SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1997
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
Commission File Number 0-21828
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building 100, Suite 100
Augusta, Georgia 30909
706/863-7708
I.R.S. Employment I. D. 04-2917072
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days. Yes X No
The number of shares of common stock outstanding at August 8, 1997 is
16,407,507 shares.
Page 1
<PAGE>
GREENFIELD INDUSTRIES, INC.
INDEX
Page
Number
Part l - Financial Information
Item 1. Financial Statements
Consolidated Statement of Operations -
three months and six months ended
June 30, 1997 and 1996 (Unaudited).......................... 3
Consolidated Balance Sheet -
June 30, 1997 (Unaudited) and
December 31, 1996........................................... 4
Consolidated Statement of Cash Flows -
six months ended June 30, 1997 and
1996 (Unaudited)............................................ 5
Consolidated Statement of Changes in
Stockholders' Equity for the six months
ended June 30, 1997 (Unaudited)............................. 6
Notes to Consolidated Financial Statements.................. 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..............11-18
Part ll - Other Information
Item 4. Results of votes of security holders........................ 19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.............................................. 19-20
(b) Reports on Form 8-K................................... 20
Signature .......................................................... 21
Page 2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GREENFIELD INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
Net sales $149,275 $ 130,021 $279,644 $ 262,719
Cost of sales 103,917 88,336 196,394 180,464
------- ------- ------- -------
Gross profit 45,358 41,685 83,250 82,255
Selling, general and
administrative expenses 26,751 23,696 50,745 46,322
------- ------- ------- -------
Operating income 18,607 17,989 32,505 35,933
Interest expense 3,363 2,649 6,029 6,162
Dividends at 6% per annum on
company-obligated, mandatorily
redeemable convertible preferred
securities of subsidiary Greenfield
Capital Trust holding solely
convertible junior subordinated
debentures of the company 1,725 1,284 3,450 1,284
------- ------- ------- -------
Income before provision for
income taxes 13,519 14,056 23,026 28,487
Provision for income taxes 5,612 5,699 9,462 11,561
------- ------- ------- -------
Net income $ 7,907 $ 8,357 $13,564 $ 16,926
------- ------- ------- -------
------- ------- ------- -------
Earnings per share:
Primary $ 0.48 $ 0.51 $ 0.83 $ 1.04
------- ------- ------- -------
------- ------- ------- -------
Fully diluted $ 0.47 $ 0.50 $ 0.82 $ 1.02
------- ------- ------- -------
------- ------- ------- -------
Weighted average common and common
equivalent shares outstanding:
Primary 16,402 16,308 16,394 16,290
------- ------- ------- -------
------- ------- ------- -------
Fully diluted 19,190 18,391 19,182 17,332
------- ------- ------- -------
------- ------- ------- -------
Dividends per common share $ 0.05 $ 0.04 $ 0.10 $ 0.08
------- ------- ------- -------
------- ------- ------- -------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
GREENFIELD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, December 31,
1997 1996
(UNAUDITED)
ASSETS
Current assets:
Cash $ -- $ 1,721
Accounts receivable 97,616 83,199
Inventories, net 176,581 152,659
Prepaid expenses and other 6,011 8,034
-------- -------
Total current assets 280,208 245,613
Property, plant and equipment, net 165,137 144,300
Goodwill, net 181,378 169,958
Other assets, net 2,696 2,773
-------- -------
Total assets $ 629,419 $ 562,644
-------- -------
-------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,780 $ 513
Accounts payable 31,940 22,392
Accrued liabilities 37,338 35,411
-------- -------
Total current liabilities 76,058 58,316
Long-term debt 197,566 162,625
Deferred income taxes 10,300 9,524
Other long-term liabilities 18,021 16,451
-------- -------
Total liabilities 301,945 246,916
-------- -------
Commitments and contingencies (see Note 9)
Company-obligated, mandatorily redeemable
convertible preferred securities of
subsidiary Greenfield Capital Trust
holding solely convertible junior
subordinated debentures of the company 115,000 115,000
-------- -------
Stockholders' equity:
Preferred stock; $0.01 par value;
1,500,000 shares authorized; no shares
issued and outstanding
Common stock; $0.01 par value;
100,000,000 shares authorized;
16,404,757 and 16,374,925 shares
issued and outstanding, respectively 164 164
Additional paid-in capital and other 110,644 109,759
Retained earnings 104,349 92,425
Cumulative translation adjustment (2,683) (1,620)
-------- -------
Total stockholders' equity 212,474 200,728
-------- -------
Total liabilities and stockh $ 629,419 $ 562,644
-------- -------
-------- -------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
GREENFIELD INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
Six months ended
June 30,
