $ 38,597 $ 56,568
200,000 13,986 44,291 82,263 120,235
400,000 28,986 91,625 169,597 247,569
600,000 43,986 138,958 256,930 374,902
800,000 58,986 186,291 344,263 502,235
1,000,000 73,986 233,625 431,597 629,569
1,200,000 88,986 280,958 518,930 756,902
</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 named individuals are
as follows: Mr. Fulgham, .04 years; Mr. Adelman, 3.44 years; Mr. Bravo, 3.00
years; Ms. Quay, 2.96 years; and Mr. Pasley, 2.33 years.
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 and Termination Arrangements
On July 10, 1998, following Mr. Jackson's notification to the Board of his
desire to terminate his employment with the Company by retiring and to resign
his positions as Chairman of the Board, Chief Executive Officer, President and
Chief Operating Officer, the Company entered into an agreement with him
Schedule I-14
<PAGE>
which provided, in part, that his termination as an employee would not occur
until October 13, 1998. Accordingly, through October 13, 1998, Mr. Jackson
continued to receive all compensation in the form of base pay and employee
benefits to which he was entitled on his resignation date. Mr. Jackson resigned
from the above-listed positions on July 10, 1998, and retired on October 13,
1998.
The Company has entered into change in control severance agreements with
certain executives of the Company. Generally, the form of severance agreement
(the "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 12-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 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 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 the executives become
subject to an excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended, the 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 Severance Agreement also provides for 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 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 purpose of the Severance Agreement, a "Change in Control" occurs (A)
when individuals who constituted the Board of Directors of the Company as of
the date of the applicable severance agreement (the "Incumbent Board") and
individuals whose election, or nomination for election by the shareholders 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 shareholders 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 severance agreements (in the general form of
the Severance Agreement) with each of Messrs. Fulgham, Adelman, Bravo, and two
other executive officers providing 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 severance agreements (in the general
form of the Severance Agreement) with each of Mr. Pasley, Ms. Quay, and two
other executive officers providing for a Period equal to 30 months, a
Multiplier equal to two and one-half (2.5), and an excise tax gross-up payment
described above. On June 6,
Schedule I-15
<PAGE>
1999, the Board approved an amendment to the change in control severance
agreements. The amendment provides that if the Company has entered into an
agreement and the consummation of the transactions contemplated by such
agreement would result in a "Change in Control," the notice set forth in
Paragraph 3 of the severance agreements may not be given until the earlier of
the consummation of such transactions and the date such agreement is
terminated.
Pursuant to the Company's 1992 Stock Compensation Plan, as amended, 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 shareholder approval, declare some or all outstanding
options to be immediately exercisable in full. Pursuant to the related forms of
stock option agreement, 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 WHX Offer,
the options granted pursuant to such agreements have become fully vested. The
change in control definition is the same as in the Severance Agreement (see
above), except that (a) the exception to the trigger for shareholder approval
of the merger is continuing shareholders owning 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 a 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.
Stock Price Performance Graph
Performance Graph
The graph set forth below compares, for the period October 31, 1993, through
December 31, 1998, the cumulative total returns for Global's Common Stock, the
Standard & Poor's SmallCap 600 Index, a New Peer Group comprised of Cooper
Industries, Inc., Ingersoll-Rand Company, Minerals Technologies Inc., and
Oglebay Norton Company, and the Old Peer Group comprised of Cooper Industries,
Inc., Harnischfeger Industries, Inc., Ingersoll-Rand Company, Minerals
Technologies Inc., and Oglebay Norton Company. As a result of strategic
decisions by the Company, two members of the Old Peer Group are no longer
appropriate: the Company (i) acquired A. P. Green Industries, Inc. in July 1998
and (ii) divested its surface mining equipment operations in August 1997,
thereby eliminating any similarities between the businesses of the Company and
Harnischfeger Industries, Inc. The graph assumes an investment on October 31,
1993, of $100 in each of the Company's Common Stock, the stocks comprising the
Standard & Poor's SmallCap 600 Index, and the common stocks of companies in the
New Peer Group and companies in the Old Peer Group, assuming that all paid
dividends were reinvested.
Schedule I-16
<PAGE>
Comparison of 62 Month Cumulative Total Return*
Among Global Industrial Technologies, Inc.,
The S & P Smallcap 600 Index,
A New Peer Group, And an Old Peer Group
[LINE GRAPH]
*$100 invested on 10/31/93 in stock or index, including reinvestment of
dividends.
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------
10/93 10/94 10/95 10/96 10/97 12/98
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC......... 100 99 136 148 135 85
NEW PEER GROUP............................... 100 86 86 102 138 150
OLD PEER GROUP............................... 100 87 90 109 141 138
S&P SMALLCAP 600............................. 100 97 117 141 186 194
</TABLE>
Schedule I-17
<PAGE>
SCHEDULE II
July 12, 1999
Board of Directors
Global Industrial Technologies, Inc.
2121 San Jacinto, Suite 2500
Dallas, TX 75201
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $0.25
per share (the "Shares") of Global Industrial Technologies, Inc. (the
"Company") of the consideration to be received by such holders pursuant to the
terms of the Agreement and Plan of Merger, dated as of July 12, 1999 (the
"Merger Agreement"), among the Company, RHI AG ("Parent"), and Heat Acquisition
Corp. ("Sub"). The Merger Agreement provides for, among other things, a cash
tender offer by Sub to acquire all of the outstanding Shares at a price of
$13.00 per Share (the "Tender Offer"), and for a subsequent merger of Sub with
and into the Company pursuant to which each outstanding Share (other than
Ineligible Shares and Dissenting Shares (each as defined in the Merger
Agreement)) will be converted into the right to receive $13.00 in cash (the
"Merger" and, together with the Tender Offer, the "Transaction"). The terms and
conditions of the Transaction are set forth in more detail in the Merger
Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, and for purposes hereof, we have assumed that the final form
of this document will not differ in any material respect from the draft
provided to us. We have also reviewed and analyzed certain publicly available
business and financial information relating to the Company for recent years and
interim periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared
by or on behalf of the Company and provided to us for purposes of our analysis,
and we have met with management of the Company to review and discuss such
information and, among other matters, the Company's business, operations,
assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the refractories industry specifically, and in other industries
generally, that we believe to be reasonably comparable to the Transaction or
otherwise relevant to our inquiry. We have also performed such other financial
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management. We express no
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the
Company, or for making or obtaining an independent valuation or appraisal of
the assets or liabilities of the Company, and no such independent valuation or
appraisal was provided to us. We also have assumed that the transactions
described in the Merger Agreement will be consummated without waiver or
modification of any of the material terms or conditions contained therein by
any party thereto. Our opinion is necessarily based on economic and market
conditions and other circumstances as they exist and can be evaluated by us as
of the date hereof.
Schedule II-1
<PAGE>
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Without limiting the foregoing, an affiliated investment fund
owns 35,000 shares of common stock of the Company.
We are acting as financial advisor to the Company in connection with the
proposed Transaction and will receive a fee for our services, a significant
portion of which is contingent upon the consummation of the Transaction. In
addition, we have performed various investment banking services for the Company
in the past, including acting as financial advisor to the Company in connection
with its acquisition of A. P. Green Industries, Inc. and its sale of APG Lime
Corp., for which we have received customary fees, and its sale of Ameri-Forge
Corporation, for which we will receive customary fees.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of the Company of the consideration to be received by such
shareholders pursuant to the Transaction, and we do not express any views on
any other terms of the Transaction. Specifically, our opinion does not address
the Company's underlying business decision to effect the transactions
contemplated by the Merger Agreement. Our opinion also does not address the
relative merits of the Transaction compared to any alternative transaction or
business strategy that may be available to the Company.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Transaction, and except
for inclusion in its entirety in any proxy statement required to be circulated
to shareholders of the Company relating to the Merger or tender offer
recommendation statement on Schedule 14D-9 from the Company to holders of
Shares relating to the Transaction, may not be quoted, referred to or
reproduced at any time or in any manner without our prior written consent. This
opinion does not constitute a recommendation to any shareholder with respect to
whether such holder should tender Shares pursuant to the Tender Offer or as to
how such holder should vote with respect to the Merger, and should not be
relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $13.00 per Share cash consideration to be received by the shareholders of
the Company (other than holders of Ineligible Shares or Dissenting Shares)
pursuant to the Tender Offer and the Merger is fair to such shareholders from a
financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
Schedule II-2
<PAGE>
SCHEDULE III
July 12, 1999
The Board of Directors
Global Industrial Technologies, Inc.
2121 San Jacinto Street, Suite 2500
Dallas, Texas 75201
Attention: Rawles Fulgham
Chairman of the Board
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Global Industrial Technologies, Inc. (the
"Company") of the consideration to be paid to them in connection with the
proposed Tender Offer and Merger (each as defined below). Pursuant to the
Agreement and Plan of Merger, dated as of July 12, 1999 (the "Agreement"), by
and among the Company, RHI AG (the "Parent") and Heat Acquisition Corp., a
wholly-owned subsidiary of the Parent (the "Purchaser"), the Purchaser will
make a cash tender offer (the "Tender Offer") to acquire all of the outstanding
shares of Common Stock, par value $0.25 per share, of the Company (each, a
"Share"), at a price of $13.00 per Share (such price, or such higher price per
Share as may be paid in the Tender Offer, the "Offer Price"), net to the seller
in cash, upon the terms and subject to the conditions set forth in the
Agreement. Pursuant to the Agreement, following the consummation of the Tender
Offer, the Purchaser will be merged with and into the Company (the "Merger"
and, together with the Tender Offer, the "Transaction"), the Company shall
continue as the surviving corporation, and each Share issued and outstanding
immediately prior to the effective time of the Merger (other than certain
Shares which are to be cancelled pursuant to the Agreement and other than
Dissenting Shares and Ineligible Shares (each as defined in the Agreement))
will be converted into the right to receive the Offer Price.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving companies comparable to the Company and the consideration received
for such companies; (iv) current and historical market prices of the common
stock of the Company; (v) the audited financial statements of the Company for
the fiscal year ended December 31, 1998 and the unaudited financial statements
of the Company for the period ended March 31, 1999; (vi) certain agreements
with respect to outstanding indebtedness or obligations of the Company; (vii)
certain internal financial analyses and forecasts prepared by the Company and
its management; and (viii) the terms of other business combinations that we
deemed relevant.
In addition, we have held discussions with certain members of the management
of the Company with respect to certain aspects of the Transaction, the past and
current business operations of the Company, the financial condition and future
prospects and operations of the Company, and certain other matters we believed
necessary or appropriate to our inquiry. We have reviewed such other financial
studies and analyses and considered such other information as we deemed
appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company or otherwise reviewed
by us, and we have not assumed any responsibility or liability therefor. We
have not conducted any valuation or appraisal of any assets or liabilities, nor
have any such valuations or appraisals been provided to us. In relying on
financial analyses and forecasts provided to us, we have assumed that they have
been reasonably prepared based on assumptions reflecting the best currently
available estimates and judgments by management as to the expected future
results of operations and financial condition of the Company to which
Schedule III-1
<PAGE>
such analyses or forecasts relate. We have also assumed that the Transaction
will have the tax consequences described in discussions with, and materials
furnished to us by, representatives of the Company, and that the other
transactions contemplated by the Agreement will be consummated as described in
the Agreement. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion
and that we do not have any obligation to update, revise, or reaffirm this
opinion.
We have acted as financial advisor to the Company with respect to the
proposed Transaction and have received a fee from the Company for our services.
We will also receive an additional fee if the proposed Transaction is
consummated. As you are aware, we have provided financial advisory services to
the Company since December 1998, for which we have received customary fees. In
the ordinary course of their businesses, J.P. Morgan Securities Inc. and its
affiliates may actively trade the debt and equity securities of the Company or
the Parent for their own account or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid to the Company's stockholders in
the proposed Tender Offer and Merger is fair, from a financial point of view,
to such stockholders.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Transaction. This
opinion does not constitute a recommendation to any stockholder of the Company
as to whether such stockholder should tender Shares in the Tender Offer or how
such stockholder should vote with respect to the Merger. This opinion may be
reproduced in full in any filing by the Company with the Securities and
Exchange Commission in connection with the Tender Offer or the Merger.
Very truly yours,
J.P. MORGAN SECURITIES INC.
Schedule III-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit 1 --Agreement and Plan of Merger, dated as of July 12, 1999, by and
among Global Industrial Technologies, Inc., RHI AG and Heat
Acquisition Corp.
Exhibit 2 --Excerpts from the Company's Proxy Statement for the Annual Meeting
of Stockholders held on June 7, 1999.
Exhibit 3 --Form of Amendment to severance agreements approved by the Board of
Directors of the Company on June 6, 1999.
Exhibit 4 --Letter to Stockholders of the Company, dated July 16, 1999.*
Exhibit 5 --Text of Press Release, dated July 12, 1999.
Exhibit 6 --Opinion of Wasserstein Perella & Co., Inc., dated as of July 12,
1999.*
Exhibit 7 --Opinion of J.P. Morgan Securities Inc., dated as of July 12,
1999.*
Exhibit 8 --Offer to Purchase dated July 16, 1999 and related Letter of
Transmittal.+
</TABLE>
- --------
*Included in copies mailed to stockholders of the Company.
+ Filed as an exhibit to RHI AG's and Heat Acquisition Corp.'s Tender Offer
Statement on Schedule 14D-1 dated July 16, 1999 and incorporated herein by
reference.
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
RHI AG
HEAT ACQUISITION CORP.
AND
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
Dated: July 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
THE OFFER
SECTION 1.01. The Offer................................................. 2
SECTION 1.02. Company Action............................................ 4
SECTION 1.03. Directors................................................. 5
ARTICLE II
THE MERGER
SECTION 2.01. The Merger................................................ 6
SECTION 2.02. Effective Time............................................ 7
SECTION 2.03. Effect of the Merger...................................... 7
SECTION 2.04. Certificate of Incorporation; By-Laws..................... 7
SECTION 2.05. Closing................................................... 7
SECTION 2.06. Directors and Officers.................................... 7
SECTION 2.07. Stockholders' Meeting..................................... 8
SECTION 2.08. Merger Without Meeting of Stockholders.................... 8
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01. Effect on Capital Stock................................... 8
SECTION 3.02. Exchange of Certificates.................................. 10
SECTION 3.03. Dissenting Shares......................................... 11
SECTION 3.04. Lost, Stolen or Destroyed Certificates.................... 12
SECTION 3.05. Further Action............................................ 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization and Qualification; Subsidiaries.............. 12
SECTION 4.02. Certificate of Incorporation and By-Laws.................. 13
SECTION 4.03. Capitalization............................................ 13
SECTION 4.04. Authority Relative to This Agreement...................... 14
SECTION 4.05. Material Contracts; No Conflict, Required Filings
and Consents.............................................. 14
SECTION 4.06. Compliance, Permits....................................... 15
SECTION 4.07. Rights Agreement.......................................... 16
SECTION 4.08. SEC Filings, Financial Statements......................... 16
SECTION 4.09. Absence of Certain Changes or Events...................... 17
SECTION 4.10. No Undisclosed Liabilities................................ 18
SECTION 4.11. Absence of Litigation..................................... 18
SECTION 4.12. Employee Benefit Plans; Employment Agreements............. 18
</TABLE>
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<TABLE>
<S> <C>
SECTION 4.13. Labor Matters............................................. 20
SECTION 4.14. Title to Property......................................... 21
SECTION 4.15. Taxes..................................................... 21
SECTION 4.16. Environmental Matters..................................... 23
SECTION 4.17. Brokers................................................... 24
SECTION 4.18. Intellectual Property..................................... 24
SECTION 4.19. Vote Required............................................. 25
SECTION 4.20. Takeover Statutes, Etc.................................... 25
SECTION 4.21. Opinion of Financial Advisor.............................. 25
SECTION 4.22. Year 2000 Compliance...................................... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 5.01. Organization and Qualification............................ 25
SECTION 5.02. Authority Relative to this Agreement...................... 26
SECTION 5.03. No Conflict, Required Filings and Consents................ 26
SECTION 5.04. Financial Structure....................................... 27
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01. Conduct of Business by the Company Pending the Merger..... 27
SECTION 6.02. No Solicitation........................................... 30
SECTION 6.03. Information Supplied...................................... 32
SECTION 6.04. The Company Rights Agreement.............................. 32
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Filings, Other Actions; Notification...................... 32
SECTION 7.02. Access to Information; Confidentiality.................... 35
SECTION 7.03. Stock Options and Stock Units............................. 35
SECTION 7.04. Employee Benefits......................................... 36
SECTION 7.05. Indemnification........................................... 37
SECTION 7.06. Further Action............................................ 38
SECTION 7.07. Public Announcements...................................... 38
SECTION 7.08. De-listing................................................ 39
SECTION 7.09. Expenses.................................................. 39
SECTION 7.10. Financing................................................. 39
SECTION 7.11. Payment to the Company.................................... 39
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to Obligation of Each Party to Effect
the Merger................................................ 40
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
TERMINATION
SECTION 9.01. Termination............................................... 40
SECTION 9.02. Effect of Termination..................................... 43
SECTION 9.03. Fees and Expenses......................................... 43
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Effectiveness of Representations, Warranties
and Agreements............................................ 45
SECTION 10.02. Notices................................................... 45
SECTION 10.03. Amendment................................................. 46
SECTION 10.04. Waiver.................................................... 46
SECTION 10.05. Headings.................................................. 46
SECTION 10.06. Severability.............................................. 46
SECTION 10.07. Entire Agreement.......................................... 47
SECTION 10.08. Assignment, Purchaser..................................... 47
SECTION 10.09. Parties in Interest....................................... 47
SECTION 10.10. Failure or Indulgence Not Waiver; Remedies Cumulative..... 47
SECTION 10.11. Governing Law............................................. 48
SECTION 10.12. Counterparts.............................................. 48
SECTION 10.13. Waiver of Jury Trial; Consent of Jurisdiction............. 48
SECTION 10.14. Certain Definitions....................................... 49
SECTION 10.15. Additional Definitions/Interpretative Matters............. 49
SECTION 10.16. Enforcement of Agreement.................................. 53
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 12, 1999 (the
"Agreement"), by and among RHI AG, a corporation organized under the laws of
- ----------
Austria ("Parent"), Heat Acquisition Corp., a Delaware corporation and a wholly-
------
owned indirect subsidiary of Parent ("Purchaser"), and Global Industrial
---------
Technologies, Inc., a Delaware corporation (the "Company"). Certain capitalized
-------
terms used in this Agreement have the meanings ascribed to them in Section 10.14
hereof.
WHEREAS, the Boards of Directors of each of Parent, Purchaser and the
Company have approved and deem it advisable and in the best interests of their
respective companies and stockholders for Parent to enter into a business
combination with the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, it is proposed that Purchaser
make a cash tender offer (the "Offer") to acquire all of the outstanding Common
-----
Stock, par value $0.25 per share, of the Company (the "Company Common Stock") at
--------------------
a price of $13.00 per share, net to the seller in cash, upon the terms and
subject to the conditions set forth herein;
WHEREAS, prior to the approval of the business combination, the Company
Board approved the amendment to the Rights Agreement (as defined herein) to
permit the Offer, the Merger and the other transactions contemplated by this
Agreement (the "Transactions") to proceed without resulting in a distribution of
------------
Rights (as defined herein) under the Rights Agreement;
WHEREAS, the Boards of Directors of each of Parent and the Company have
approved this Agreement and the merger (the "Merger"), following the
------
consummation of the Offer, of Purchaser with and into the Company in accordance
with the DGCL and upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company Board, by the affirmative vote of a majority of the
members of the Company Board, has (i) determined that this Agreement and the
Transactions are fair to and in the best interests of the Company and the
holders of the Shares (as defined herein), (ii) authorized, approved, adopted
and declared advisable this Agreement and the Transactions and (iii) resolved to
recommend that the stockholders of the Company accept the Offer and tender their
Shares to Purchaser pursuant to the Offer and approve and adopt this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.01 The Offer. (a) Provided that this Agreement shall not have
---------
been terminated in accordance with Article IX and none of the events set forth
in Annex A shall have occurred and be existing, as promptly as reasonably
-------
practicable (but in no event later than five business days from the public
announcement of the execution of this Agreement), Purchaser shall commence
(within the meaning of Rule 14d-2 promulgated under the Exchange Act) the Offer
to acquire all the outstanding Shares at a price of $13.00 per Share, net to the
seller in cash, subject to applicable withholding of taxes, without interest
(such price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"). Subject to (i) the satisfaction of
-----------
the Minimum Condition and (ii) the satisfaction or waiver of the other
conditions set forth in Annex A, Purchaser shall consummate the Offer in
-------
accordance with its terms and promptly accept for payment and pay for Shares
validly tendered pursuant to the Offer and not withdrawn as soon as Purchaser is
legally permitted to do so under applicable law. The Offer shall be made by
means of an offer to purchase (the "Offer to Purchase") and shall be subject to
-----------------
the Minimum Condition and the other conditions set forth in Annex A hereto, and
-------
shall reflect, as appropriate, the other terms set forth in this Agreement.
Parent and Purchaser expressly reserve the right, in their sole discretion,
subject to compliance with the Exchange Act and the terms of this Agreement, to
waive any such condition and to make any other changes in the terms and
conditions of the Offer; provided, however, that Parent and Purchaser shall not
-------- -------
(i) amend or waive the Minimum Condition, (ii) decrease the Offer Price, (iii)
decrease the maximum number of Shares to be purchased in the Offer, (iv) waive
or satisfy the Financing Condition (as defined herein) unless the representation
set forth in Section 5.04 shall be true and correct, or (v) amend any other term
or condition of the Offer in any manner or impose any term or condition that is
adverse to the holders of the Shares without the written consent of the Company
executed by the Chief Executive Officer of the Company stating that it was
authorized by the Company Board or a duly authorized committee thereof.
Notwithstanding any other provision hereof, Parent and Purchaser expressly
reserve the right (but will have no obligation to), in their sole discretion,
subject to compliance with the Exchange Act and the terms of this Agreement, to
waive the Financing Condition. Unless otherwise stated, all references in this
Agreement to Company Common Stock and Shares shall be deemed to include the
associated preferred stock purchase rights (the "Rights") issued pursuant to the
------
Rights Agreement.
(b) Notwithstanding the foregoing, in the event that any condition to the
Offer set forth in Annex A shall not have been satisfied or waived at the
-------
scheduled or any extended expiration date of the Offer, Purchaser shall (unless
otherwise notified by the Company in writing), and Purchaser shall otherwise be
entitled to, extend the expiration date of the Offer in increments of up to 5
business days each (unless otherwise agreed by Parent and the Company) until the
earliest to occur of (x) the satisfaction or waiver of each such condition and
(y) the termination of this Agreement in accordance with its terms; provided,
--------
however, that Purchaser shall not be required to extend the Offer as provided in
- -------
this sentence if any such condition (other than the
-2-
<PAGE>
Financing Condition) is incapable of being satisfied. In addition, without
limiting the foregoing, Purchaser may, without the consent of the Company,
extend the expiration date of the Offer (i) as required by applicable law, (ii)
pursuant to Section 7.10, and (iii) for up to 5 business days if, on the
scheduled or any extended expiration date of the Offer, the Shares validly
tendered pursuant to the Offer and not withdrawn represent more than 80% but
less than 90% of the outstanding Shares, notwithstanding that all the conditions
to the Offer set forth in Annex A have been satisfied, so long as Purchaser
-------
waives the further satisfaction of any of the conditions to the Offer (other
than the condition set forth in paragraph (a) of Annex A).
(c) As soon as practicable on the date the Offer is commenced (the "Offer
Commencement Date"), Parent and Purchaser shall file with the SEC a Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1
--------------
shall contain or shall incorporate by reference the Offer to Purchase and forms
of the related letter of transmittal and any related summary advertisement (the
Schedule 14D-1, the Offer to Purchase and such other documents, together with
all supplements and amendments thereto, being referred to herein collectively as
the "Offer Documents"). Parent and Purchaser shall mail the applicable Offer
---------------
Documents to the stockholders of the Company as soon as practicable after filing
with the SEC. The Offer Documents shall comply in all material respects with the
provisions of applicable federal securities laws. Each of Parent and Purchaser,
on the one hand, and the Company, on the other hand, shall correct promptly any
information provided by it for use in the Offer Documents which shall have
become false or misleading in any material respect, and Parent and Purchaser
further agree to take all steps necessary to cause the Schedule 14D-1, as so
corrected, to be filed with the SEC and the other Offer Documents, as so
corrected, to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws. Parent and Purchaser
shall give the Company and its counsel reasonable opportunity to review and
comment upon the Offer Documents prior to their being filed with, or sent to,
the SEC. Parent and Purchaser agree to provide the Company and its counsel any
comments Parent, Purchaser or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
(d) Parent shall provide or cause to be provided to Purchaser on a timely
basis the funds necessary to purchase all the Shares that Purchaser becomes
obligated to purchase pursuant to the Offer.
(e) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Offer such amounts as be
required to be deducted and withheld with respect to the making of such payment
under the Code or under any provision of state, local or foreign tax law;
provided, however, that Purchaser shall promptly pay any amounts deducted and
- -------- -------
withheld hereunder to the applicable Governmental Entity, shall promptly file
all Tax Returns and reports required to be filed in respect of such deductions
and withholdings, and shall promptly provide to the Company proof of such
payment and a copy of all such Tax Returns and reports.
-3-
<PAGE>
SECTION 1.02 Company Action. (a) The Company hereby approves of and
--------------
consents to the Offer and represents that the Company Board, at a meeting duly
called and held on July 12, 1999 by the affirmative vote of a majority of the
members of the Company Board, has duly (i) determined that the Transactions are
fair to and in the best interests of the Company and the holders of the Shares,
(ii) authorized, approved, adopted and declared advisable this Agreement and the
Transactions, (iii) resolved to recommend that the stockholders of the Company
accept the Offer and tender their Shares to Purchaser pursuant to the Offer and
approve and adopt this Agreement, (iv) took all other action necessary to render
the limitations on business combinations contained in Section 203 of the DGCL
(or any similar provision) and Article VI of the Company's Certificate of
Incorporation inapplicable to the Transactions and (v) amended the Rights
Agreement as described in Section 4.07. J.P. Morgan & Co., Inc. and Wasserstein
Perella & Co., Inc., the Company's financial advisors, have each delivered to
the Company Board the opinion described in Section 4.21. The Company will use
its best efforts to obtain the consent of each of J.P. Morgan & Co., Inc. and
Wasserstein Perella & Co., Inc. to permit the inclusion of the opinions referred
to in Section 4.21 in the Schedule 14D-9 and the Information Statement. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Company Board described in the immediately preceding
sentence, subject to Section 6.02(b).
(b) On the date that Parent and Purchaser file the Schedule 14D-1 with the
SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement
on Schedule 14D-9 (together with all amendments and supplements thereto, the
"Schedule 14D-9") containing the recommendation of the Company Board described
- ---------------
in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the holders of
the Shares to the extent required by Rule 14d-9 promulgated under the Exchange
Act and any other applicable federal securities laws. The Schedule 14D-9 shall
comply in all material respects with the provisions of applicable federal
securities laws. Each of the Company, on the one hand, and Parent and Purchaser,
on the other hand, shall correct promptly any information provided by it for use
in the Schedule 14D-9 which shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9, as so corrected, to be filed with the SEC and
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. The Company shall give Parent,
Purchaser and their counsel reasonable opportunity to review and comment upon
the Schedule 14D-9 prior to it being filed with, or sent to, the SEC. The
Company agrees to provide Parent, Purchaser and their counsel any comments the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments.
(c) The Company shall cause its transfer agent to promptly furnish
Purchaser with mailing labels containing the names and addresses of all record
holders of the Shares and with security position listings of Shares held in
stock depositories, each as of a recent date, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and beneficial owners of Shares. The Company shall
furnish Purchaser with such additional information, including, without
limitation, updated listings and
-4-
<PAGE>
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Purchaser
shall (i) hold in confidence the information contained in such labels, listings
and files, (ii) use such information only in connection with the Offer and the
Merger and (iii) if this Agreement is terminated in accordance with Article IX,
upon request of the Company, promptly deliver or cause to be delivered to the
Company (or destroy and certify to the Company the destruction of) all copies of
such information then in their possession or the possession of their affiliates,
agents or representatives.
SECTION 1.03 Directors. (a) Promptly upon the acceptance for payment by
---------
Parent or any of its subsidiaries of Shares pursuant to the Offer, the Company
will, subject to compliance with Section 14(f) of the Exchange Act, take all
actions necessary to cause persons designated by Purchaser to become directors
of the Company so that the total number of such persons equals the product of
the total number of directors on the Company Board (giving effect to the
directors appointed or elected pursuant to this sentence and including current
directors serving as officers of the Company) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent, Purchaser or any of
their affiliates (including for purposes of this Section 1.03, such Shares as
are accepted for payment pursuant to the Offer, but excluding Shares held by the
Company or any of its affiliates, which would not include Parent, Purchaser or
any of their respective affiliates) bears to the number of Shares then
outstanding; provided, however, that if the number of Shares purchased pursuant
-------- -------
to the Offer equals or exceeds a majority of the outstanding Shares, the Board
percentage described above will in all events be a majority of the members of
the Company Board. Notwithstanding any other provision hereof, in the event
that Parent's designees are appointed or elected to the Company Board, until the
Effective Time (as defined in Section 2.02), the Company Board shall have at
least two directors who are directors on the date of this Agreement and who are
not executive officers of the Company or, if no such persons are willing or able
so to serve, who qualify as "independent directors" within the meaning of the
New York Stock Exchange ("NYSE") Listed Company Manual (the "Independent
---- --------------------- -----------
Directors"). At such times, the Company will use its best efforts to cause (i)
- ---------
each committee of the Company Board, (ii) if requested by Parent, the board of
directors of each of the Company's subsidiaries and (iii) if requested by
Parent, each committee of such subsidiaries' boards to include persons
designated by Parent constituting the same percentage of each such committee or
board as Parent's designees are of the Company Board. The Company shall, upon
request by Parent, promptly increase the size of the Company Board or secure the
resignations of such number of directors, or both, as is necessary to enable
Parent's designees to be elected or appointed to the Company Board pursuant to
this Section 1.03(a) and shall cause Parent's designees to be so elected or
appointed. The Company Board shall approve, and by approving the execution and
delivery of this Agreement by the Company, hereby does approve the taking of
action by stockholders of the Company, by written consent, to amend the By-Laws
of the Company as may be necessary or desirable to effect the provisions of this
Section 1.03.
-5-
<PAGE>
(b) Following the election or appointment of Parent's designees pursuant to
this Section 1.03, and prior to the Effective Time, the approval of a majority
of the Independent Directors shall be required to authorize (i) any amendment of
this Agreement or the Certificate of Incorporation or By-Laws of the Company,
(ii) any termination of this Agreement by the Company, (iii) any consent by the
Company to any extension of the time for performance of any of the obligations
or other acts of Parent or Purchaser or (iv) any waiver by the Company of
compliance with any of the covenants or conditions contained in this Agreement
for the benefit of the Company or any other rights of the Company under this
Agreement. Any person who is a director on the date of this Agreement, but who,
in order to carry out the provisions of this Section 1.03, is not a director at
the Effective Time, shall be entitled to receive all payments (other than
attendance fees) at the time such director resigns as he or she otherwise would
have been entitled to receive under policies or programs in effect on the date
hereof if he or she had been a director as of the Effective Time.
(c) Subject to applicable law, the Company shall promptly take all action
necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this Section
1.03 and shall include in the Schedule 14D-9 mailed to stockholders promptly
after the commencement of the Offer (or an amendment thereof or an information
statement pursuant to Rule 14f-1 if Parent has not theretofore designated
directors) such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.03. Parent and Purchaser shall furnish to
the Company in a timely manner so as to permit the Company to fulfill its
obligations under this Section 1.03 and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1. Subject to clause (b) of
this Section 1.03, the provisions of this Section 1.03 are in addition to and
shall not limit any rights that Parent, Purchaser or any of their respective
affiliates may have as a holder or beneficial owner of Shares as a matter of law
with respect to the election of directors or otherwise.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the DGCL, at the Effective
Time Purchaser shall be merged with and into the Company. As a result of the
Merger, (i) the separate corporate existence of Purchaser shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"), (ii) the Company shall succeed to and assume all the
---------------------
rights and obligations of Purchaser in accordance with the DGCL and (iii) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in Section 2.04.
-6-
<PAGE>
SECTION 2.02 Effective Time. As promptly as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VIII, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger (in either case, the "Certificate of Merger") with the
---------------------
Secretary of State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of the DGCL. The parties
hereto shall make all other filings, recordings or publications required by the
DGCL in connection with the Merger. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with such Secretary of State, or
at such later time as Parent and the Independent Directors of the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time").
--------------
SECTION 2.03 Effect of the Merger. At the Effective Time, the effect of
--------------------
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, immunities, powers and franchises of the Company and Purchaser shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 2.04 Certificate of Incorporation; By-Laws. At the Effective
-------------------------------------
Time and without any further action on the part of the Company and Purchaser,
the Certificate of Incorporation of the Company in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, until
thereafter amended as provided by the DGCL and such Certificate of
Incorporation, except that Article IV of the Company's Certificate of
Incorporation shall be amended to read in its entirety as follows: "The
aggregate number of shares which the Corporation shall have the authority to
issue is 1,000 shares of Common Stock, par value $0.01 per share.". The By-Laws
of the Company shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by the DGCL, the Certificate of Incorporation of
the Surviving Corporation and such By-Laws.
SECTION 2.05 Closing. Unless this Agreement has been terminated and the
-------
Transactions have been abandoned pursuant to Article IX, and subject to the
satisfaction or waiver of the conditions set forth in Article VIII, the closing
of the Merger (the "Closing") will take place at 10:00 AM (EST) as promptly as
-------
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Article VIII, at the offices of Jones,
Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 2.06 Directors and Officers. The directors of Purchaser
----------------------
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be
-7-
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the initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 2.07 Stockholders' Meeting.
---------------------
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Company Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as promptly as practicable
---------------
following the acceptance for payment and purchase of Shares by Purchaser
pursuant to the Offer for the purpose of considering and taking action upon the
approval of the Merger and the approval and adoption of this Agreement; and
(ii) prepare and file with the SEC a preliminary Information
Statement relating to the Merger and this Agreement, use its best efforts to
obtain and furnish the information required to be included by the SEC in the
Information Statement and, after consultation with Parent, respond promptly to
any comments made by the SEC with respect to the preliminary Information
Statement and cause a definitive Information Statement to be mailed to its
stockholders, provided that the Information Statement shall not be filed, and no
amendment or supplement to the Information Statement shall be made, by the
Company without consultation with Parent and its counsel.
(b) Parent shall provide the Company with the information concerning
Parent and Purchaser required to be included in the Information Statement.
Parent shall vote, or cause to be voted, all of the Shares then beneficially
owned by it, Purchaser or any of its other subsidiaries or affiliates in favor
of the approval of the Merger and the approval and adoption of this Agreement.
SECTION 2.08 Merger Without Meeting of Stockholders. Notwithstanding
--------------------------------------
Section 2.07 hereof, in the event that Parent, Purchaser or any other subsidiary
of Parent shall acquire at least 90 percent of the outstanding Shares pursuant
to the Offer or otherwise, the parties hereto shall, subject to Article VIII,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01 Effect on Capital Stock. At the Effective Time, by virtue
-----------------------
of the Merger and without any action on the part of Parent, Purchaser, the
Company or the holders of any of the following securities:
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<PAGE>
(a) Cancellation. Each Share held in the treasury of the Company and each
------------
Share owned by Parent, Purchaser or any direct or indirect wholly-owned
subsidiary of the Company or Parent immediately prior to the Effective Time
(other than Shares in trust accounts, managed accounts and the like that are
beneficially owned by third parties) ("Ineligible Shares") shall, by virtue of
-----------------
the Merger and without any action on the part of the holder thereof, cease to be
outstanding, be canceled and retired without payment of any consideration
therefor and cease to exist.
(b) Conversion of Securities. Each Share issued and outstanding
------------------------
immediately prior to the Effective Time, other than Dissenting Shares and
Ineligible Shares, shall be converted into the right to receive the Offer Price
(the "Merger Consideration"), upon surrender of the certificate formerly
--------------------
representing such Share in the manner provided in Section 3.02. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 3.02.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding Shares shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Merger Consideration will be correspondingly adjusted on a per-
share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(c) Stock Options and Stock Units. All options to purchase Company Common
-----------------------------
Stock granted under the Stock Option Plans to directors, officers or employees
of the Company (in any such case, an "Option") and all stock units ("Stock
------ -----
Units") issued under the Global Industrial Technologies, Inc. Deferred
- -----
Compensation Plan (the "Deferred Compensation Plan") then outstanding shall be
--------------------------
subject to the provisions of Section 7.03.
(d) Capital Stock of Purchaser. Each share of Purchaser Common Stock
--------------------------
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and non-
assessable share of common stock, par value $.01 per share, of the Surviving
Corporation. Each stock certificate of Purchaser evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(e) All Other Capital Stock of the Company. All other capital stock of the
--------------------------------------
Company and any options, warrants or other rights to purchase capital stock of
the Company (other than Options and Stock Units) shall be canceled and retired
and shall cease to exist, and no Merger Consideration or other consideration
shall be issued or delivered in exchange therefor.
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<PAGE>
SECTION 3.02 Exchange of Certificates.
------------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall designate
------------
a bank or trust company to act as agent for holders of the Shares in connection
with the Merger (the "Paying Agent") to receive in trust the funds to which
------------
holders of the Shares shall become entitled pursuant to Section 3.01(b). At the
Effective Time, Parent shall take all steps necessary to deposit or cause to be
deposited with the Paying Agent such funds for timely payment thereunder. Such
funds shall be invested by the Paying Agent as directed by Parent pending
payment thereof by the Paying Agent to holders of the Shares. Any net profit
resulting from, or interest or income produced by, such investments shall be the
sole and exclusive property of Parent and shall be payable at the direction of
Parent, and no part of such earnings shall accrue to the benefit of holders of
the Shares. No interest will accrue or be paid on any cash payable upon the
surrender of a Certificate or Certificates which immediately before the
Effective Time represented outstanding Shares.
(b) Exchange Procedures. Promptly after the Effective Time, Parent
-------------------
shall cause the Paying Agent to mail to each holder of record of a certificate
or certificates, which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted pursuant to
------------
Section 3.01(b) into the right to receive the Merger Consideration, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate shall, subject to the immediately following sentence
and Section 3.02(e), be entitled to receive in exchange therefor the Merger
Consideration for each Share formerly represented by such Certificate and the
Certificate so surrendered shall forthwith be canceled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition to
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
Parent that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 3.02.
(c) Transfer Books; No Further Ownership Rights in Company Common
-------------------------------------------------------------
Stock. At the Effective Time, the stock transfer books of the Company shall be
- -----
closed and thereafter there shall be no further registration of transfers of
Shares on the records of the Company. From and after the Effective Time, the
holders of Certificates evidencing ownership of the Shares outstanding
immediately prior to the Effective Time shall cease to have any rights
-10-
<PAGE>
with respect to such Shares, except as otherwise provided for herein or by
applicable law. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article III.
(d) Termination of Fund; No Liability. At any time following six
---------------------------------
months after the Effective Time, Parent shall be entitled to require the Paying
Agent to deliver to it any funds (including any interest received with respect
thereto) which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to Parent (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the payment of
any Merger Consideration that may be payable upon surrender of any Certificates
such stockholder holds, as determined pursuant to this Agreement, without any
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Corporation or the Paying Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) Withholding Rights. Parent, the Surviving Corporation and the
------------------
Paying Agent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local, provincial or foreign tax law. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made.
SECTION 3.03. Dissenting Shares. Notwithstanding any provision of this
-----------------
Agreement to the contrary, if and to the extent required by the DGCL, Dissenting
Shares shall not be converted into the right to receive the Merger
Consideration, and holders of such Dissenting Shares shall be entitled to
receive payment of the appraised value of such Dissenting Shares in accordance
with the provisions of Section 262 of the DGCL unless and until such holders
fail to perfect or effectively withdraw or otherwise lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or otherwise loses such right,
such Dissenting Shares shall thereupon be treated as if they had been converted
into and become exchangeable for, at the Effective Time, the right to receive
the Merger Consideration, without any interest thereon. Notwithstanding
anything to the contrary contained in this Section 3.03, if (i) the Merger is
rescinded or abandoned or (ii) the stockholders of the Company revoke the
authority to effect the Merger, then the right of any stockholder to be paid the
fair value of such stockholder's Dissenting Shares pursuant to Section 262 of
the DGCL shall cease. The Company shall give Parent prompt notice of any
demands received by the Company for appraisals of Dissenting Shares and the
opportunity to direct all negotiations and proceedings with respect to appraisal
rights under the DGCL. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to any demands for appraisals
or offer to settle or settle any such demands.
-11-
<PAGE>
SECTION 3.04. Lost, Stolen or Destroyed Certificates. If any Certificates
--------------------------------------
shall have been lost, stolen or destroyed, the Paying Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such Merger Consideration as may
be required pursuant to Section 3.01(b); provided, however, that Parent may, in
-------- -------
its discretion and as a condition precedent to the issuance and delivery
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Paying Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
SECTION 3.05. Further Action. If, at any time after the Effective Time,
--------------
any such further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Purchaser, the officers and directors of the Company and
Purchaser are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company hereby
represents and warrants to Parent and Purchaser that:
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of the
--------------------------------------------
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to own, lease and
---------
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
Approvals is not reasonably likely to have a Company Material Adverse Effect.
Each of the Company and its subsidiaries is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that is not reasonably likely to have a Company Material Adverse
Effect. A true and complete list of all of the Company's subsidiaries, together
with the jurisdiction of incorporation of each subsidiary and the percentage of
each subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 4.01 of the Company Disclosure Schedule.
The Company does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
-12-
<PAGE>
SECTION 4.02. Certificate of Incorporation and By-Laws. The Company has
----------------------------------------
heretofore furnished or made available to Parent a complete and correct copy of
its Certificate of Incorporation and By-Laws, as amended to date, and a complete
and correct copy of the equivalent organizational documents of each of A.P.
Green Industries, Inc., Corrosion Technology International, Inc., Harbison-
Walker Refractories Company, Inc. and Shred-Tech Capital Corp. The Certificate
of Incorporation, By-Laws and equivalent organizational documents of each of the
Company's subsidiaries are in full force and effect. The Company is not in
violation of any of the provisions of its Certificate of Incorporation or By-
Laws. None of the Company's subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or By-Laws or equivalent
organizational documents.
SECTION 4.03. Capitalization. (a) The authorized capital stock of the
--------------
Company consists of 100,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $0.25 per share. As of July 1, 1999 (the
"Measurement Date"), (i) 22,412,961 shares of Company Common Stock were issued
and outstanding (including 651,297 Shares held under the Company's 401(k) Plan),
all of which have been duly authorized and validly issued and are fully paid and
non-assessable, (ii) no shares of preferred stock were issued or outstanding or
had been designated, (iii) 4,950,736 Shares were held in the treasury of the
Company, (iv) 2,276,535 Shares were reserved for future issuance pursuant to
outstanding Options granted under the 1992 Stock Compensation Plan and the Stock
Option Plan for Non-Employee Directors and 120,760 Stock Units were outstanding
under the Deferred Compensation Plan, and (v) 222,956 shares of preferred stock
were reserved for issuance pursuant to the Rights Agreement. Except as
expressly contemplated hereunder, no change in such capitalization, including
without limitation, any issuance of Shares or grants of Options or Stock Units,
has occurred between January 1, 1998 and the date hereof other than any change
associated with the exercise of vested Options. Except as set forth in this
Section 4.03 or Section 4.12 hereof and except for the Rights, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company or
any of its subsidiaries or obligating the Company or any of its subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any of its subsidiaries. All shares subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and non-assessable. There are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or the capital stock of any subsidiary or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than guarantees of bank obligations of
subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock of each of the Company's subsidiaries are
duly authorized, validly issued, fully paid and non-assessable and are owned by
the Company or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in the Company's voting rights,
charges or other encumbrances of any nature whatsoever. The Company has
delivered or made available to Parent a complete, true and correct copy of the
Rights Agreement and the forms of option agreements for Options. Section
-13-
<PAGE>
4.03 of the Company Disclosure Schedule contains a list of existing Options,
including the number of option shares, exercise price, vesting terms and grant
date thereof.
(b) There are no voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries. None of
the Company or its subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company or any of its subsidiaries,
respectively, as a result of the Transactions.
SECTION 4.04. Authority Relative to This Agreement. (a) The Company has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Transactions (other than the
approval and adoption of this Agreement by stockholders as contemplated by
Section 2.07). This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution and delivery of
this Agreement by Parent and Purchaser, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) The Company Board, at a meeting duly called and held on July 12, 1999
by the affirmative vote of a majority of the members of the Company Board, has
duly (i) determined that this Agreement and the Transactions are fair to and in
the best interests of the Company and the holders of the Shares, (ii)
authorized, approved, adopted and declared advisable this Agreement and the
Transactions and (iii) recommended that the stockholders of the Company accept
the Offer and tender their Shares to Purchaser pursuant to the Offer and approve
and adopt this Agreement, and as of the date hereof none of the aforesaid
actions by the Company Board has been amended, rescinded or modified.
SECTION 4.05. Material Contracts; No Conflict, Required Filings and
-----------------------------------------------------
Consents. (a) Subject to such exceptions that are not reasonably likely to have
- --------
a Company Material Adverse Effect or otherwise prevent or materially delay the
Company from performing its obligations under this Agreement or the consummation
of the Transactions, all of the Material Contracts are valid, binding and in
full force and effect, and neither the Company nor any of its subsidiaries is in
default of any of its obligations under any of the Material Contracts. As of
the date hereof, no contracting party to any Material Contract has notified
(whether orally or in writing) the Company or any of its subsidiaries of its
intention to terminate, cancel or modify such Material Contract or otherwise to
reduce or change its activity thereunder so as to materially adversely
-14-
<PAGE>
affect the benefits derived, or currently expected to be derived, by the Company
or any of its subsidiaries.
(b) Except as set forth in Section 4.05(c) hereof, the execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement and the consummation of the Transactions by the Company will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws or
equivalent organizational documents of the Company or any of its subsidiaries,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective assets or properties is bound or affected or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or impair the Company's or
any of its subsidiaries' rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any Material Contract, or result in the
creation of a lien or encumbrance on any of the assets or properties of the
Company or any of its subsidiaries pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective assets or properties is bound or affected except, in the case of
clauses (ii) and (iii), for such conflicts, breaches, violations, defaults or
other occurrences that are not reasonably likely to have a Company Material
Adverse Effect or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement or the consummation of the
Transactions.
(c) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement and the consummation of the Transactions by
the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Exchange Act, state securities laws
("Blue Sky Laws"), state anti-takeover laws, the pre-merger notification
- ---------------
requirements of the HSR Act, the laws regulating competition, antitrust,
investment or exchange controls in Germany and Mexico, and the filing of the
Certificate of Merger or other documents as required by the DGCL and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Transactions, or otherwise prevent or materially delay the
Company from performing its obligations under this Agreement, or is not
otherwise reasonably likely to have a Company Material Adverse Effect.
SECTION 4.06. Compliance, Permits. (a) Except for such conflicts,
-------------------
defaults and violations as are not reasonably likely to have a Company Material
Adverse Effect or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement or the consummation of the
Transactions, since December 31, 1998, neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective assets or properties
is bound or affected or (ii) any note, bond, mortgage,
-15-
<PAGE>
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective assets or properties is bound or affected.
(b) The Company and its subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
Governmental Entities necessary for the operation of the business of the Company
and its subsidiaries taken as a whole (collectively, the "Company Permits"),
---------------
except to the extent that the failure to have any such Company Permit is not
reasonably likely to have a Company Material Adverse Effect or otherwise prevent
or materially delay the Company from performing its obligations under this
Agreement or the consummation of the Transactions. The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply is not reasonably likely to have a Company
Material Adverse Effect or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement or the consummation of the
Transactions.
SECTION 4.07. Rights Agreement. The Company has taken all necessary action
----------------
so that neither the execution, delivery and performance of this Agreement nor
the consummation of the Transactions shall (i) cause Parent, Purchaser or any of
their respective affiliates to become an Acquiring Person or (ii) result in the
occurrence of a Stock Acquisition Date (as such terms are defined in the Rights
Agreement). The Company Board has approved, and the Company and The Bank of New
York, as Rights Agent, have entered into, an amendment to the Rights Agreement a
copy of which has been delivered to Parent (the "Rights Amendment"). Pursuant
----------------
to the Rights Amendment, among other things, neither the execution, delivery and
performance of this Agreement nor the consummation of the Transactions will (x)
result in the distribution of separate certificates representing Rights, (y)
cause the Rights to become exercisable or (z) result in the occurrence of a
Distribution Date (as defined in the Rights Agreement).
SECTION 4.08. SEC Filings, Financial Statements. (a) The Company has
---------------------------------
filed all forms, reports and documents required to be filed by it with the SEC
since January 1, 1998. The Company has delivered or made available to Parent, in
the form filed with the SEC, the Company SEC Reports. The Company SEC Reports
(including any financial statements or schedules included therein) filed prior
to the Measurement Date ("Company Filed SEC Documents") and all reports or other
filings permitted or required to be filed with the SEC thereafter (i) were
prepared or will be prepared, as the case may be, in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not or will not, as the case may be, at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
-16-
<PAGE>
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each of the
consolidated balance sheets (including the related notes and schedules) included
or incorporated in such financial statements fairly presents in all material
respects the consolidated financial position of the Company and its subsidiaries
as at the respective dates thereof and each of the consolidated statements of
income and of cash flows (including the related notes and schedules) included or
incorporated in such financial statements fairly presents in all material
respects the consolidated results of their operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments and such statements
do not contain notes thereto.
(c) The Company has heretofore furnished or made available to Parent a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.
SECTION 4.09. Absence of Certain Changes or Events. Except as set forth in
------------------------------------
the Company Filed SEC Documents or as expressly contemplated by this Agreement,
since December 31, 1998 and prior to the date hereof, the Company and its
subsidiaries have conducted their business in the ordinary course and there has
not occurred: (i) any amendments or changes to the Certificate of
Incorporation, By-Laws or equivalent organizational documents of the Company or
any of its subsidiaries; (ii) any change, condition or event that is reasonably
likely to have a Company Material Adverse Effect or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement or the consummation of the Transactions; (iii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of the Company; (iv) any change by the Company in its
accounting methods, principles or practices; (v) any revaluation by the Company
or any of its subsidiaries of any of its assets, including, without limitation,
writing down the value of capitalized software or inventory or writing off notes
or accounts receivable other than in the ordinary course of business; (vi) any
sale of a material amount of assets of the Company or any of its subsidiaries,
except for the sale of inventory in the ordinary course of business; (vii) any
split, combination or reclassification of any of the Company's capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for any shares of the Company's
capital stock; (viii) any granting by the Company or any of its subsidiaries to
any director, executive officer or other employee of the Company of any material
increase in compensation (except for increases to employees who are not
directors or officers in the ordinary course of business); (ix) any granting by
the Company or any of its subsidiaries to any such director, executive officer
or employee of any severance or termination pay, except as was required under
any employment, severance or termination agreements in effect as of the date of
the most recent financial statements included in the Company Filed SEC
Documents; or (x)
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any entry by the Company or any of its subsidiaries into any employment,
severance or termination agreement with any such director, executive officer or
employee.
SECTION 4.10. No Undisclosed Liabilities. (a) Except as is disclosed in
--------------------------
the Company Filed SEC Documents, neither the Company nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) of the type
that are required to be disclosed in financial statements, including the notes
thereto, prepared in accordance with GAAP, that are, in the aggregate, material
to the business, operations or financial condition of the Company and its
subsidiaries taken as a whole, except liabilities (i) adequately provided for or
referred to in the Company's balance sheet and the related notes thereto as of
December 31, 1998 included in the Company's Form 10-K for the year ended
December 31, 1998 (which is part of the Company SEC Reports) or (ii) incurred
since December 31, 1998 (A) in the ordinary course of business and consistent
with past practice, or (B) that are not reasonably likely to have a Company
Material Adverse Effect.
(b) Set forth in Section 4.10(b) of the Company Disclosure Schedule is a
true and complete listing of all of the Company's and its subsidiaries'
indebtedness for borrowed money outstanding and other obligations required to be
reflected as indebtedness on a consolidated balance sheet of the Company
("Indebtedness"), and capitalized leases required to be reflected on a
- --------------
consolidated balance sheet of the Company, in each case as of the date
immediately preceding the date hereof and in each case setting forth the
principal amount thereof. No payment defaults have occurred and are continuing
under the agreements and instruments governing the terms of such obligations or
any agreements and instruments governing the terms of any Indebtedness arising
after the date hereof and no other events have occurred which, with the giving
of notice, the passage of time, or both could constitute an event of default
thereunder.
SECTION 4.11. Absence of Litigation. Except as set forth in the Company
---------------------
Filed SEC Documents, there are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
Company or any of its subsidiaries, before any arbitrator or Governmental Entity
that is reasonably likely to have a Company Material Adverse Effect.
SECTION 4.12. Employee Benefit Plans; Employment Agreements. (a) All
---------------------------------------------
benefit and compensation plans, contracts, policies or arrangements covering
current or former employees of the Company and its subsidiaries (the
"Employees") and current or former directors of the Company, including, but not
---------
limited to, "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
deferred compensation, stock option, stock purchase, stock appreciation rights,
stock based, incentive and bonus plans (the "Employee Plans"), other than
--------------
Employee Plans maintained outside of the United States primarily for the benefit
of Employees working outside of the United States, are listed on Section 4.12(a)
of the Company Disclosure Schedule. True and complete copies of all Employee
Plans listed on Section 4.12(a) of the Company Disclosure Schedule, including,
but not limited to, any trust instruments and insurance contracts forming a
-18-
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part of any Employee Plans, and all amendments thereto, together with (if
applicable) the most recent favorable determination letter from the Internal
Revenue Service, the three most recent Form 5500 Annual Return/Reports and the
most recent summary plan description and subsequent summaries of material
modifications, have been provided or made available to Parent.
(b) All Employee Plans, other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, covering Employees and maintained in the
United States (the "Plans") are in substantial compliance with their terms and
-----
all applicable laws. Each Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
------------
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), has received a favorable determination letter
----
from the Internal Revenue Service with respect to "TRA" (as defined in Section 1
of Rev. Proc. 93-39), and the Company is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. There is no
material pending or, to the knowledge of the Company threatened, litigation or
governmental investigation relating to the Plans. Neither the Company nor any
of its subsidiaries has engaged in a transaction with respect to any Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject the Company or any subsidiary to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would be material.
(c) No Plan (i) is a "plan maintained by more than one employer", within
the meaning of Section 413(c) of the Code, (ii) provides benefits to any
individual who is not a current or former Employee or director of the Company,
or the dependent or beneficiary of such current or former Employee or director,
(iii) is, or during the preceding 36 months was, funded through a "welfare
benefit fund", within the meaning of Section 419(e) of the Code, (iv) provides,
or during the preceding 36 months provided, benefits through (A) a "voluntary
employees' beneficiary association", within the meaning of Section 501(c)(9) of
the Code or (B) except as set forth on Section 4.12(a) of the Company Disclosure
Schedule, a trust forming part of a plan providing for the payment of
"supplemental unemployment compensation benefits", within the meaning of Section
501(c)(17) of the Code.
(d) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by the Company or any of its subsidiaries with respect
to any ongoing, frozen or terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is considered one employer
with the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). The Company and the subsidiaries have not incurred and do
- ----------------
not expect to incur any withdrawal liability with respect to a multiemployer
plan under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived or extended, other than pursuant to PBGC Reg.
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<PAGE>
Section 4043.66, has been required to be filed for any Pension Plan or by any
ERISA Affiliate since January 1, 1998.
(e) All contributions required to be made under the terms of any Plan have
been timely made or have been reflected on the audited financial statements
included in the Company Filed SEC Documents. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and neither the Company nor any ERISA Affiliate has
an outstanding funding waiver. Neither the Company nor any of its subsidiaries
has provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code nor has any lien in favor of any such Pension Plan arisen under Section
412(n) of the Code or Section 302(f) of ERISA.
(f) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current fair market value of the assets of such Plan,
and there has been no material change in the financial condition of such Plan
since the last day of the most recent plan year. The withdrawal liability of the
Company and its subsidiaries under each Plan which is a multiemployer plan to
which the Company, any of its subsidiaries or an ERISA Affiliate has contributed
during the preceding 36 months, determined as if a "complete withdrawal", within
the meaning of Section 4203 of ERISA, had occurred as of the date hereof, does
not exceed $100,000.
(g) Neither the Company nor any of its subsidiaries has any obligations
for retiree health and life benefits under any Plan, except as set forth on
Section 4.12(g) of the Company Disclosure Schedule. The Company or the
subsidiaries may amend or terminate any such Plan at any time without incurring
any liability thereunder.
(h) The consummation of the transactions contemplated by this Agreement
will not (x) entitle any employees of the Company or any of the subsidiaries to
severance pay, or (y) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Employee Plans.
(i) All Employee Plans maintained outside of the United States (which are
listed in Section 4.12(i) of the Company Disclosure Schedule) comply in all
material respects with applicable local law and there is no material litigation
or governmental investigation pending, or to the knowledge of the Company,
threatened against or relating to any such Plan. The Company and its
subsidiaries have no material unfunded liabilities with respect to any such
Employee Plan.
-20-
<PAGE>
SECTION 4.13. Labor Matters. There are no labor disputes pending or, to
-------------
the best knowledge of the Company, threatened, between the Company or any of its
subsidiaries and any of their respective employees, which disputes are
reasonably likely to have a Company Material Adverse Effect. Neither the
Company nor any of its subsidiaries is involved in or, to the best knowledge of
the Company, threatened with any labor dispute, grievance or litigation relating
to labor, safety or discrimination matters involving any persons employed by the
Company or any of its subsidiaries, including, without limitation, charges of
unfair labor practices or discrimination complaints which is reasonably likely
to have a Company Material Adverse Effect. Neither the Company nor any of its
subsidiaries is presently or has been in the past a party to, or bound by, any
collective bargaining agreement or union contract with respect to any persons
employed by the Company or any of its subsidiaries and no collective bargaining
agreement is being negotiated by the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries has any knowledge of any strikes,
slowdowns, work stoppages or lockouts, or threats thereof, by or with respect to
any employees of the Company or any of its subsidiaries, and there have been no
such strikes, slowdowns, work stoppages or lockouts within the past three years.
SECTION 4.14. Title to Property. The Company and each of its subsidiaries
-----------------
have good, marketable and defensible title to all of their properties and
assets, free and clear of all liens, charges and encumbrances, except liens for
Taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not detract from the value of or interfere with the present use of
the property affected thereby or which is not reasonably likely to have a
Company Material Adverse Effect.
SECTION 4.15. Taxes.
-----
(a) Except as is not reasonably likely to have a Company Material Adverse
Effect: The Company and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its subsidiaries is or has been a member, have timely filed all United
States federal income Tax Returns and all other material Tax Returns required to
be filed by them or any of them (taking into account applicable extensions), and
have timely paid and discharged all Taxes shown to be due, and all other
material Taxes due except with respect to Taxes which the Company is maintaining
reserves in accordance with GAAP in its financial statements included in the
Company Filed SEC Documents that are adequate for their payment. All federal
income Tax Returns and all other Tax Returns filed by the Company and each of
its subsidiaries with respect to Taxes were true, complete and correct as of the
date on which they were filed or as subsequently amended to the date hereof.
Neither the IRS nor any other taxing authority or agency is now asserting or, to
the best knowledge of the Company, threatening to assert against the Company or
any of its subsidiaries any deficiency or claim for additional Taxes. There are
no requests for information from the IRS or any other taxing authority or agency
currently outstanding. No Tax Return of either the Company or any of its
subsidiaries is currently being audited by any taxing authority nor are any
proceedings (whether administrative or judicial) currently being conducted with
respect to any issues relating to Taxes.
-21-
<PAGE>
No Tax claim has become a lien on any assets of the Company or any subsidiary
thereof (ignoring for this purpose liens for Taxes not yet due and payable).
Neither the Company nor any of its subsidiaries is required to include in income
(i) any items in respect of any change in accounting principles or any material
deferred intercompany transactions or (ii) any installment sale gain, where the
inclusion in income would result in a Tax liability in excess of the reserves
therefor.
(b) (i) Neither the Company nor any of its subsidiaries is a party to any
agreement, contract or arrangement, or maintains or sponsors any Employee Plans,
that will result, separately or in the aggregate, in the payment of (A) any
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code,
determined without regard to Section 280G(b)(4) of the Code, and no Employee
Plan provides for the reimbursement of excise taxes under Section 4999 of the
Code or any income taxes under the Code or (B) amounts that will be disallowed
as a deduction under Section 162(m) of the Code; (ii) neither the Company nor
any of its subsidiaries has been subject to any accumulated earnings tax or
personal holding company tax; (iii) none of the Company's foreign subsidiaries
has any investments in United States property within the meaning of Section 956
of the Code or, for taxable years beginning after September 30, 1994 and before
January 1, 1998, has "excess passive assets" as defined in former Section
956A(c) of the Code; (iv) neither the Company nor any of its subsidiaries is
obligated under any agreement with respect to industrial development bonds or
other obligations with respect to which the excludability from gross income of
the holder for United States federal or state income tax purposes could be
affected by the Transactions; (v) neither the Company nor any of its
subsidiaries has entered into any deferred intercompany transaction within the
meaning of section 1.1502-13 of the United States Treasury Regulations as to
which items of deferred gain or loss have not been restored; (vi) no excess loss
account within the meaning of section 1.1502-19 of the United States Treasury
Regulations exists with respect to the stock of any of the Company's
subsidiaries; (vii) no extension of time within which to file any material Tax
Return that relates to the Company or any of its subsidiaries has been requested
which Tax Return has not since been filed; (viii) there are no waivers or
extensions of any applicable statute of limitations for the assessment or
collection of Taxes with respect to any material Tax Return that relates to the
Company or any of its subsidiaries which remain in effect; (ix) there are no tax
rulings, closing agreements or changes of accounting method relating to the
Company or any of its subsidiaries which would affect their liability for Taxes
for any period after the Effective Time; (x) all of the Tax Returns referred to
in Section 4.16(a) have been examined by the IRS or the appropriate state, local
or foreign taxing authorities, which examinations have been concluded with a
final determination and payment of adjustments, if any, or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired (unless the period for assessment is still open pursuant to
the normal statute of limitations), and no extensions or waivers of the statute
of limitations with respect to any Tax Returns have been executed by the Company
or any of its subsidiaries and are currently in effect; (xi) neither the Company
nor any of its subsidiaries has filed a consent under Section 341(f) of the Code
or any comparable provision of state revenue statutes; (xii) no property of the
Company or any of its subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of
-22-
<PAGE>
the Code; (xiii) neither the Company nor any of its subsidiaries is a party to
any lease made pursuant to Section 168(f) of the Code; (xiv) to the extent
applicable, the Company and its subsidiaries have properly and in a timely
manner documented their material transfer pricing methodology in compliance with
Section 482 and related provisions of the Code; and (xv) neither the Company nor
any of its subsidiaries was a member of a consolidated, combined, unitary or
similar group of corporations other than such a group of which the Company is
the common parent corporation.
(c) Neither the Company nor any of its subsidiaries is a party to any
agreement or arrangement (written or oral) providing for the allocation or
sharing of Taxes.
SECTION 4.16. Environmental Matters. Except as is not reasonably likely to
---------------------
have a Company Material Adverse Effect:
(a) All of the operations of the Company and each of its subsidiaries and
their respective assets, businesses and real property, including any of its
operations at or from any real property presently or formerly owned, leased or
operated by the Company or any of its subsidiaries (collectively, the "Real
----
Property"), comply with all applicable Environmental Laws.
- --------
(b) None of the assets of the Company or any of its subsidiaries, or any of
the Real Property, are contaminated with any Hazardous Substances in, on, over,
under or at it, in concentrations which would violate any applicable
Environmental Laws or would result in the imposition of Environmental
Liabilities or obligations on the Company or any of its subsidiaries under any
applicable Environmental Laws, including any obligations for the investigation,
corrective action, remediation or monitoring of Hazardous Substances in, on,
over, under or at the Real Property.
(c) None of the Real Property is listed or proposed for listing on the
National Priorities List pursuant to CERCLA or any similar inventory of sites
requiring investigation or remediation maintained by any state or locality.
Neither the Company nor any of its subsidiaries has received any written notice
or oral claim from any Governmental Entity or third party alleging any
Environmental Liabilities.
(d) Each of the Company and its subsidiaries has all the permits, licenses,
authorizations and approvals necessary for the present conduct of their
businesses and for the present operations on, in or at the Real Property which
are required under applicable Environmental Laws (the "Environmental Permits")
---------------------
and they are in compliance with the terms and conditions of all such
Environmental Permits.
(e) Neither the Company nor any of its subsidiaries, nor any other person
or entity, has engaged in, authorized or consented to any operations or
activities upon any of the Real Property for the purpose of or in any way
involving the handling, manufacture, treatment, processing, storage, use,
generation, release, discharge, spilling, emission, dumping or disposal of any
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<PAGE>
Hazardous Substances at, on, under or from the Real Property, except in
compliance with all applicable Environmental Laws.
(f) There are no conditions existing at any Real Property or with respect
to any of the assets of the Company or its subsidiaries that require, or which
with the giving of notice or the passage of time or both would require, remedial
or corrective action pursuant to the Environmental Laws or have resulted in the
imposition of Environmental Liabilities on the Company or any of its
subsidiaries.
(g) The Company and its subsidiaries have provided or made available to
Parent all environmental reports, assessments, audits, studies, investigations,
data and Environmental Permits in their custody, possession or control
concerning the Real Property or the assets of the Company or any of its
subsidiaries.
(h) Neither the Company nor any of its subsidiaries has received any claims
for Environmental Liabilities arising out of any indemnity agreement or sale
agreement.
SECTION 4.17. Brokers. No broker, finder or investment banker (other than
-------
Wasserstein Perella & Co., Inc. and J.P. Morgan & Co., Inc.) is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company. The
Company has delivered to Parent a true, correct and complete copy of the
engagement letters and any other agreements or arrangements between the Company
and Wasserstein Perella & Co., Inc. and J.P. Morgan & Co., Inc. with respect to
the Transactions. The Company or, if the Effective Time occurs, the Surviving
Corporation, will pay all amounts owed pursuant to the foregoing arrangements.
SECTION 4.18. Intellectual Property. (a) Schedule 4.18 of the Company
---------------------
Disclosure Schedule sets forth a list of (i) all material patents, patent
applications, registered trademarks, trademark applications, registered
copyrights and copyright applications that are owned by the Company or its
subsidiaries (collectively, "Company Intellectual Property") and (ii) all
-----------------------------
agreements under which the Company or its subsidiaries are licensed or otherwise
permitted, or license or otherwise permit a third party, to use patents,
trademarks and copyrights that are material to the business of the Company and
its subsidiaries.
(b) (i) The Company and its subsidiaries directly or indirectly own, or
are licensed or otherwise possess valid rights to use, all Company Intellectual
Property, with such exceptions as have not had and is not reasonably likely to
have a Company Material Adverse Effect, (ii) no person is challenging or, to the
knowledge of the Company, infringing or otherwise violating the Company
Intellectual Property, except in each case for challenges, infringements or
violations which are not reasonably likely to have a Company Material Adverse
Effect, and (iii) neither the Company nor any of its subsidiaries is, or will be
as a result of the execution and delivery of this Agreement or the performance
of its obligations hereunder, infringing or otherwise violating any patents,
registered trademarks or registered copyrights that are owned by any third party
-24-
<PAGE>
(collectively, "Third Party Intellectual Property Rights"), except in each case
----------------------------------------
for infringements or violations which are not reasonably likely to have a
Company Material Adverse Effect.
SECTION 4.19. Vote Required. The affirmative vote of the holders of at
-------------
least a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger.
SECTION 4.20. Takeover Statutes, Etc. (a) No "fair price," "moratorium,"
----------------------
"control share acquisition" or other similar anti-takeover statute or regulation
(including, without limitation, Section 203 of the DGCL) (each, a "Takeover
--------
Statute") is applicable to the Company, the Shares, this Agreement or the
- -------
Transactions.
(b) The Company has taken such actions as are required to render Article
VI of the Company's Certificate of Incorporation inapplicable to the
Transactions.
SECTION 4.21. Opinion of Financial Advisor. The Company Board has been
----------------------------
advised by its financial advisors that in their opinion, as of the date hereof,
the consideration to be received by holders of the Shares in the Offer and the
Merger, taken together, is fair from a financial point of view to such holders.
SECTION 4.22. Year 2000 Compliance. The Company has conducted a review of
--------------------
each item of software, hardware and firmware ("System") used in the conduct of
------
its business and operations to determine whether such System is Year 2000
Compliant, and is currently implementing a compliance plan that is intended to
result in each System being Year 2000 Compliant no later than January 1, 2000.
Each action to have been taken prior to the date hereof under such plan has been
substantially completed and as of the date hereof the Company has no knowledge
indicating that any action to be taken under such plan after the date hereof
will be materially delayed (and in any event not beyond January 1, 2000) or will
fail to accomplish its purpose under the plan. Achieving Year 2000 Compliance
is not reasonably likely to have a Company Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Except as set forth in the Parent Disclosure Schedule, Parent and Purchaser
each hereby represent and warrant to the Company that:
SECTION 5.01. Organization and Qualification. Each of Parent and Purchaser
------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the
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<PAGE>
failure to be so organized, existing and in good standing or to have such power,
authority and Approvals is not reasonably likely to have a Parent Material
Adverse Effect. Each of Parent and Purchaser is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that is not reasonably likely to have a Parent Material Adverse
Effect.
SECTION 5.02. Authority Relative to this Agreement. Each of Parent and
------------------------------------
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action on the part
of Parent and Purchaser, and no other corporate proceedings on the part of
Parent or Purchaser are necessary to authorize this Agreement or to consummate
the Transactions. This Agreement has been duly and validly executed and
delivered by Parent and Purchaser and, assuming the due authorization, execution
and delivery of this Agreement by the Company, constitutes a legal, valid and
binding obligation of Parent and Purchaser, enforceable against Parent and
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
SECTION 5.03. No Conflict, Required Filings and Consents. (a) Except as
------------------------------------------
set forth in Section 5.03(b) hereof, the execution and delivery of this
Agreement by Parent and Purchaser do not, and the performance of this Agreement
and the consummation of the Transactions by Parent and Purchaser will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws or
comparable constituent documents of Parent or Purchaser, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or Purchaser or by which their respective assets or properties are bound
or affected or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair Parent's or Purchaser's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any contracts material to the business of
Parent and Purchaser taken as a whole, or result in the creation of a lien or
encumbrance on any of the assets or properties of Parent or Purchaser pursuant
to any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Purchaser
is a party or by which Parent or Purchaser or any of their respective assets or
properties are bound or affected except, in the case of clauses (ii) and (iii),
for such conflicts, breaches, violations, defaults or other occurrences that is
not reasonably likely to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Purchaser do
not, and the performance of this Agreement and the consummation of the
Transactions by Parent and Purchaser will not, require any consent, approval,
authorization or permit of, or filing with or
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<PAGE>
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
state anti-takeover laws, the pre-merger notification requirements of the HSR
Act, the laws regulating competition, antitrust, investment or exchange controls
in Germany and Mexico, and the filing of the Certificate of Merger or other
documents as required by the DGCL and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, is not reasonably likely to have a Parent Material Adverse
Effect.
SECTION 5.04. Financial Structure. Parent and Purchaser hereby represent
-------------------
that all outstanding Indebtedness of the Company existing at the Effective Time
shall be repaid immediately after the Effective Time to the extent required by
the terms thereof and that no less than $300 million of the total financing
currently expected to be approximately $635 million (based on the assumption
that total Indebtedness less cash ("Net Debt") at the time Shares are to be
--------
purchased in the Offer is not greater than $240 million) to be incurred in
connection with the Transactions (the "Financing") will consist of equity
contributed to North American Refractories Company or loans from Parent,
provided that such loans from Parent are subordinate to the claims of all
creditors of the Surviving Corporation and no such loans will be payable or
guaranteed by the Company and its subsidiaries.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01. Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
During the period from the date of this Agreement and continuing until the
earliest to occur of (i) the termination of this Agreement, (ii) the time the
designees of Parent constitute a majority of the Company Board or (iii) the
Effective Time, the Company covenants and agrees that, unless Parent shall
otherwise approve in writing (which approval shall not be unreasonably withheld)
and unless otherwise expressly contemplated hereunder, the Company shall conduct
its business and shall cause the businesses of its subsidiaries to be conducted,
and the Company and its subsidiaries shall not take any action except, in the
ordinary course of business and in a manner consistent with past practice and in
compliance with applicable laws; and the Company shall use reasonable commercial
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries, and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations; and the Company shall take such
actions prior to the Effective Time as are reasonably requested by Parent to
inform employees of the Company of the existence of certain caps on health
benefits currently in effect. By way of amplification and not limitation,
neither the Company nor any of its subsidiaries shall, during the period from
the date of this Agreement and continuing until the earliest to occur of (i) the
termination of this Agreement, (ii) the time the designees of Parent constitute
a majority of the Company Board or (iii) the Effective Time, directly or
indirectly do, or propose to do, any of
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the following without the prior written approval of Parent, unless expressly
contemplated hereunder or disclosed in the Company Disclosure Schedule:
(a) amend or otherwise change the Company's or any of its subsidiaries'
Certificates of Incorporation, By-Laws or other equivalent organizational
documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) of the Company or any of
its subsidiaries (except for (i) the issuance of Shares pursuant to the exercise
of Options that are outstanding on the date hereof, (ii) the issuance of Stock
Units representing no more than 200,000 Shares in the aggregate pursuant to the
Deferred Compensation Plan, and (iii) the sale of existing ownership interests
in any of its subsidiaries (A) having a book value as of the date of the
Company's most recent financial statements included in the Company Filed SEC
Documents of less than $2.0 million individually and $6.0 million in the
aggregate and (B) the consideration received therefor is less than $2.0 million
individually and, together with the proceeds of sales of assets permitted under
Section 6.01(c), $6.0 million in the aggregate);
(c) sell, pledge, dispose of or encumber any assets of the Company or any
of its subsidiaries (except for (i) sales of assets in the ordinary course of
business and in a manner consistent with past practice and not exceeding $2.0
million individually and, together with the amount of consideration (or book
value, whichever is greater) received in sales of ownership interests permitted
under Section 6.01(b), $6.0 million in the aggregate, (ii) sales of inventory in
the ordinary course of business consistent with past practice, and (iii)
dispositions of obsolete or worthless assets);
(d) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of Options granted under the Stock Option Plans or
authorize cash payments in exchange for any such Options;
(e) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly-owned subsidiary of the Company
may declare and pay a dividend to its parent, (ii) split, combine or reclassify
any of its outstanding capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) amend the terms of, repurchase, redeem
or otherwise acquire, or permit any subsidiary to repurchase, redeem or
otherwise acquire, any of its securities or any securities of its subsidiaries,
or propose to do any of the foregoing, except in connection with the repurchase
of Options and Stock Units as contemplated by Section 7.03;
(f) sell, transfer, license, sublicense or otherwise dispose of any
material Company Intellectual Property or amend or modify any existing
agreements with respect to any material
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Company Intellectual Property or Third Party Intellectual Property Rights (other
than in the ordinary course of business consistent with past practice);
(g) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money, issue any debt
securities, assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any person, or make any loans or advances
except in the ordinary course of business consistent with past practice; (iii)
enter into any Material Contract other than in the ordinary course of business;
(iv) authorize or make any capital expenditures or purchases of fixed assets
that are not currently budgeted or, if not budgeted, that in the aggregate
exceed $2,000,000; (v) terminate any Material Contract or amend any of its
material terms (other than amendments to existing credit arrangements designed
to remedy or prevent defaults thereunder and within the parameters described in
Schedule 6.01 of the Company Disclosure Schedule); or (vi) enter into or amend
any contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 6.01(g);
(h) except for contracts or amendments that serve to reduce the cost to the
Company of severance arrangements, increase the compensation payable or to
become payable to its employees, officers or directors (except for increases to
employees who are not directors or officers of the Company in the ordinary
course of business in connection with normal periodic performance reviews) or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any employee, director or officer of the Company or
any of its subsidiaries (other than employees hired by the Company or any of its
subsidiaries after the date hereof in the ordinary course of business and on
terms consistent with those provided to employees of the Company or any such
subsidiary generally) or establish, adopt, enter into, terminate or amend any
Employee Plan (except as may otherwise be required by applicable law);
(i) (i) take any action, other than as required by GAAP, to change
accounting methods, principles or practices (including, without limitation,
procedures with respect to revenue recognition, capitalization of development
costs, payments of accounts payable and collection of accounts receivable) or
(ii) revalue any assets of the Company or any of its subsidiaries, including
without limitation, any write down of the value of capitalized software or
inventory or writing off of notes or accounts receivable other than in the
ordinary course of business;
(j) make any Tax election inconsistent with past practice or settle or
compromise any Tax liability, except to the extent the amount of any such
settlement or compromise has been reserved for on the consolidated financial
statements contained in the Company SEC Reports or is not reasonably likely to
have a Company Material Adverse Effect;
(k) pay, discharge, settle or satisfy any material lawsuits, claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past
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practice of liabilities reflected or reserved against in the financial
statements of the Company included in the Company Filed SEC Documents or
incurred in the ordinary course of business and consistent with past practice;
(l) permit any material increase in the number of employees employed by the
Company or any of its subsidiaries on the date hereof or hire any executive
officer or employee whose total annual compensation is more than $100,000;
(m) authorize, recommend, propose, adopt or announce an intention to adopt
a plan of complete or partial liquidation, dissolution, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its subsidiaries; or
(n) take or fail to take, or agree in writing or otherwise to take, or fail
to take any of the actions described in Section 6.01(a) through (l) above.
SECTION 6.02. No Solicitation. (a) The Company will not, and will not
---------------
permit or cause any of its subsidiaries or any of the officers and directors of
it or its subsidiaries to, and shall direct and use its best efforts to cause
its and its subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) not to, directly or indirectly, initiate, solicit or encourage
(including without limitation by way of furnishing information), or take any
other action designed or reasonably likely to facilitate or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, tender offer, consolidation, liquidation or
dissolution or similar transaction involving, or any purchase of 15% or more of
the consolidated assets (based on the Company's December 31, 1998 audited
consolidated balance sheet) or outstanding shares of capital stock of, the
Company or any of its subsidiaries or any other transaction that is intended or
reasonably could be expected to prevent or materially interfere with the
completion of the Transactions (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). The Company will not, and will not
--------------------
permit or cause any of its subsidiaries or any of the officers and directors of
it or its subsidiaries to, and shall direct and use its best efforts to cause
its and its subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, whether made
before or after the date of this Agreement, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however, that
-------- -------
nothing contained in this Agreement shall prevent the Company or the Company
Board (acting directly or through its employees, agents or representatives) from
(i) complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal or disclosure obligations under state law or
(ii) at any time prior to the earlier to occur of (x) payment for shares of
Company Common Stock pursuant to the Offer or (y) the approval of the Merger by
the requisite vote of the stockholders of the Company, (A) providing information
in response to a request therefor by a person who has made an unsolicited bona
fide written Acquisition Proposal
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(so long as such proposal did not result from a breach of this Section 6.02) if
the Company Board receives from the person so requesting such information an
executed confidentiality agreement with customary terms (which shall not
preclude the making of an Acquisition Proposal); or (B) engaging in any
negotiations or discussions with any person who has made an unsolicited bona
fide written Acquisition Proposal, if and only to the extent that, (x) in each
such case referred to in clause (A) or (B) above, the Company Board determines
in good faith, after consultation with outside legal counsel, that such action
is necessary in order for its directors to comply with their fiduciary duties
under applicable law and (y) in the case referred to in clause (B) above, the
Company Board determines in good faith (based on the advice of its financial
advisor) that such Acquisition Proposal would, if consummated, result in a more
favorable transaction than the Transactions; provided, however, that the Company
-------- -------
may not, except as permitted by Section 6.02(b) below, withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer or the
Merger or approve or recommend, or propose to approve or recommend, any
Acquisition Proposal, or enter into any agreement with respect to any
Acquisition Proposal (other than a confidentiality agreement); it being
understood and agreed that making the determination in clause (y) above (the
"Section 6.02 Determination") and disclosing such determination shall not
--------------------------
constitute a withdrawal or modification, proposed or otherwise, or an approval
or recommendation, proposed or otherwise, in breach of this proviso or result in
a breach of paragraph (e) to Annex A. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
(whether by it or an agent or representative of the Company) with any parties
conducted heretofore with respect to any of the foregoing. The Company agrees
that it will take the necessary steps to inform promptly the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 6.02. The Company will notify Parent immediately (but in any
event within 24 hours) if any such inquiries, proposals or offers are received
by, any such information requested from, or any such discussions or negotiations
are sought to be initiated or continued with any of its representatives. The
Company also will promptly request each person that has heretofore executed a
confidentiality agreement in connection with its consideration of an Acquisition
Proposal to return or destroy (and certify the destruction of) all confidential
information heretofore furnished to such person by or on behalf of it or any of
its subsidiaries and the Company will use its reasonable efforts consistent with
its fiduciary obligations to enforce the provisions of such confidentiality
agreements, including without limitation, any standstill provisions.
Notwithstanding anything to the contrary in this Section 6.02(a), no breach of
this Section 6.02(a) will result from actions taken by the director elected at
the 1999 Annual Meeting of Stockholders of the Company provided such actions
were not caused, authorized, directed, solicited or encouraged by the Company or
any of its subsidiaries or any of their respective officers and other directors.
(b) So long as the Agreement is in effect, neither the Company Board nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation of the Offer, this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal by a
third party or (iii) terminate this Agreement pursuant to Section 9.01(f) in
order to
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enter into a definitive agreement with respect to any third-party Acquisition
Proposal unless the Company Board shall have (A) determined in good faith, after
consultation with outside counsel, that such action is necessary in order for
its directors to comply with their fiduciary duties under applicable law and (B)
determined in good faith, after receiving the advice of its financial advisor
that an Acquisition Proposal is a Superior Proposal; provided, however, that
-------- -------
nothing herein shall prevent the Company or the Company Board from complying
with its disclosure obligations under any federal or state law.
SECTION 6.03 Information Supplied. Each of the Company and Parent
--------------------
agrees, as to itself and its subsidiaries, that (i) none of the information
supplied or to be supplied by it or its subsidiaries for inclusion or
incorporation by reference in the Offer Documents and the Schedule 14D-9 will,
at the time of distribution thereof, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (ii) the Information Statement,
if any, will, at the date of mailing to stockholders of the Company, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.04. The Company Rights Agreement. The Company Board will take all
----------------------------
further action (in addition to that referred to in Section 4.07) reasonably
requested in writing by Parent (including redeeming the Rights immediately prior
to the Effective Time or amending the Rights Agreement) in order to render the
Rights inapplicable to any of the Transactions. Except as provided above with
respect to the Transactions, the Company Board will not (a) amend the Rights
Agreement or (b) take any action with respect to, or make any determination
under, the Rights Agreement, including a redemption of the Rights or any action
to facilitate an Acquisition Proposal, provided, however, that this Section 6.04
-------- -------
will not prevent the Company Board from taking such actions as it determines are
necessary to prevent the occurrence of a Distribution Date following the
commencement of a tender or exchange offer unless doing so is intended or could
reasonably be expected to facilitate an Acquisition Proposal.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Filings, Other Actions; Notification.
------------------------------------
(a) Parent and the Company shall promptly prepare and file as soon as
practicable after the date hereof all documents required to be filed (i) with
the United States Federal Trade Commission and the Department of Justice in
order to comply with the HSR Act and (ii) any other documents which are required
under any non-United States laws regulating competition, antitrust, investment
or exchange controls. Parent and the Company shall promptly furnish all
materials thereafter required in connection therewith.
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(b) Upon the terms and subject to the provisions hereof, each of the
Company and Parent shall cooperate with each other and use (and shall cause its
subsidiaries to use) all reasonable efforts (i) to cause to be done all things
necessary, proper or advisable on its part under this Agreement and applicable
laws to consummate and make effective the Transactions as soon as practicable,
including preparing and filing as promptly as practicable all documentation to
effect all necessary notices, reports and other filings and (ii) to obtain as
promptly as practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in connection with, as a result of or in order to
consummate any of the Transactions. Subject to applicable laws relating to the
exchange of information, Parent and the Company shall have the right to review
in advance, and to the extent reasonably practicable each will consult the other
on, all the information relating to the other and its subsidiaries, that appear
in any filing made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the Transactions; provided, however,
-------- -------
that with respect to documents that one party reasonably believes should not be
disclosed to the other party, such party shall instead furnish those documents
to counsel for the other party pursuant to a mutually satisfactory
confidentiality agreement. In exercising the foregoing right, each of the
Company and Parent shall act reasonably and as promptly as reasonably
practicable.
(c) Parent and the Company shall promptly respond to any request for
additional information pursuant to the HSR Act. Upon the terms and subject to
the provisions hereof, Parent and the Company shall each use all reasonable
efforts to resolve objections, if any, as may be asserted by any Governmental
Entity with respect to the Transactions under any antitrust or trade or
regulatory laws or regulations of any Governmental Entity, which, in the case of
Parent, will include if necessary to resolve such objections, offering, and
agreeing to enter into necessary agreements, to sell, license or otherwise
dispose of, or hold separate or otherwise divest itself of, all or any portion
of Parent's businesses or assets or any portion of the businesses or assets of
any of its subsidiaries or any portion of the businesses or assets of the
Company or the Company's subsidiaries. Notwithstanding anything to the contrary
in this Agreement, (i) Parent shall not be required to sell or otherwise dispose
of, or hold separate or otherwise divest itself of, businesses or assets located
outside of the United States, Canada and Germany and (ii) with respect to
businesses or assets located in the United States or Canada, Parent shall not be
required to sell or otherwise dispose of, or hold separate or otherwise divest
itself of, businesses or assets that accounted for, individually or in the
aggregate, more than $86.0 million (the "Revenue Amount") of revenues of the
--------------
Company or Parent, as the case may be, for the year ended December 31, 1998, as
set forth in the respective audited financial statements for the period then
ending for Parent or the Company. Parent shall reasonably consult with the
Company and, subject to being permitted by the Governmental Entity to do so, the
Company shall have the right to attend and participate in any telephone calls or
meetings that Parent or Purchaser have with any person with respect to the
foregoing. The Parent shall use (and cause its subsidiaries to use) all
reasonable efforts to obtain all necessary approvals from the German Federal
Cartel Office (the "FCO") in order to consummate the Transactions, including
---
without limitation, if necessary to resolve any objections raised by the FCO,
offering, and agreeing to enter into necessary agreements, to sell,
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license, divest or otherwise dispose of, or hold separate or otherwise divest
itself of, all or any portion of the businesses or assets of the Company or the
Company's subsidiaries located in Germany (the "German Assets"). Any such
-------------
divestitures required by the FCO shall not be included in the calculation of the
Revenue Amount. The provisions of Section 7.01(a) - (d) constitute the sole
covenants of the parties with respect to the subject matter hereof and no other
provision of this Agreement will be interpreted as obligating any party to take
or fail to take any action in respect of any matter referred to in Section
7.01(a) - (d) that is not required by Section 7.01(a) - (d).
(d) Upon the terms and subject to the provisions hereof, Parent and the
Company each shall use all reasonable efforts (and cause their respective
subsidiaries) to lift or rescind or appeal any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
Transactions and use their best efforts to defend any action, suit or proceeding
seeking to enjoin, prevent or delay the consummation of the transactions
contemplated hereby or seeking material damages.
(e) Each of the Company and Parent shall keep the other apprised of the
status of matters relating to completion of the Transactions, including promptly
furnishing the other with copies of notices or other communications received by
Parent or the Company, as the case may be, or any of their respective
subsidiaries, from any third party or any Governmental Entity with respect to
the Transactions.
(f) In connection with and without limiting the foregoing, the Company and
Parent will, and Parent will cause Purchaser to, (i) take all action necessary
to ensure that no state anti-takeover statute or similar statute or regulation
is or becomes applicable to the Transactions, and (ii) if any state anti-
takeover statute or similar statute or regulation becomes applicable thereto,
take all action necessary to ensure that the Transactions may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise to
minimize the effect of such statute or regulation thereon.
(g) The Company will use all reasonable efforts to give prompt notice to
Purchaser of (i) any notice of, or other communication relating to, any
environmental matter, a default or event that, with notice or lapse of time or
both, would become a default, received by an executive officer of the Company
concerning the Company or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any Material Contract to which
the Company or any of its subsidiaries is a party or is subject; (ii) any
changes or developments relating to any material legal action pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries existing as of the date hereof; (iii) any new material legal
actions pending or, to the knowledge of the General Counsel of the Company,
threatened against the Company or any of its subsidiaries since the date hereof;
and (iv) any general denial of insurance coverage or contractual indemnity for
asbestos claims. Each of the Company and Purchaser shall give prompt notice to
the other party of any notice or other
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communication from any third party alleging that the consent of such third party
is or may be required in connection with the Transactions.
(h) The Parent and Purchaser will each use all reasonable efforts to give
prompt notice to the Company of any general denial of insurance coverage or
contractual indemnity for asbestos claims.
SECTION 7.02 Access to Information; Confidentiality. The Company shall
--------------------------------------
(and shall cause each of its subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of Parent reasonable access,
consistent with applicable law, at all reasonable times during the period prior
to the Appointment Date, to all its properties, books, contracts, commitments
and records, and, during such period, the Company shall (and shall cause each of
its subsidiaries to) furnish, consistent with applicable law, promptly to Parent
all information concerning the Company's business, properties and personnel as
Parent may reasonably request and shall make available, consistent with
applicable law, to Parent the appropriate individuals (including attorneys,
accountants and other professionals) for discussion of the Company's business,
properties and personnel as Parent may reasonably request. After the
Appointment Date, the Company shall provide Parent and such persons as Parent
shall designate with all such information, at any time as Parent shall request.
Any such information obtained by Parent or Purchaser shall be governed by the
terms of the Confidentiality Agreement. Notwithstanding the foregoing, (i) no
review, inquiry or investigation by Parent shall affect any representations or
warranties of the Company contained herein or the conditions to the obligations
of Parent or Purchaser and (ii) nothing contained in this Agreement shall
require the Company to permit any inspection, or to disclose any information,
that in the reasonable judgment of the Company would result in the disclosure of
any trade secrets of it or third parties or violate any of its obligations with
respect to confidentiality if the Company shall have used reasonable efforts to
obtain the consent of such third party to such inspection or disclosure. All
requests for information made pursuant to this Section shall be directed to an
executive officer of the Company or such person as may be designated by any of
its officers, as the case may be.
SECTION 7.03 Stock Options and Stock Units. (a) Immediately prior to the
-----------------------------
Effective Time, each outstanding Option under the Stock Option Plans shall be
canceled and only entitle the holder thereof to receive for each Share with
respect to such Option an amount in cash equal to the difference between (i) the
Merger Consideration and (ii) the price per share exercise price under such
Option. Prior to the Effective Time, the Company shall take all necessary
action with respect to such cancellation, including obtaining any necessary
consents from the holders of such Options.
(b) Immediately prior to the Effective Time, the Company will amend the
Deferred Compensation Plan to provide (i) that each Stock Unit credited to
accounts of participants will be canceled and the accounts of each such
participant will be credited for each Stock Unit an amount in cash equal to the
Merger Consideration and (ii) that thereafter such accounts will be credited
with a fixed rate of interests. Prior to the Effective Time, the Company shall
take all
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necessary action with respect to such cancellation, including obtaining any
necessary consents from the holders of such Stock Units.
SECTION 7.04 Employee Benefits. (a) Parent shall maintain for a period
-----------------
of nine months immediately following the Effective Time, employee benefit plans,
programs, policies and arrangements for employees of the Company and its
subsidiaries (other than employees covered by collective bargaining agreements)
as of the Effective Time which provide benefits that in the aggregate are
substantially comparable to the employee benefit plans, programs, policies and
arrangements other than stock option plans, stock purchase plans, stock
appreciation rights and any other stock based incentive and bonus plans provided
by the Company or any subsidiary for such employees immediately prior to the
Effective Time; provided, however, that (i) in no event will Parent be obligated
-------- -------
hereunder to award options or equity rights to any Employee, (ii) Parent may
cause the Company to adopt, or extend to employees of the Company, benefit
plans, programs, policies and arrangements that are in effect for the Parent's
other North American businesses, and to substitute the same for the Company's
benefit plans, programs, policies and arrangements, and (iii) nothing herein
will prevent the amendment or termination of any specific plan, program or
arrangement, require that the Surviving Corporation provide or permit investment
in the securities of Parent, the Company or the Surviving Corporation or
interfere with the Surviving Corporation's right or obligation to make such
changes as are necessary to comply with applicable law. Parent shall cause each
employee benefit plan, program, policy or arrangement of Parent in which
employees of the Company and its subsidiaries are eligible to participate to
take into account for purposes of vesting and eligibility thereunder the service
of such employees with the Company and its subsidiaries to the same extent as
such service was credited for such purpose by the Company and its subsidiaries,
unless such credit would result in a duplication of benefits.
(b) Parent shall honor, in accordance with their terms, all benefit
obligations and contractual rights to current and former employees of the
Company and its subsidiaries existing as of the Effective Time the existence of
which is expressly disclosed in the Company Disclosure Schedule, including
employment or severance agreements, plans or policies of the Company and its
subsidiaries which are previously specifically disclosed in the Company
Disclosure Schedule; provided, however, that nothing contained in this Section
-------- -------
7.04(b) shall or shall be deemed to limit the Surviving Corporation's obligation
with respect to all benefit obligations and contractual rights to current and
former employees of the Company and its subsidiaries existing as of the
Effective Time.
(c) If employees of the Company and its subsidiaries become eligible to
participate in a medical, dental or health plan of Parent, Parent shall cause
such plan to (i) waive any preexisting condition limitations for conditions
covered under the applicable medical, health or dental plans of the Company and
its subsidiaries to the same extent waived under such plans of the Company and
its subsidiaries and (ii) honor any deductible and out of pocket expenses
incurred by the employees and their beneficiaries under such plans during the
portion of the calendar year prior to such participation.
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(d) Nothing in this Section 7.04 will require the continued employment of
any person.
SECTION 7.05 Indemnification. (a) From and after the Effective
---------------
Time, Parent shall, or may cause the Surviving Corporation to the extent
provided in the Company's Certificate of Incorporation as in effect on the date
hereof, to the fullest extent each corporation is permitted under applicable
law, indemnify and hold harmless each present and former director and officer of
the Company (collectively, the "Indemnified Parties") against any costs or
-------------------
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any facts or
events existing or occurring at or prior to the Effective Time (including,
without limitation, the Transactions) for a period of six years after the
Effective Time. Parent or the Surviving Corporation shall advance expenses to an
Indemnified Party, as incurred, to the fullest extent permitted under applicable
law; provided that the Indemnified Party to whom expenses are advanced provides
--------
an undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) the Indemnified Parties shall promptly notify
Parent or the Surviving Corporation thereof, (ii) any counsel retained by the
Indemnified Parties for any period after the Effective Time must be reasonably
satisfactory to Parent and the Surviving Corporation, (iii) neither Parent nor
the Surviving Corporation shall be obligated to pay for more than one firm of
counsel for all Indemnified Parties, except to the extent that (A) an
Indemnified Party has been advised by counsel that there are conflicting
interests between it and any other Indemnified Party or (B) local counsel, in
addition to such other counsel, is required to effectively defend against such
action or proceeding, and (iv) neither Parent nor the Surviving Corporation
shall be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld). Neither Parent nor the Surviving
Corporation shall have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine (and such
determination shall have become final) that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(b) For a period of six years after the Effective Time (or the time the
designees of Parent constitute a majority of the Company Board, if earlier),
Parent shall cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by the Company (provided that
Parent may substitute therefor policies with reputable and financially sound
carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
or related to facts or events that occurred at or before the Effective Time;
provided, however, that Parent shall not be obligated to make annual premium
- -------- -------
payments for such insurance to the extent such premiums exceed 200% of the
annual premiums paid as of the date hereof by the Company for such insurance
(such 200% amount, the "Maximum Premium"). If such insurance coverage cannot be
---------------
obtained at all, or can only be obtained at an annual premium in excess of the
Maximum Premium, Parent shall maintain the most advantageous policies of
directors' and officers'
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insurance obtainable for an annual premium equal to the Maximum Premium;
provided, further, if such insurance coverage cannot be obtained at all, Parent
- -------- -------
shall purchase all available extended reporting periods with respect to pre-
existing insurance in an amount that, together with all other insurance
purchased pursuant to this Section 7.05(b), does not exceed the Maximum Premium.
The Company represents to Parent that the annual premiums paid as of the date
hereof are $525,000. Parent agrees, and will cause the Surviving Corporation,
not to take any action that would have the effect of limiting the aggregate
amount of insurance coverage required to be maintained for the individuals
referred to in this Section 7.05(b). Notwithstanding the foregoing, during the
period from the date of this Agreement and continuing until the time the
designees of Parent constitute a majority of the Company Board, the Company
shall be permitted to purchase a "tail" insurance policy with respect to the
foregoing and a similar policy covering ERISA obligations, as long as the cost
of both policies (on an annualized basis) does not exceed the Maximum Premium.
(c) If the Surviving Corporation or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then, and in each such
case, proper provision shall be made so that the successors and assigns of the
Surviving Corporation shall assume all of the obligations set forth in this
Section.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs, their
representatives and assigns.
SECTION 7.06 Further Action. Upon the terms and subject to the
--------------
conditions hereof, each of the parties hereto in good faith shall use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the Transactions, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to otherwise satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
SECTION 7.07 Public Announcements. The initial press release with
--------------------
respect to the execution of this Agreement shall be a joint press release
acceptable to Parent and the Company. Thereafter, so long as this Agreement is
in effect, Parent and the Company shall consult with each other before issuing
any press release or otherwise making any public statements with respect to the
Offer, the Merger or this Agreement and shall not issue any such press release
or make any such public statement without the prior consent of the other party,
which shall not be unreasonably withheld; provided, however, that a party may,
-------- -------
without the prior consent of the other party, issue such press release or make
such public statement as may upon the advice of counsel be required by law or
the NYSE if it has used all reasonable efforts to consult with the other party.
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SECTION 7.08 De-listing. The Surviving Corporation shall use its best
----------
efforts to cause the Shares to be de-listed from the NYSE and de-registered
under the Exchange Act as soon as practicable following the Effective Time.
SECTION 7.09 Expenses. The Surviving Corporation shall pay all charges
--------
and expenses, including those of the Paying Agent, in connection with the
transactions contemplated in Article III. Except as otherwise provided in
Section 9.03, whether or not the Merger is consummated, all other costs and
expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such expense, except that expenses incurred in
connection with the filing fee for the Information Statement and printing and
mailing the Information Statement shall be shared equally by Parent and the
Company.
SECTION 7.10 Financing. Parent shall use all reasonable efforts to
---------
satisfy the Financing Condition; provided, however, that notwithstanding the
-------- -------
fact that all of the conditions to the Offer set forth in Annex A have been
-------
satisfied, Parent may extend the expiration date of the Offer if Net Debt
exceeds $240 million until such time as Net Debt is $240 million or less. The
provisions of this Section 7.10 constitute the sole covenant of Parent with
respect to the subject matter hereof and no other provision of this Agreement
will be interpreted as obligating Parent to take or fail to take any action in
respect of any matter referred to in this Section 7.10 that is not required by
this Section 7.10.
SECTION 7.11 Payment to the Company. Unless this Agreement has
----------------------
heretofore been terminated in accordance with Section 9.01 and unless the
Financing Condition has been irrevocably waived in writing by Parent prior to
(a) 5:00 p.m. (New York City time) on July 30, 1999, Parent shall pay the
Company $5.0 million, and (b) 5:00 p.m. (New York City time) on October 31,
1999, Parent shall pay the Company an additional $10.0 million; provided,
--------
however, that Parent will have no obligation to pay such $10.0 million pursuant
- -------
to this Section 7.11(b) (i) unless it has elected to extend the Financing
Termination Time to the Extended Financing Termination Time pursuant to Section
9.01(i) and (ii) if Net Debt as of the Extended Financing Termination Time is
greater than $250 million. The payments to be made to the Company pursuant to
clauses (a) and (b) of this Section 7.11 shall be made by wire transfer of same
day funds and shall be paid by Parent within two business days of the date set
forth in clause (i) or (ii), as the case may be. The letter agreement, dated
June 6, 1999, addressed to Parent from the Company and amending the
Confidentiality Agreement, is of no further force and effect and the parties
agree that no Termination Fee (as defined in such letter agreement) is payable
thereunder. Parent acknowledges that the agreements contained in this Section
7.11 are an integral part of the Transactions and that, without these
agreements, the Company would not enter into this Agreement. Accordingly, if
Parent fails to pay any amounts when due pursuant to this Section 7.11 and, in
order to obtain such payment, the Company commences a suit that results in a
judgment against Parent for such amounts, Parent shall pay the Company's costs
and expenses (including reasonable attorneys' fees) in connection with such
suit, together with interest on such amounts at the prime rate of Bankers Trust
Company on the date such amounts were required to be paid.
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ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to Obligation of Each Party to Effect the Merger.
-----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions:
(a) Stockholder Approvals. This Agreement and the Merger shall have been
---------------------
approved and adopted by the requisite vote of the stockholders of the Company to
the extent required by the DGCL and the Certificate of Incorporation of the
Company;
(b) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any
Governmental Entity preventing the consummation of the Merger shall be in
effect, and there shall not be any statute, rule, regulation or order enacted,
entered or enforced by any Governmental Entity which makes the consummation of
the Merger illegal; and
(c) Offer. Parent, Purchaser or their affiliates shall have purchased, or
-----
caused to be purchased, Shares pursuant to the Offer.
(d) Solvency Opinion. The Company Board shall have received an opinion,
----------------
in form and substance and from an independent evaluation firm reasonably
satisfactory to the Company Board, as to solvency matters relating to the
Company and to North American Refractories Company and its subsidiaries before
and after giving effect to the Transactions, including the incurrence of
indebtedness related thereto; provided, however, that this condition will in all
-------- -------
events be deemed satisfied if the Company Board receives an opinion as to such
matters from the same firm as provides such opinion to the lenders in respect of
the Financing; provided such firm agrees with the Company within 20 business
days hereof to provide the services required in order to render the opinion
required by this Section 8.01(d). Parent and the Company will, and will cause
their respective subsidiaries and employees to, cooperate with the evaluation
firm in performing the services required hereby, by, among other things,
providing relevant information and access to employees and data.
ARTICLE IX
TERMINATION
SECTION 9.01 Termination. Upon notice given by the appropriate parties in
-----------
accordance with this Agreement, this Agreement may be terminated and the Merger
contemplated hereby may be abandoned on or following the occurrence of one of
the events set forth below prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company; provided, however, that any
-------- -------
termination by the Company pursuant to Section 9.01(c) or Section 9.01(f) shall
not be effective unless and until the Company shall have paid to Purchaser any
fees and expenses payable pursuant to Section 9.03:
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(a) by mutual written consent duly authorized by the respective boards of
directors of Parent and, subject to Section 1.03(b), the Company; or
(b) by either Parent or the Company if (i) a Governmental Entity shall
have issued a non-appealable final order, decree or ruling, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger or (ii) any statute, rule or regulation is enacted or enforced by any
Governmental Entity for which there is no administrative or judicial right of
appeal, which in any such case makes the consummation of the Offer or the Merger
illegal; or
(c) by either Parent or the Company, if the Company Common Stock has not
been purchased pursuant to the Offer prior to December 31, 1999 (the
"Termination Date") (provided that the right to terminate this Agreement under
----------------
this Section 9.01(c) shall not be available to any party whose failure to
fulfill any obligations under this Agreement has been the cause of or resulted
in the failure to consummate the Offer prior to such date); or
(d) as long as Company Common Stock has not been purchased pursuant to the
Offer, by Parent, if any actions described in paragraph (e) to Annex A has
-------
occurred; or
(e) as long as Company Common Stock has not been purchased pursuant to the
Offer, by Parent, (i) if there has been a breach of any covenant or agreement on
the part of the Company set forth in this Agreement or (ii) if any
representation or warranty of the Company (A) shall have been inaccurate or
incomplete when made or (B) shall have become untrue, and in either case under
clause (i) or (ii) the applicable event would give rise to the failure of a
condition set forth in paragraph (f) or (g) of Annex A, as the case may be (a
-------
"Company Terminating Event"); provided that, in the event of a Company
------------------------- --------
Terminating Event arising with respect to clause (i) or (ii)(A) above (other
than a breach of Section 6.02), if such Company Terminating Event is curable
prior to the expiration of 20 days from notice by Parent to the Company of its
intention to terminate due to its occurrence (but in no event later than the
Termination Date) by the Company through the exercise of its reasonable best
efforts and for so long as the Company continues to exercise such reasonable
best efforts, Parent may not terminate this Agreement under this Section 9.01(e)
until the expiration of such period without such Company Terminating Event
having been cured; provided, further, that, in the event of a Company
-------- -------
Terminating Event arising with respect to clause (ii)(B) above, if such Company
Terminating Event may be curable prior to the Termination Date by the Company
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts, Parent may not
terminate this Agreement under this Section 9.01(e); or
(f) as long as Company Common Stock has not been purchased pursuant to
the Offer, by the Company to allow the Company to enter into a definitive
agreement in accordance with Section 6.02(b) with respect to a Superior
Proposal; provided, however, that the Company shall have complied with the
-------- -------
provisions of Section 6.02; and provided, further, however, that not less than
-------- ------- -------
five business days prior to such termination, the Company shall have notified
Purchaser of
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its intention to terminate the Agreement pursuant to this Section 9.01(f) and
shall have caused its financial and legal advisers to be reasonably available to
negotiate in good faith with Purchaser and Purchaser's financial and legal
advisers during such five-day period if Purchaser offers to make such
adjustments in the terms and conditions of this Agreement as would cause such
Acquisition Proposal not to be a Superior Proposal; or
(g) as long as Company Common Stock has not been purchased pursuant to the
Offer, by the Company, (i) upon a breach of any covenant or agreement on the
part of Parent or Purchaser set forth in this Agreement or (ii) if any
representation or warranty of Parent or Purchaser (A) shall have been inaccurate
or incomplete when made or (B) shall have become untrue, and in either case, the
applicable event would materially adversely affect Parent's or Purchaser's
ability to consummate (or materially delays commencement or consummation of) the
Offer (a "Parent Terminating Event"); provided that, in the event of a Parent
------------------------ --------
Terminating Event arising with respect to clause (i) or (ii)(A) above, if such
Parent Terminating Event is curable prior to the expiration of 20 days from
notice by the Company to Parent of its intention to terminate due to its
occurrence (but in no event later than the Termination Date) by Parent or
Purchaser through the exercise of its reasonable best efforts and for so long as
Parent or Purchaser continues to exercise such reasonable best efforts, the
Company may not terminate this Agreement under this Section 9.01(g) until the
expiration of such period without such Parent Terminating Event having been
cured; provided, further, that, in the event of a Parent Terminating Event under
-------- -------
clause (ii)(B) above, if such Parent Terminating Event is curable prior to the
Termination Date by Parent or Purchaser through the exercise of its reasonable
best efforts and for so long as Parent or Purchaser continues to exercise such
reasonable best efforts, the Company may not terminate this Agreement under this
Section 9.01(g); or
(h) as long as Company Common Stock has not been purchased pursuant to the
Offer, by Parent, if any person or group (as defined in Section 13(d)(3) of the
Exchange Act) other than Parent, Purchaser or any of their respective
subsidiaries or affiliates shall have become the beneficial owner of more than
50% of the outstanding Shares (either on a primary or fully diluted basis); or
(i) by the Company at any time after 5:00 p.m. (New York City time) on
July 30, 1999 (the "Financing Termination Time"), if Parent has not irrevocably
--------- ----------- ----
waived in writing the Financing Condition prior to the Financing Termination
Time; provided, however, that not less than two business days prior to such
-------- -------
termination, the Company shall have notified Purchaser of its intention to
terminate the Agreement pursuant to this Section 9.01(i); provided, further,
-------- -------
however, that the Company shall not be entitled to terminate this Agreement
- -------
pursuant to this Section 9.01(i) if Parent shall (i) have paid any amount
payable under Section 7.11(a) and (ii) have notified the Company in writing
prior to the Financing Termination Time of its determination to extend the
Financing Termination Time to 5:00 p.m. (New York City time) on October 31, 1999
(the "Extended Financing Termination Time");
-----------------------------------
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<PAGE>
(j) by the Company at any time after the Extended Financing Termination
Time, if Parent has extended the Financing Termination Time to the Extended
Financing Termination Time pursuant to Section 9.01(i) and Parent has not
irrevocably waived in writing the Financing Condition prior to the Extended
Financing Termination Time; provided, however, that not less than two business
-------- -------
days prior to such termination, the Company shall have notified Purchaser of its
intention to terminate the Agreement pursuant to this Section 9.01(j); provided,
--------
further, however, that the Company shall not be entitled to terminate this
- ------- -------
Agreement pursuant to this Section 9.01(j) if (A) Parent shall (i) have paid any
amount payable pursuant to Section 7.11(b) and (ii) have irrevocably waived the
Financing Condition prior to such termination by the Company pursuant to this
Section 9.01(j) or (B) Net Debt as of the Extended Financing Termination Time is
greater than $250 million.
SECTION 9.02. Effect of Termination. In the event of the termination of
---------------------
this Agreement and the abandonment of the Merger pursuant to Section 9.01, this
Agreement shall forthwith become void and there shall be no liability on the
part of any party hereto (or any of its affiliates, directors, officers,
employees, agents, legal and financial advisors or other representatives),
except (i) as set forth in Sections 7.09, 7.11(but only to the extent any fee
thereunder has become payable but has not been paid), 9.03 and 10.01, (ii)
nothing shall relieve Parent, Purchaser or any of their affiliates from
liability or damages resulting from any breach of this Agreement and (iii)
nothing herein shall relieve the Company from liability or damages resulting
from any willful breach of this Agreement.
SECTION 9.03. Fees and Expenses. (a) Except as set forth in Section 7.09
-----------------
and this Section 9.03, all fees and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(b) The Company shall pay the Parent Fee (as defined herein), plus (x)
actual, documented and reasonable out-of-pocket expenses of Parent not in excess
of $1,500,000 relating to the Transactions (including, but not limited to, fees
and expenses of counsel) plus (y) after Parent has entered into one or more
definitive agreements with respect to the Financing, actual, documented and
reasonable out-of-pocket expenses of Parent not in excess of $1,500,000 relating
to or incurred in connection with the Financing (the expenses referred to in
clauses (x) and (y) collectively, the "Expense Amount"), upon the earliest to
--------------
occur of the following events:
(i) the termination of this Agreement by Parent pursuant to Section
9.01(d), 9.01(e)(i), 9.01(e)(ii)(A) or 9.01(h); or
(ii) the termination of this Agreement by Parent or the Company
pursuant to Section 9.01(c) if at the time of termination there has been
publicly announced and not withdrawn an Acquisition Proposal and the
Company Board has withdrawn, modified or changed in a manner adverse to
Parent or Purchaser (including by amendment of the
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Schedule 14D-9) its approval or recommendation of this Agreement, the Offer
or the Merger or shall have resolved to do so;
(iii) the termination of this Agreement by Parent or the Company
pursuant to Section 9.01(c) if at the time of termination there has been
publicly announced and not withdrawn an Acquisition Proposal at a price per
Share at or higher than the Offer Price and the Company thereafter
consummates a transaction that would constitute an Acquisition Proposal
with the person making such Acquisition Proposal within fifteen months
after the termination of this Agreement at a price per Share at or higher
than the Offer Price; or
(iv) the termination of this Agreement by the Company pursuant to
Section 9.01(f).
(c) The Parent Fee payable pursuant to Section 9.03(b) shall be paid by the
Company within two business days after being notified of such by Parent or if
earlier, the time herein specified.
(d) The Company acknowledges that the agreements contained in this Section
9.03 are an integral part of the Transactions and that, without these
agreements, Parent and Purchaser would not enter into this Agreement.
Accordingly, if the Company fails to pay any amounts when due pursuant to this
Section 9.03 and, in order to obtain such payment, Parent commences a suit that
results in a judgment against the Company for such amounts, the Company shall
pay Parent's costs and expenses (including reasonable attorneys' fees) in
connection with such suit, together with interest on such amounts at the prime
rate of Bankers Trust Company on the date such amounts were required to be paid.
(e) The payment of the Parent Fee and the reimbursement of any expenses
pursuant to this Section 9.03 shall be made by wire transfer of same day funds.
Except as otherwise provided in Section 9.02, such payment and reimbursement by
the Company shall be the sole and exclusive remedy of Parent and Purchaser
against the Company and any of its subsidiaries and their respective directors,
officers, employees, agents, advisors or other representatives with respect to a
breach of any representation, warranty, covenant or agreement of the Company.
The payment by Parent to the Company of an aggregate amount of $15 million
pursuant to Section 7.11 shall be the sole and exclusive remedy of the Company
against Parent and any of its subsidiaries and their respective directors,
officers, employees, agents, advisors or other representatives with respect to a
breach (other than a willful breach) of Section 5.04 or Section 7.10; provided,
--------
however, that nothing herein shall relieve such persons from liability or
- -------
damages resulting from any breach of Section 5.04 or Section 7.10 unless the
entire $15 million is paid to the Company pursuant to Section 7.11.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Effectiveness of Representations, Warranties and
------------------------------------------------
Agreements. Except as otherwise provided in this Section 10.01, the
- ----------
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time (or the time the designees of Parent
constitute a majority of the Board, if earlier) or upon the termination of this
Agreement pursuant to Section 9.01, as the case may be, except that the
agreements set forth in Article III and in Sections 7.03 (Stock Options and
Stock Units), 7.04 (Employee Benefits), 7.05 (Indemnification), 7.06 (Further
Action), 7.08 (De-listing) and 7.09 (Expenses) shall survive the consummation of
the Merger and those set forth in Section 9.02 (Effect of Termination) and
Section 9.03 (Fees and Expenses) shall survive termination of this Agreement.
SECTION 10.02. Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by such party by notice given pursuant to this provision) or
sent by electronic transmission, with confirmation received, to the telecopy
number specified below:
(a) If to Parent or Purchaser:
RHI AG
c/o North American Refractories Company
500 Halle Building
1228 Euclid Avenue
Cleveland, Ohio 44115-1809
Telecopier No.: (216) 621-8446
Attention: General Counsel
With a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Telecopier No.: (216) 579-0212
Attention: John P. Dunn, Esq.
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(b) If to the Company:
Global Industrial Technologies, Inc.
2121 San Jacinto Street
Dallas, Texas 75201
Telecopier No.: (214) 953-4597
Attention: General Counsel
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopier No.: (212) 558-3588
Attention: James C. Morphy, Esq.
SECTION 10.03. Amendment. Subject to Section 1.03(b) and applicable law,
---------
this Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective boards of directors at any time prior to the
Effective Time; provided, however, that, after approval and adoption of this
-------- -------
Agreement by the stockholders of the Company, no amendment may be made which by
law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 10.04. Waiver. Subject to Section 1.03(b), at any time prior to
------
the Effective Time, any party hereto may with respect to any other party hereto
(a) extend the time for the performance of any of the obligations or other acts,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
SECTION 10.05. Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.06. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this
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Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the Transactions are fulfilled
to the fullest extent possible.
SECTION 10.07. Entire Agreement. (a) This Agreement (including any
----------------
exhibits hereto) and the Company Disclosure Schedule, together with the
Confidentiality Agreement, constitute the entire agreement and supersede all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof.
(b) The Confidentiality Agreement is hereby amended so as to permit
Parent, Purchaser or any of its respective affiliates or Representatives (as
defined therein) to (i) effect the Transactions, (ii) take any action otherwise
prohibited by the fourth paragraph of the Confidentiality Agreement (A)
involving a transaction pursuant to which Parent offers to acquire all of the
shares of Company Common Stock at not less than $13.00 per share or (B) at any
time following (1) a tender offer or exchange offer (other than a tender offer
that has been commenced but has not expired prior to the date hereof) for some
portion or all of the Shares shall have been commenced or publicly proposed to
be made by a person other than Parent or any of its subsidiaries, including by
the Company or its subsidiaries, or it shall have been publicly disclosed or
Parent shall have otherwise learned that any person or "group" (as defined in
Section 13(d)(3) of the Exchange Act), other than Parent or its affiliates or
any group of which any of them is a member or any affiliates controlled by it,
shall have acquired beneficial ownership (determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of more than 15% of the outstanding Shares
and (2) the purchase of Shares pursuant to the Offer, and (iii) take any action
otherwise prohibited by the sixth paragraph of the Confidentiality Agreement at
any time following the purchase of Shares pursuant to the Offer.
SECTION 10.08. Assignment, Purchaser. This Agreement shall not be assigned
---------------------
by operation of law or otherwise without the prior written consent of the other
parties hereto; provided, however, that Parent may designate, by written notice
-------- -------
to the Company, another wholly owned direct or indirect subsidiary to be a
constituent corporation in the Merger in lieu of Purchaser, in the event of
which all references herein to Purchaser shall be deemed references to such
other subsidiary, except that all representations and warranties made herein
with respect to Purchaser as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as of
the date of such designation.
SECTION 10.09. Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto and their successors and
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than Article III and
Sections 7.03 (Stock Options and Stock Units) and 7.05 (Indemnification).
SECTION 10.10. Failure or Indulgence Not Waiver; Remedies Cumulative. No
-----------------------------------------------------
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation,
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warranty or agreement herein, nor shall any single or partial exercise of any
such right preclude other or further exercise thereof or of any other right. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 10.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 10.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.13. Waiver of Jury Trial; Consent of Jurisdiction. (a) EACH OF
---------------------------------------------
PARENT, PURCHASER AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS.
(b) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF THE COURTS OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE SOLELY IN RESPECT OF THE
INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE
DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS
CONTEMPLATED HEREIN, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN
ANY ACTION FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT,
THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION MAY NOT BE BROUGHT OR IS NOT
MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR
THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO
SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A DELAWARE STATE
OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH
DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY
SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 10.02 HEREOF OR IN
SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT
SERVICE THEREOF.
-48-
<PAGE>
SECTION 10.14. Certain Definitions. For purposes of this Agreement, the
-------------------
term:
(a) "affiliate" shall mean, with respect to any specified person, any
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the person
specified, including, without limitation, any partnership or joint venture in
which the person specified (either alone, or through or together with any other
subsidiary) has, directly or indirectly, an interest of 10 percent or more.
(b) "Appointment Date" shall mean the time the persons designated by Parent
have been elected to, and shall constitute a majority of, the Company Board
pursuant to Section 1.03.
(c) "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)9601 et seq.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Company Board" shall mean the Board of Directors of the Company.
(f) "Company Disclosure Schedule" shall mean the written disclosure
schedule prepared and signed by the Company and previously delivered to Parent.
(g) "Company Material Adverse Effect" shall mean any change or effect that,
individually or when taken together with all other such changes or effects, is
reasonably likely to be materially adverse to the business, results of
operations or financial condition of the Company and its subsidiaries, taken as
a whole; provided, however, that in determining whether there has been a Company
-------- -------
Material Adverse Effect, to the extent that any adverse effect is attributable
to the following it shall be disregarded: (i) general economic, business or
financial market conditions; (ii) general industry conditions; (iii) the taking
of any action expressly permitted or required by this Agreement; (iv) the breach
by Parent or Purchaser of this Agreement; or (v) any change in any law, rule or
regulation or GAAP or interpretations thereof that directly apply to the
Company.
(h) "Company SEC Reports" shall mean each form, report, schedule, statement
and other document filed by the Company since January 1, 1998 under the Exchange
Act or the Securities Act, including any amendment to such document.
(i) "Confidentiality Agreement" shall mean the confidentiality agreement,
dated April 1, 1999, between Parent and the Company.
(j) "control" (including the terms "controlled by" and "under common
control with") shall mean the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
-49-
<PAGE>
(k) "DGCL" shall mean the Delaware General Corporation Law.
(l) "Dissenting Shares" shall mean any Shares issued and outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
properly in writing appraisal for such Shares in accordance with Section 262 of
the DGCL, if such Section 262 provides for appraisal rights for such Shares in
the Merger.
(m) "Environment" shall mean any surface or subsurface physical medium or
natural resources, including air, land, soil, surface waters, ground waters,
stream and river sediments, biota and any indoor area, surface or physical
medium.
(n) "Environmental Laws" shall mean federal, foreign, state and local laws
(including the common law), rules, regulations, ordinances, codes, orders and
judgments (including any judicial or administrative interpretations, guidances,
directives, policy statements or opinions) relating to the injury to, or the
pollution or protection of, human health and safety or the Environment.
(o) "Environmental Liabilities" shall mean any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of any required investigation, remediation, monitoring or
defense of any matter relating to human health, safety as it relates to
Hazardous Substances or the Environment of whatever kind or nature by any party,
entity or authority (A) which are incurred as a result of (i) the existence of
Hazardous Substances in, on, under, at or emanating from any Real Property, (ii)
the Company's or any of its subsidiaries' offsite transportation, treatment,
storage or disposal of Hazardous Substances or (iii) the violation of or non-
compliance with any Environmental Laws or (B) which arise under any
Environmental Laws.
(p) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(r) "fully diluted basis" shall mean the aggregate number of issued and
outstanding shares of Company Common Stock, shares of Company Common Stock
subject to issuance under vested Options and shares of Company Common Stock
subject to issuance upon exercise of outstanding warrants, calls, subscriptions
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or securities
convertible or exchangeable for such capital stock, but shall not include
unvested Options.
(s) "GAAP" shall mean United States Generally Accepted Accounting
Principles.
-50-
<PAGE>
(t) "Governmental Entity" shall mean any United States, state or foreign
governmental, administrative or regulatory authority, commission, body, agency
or other authority, or any court of competent jurisdiction.
(u) "Hazardous Substances" shall mean any regulated quantities of
petroleum, petroleum products, petroleum-derived substances, radioactive
materials, hazardous wastes, polychlorinated biphenyls, lead-based paint, radon,
urea formaldehyde, asbestos or any materials containing asbestos, and any
chemicals, contaminants, materials or substances regulated or defined as, or
included in the definition of, "hazardous substances," "extremely hazardous
substances," "hazardous wastes," "hazardous materials," "hazardous
constituents," "toxic substances," "pollutants" or "contaminants" or regulated
by reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity
or other characteristics under any Environmental Law.
(v) "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
(w) "Information Statement" shall mean the information statement to be
filed by the Company with the SEC pursuant to Section 2.07 hereof, together with
all amendments and supplements thereto and including the exhibits thereto.
(x) "IRS" shall mean the United States Internal Revenue Service.
(y) "Material Contracts" shall mean any agreement, arrangement, bond,
commitment, contract, franchise, indemnity, indenture, instrument, lease,
license, understanding or undertaking, and any amendment or supplement thereto,
in each case, not otherwise terminable on 90 days' or less notice by the
terminating party, that (i) obligates the Company or any of its subsidiaries to
pay, or entitles the Company or any of its subsidiaries to receive, an amount of
$2,500,000 or more annually (including any amounts payable as a result of the
termination thereof), (ii) involves an extension of credit other than relating
to customer accounts receivable having normal credit terms, (iii) contains non-
competition, no solicitation, no hire or change-in-control provisions or (iv) is
otherwise required to be described in or filed as an exhibit to the Company SEC
Reports.
(z) "Minimum Condition" shall mean at least a majority of the outstanding
shares of Company Common Stock (together with the shares of Company Common
Stock, if any, then owned by Parent, Purchaser or their subsidiaries) on a fully
diluted basis shall have been validly tendered and not withdrawn prior to the
expiration of the Offer.
(aa) "Parent Fee" shall mean a termination fee of $10.0 million; provided,
--------
however, that such fee shall be $5.0 million unless (i) Parent has irrevocably
- -------
waived the Financing Condition prior to the earlier of giving any notice by the
Company of an intention to terminate or actual termination under Section 9.01 by
the Company or prior to any occurrence, action or event
-51-
<PAGE>
giving rise to Parent's right to terminate under Section 9.01 or (ii) Parent has
paid the $5.0 million fee in accordance with Section 7.11(a).
(bb) "Parent Material Adverse Effect" shall mean any change or effect that,
individually or when taken together with all other such changes or effects, is
reasonably likely to prevent or delay Parent or Purchaser from performing their
obligations under this Agreement or the consummation of the Transactions.
(cc) "person" shall mean an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(dd) "Purchaser Common Stock" shall mean the common stock, par value $.01
per share, of Purchaser.
(ee) "Rights Agreement" shall mean that certain Rights Agreement dated as
of October 31, 1995 between the Company and The Bank of New York, as Rights
Agent, as amended.
(ff) "SEC" shall mean the United States Securities and Exchange Commission.
(gg) "Securities Act" shall mean the Securities Act of 1933, as amended.
(hh) "Shares" shall mean shares of Company Common Stock.
(ii) "Stock Option Plans" shall mean the 1992 Stock Compensation Plan, as
amended, and the Stock Option Plan for Non-Employee Directors, as amended and
restated.
(jj) "subsidiary" or "subsidiaries" of any person shall mean any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity;
(kk) "Superior Proposal" shall mean an Acquisition Proposal that the
Company Board determines in good faith (A) is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal, the person making the proposal and all other relevant factors, (B)
for which financing, to the extent required, is then committed or which, in the
good faith judgment of the Company Board, is reasonably capable of being
obtained by the party making the Acquisition Proposal, and (C) would, if
consummated, result in a more favorable transaction, from a financial point of
view, than the Transactions.
-52-
<PAGE>
(ll) "Tax" shall mean taxes, fees, levies, duties, tariffs, imposts and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, provincial, local or foreign taxing
authority, including, without limitation, (i) income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
(mm) "Tax Returns" shall mean returns, reports and information statements
with respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
(nn) "Year 2000 Compliant" shall mean that the computer systems (i) are
capable of recognizing, processing, managing, representing, interpreting and
manipulating correctly date-related data for dates earlier and later than
January 1, 2000; (ii) have the ability to function automatically into and beyond
the year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000; and (iii) have the ability to
recognize all "leap years," including February 29, 2000.
SECTION 10.15. Additional Definitions/Interpretive Matters. Whenever
-------------------------------------------
the words "include," "includes" or "including" are used in this Agreement, they
will be deemed to be followed by the words "without limitation." The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole, including the Company
Disclosure Schedule, and not to any particular provision of this Agreement. All
terms used herein with initial capital letters have the meanings ascribed to
them herein and all terms defined in this Agreement will have such defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term.
SECTION 10.16. Enforcement of Agreement. The parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties will be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
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<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
RHI AG
By: /s/ Dr. Georg Obermeir
----------------------------------------
Name: Dr. Georg Obermeir
Title: Chief Executive Officer
HEAT ACQUISITION CORP.
By: /s/ Dr. Georg Obermeir
----------------------------------------
Name: Dr. Georg Obermeir
Title: Chief Executive Officer
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ Rawles Fulgham
----------------------------------------
Name: Rawles Fulgham
Title: Chairman of the Board and Chief
Executive Officer
-54-
<PAGE>
Annex A
Certain Conditions to the Offer
-------------------------------
Notwithstanding any other provisions of the Offer and subject to (and not
in limitation of) Purchaser's rights or obligations with respect to extending
and amending the Offer pursuant to the terms of this Agreement, Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, payment for,
any tendered Shares, and may terminate the Offer or amend the Offer, but only to
the extent permitted by this Agreement, if (i) any applicable waiting period
under the HSR Act or any applicable laws regulating competition, antitrust,
investment or exchange controls in Germany and Mexico shall not have expired or
not have been terminated prior to the expiration of the Offer, (ii) the Minimum
Condition shall not have been satisfied or waived (pursuant to this Agreement)
prior to the expiration of the Offer or (iii) at any time on or after the date
of this Agreement and before the time of acceptance of Shares for payment
pursuant to the Offer, any of the following events shall have occurred and be
continuing:
a. there shall have been entered any judgment, order or injunction
applicable to Parent, Purchaser, the Company or any subsidiary or affiliate of
Parent or the Company, or to the Offer or the Merger, by any Governmental Entity
that (i) makes illegal or otherwise directly or indirectly restrains or
prohibits the acceptance for payment of, or payment for, some of or all the
Shares by Purchaser or any of its affiliates or the consummation of the Merger,
(ii) renders Purchaser unable to accept for payment, pay for or purchase some
or all of the Shares pursuant to the Offer, (iii) imposes limitations on the
ability of Parent, Purchaser or any other affiliate of Parent effectively to
exercise full rights of ownership of any Shares, including, without limitation,
the right to vote any Shares acquired by it pursuant to the Offer or otherwise
on all matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of this Agreement and the Merger,
(iv) prohibits, limits or otherwise materially adversely affects the ownership
or operation by Parent or any of its subsidiaries of all or any portion of the
business or assets of the Company, Parent or any of their respective
subsidiaries located in the United States or Canada or in the alternative
compels the Company, Parent or any of their respective subsidiaries to sell or
otherwise dispose of, or hold separate or otherwise divest itself of, all or any
portion of the business or assets of the Company, Parent or any of their
respective subsidiaries located in the United States or Canada, but only if in
each case such businesses or assets accounted for, individually or in the
aggregate, revenues of the Company or Parent, as the case may be, for the year
ended December 31, 1998 as set forth in the respective audited financial
statements for the period then ending for Parent or the Company in excess of the
Revenue Amount; or (v) which otherwise would materially adversely affect the
ability of the Company or Parent to consummate the Offer or the Merger or to
perform any of their respective obligations under this Agreement; or
A-1
<PAGE>
b. there shall have been (i) any statute, rule, regulation, executive
order, decree, legislation, interpretation, enacted, entered, enforced,
promulgated, amended, issued or deemed applicable by any Governmental Entity to
(x) Parent, the Company or any subsidiary or affiliate of Parent or the Company
or (y) the Offer or the Merger, or (ii) any action, suit or proceeding initiated
by any Governmental Entity, other than the application to the Offer or the
Merger of the applicable waiting periods under the HSR Act or any applicable
non-United States laws regulating competition, antitrust, investment or exchange
controls, that would result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above; or
c. there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the NYSE for a period in excess of 24
hours (excluding suspensions or limitations resulting solely from physical
damage or interference with the NYSE not related to market conditions or
suspensions or limitations triggered on the NYSE by price fluctuations on a
single trading day), (ii) a declaration of a banking moratorium or any
suspension of or material limitation on payments in respect of banks or other
lending institutions by United States, Austrian, European Community or New York
authorities or any suspension or material limitation on the extension of credit
(whether or not mandatory), (iii) a commencement of a war, insurrection, armed
conflict or other international or national crisis other than the current
hostilities in Iraq or Eastern Europe or (iv) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof not contemplated as of the date hereof; or
d. there shall have occurred any change or effect that, individually or
when taken together with all other such changes or effects, is or is reasonably
likely to be materially adverse to the business, results of operations or
financial condition of the Company and its subsidiaries, taken as a whole;
e. the Company Board or any committee thereof shall have (i) withdrawn or
modified in a manner adverse to Parent or Purchaser (including by amendment of
the Schedule 14D-9) its approval or recommendation of this Agreement, the Offer
or the Merger, (ii) recommended or taken a "neutral" position (except in
connection with a Section 6.02 Determination) with respect to the approval or
acceptance of an Acquisition Proposal from, or similar business combination
with, a person or entity other than Parent, Purchaser or their affiliates, (iii)
taken any action referred to in Section 6.02 of this Agreement that is
prohibited thereby, or (iv) publicly disclosed any intention, or resolved, to do
any of the foregoing; or
f. any of the representations and warranties of the Company set forth in
this Agreement that are qualified as to Company Material Adverse Effect shall
not be true and correct and any such representations and warranties that are not
so qualified shall (i) not be true and correct and (ii) be reasonably likely to
result in a Company Material Adverse Effect, in each case as if such
representations and warranties were made at the time of such determination; or
A-2
<PAGE>
g. the Company shall have breached any material agreement or covenant or
failed to perform any material obligation to be complied with or performed by it
under this Agreement; or
h. all consents necessary to the consummation of the Offer or the Merger,
including, without limitation, consents from parties to loans, contracts, leases
or other agreements to which the Company or any of its subsidiaries is subject,
and consents from Governmental Entities, shall not have been obtained, other
than consents the failure to obtain which is not reasonably likely to have a
Company Material Adverse Effect; or
i. this Agreement shall have been terminated in accordance with its
terms; or
j. the Financing shall not be available to Parent and Purchaser on terms
reasonably satisfactory to Parent given the structure of the Financing
contemplated for the Transactions, including, without limitation, the financing
contemplated to be arranged by Parent (the "Financing Condition").
-------------------
The foregoing conditions are for the sole benefit of Parent and Purchaser,
and may (subject to the terms of the Merger Agreement) be asserted or waived by
Parent or Purchaser, in whole or in part, regardless of the circumstances
(including any action or inaction by Parent or Purchaser) at any time and from
time to time in the good faith discretion of Parent or Purchaser; provided,
--------
however, that nothing contained herein shall relieve Parent or Purchaser of its
- -------
obligations under the Agreement. The failure by Parent or Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
A-3
<PAGE>
EXHIBIT 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table shows, as of April 12, 1999, certain information
regarding those persons known to 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
------------------- ------------------- --------
WHX Corporation................................. 2,173,800(1) 9.749
Wheeling-Pittsburgh Capital Corp.
110 East 59th Street
New York, New York 10022
Franklin Resources.............................. 1,715,900(2) 7.696
One Parker Plaza
Ft. Lee, New Jersey 07724
________________
(1) Based upon an amendment dated October 5, 1998, to Schedule 13D filed with
the Securities and Exchange Commission.
(2) Based upon a Form 13G filed with the Securities and Exchange Commission on
or about December 31, 1998.
The following table states the number of shares of Common Stock owned by
(i) each person who is a director or nominee or an executive officer named in
the Summary Compensation Table on page 11, and (ii) all current directors,
nominees, and executive officers as a group. Except as otherwise indicated, each
individual named has sole investment and voting power with respect to the
securities shown. All ownership information is as of December 31, 1998.
<TABLE>
<CAPTION>
Shares Owned Percent
Name Directly or Indirectly(1) Stock Units(2) of Class
- ---- ------------------------- -------------- ---------
<S> <C> <C> <C>
Rawles Fulgham.................................................... 52,000 0 .24%
David H. Blake.................................................... 47,000 0 .21
Samuel B. Casey, Jr............................................... 46,259 0 .21
Richard W. Vieser................................................. 81,623 0 .37
Sheldon R. Erikson................................................ 0 0 0
Graham L. Adelman................................................. 141,034 9,433 .64
Juan M. Bravo..................................................... 91,160 8,569 .41
George W. Pasley.................................................. 85,771 1,863 .39
Jeanette H. Quay.................................................. 7,218 3,161 .03
J.L. Jackson...................................................... 451,550 58,963 2.04
All current directors and nominees and executive officers
as a group (13 persons)....................................... 1,220,059 83,315 5.64
</TABLE>
____________________
(1) Includes the following shares subject to options granted under various
incentive compensation plans which are exercisable within sixty days: 46,000
shares for each of Messrs. Fulgham, Blake, Casey, and Vieser; 111,450 shares
for Mr. Adelman; 79,500 shares for Mr. Bravo; 85,250 shares for Mr. Pasley;
5,783 shares for Ms. Quay; 439,550 shares for Mr. Jackson; and 1,119,333
shares for all current directors and nominees and executive officers as a
group. 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.
(2) Includes shares of Common Stock which may be distributable after termination
of employment to persons 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".
<PAGE>
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, comprised solely of outside directors,
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 analyses
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
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 approved the Stock Ownership Requirements Policy in January
1994. This policy establishes for each officer and certain managers stock
ownership and retention levels which are stated as multiples of base salary. The
Stock Ownership Requirements Policy provides that at least 50% of any annual
incentive payment must be invested in Common Stock or credited in the form of
Stock Units under the Company's Deferred Compensation Plan until such time as
ownership requirements are satisfied. In addition, at least 25% of all shares
acquired upon exercise of stock options by these individuals must be retained
until such requirements have been met. Individuals must comply with this policy
until retirement or termination.
The required ownership level for the Chairman and Chief Executive Officer
is 3.5 times annual base salary. Accordingly, Mr. Fulgham is required to acquire
and retain, until retirement or termination, ownership of Common Stock or Stock
Units with a market value equivalent to $1,750,000. Mr. Fulgham, who was
appointed Chairman and Chief Executive Officer on December 14, 1998, owns 6,000
shares of Common Stock. Other executive officers have ownership levels ranging
from 1.5 to 2.5 times annual base salaries, or a total of $3,672,500. As of
December 31, 1998, 26.4% of this requirement had been met, in the aggregate, by
executive officers other than Mr. Fulgham.
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 financial performance objectives by the Company and individual
performance objectives. Under the Division Executive Incentive Plan ("Division
Plan"), payments to officers who are also Division Presidents are based
primarily upon financial performance objectives for the Company's major business
units. Additionally, in connection with the acquisition in July 1998 of A. P.
Green Industries, Inc. ("A. P. Green"), the Company adopted a temporary bonus
plan which provides incentives to key executives and other employees to quickly
maximize shareholder value through consolidation of the refractories operations
of A. P. Green and the Company, the results of which will include substantial
cost savings and
2
<PAGE>
manufacturing efficiencies ("Synergy Bonus Plan"). The Company estimates that
annual synergies realized by the end of 1999 will exceed $30 million. Mr. Bravo,
President of the Company's Refractory Products and Minerals business, and other
key executives and employees of the Company's Harbison-Walker Refractories
Company subsidiary are eligible to receive incentive awards under the Synergy
Bonus Plan during 1998 and 1999. No payments were made from the Synergy Bonus
Plan for 1998.
The Headquarters Plan and the Division Plan enable the Committee to provide
incentives for participants to contribute each year to growth in Company
earnings and other financial and non-financial goals. Pursuant to Board
authorization, under the Headquarters Plan, funds available for distribution for
1998 could equal up to 4% of the Company's net-after-tax profit, adjusted for
unusual items. The financial performance objectives for the Headquarters Plan
and the Division Plan for 1998 were sales and earnings before interest, taxes,
depreciation, and amortization ("EBITDA"). For 1998 funds equal to 6% of net-
after-tax profits, adjusted for unusual items, were authorized for payments
under the Division Plan. Performance objectives may be adjusted by the Committee
to reflect unanticipated, significant changes in the Company's businesses during
a plan year. For 1998 the minimum financial objectives for the Headquarters Plan
and the Division Plan were not achieved, and no incentive payments were made to
the executive officers under either plan.
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. 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 United States
manufacturing corporations, including approximately one-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 annually determines 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 and to internal equity.
In 1998 officers received salary increases averaging 6.3%, continuing the
Company's competitive position in the employment market. Three officers received
additional promotional salary increases averaging 20%, and one officer received
a special one-time bonus award of $50,000 relating to the favorable resolution
of certain claims against the Company.
In addition to ten executive officers, 72 other employees were eligible to
participate in the annual incentive plans and the Synergy Bonus Plan during
1998. Amounts earned by participants in the Division Plan for 1998, other than
eligible officers, were related to the extent to which financial and non-
financial criteria for division performance established by the Committee were
achieved.
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 actions which will result in the realization by shareholders of an
attractive return on their Common Stock investments. 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. As a result of its Stock Ownership Requirements
Policy, the Committee generally grants options to executive officers in an
amount which exceeds the average level of grants made by other companies of
similar size. However, reduced grants are made from time to time in the
discretion of the Committee.
Under the Stock Plan, on February 23, 1998, the Committee granted executive
officers options to purchase a total of 650,460 shares of Common Stock at
$15.5313 per share. These one-time grants were equivalent to the appropriate
3
<PAGE>
number of shares for which options would normally be granted to each executive
officer over a three-year period. They vest on the earlier of (i) five years
from the date of grant or (ii) 50% at such time as the average closing price of
the Company's Common Stock equals or exceeds 150% of the grant price for any 21-
consecutive trading day period and the remaining 50% at such time as the price
equals or exceeds 200% of the grant price for any 21-consecutive trading day
period.
Due to the depressed price of the Common Stock in the third quarter, the
Company offered all employees an opportunity in September 1998 to exchange
outstanding stock option agreements ("old options") for reissued options for a
reduced number of shares, exercisable at the average market price on September
18, 1998, or $6.91 ("new options"). In exchange for each new option, employees
tendered for cancellation (i) old options granted prior to January 1, 1998, on a
two-for-one share basis; and (ii) old options granted after January 1, 1998, on
a one and one-half-for-one share basis. Additional options were granted at the
same time to certain executive officers.
In total, options to purchase 950,079 shares of Common Stock were granted
under the Stock Plan in September, and previously issued options to purchase
1,083,960 shares of Common Stock were cancelled. The exercise price of the
cancelled options ranged from to $11.00 to $20.00 per share. The new option
grants have the following terms: (1) ten-year expiration date; (2) exercise
price equal to the average of the high and low market prices on grant date, or
$6.91; and (3) vesting on the earlier of (i) one year (for cancelled, non-
performance options which had been granted to non-executive officers) or 5 years
(for cancelled performance options which had been granted to executive officers)
from date of grant or (ii) 50% at such time as the average closing price of the
Company's Common Stock equals or exceeds $10.36 per share for any 21-consecutive
trading day period, and (iii) the remaining 50% at such time as the price equals
or exceeds $13.81. Vesting of new options was accelerated in accordance with
their terms upon commencement of the WHX Offer.
The following table reflects the cancellation of old options and replacement
with new options described above for named executive officers:
Ten-Year Option/SAR Repricings
<TABLE>
<CAPTION> Length
of Original
Number Option Term
of Securities Market Remaining
Underlying Price of Stock Exercise Price at Date of
Options/SAR's at Time of at Time of Repricing or
Repriced or Repricing or Repricing or New Amendment
Name Date Amended (#)(1) Amendment(2) Amendment(3) Exercise Price (years)(3)
- ---- ------- ------------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Rawles Fulgham..... 9/18/98 -- -- -- -- --
Graham L. Adelman.. 9/18/98 97,900 $6.90625 $16.19 $6.90625 9.16
Juan M. Bravo...... 9/18/98 129,000 9.90625 16.20 6.90625 8.99
George W. Pasley... 9/18/98 75,500 6.90625 16.60 6.90625 9.10
Jeanette H. Quay... 9/18/98 10,300 6.90625 17.41 6.90625 8.70
J.L. Jackson....... 9/18/98 -- -- -- -- --
</TABLE>
____________
(1) Sum of all securities underlying options reissued as follows: (i) 2 old-
for-1 new formula used for options granted prior to 1998; and (ii) 1.5 old-
to-1 new formula used for options granted during 1998.
(2) Average of the high and low market price of Common Stock on cancellation
date.
(3) Weighted average.
4
<PAGE>
Chief Executive Officer Compensation
Mr. Jackson, who served as Chairman and Chief Executive Officer and
President and Chief Operating Officer until July 1, 1998, retired on October 13,
1998, and did not receive a salary increase or any incentive payment for fiscal
1998. Mr. Jackson did not receive retirement or severance enhancements, and none
of his stock options were cancelled and replaced.
Mr. Fulgham, who served as acting President and Chief Executive Officer from
July 1, 1998, to December 14, 1998, received $1,000 per day for his services.
Upon election as Chairman and Chief Executive Officer on December 14, 1998, the
Board established an annual base salary of $500,000 for his position and granted
Mr. Fulgham an option to purchase 200,000 shares of Common Stock at the average
of the high and low market price on that date, or $8.09. The option vests at the
earlier of 5 years or 50% when the market price exceeds the exercise price by
50%, and 100% when the average market price exceeds the exercise price by 100%.
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 executive officers
to $1 million, unless specified conditions are met. Certain performance-based
compensation is not subject to the deduction limitation. The Company did not
have nondeductible compensation expense during the Transition Period and 1998
and is not expected to have such in 1999. The 1992 Stock Compensation Plan
limits the number of shares for which options may be granted in any year to a
participant in order to maximize under Section 162(m) the amount of compensation
expense that may be deductible to the Company.
Members of the Executive Compensation Committee:
Richard W. Vieser, Chairman
David H. Blake
Samuel B. Casey, Jr.
The foregoing Report on Executive Officer Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation
There were no committee interlocks.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table reflects the cash and non-cash compensation paid or
accrued for the Chief Executive Officer and named executive officers of the
Company for the years indicated.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------ ------------
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options/ Compensation
Position Year ($)(1) ($) ($)(2) SARs (#) ($)(3)
- --------------------- --- -------- -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rawles Fulgham............... 1998 $221,310(4) $ 0 $ 0 200,000 $ 0
Chairman of the Board and 1997 -- -- -- -- --
Chief Executive Officer 1996 -- -- -- -- --
Graham L. Adelman............ 1998 252,468 0 0 162,000 3,750
President and Chief 1997 220,834 20,000 6,665 9,400 3,625
Operating Officer and 1996 200,000 82,400 29,333 13,500 5,603
Director
Juan M. Bravo................ 1998 265,000 0 0 79,500 2,727
Vice President; President 1997 240,000 30,500 10,880 10,000 2,520
Harbison-Walker 1996 235,000 160,000 53,023 24,000 10,380
Refractories, Inc.
George W. Pasley............. 1998 180,000 0 0 85,250 2,363
Vice President-- 1997 160,000 15,000 5,002 5,500 0
Communications 1996 53,333 10,500 3,729 15,500 693
Jeanette H. Quay............. 1998 144,152 50,000 0 50,000 3,563
Vice President--General 1997 130,000 16,351 4,998 0 2,940
Counsel and Secretary 1996 102,315 30,000 10,569 0 1,710
J.L. Jackson................. 1998 477,724 0 0 200,000 10,656
Retired Chairman and 1997 550,000 0 0 25,500 1,917
Chief Executive Officer, 1996 550,000 350,000 56,349 34,250 20,967
President and Chief
Operating Officer
</TABLE>
_________
(1) Information provided for 1997 includes amounts paid during the Transition
Period as follows: Adelman, $37,500; Bravo, $40,000; Pasley, $26,667; Quay,
$22,000; and Jackson, $91,667.
(2) The amounts in this column represent discounts (75% of the average closing
price) given on stock units deemed purchased with incentive compensation
deferred under the Company's Deferred Compensation Plan. This column also
includes amounts paid to Mr. Bravo in 1996 and 1997 related to his
relocation from Mexico. Applicable regulations set certain reporting levels
for certain non-cash compensation.
(3) The amounts shown for 1998 include matching contributions made under the
Company's Deferred Savings Plan as follows: Mr. Adelman, $3,750; Mr. Bravo,
$2,727; Mr. Pasley, $2,363; Ms. Quay, $3,563; and Mr. Jackson, $2,042; and
payment of non-qualified pension benefits as follows: Mr. Jackson, $5,280.
No contributions or payments were made during the Transition Period. Prior
to 1997, this column reflected pension benefits on amounts deferred under
the Deferred Compensation Plan. The Deferred Compensation Plan was amended
in 1997 to eliminate pension benefit credits.
(4) Includes $44,400 paid to Mr. Fulgham as a non-employee Director prior to
his being elected Chairman of the Board and Chief Executive Officer.
6
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table summarizes options granted during the 12 months ended
December 31, 1998, and the potential value of shares subject to such options
upon their expiration in 2008. The Company granted no options during the
Transition Period.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Number of Percent of Total Assumed Annual Rate of
Securities Options/SARs Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (2)
Options/SARs Employees in Base Price Expiration -------------------------
Name Granted (#) Fiscal Year ($ /sh) Date 5% 10%
- ---- ------------- -------------- ------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Rawles Fulgham........ 5,000 0.31% $15.53 2/23/08 $ 48,838 123,764
20,000 1.23 17.13 5/20/08 215,396 545,857
200,000 12.31 8.09 12/14/08 1,018,023 2,579,871
Graham L. Adelman..... 50,000 3.08 6.91 9/18/08 217,283 550,638
50,000(1) 3.08 6.91 9/18/08 217,283 550,638
50,550 3.11 8.90 12/14/08 283,056 717,319
Juan M. Bravo......... 60,000(1) 3.69 6.91 9/18/08 260,598 660,407
George W. Pasley...... 36,666(1) 2.26 6.91 9/18/08 159,252 403,575
Jeanette H. Quay...... 2,533(1) 0.16 6.91 9/18/08 11,008 27,895
44,217 2.72 8.90 12/14/08 247,594 627,452
J.L. Jackson.......... 200,000 12.31 15.53 2/23/08 1,953,510 4,950,578
All Shareholders...... 22,108,853 10.69 148,600,484 376,582,802
</TABLE>
_______________
(1) Reflects options reissued in September 1998 on a 1.5-to-1 ratio on shares
granted earlier in 1998. Does not include grants made on a 2-to-1 ratio in
September 1998 in exchange for the cancellation of options issued prior to
1998, as follows: Mr. Adelman, 11,450 shares; Mr. Bravo, 19,500 shares; Mr.
Pasley, 10,250 shares; and Ms. Quay, 3,250 shares.
(2) 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,
1998, which then had a value of $10.69, assuming the same rates of
appreciation used to calculate the Potential Realizable Value of shares
subject to the stock options summarized in the table. Such information is
shown for comparison purposes only and does not represent an estimate or
prediction of future Company stock price.
7
<PAGE>
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Value Table
The following table summarizes the value at December 31, 1998, of all shares
subject to options granted to the named executive officers of the Company to the
extent not then exercised. No options were exercised during the Transition
Period or the 12 months ending December 31, 1998, by any of the named executive
officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year at Fiscal Year-End
---------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
(#) (#) ($) ($)
---- ----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Rawles Fulgham........ 46,000 200,000 $ 0 $518,750
Graham L. Adelman..... 111,450 50,550 421,420 131,113
Juan M. Bravo......... 79,500 0 300,609 0
George W. Pasley...... 85,250 0 322,352 0
Jeanette H. Quay...... 5,783 44,217 21,867 114,688
J. L. Jackson......... 439,550 0 0 0
</TABLE>
The year-end value of the Common Stock was $10.6875
Retirement Plans
The estimated total annual retirement benefits payable at age 65 under
pension plans in which Messrs. Fulgham, Adelman, Bravo, Pasley, and Jackson and
Ms. Quay participate are set forth below. Retirement benefits will not become
vested until the completion of a five-year vesting period, as follows: Mr.
Fulgham, 2003; Mr. Adelman, 2000; Mr. Bravo, 1999; Mr. Pasley, 2001; and Ms.
Quay, 2001. Mr. Jackson retired and began receiving pension benefits under the
plan in 1998.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
----------------------------------------------
Remuneration 5 15 25 35
------------ ------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 150,000 $ 6,486 $ 20,624 $ 38,597 $ 56,568
200,000 13,986 44,291 82,263 120,235
400,000 28,986 91,625 169,597 247,569
600,000 43,986 138,958 256,930 374,902
800,000 58,986 186,291 344,263 502,235
1,000,000 73,986 233,625 431,597 629,569
1,200,000 88,986 280,958 518,930 756,902
</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 named individuals are as
follows: Mr. Fulgham, .04 years; Mr. Adelman, 3.44 years; Mr. Bravo, 3.00 years;
Ms. Quay, 2.96 years; and Mr. Pasley, 2.33 years.
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.
8
<PAGE>
Employment and Termination Arrangements
On July 10, 1998, following Mr. Jackson's notification to the Board of his
desire to terminate his employment with the Company by retiring and to resign
his positions as Chairman of the Board, Chief Executive Officer, President and
Chief Operating Officer, the Company entered into an agreement with him which
provided, in part, that his termination as an employee would not occur until
October 13, 1998. Accordingly, through October 13, 1998, Mr. Jackson continued
to receive all compensation in the form of base pay and employee benefits to
which he was entitled on his resignation date. Mr. Jackson resigned from the
above-listed positions on July 10, 1998, and retired on October 13, 1998.
The Company has entered into change in control severance agreements with
certain executives of the Company. Generally, the form of severance agreement
(the "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 12-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 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 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 the executives become subject to
an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, the 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 Severance Agreement also provides for 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 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 purpose of the Severance Agreement, a "Change in Control" occurs (A)
when individuals who constituted the Board of Directors of the Company as of the
date of the applicable severance agreement (the "Incumbent Board") and
individuals whose election, or nomination for election by the shareholders 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 shareholders 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 severance agreements (in the general form of
the Severance Agreement) with each of Messrs. Fulgham, Adelman, Bravo, and two
other executive officers providing 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 severance agreements (in the general form of the
Severance Agreement) with each of Mr. Pasley, Ms. Quay, and
9
<PAGE>
two other executive officers providing for a Period equal to 30 months, a
Multiplier equal to two and one-half (2.5), and an excise tax gross-up payment
described above.
Pursuant to the Company's 1992 Stock Compensation Plan, as amended, 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 shareholder approval, declare some or all outstanding
options to be immediately exercisable in full. Pursuant to the related forms of
stock option agreement, 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 WHX Offer, the
options granted pursuant to such agreements have become fully vested. The change
in control definition is the same as in the Severance Agreement (see above),
except that (a) the exception to the trigger for shareholder approval of the
merger is continuing shareholders owning 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 a 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.
CERTAIN TRANSACTIONS
Ameri-Forge Corporation ("AFC"), a subsidiary of the Company, entered into
a Shareholder Agreement, Distribution Agreement, and Stock Consignment Agreement
with Linser Industrie Service GmbH ("LIS-Germany") effective March 1998, whereby
AFC acquired 25% of LIS-Germany and granted LIS-Germany certain rights to
distribute AFC products. In a separate transaction, AFC acquired a subsidiary of
Linser Industry Services, Inc. ("LIS-US") and rights to distribute LIS-Germany
products within the United States. Although Mr. Herbert Linser, an executive
officer of the Company, received no consideration from the above transactions,
his wife and children own 72% of LIS-Germany and 100% of LIS-US. During the
Transaction Period, the Company paid LIS-Germany $0 and LIS-US $39,986. During
the 12 months ended December 31, 1998, the Company paid LIS-Germany $854,341 and
LIS-US $1,046,830.
PERFORMANCE GRAPH
The graph set forth below compares, for the period October 31, 1993,
through December 31, 1998, the cumulative total returns for Global's Common
Stock, the Standard & Poor's SmallCap 600 Index, a New Peer Group comprised of
Cooper Industries, Inc., Ingersoll-Rand Company, Minerals Technologies Inc., and
Oglebay Norton Company, and the Old Peer Group comprised of Cooper Industries,
Inc., Harnischfeger Industries, Inc., Ingersoll-Rand Company, Minerals
Technologies Inc., and Oglebay Norton Company. As a result of strategic
decisions by the Company, two members of the Old Peer Group are no longer
appropriate: the Company (i) acquired A. P. Green Industries, Inc. in July 1998
and (ii) divested its surface mining equipment operations in August 1997,
thereby eliminating any similarities between the businesses of the Company and
Harnischfeger Industries, Inc. The graph assumes an investment on October 31,
1993, of $100 in each of the Company's Common Stock, the stocks comprising the
Standard & Poor's SmallCap 600 Index, and the common stocks of companies in the
New Peer Group and companies in the Old Peer Group, assuming that all paid
dividends were reinvested.
10
<PAGE>
COMPARISON OF 62 MONTH CUMULATIVE TOTAL RETURN*
AMONG GLOBAL INDUSTRIAL TECHNOLOGIES, INC.,
THE S & P SMALLCAP 600 INDEX,
A NEW PEER GROUP, AND AN OLD PEER GROUP
(Performance graph appears here illustrating
the cumulative total return from the chart below)
* $100 invested on 10/31/93 in stock or index, including reinvestment of
dividends.
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------
10/93 10/94 10/95 10/96 10/97 12/98
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. 100 99 136 148 135 85
NEW PEER GROUP 100 86 86 102 138 150
OLD PEER GROUP 100 87 90 109 141 138
S&P SMALLCAP 600 100 97 117 141 186 194
</TABLE>
The Performance Graph above 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, as amended, except to the extent that the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
11
<PAGE>
EXHIBIT 3
FORM OF AMENDMENT TO SEVERANCE AGREEMENT
FORM OF AMENDMENT TO SEVERANCE AGREEMENT, entered into as of June __, 1999
("Amendment"), to Severance Agreement, dated as of February 23, 1998 (the
"Agreement"), as amended on September 18, 1998 and October 27, 1998, 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
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 3 of the Agreement is hereby amended by the addition of the
following at the end thereof:
If the Company has entered into an agreement and the consummation of the
transactions contemplated thereunder would result in a Change in Control,
the notice referred to in the first sentence of this paragraph may not be
given until the earlier of the consummation of such transactions and the
date such agreement is terminated.
2. Defined terms used in this Agreement 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
By: By:
------------------------- -------------------------
Rawles Fulgham [Name]
Chairman [title]
<PAGE>
EXHIBIT 4
July 16, 1999
Dear Fellow Global Industrial Technologies Stockholder:
On July 12, 1999, Global Industrial Technologies, Inc. (the "Company")
entered into an Agreement and Plan of Merger (the "Merger Agreement") with RHI
AG, an Austrian stock corporation ("Parent"), and its wholly-owned indirect
subsidiary Heat Acquisition Corp., a Delaware corporation ("Purchaser"), that
provides for the acquisition of all of the shares of common stock, par value
$0.25 per share, of the Company (the "Shares" or, individually, a "Share") by
Purchaser at a price of $13.00 per Share net to the seller in cash. Under the
terms of the proposed transaction, Purchaser has commenced a tender offer (the
"Offer") for all outstanding Shares at a price of $13.00 per Share net to the
seller in cash. The Offer is currently scheduled to expire at 12:00 midnight,
New York City time, on August 12, 1999, unless extended. The completion of the
Offer is conditioned on at least a majority of the outstanding Shares having
been tendered and not withdrawn, Parent's obtaining arrangement of financing and
regulatory and other customary conditions.
Following the successful completion of the Offer and upon approval by the
affirmative vote of holders of a majority of the Shares, if required, Purchaser
will be merged with and into the Company (the "Merger") and all Shares not
purchased in the Offer, other than Shares held by the Company as treasury stock
or owned by Parent or any of its subsidiaries ("Ineligible Shares") or Shares as
to which dissenters' rights have been exercised, will be converted into the
right to receive, without interest, an amount in cash equal to $13.00 per Share.
YOUR BOARD OF DIRECTORS HAS DULY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND THE COMPANY'S STOCKHOLDERS.
THE BOARD RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER, TENDER
THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company
with the Securities and Exchange Commission. The Board of Directors of the
Company has received opinions of J.P. Morgan Securities Inc. and Wasserstein
Perella & Co., Inc., financial advisors to the Company, that, as of the date of
such opinions and based on and subject to the matters stated in such opinions,
the $13.00 per Share cash consideration to be received by holders of Shares
(other than holders of Ineligible Shares) in the Offer and the Merger is fair
from a financial point of view to such holders.
Please refer to the Offer to Purchase and related materials of Purchaser,
including a Letter of Transmittal sent to you under separate cover, for use in
tendering Shares. These documents set forth the terms and conditions of the
Offer and provide instructions as to how to tender your Shares.
WE URGE YOU TO READ THE ENCLOSED DOCUMENTS CAREFULLY.
On behalf of the Board of Directors, I thank you for your investment in and
support of the Company.
Sincerely,
/s/ Rawles Fulgham
Rawles Fulgham
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 5
FOR IMMEDIATE RELEASE:
Contacts:
RHI AG Global Industrial Technologies, Inc.
Peter Hofmann George Pasley
(+43)(1) 50213-123 Vice President Communications
214-953-4510
RHI AG AND GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
ANNOUNCE DEFINITIVE AGREEMENT FOR
ACQUISITION OF GLOBAL FOR $13 CASH PER SHARE
VIENNA AND DALLAS, July 12, 1999 - RHI AG (Vienna Stock Exchange: RHI) and
Global Industrial Technologies, Inc. (NYSE: GIX) today announced the signing of
a definitive agreement under which a subsidiary of RHI AG will make a cash
tender offer to purchase all outstanding shares of Global for $13 per share, or
approximately $300 million, in cash. The total transaction value, including
Global's indebtedness, will be over $500 million. The definitive agreement has
been approved by the parties' boards of directors.
The tender offer will commence no later than Friday, July 16, 1999. The
completion of the tender offer is conditioned on at least a majority of the
outstanding Global shares having been tendered and not withdrawn, RHI's
obtaining arrangement of financing and regulatory and other customary
conditions.
The definitive agreement also provides that, following completion of the tender
offer, the RHI subsidiary will merge with and into Global. When the merger
becomes effective, each outstanding share of Global will be converted into the
right to receive $13 per share and Global will become a subsidiary of RHI.
The Americas operations of RHI's refractories subsidiary, VRD (Veitsch-Radex-
Didier), are conducted by North American Refractories Company (NARCO), a
Cleveland-based subsidiary of RHI.
Dr. Georg Obermeir, RHI's Chairman, said, "The acquisition of Global will permit
us to operate more efficiently, thereby permitting us to better serve our
customers around the world. We are delighted that Global, including its
Harbison-Walker business, will be joining our group of companies."
Rawles Fulgham, Chairman and Chief Executive Officer of Global, stated, "We are
pleased the process Global's Board initiated in March to evaluate strategic
alternatives has achieved our goal of enhancing shareholder value. We are also
very pleased we will be combining Global with RHI, a very strong company highly
experienced in worldwide industrial manufacturing. Our customers will be well
served by this combination, and our employees will be part of a larger and more
diverse organization."
<PAGE>
Global was advised by and received fairness opinions from Wasserstein Perella &
Co., Inc. and J.P. Morgan & Co., Inc. in connection with the transaction.
Deutsche Banc Alex.Brown and Jones, Day, Reavis & Pogue are RHI's financial and
legal advisors in the transaction.
RHI is a global operator in the refractories, engineering, insulating and
waterproofing sectors with over 10,000 employees at more than 50 locations
spanning all five continents. RHI is the world market leader for refractories
and a vital partner to all industries whose activities require high temperature
production processes. RHI's customers include the steel, cement, glass and
nonferrous metals industries. In 1998 RHI reported earnings before tax of
(U.S.) $68.0 million on sales of (U.S.) $1.6 billion.
Global is a major manufacturer of technologically advanced industrial products
that support high-growth markets around the world. Products include 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. For the first quarter
ended March 31, 1999, Global reported operating earnings from continuing
operations of $14.0 million on revenues of $141.8 million.
Forward-looking statements in this press release involve risks and uncertainties
that could cause actual results to differ from those contemplated. Factors
which could cause those differences include the terms and availability of
financing, actions by other persons, legal and regulatory requirements and other
factors.
-2-
<PAGE>
EXHIBIT 6
OPINION OF WASSERSTEIN PERELLA & CO., INC.
July 12, 1999
Board of Directors
Global Industrial Technologies, Inc.
2121 San Jacinto, Suite 2500
Dallas, TX 75201
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $0.25 per
share (the "Shares") of Global Industrial Technologies, Inc. (the "Company") of
the consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 12, 1999 (the "Merger
Agreement"), among the Company, RHI AG ("Parent"), and Heat Acquisition Corp.
("Sub"). The Merger Agreement provides for, among other things, a cash tender
offer by Sub to acquire all of the outstanding Shares at a price of $13.00 per
Share (the "Tender Offer"), and for a subsequent merger of Sub with and into the
Company pursuant to which each outstanding Share (other than Ineligible Shares
and Dissenting Shares (each as defined in the Merger Agreement)) will be
converted into the right to receive $13.00 in cash (the "Merger" and, together
with the Tender Offer, the "Transaction"). The terms and conditions of the
Transaction are set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, and for purposes hereof, we have assumed that the final form
of this document will not differ in any material respect from the draft provided
to us. We have also reviewed and analyzed certain publicly available business
and financial information relating to the Company for recent years and interim
periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared by
or on behalf of the Company and provided to us for purposes of our analysis, and
we have met with management of the Company to review and discuss such
information and, among other matters, the Company's business, operations,
assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the refractories industry specifically, and in other industries
generally, that we believe to be reasonably comparable to the Transaction or
otherwise relevant to our inquiry. We have also performed such other financial
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management. We express no
<PAGE>
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the Company,
or for making or obtaining an independent valuation or appraisal of the assets
or liabilities of the Company, and no such independent valuation or appraisal
was provided to us. We also have assumed that the transactions described in the
Merger Agreement will be consummated without waiver or modification of any of
the material terms or conditions contained therein by any party thereto. Our
opinion is necessarily based on economic and market conditions and other
circumstances as they exist and can be evaluated by us as of the date hereof.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Without limiting the foregoing, an affiliated investment fund
owns 35,000 shares of common stock of the Company.
We are acting as financial advisor to the Company in connection with the
proposed Transaction and will receive a fee for our services, a significant
portion of which is contingent upon the consummation of the Transaction. In
addition, we have performed various investment banking services for the Company
in the past, including acting as financial advisor to the Company in connection
with its acquisition of A. P. Green Industries, Inc. and its sale of APG Lime
Corp., for which we have received customary fees, and its sale of Ameri-Forge
Corporation, for which we will receive customary fees.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of the Company of the consideration to be received by such
shareholders pursuant to the Transaction, and we do not express any views on any
other terms of the Transaction. Specifically, our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement. Our opinion also does not address the relative merits
of the Transaction compared to any alternative transaction or business strategy
that may be available to the Company.
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Transaction, and except
for inclusion in its entirety in any proxy statement required to be circulated
to shareholders of the Company relating to the Merger or tender offer
recommendation statement on Schedule 14D-9 from the Company to holders of Shares
relating to the Transaction, may not be quoted, referred to or reproduced at any
time or in any manner without our prior written consent. This opinion does not
constitute a recommendation to any shareholder with respect to whether such
holder should tender Shares pursuant to the Tender Offer or as to how such
holder should vote with respect to the Merger, and should not be relied upon by
any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $13.00 per Share cash consideration to be received by the shareholders of
the Company (other than holders of Ineligible Shares or Dissenting Shares)
pursuant to the Tender Offer and the Merger is fair to such shareholders from a
financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
<PAGE>
EXHIBIT 7
OPINION OF J.P. MORGAN SECURITIES INC.
July 12, 1999
The Board of Directors
Global Industrial Technologies, Inc.
2121 San Jacinto Street, Suite 2500
Dallas, Texas 75201
Attention: Rawles Fulgham
Chairman of the Board
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Global Industrial Technologies, Inc. (the
"Company") of the consideration to be paid to them in connection with the
proposed Tender Offer and Merger (each as defined below). Pursuant to the
Agreement and Plan of Merger, dated as of July 12, 1999 (the "Agreement"), by
and among the Company, RHI AG (the "Parent") and Heat Acquisition Corp., a
wholly-owned subsidiary of the Parent (the "Purchaser"), the Purchaser will make
a cash tender offer (the "Tender Offer") to acquire all of the outstanding
shares of Common Stock, par value $0.25 per share, of the Company (each, a
"Share"), at a price of $13.00 per Share (such price, or such higher price per
Share as may be paid in the Tender Offer, the "Offer Price"), net to the seller
in cash, upon the terms and subject to the conditions set forth in the
Agreement. Pursuant to the Agreement, following the consummation of the Tender
Offer, the Purchaser will be merged with and into the Company (the "Merger"and,
together with the Tender Offer, the "Transaction"), the Company shall continue
as the surviving corporation, and each Share issued and outstanding immediately
prior to the effective time of the Merger (other than certain Shares which are
to be cancelled pursuant to the Agreement and other than Dissenting Shares and
Ineligible Shares (each as defined in the Agreement)) will be converted into the
right to receive the Offer Price.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the business of the Company and of
certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving companies comparable to the Company and the consideration received for
such companies; (iv) current and historical market prices of the common stock of
the Company; (v) the audited financial statements of the Company for the fiscal
year ended December 31, 1998 and the unaudited financial statements of the
Company for the period ended March 31, 1999; (vi) certain agreements with
respect to outstanding indebtedness or obligations of the Company; (vii) certain
internal financial analyses and forecasts prepared by the Company and its
management; and (viii) the terms of other business combinations that we deemed
relevant.
In addition, we have held discussions with certain members of the management of
the Company with respect to certain aspects of the Transaction, the past and
current business operations of the Company, the financial condition and future
prospects and operations of the Company, and certain other matters we believed
necessary or appropriate to our inquiry. We have reviewed
<PAGE>
such other financial studies and analyses and considered such other information
as we deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company or otherwise reviewed by us, and
we have not assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor have any
such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us, we have assumed that they have been
reasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future results of
operations and financial condition of the Company to which such analyses or
forecasts relate. We have also assumed that the Transaction will have the tax
consequences described in discussions with, and materials furnished to us by,
representatives of the Company, and that the other transactions contemplated by
the Agreement will be consummated as described in the Agreement. We have relied
as to all legal matters relevant to rendering our opinion upon the advice of
counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We have acted as financial advisor to the Company with respect to the proposed
Transaction and have received a fee from the Company for our services. We will
also receive an additional fee if the proposed Transaction is consummated. As
you are aware, we have provided financial advisory services to the Company since
December 1998, for which we have received customary fees. In the ordinary
course of their businesses, J.P. Morgan Securities Inc. and its affiliates may
actively trade the debt and equity securities of the Company or the Parent for
their own account or for the accounts of customers and, accordingly, they may at
any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the consideration to be paid to the Company's stockholders in the
proposed Tender Offer and Merger is fair, from a financial point of view, to
such stockholders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Transaction. This opinion
does not constitute a recommendation to any stockholder of the Company as to
whether such stockholder should tender Shares in the Tender Offer or how such
stockholder should vote with respect to the Merger. This opinion may be
reproduced in full in any filing by the Company with the Securities and Exchange
Commission in connection with the Tender Offer or the Merger.
Very truly yours,
J.P. MORGAN SECURITIES INC.