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income $ 13,564 $ 16,926
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 8,685 7,071
Amortization 2,493 2,167
Deferred income taxes 3,332 779
Tax benefits relating to exercise of
stock options 25 154
Other 900 129
Changes in operating assets and
liabilities, net of the effects of
acquisitions:
Accounts receivable, net (7,199) (5,404)
Inventories, net (13,384) (14,256)
Prepaid expenses and other 2,343 (2,091)
Accounts payable 1,220 (12,536)
Accrued liabilities (2,427) (522)
-------- -------
Net cash provided by (used in)
operating activities 9,552 (7,583)
-------- -------
Cash flows from investing activities:
Capital expenditures (16,714) (14,979)
Purchase of businesses, net of cash
acquired (see Note 3) (33,700) (91,632)
Other 990 1,318
-------- -------
Net cash used in investing activities (49,424) (105,293)
-------- -------
Cash flows from financing activities:
Proceeds from borrowings 48,795 111,365
Payments on borrowings (6,965) (115,129)
Net proceeds from issuance of 6%
company-obligated, mandatorily redeemable
convertible preferred securities of
subsidiary Greenfield Capital Trust
holding solely convertible junior subordinated
debentures of the company -- 110,864
Dividends paid on common stock (1,640) (1,304)
Other (319) 2,607
-------- -------
Net cash provided by financing activities 39,871 108,403
-------- -------
Effect of exchange rate changes on cash (1,720) (785)
-------- -------
Net decrease in cash (1,721) (5,258)
Cash at beginning of period 1,721 5,258
-------- -------
Cash at end of period $ 0 $ 0
-------- -------
-------- -------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
GREENFIELD INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional Cumulative
Common Paid-In Retained Translation
Stock Capital Earnings Adjustment Total
& Other
Balance, December 31, 1996 $ 164 $ 109,759 $ 92,425 $ (1,620) $ 200,728
Net income 13,564 13,564
Exercise of stock options and
tax benefits related thereto 145 145
Dividends declared and paid
($0.10 per common share) (1,640) (1,640)
Partial repayment of stock
subscriptions receivable 127 127
Executive stock awards 613 613
Cumulative translation
adjustment (1,063) (1,063)
--------- ---------- ---------- ------------ -----------
Balance, June 30, 1997 $ 164 $ 110,644 $ 104,349 $ (2,683) $ 212,474
--------- ---------- ---------- ------------ -----------
--------- ---------- ---------- ------------ -----------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
GREENFIELD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per share data)
1. Unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements of Greenfield
Industries, Inc. (Company or Greenfield) have been prepared in accordance with
the instructions for Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, in the opinion of management, such information
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations for the periods
presented. Operating results for any quarter are not necessarily indicative of
the results for any other quarter or for the full year. These statements should
be read in conjunction with the consolidated financial statements and notes
relating thereto included in the Company's Form 10-K for the year ended December
31, 1996.
2. Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances are eliminated in consolidation.
3. Acquisition
On March 31, 1997, the Company acquired the outstanding shares of Hanita
Metal Works, Ltd., an Israeli-based company, and its U. S. subsidiary Hanita
Cutting Tools, Inc. (collectively, Hanita) for approximately $20,800 and assumed
indebtedness of approximately $14,600. Hanita, with its primary manufacturing,
sales and distribution operations in Israel, is a leading manufacturer of
high-quality, high performance end mills and other cutting tools for the
metalworking industry. Hanita also sells and distributes products around the
world, including the United States which accounts for approximately 40% of its
sales. The acquisition was accounted for using the purchase method of accounting
and was financed through the Company's existing unsecured credit facility. For
the year ended December 31, 1996, Hanita had net sales of approximately $27,000.
The pro forma effects of the acquisition on the Company's results of
operations are not material. The results of operations of Hanita are included in
the Company's consolidated financial statements from the date of acquisition.
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<PAGE>
4. Financing
The Company has a $180 million senior unsecured credit facility provided by
six institutions. The facility includes a $130 million multi-currency revolving
credit line and a $50 million U. S. acquisition line. The multi-currency
revolving facility provides for loans of up to DM30 million and British Pound 15
million. The revolving credit line generally bears interest at floating rates
based upon the prime rate or LIBOR, at the option of the Company.
As of June 30, 1997, borrowings outstanding under the multi-currency
facility were as follows:
<TABLE>
<S> <C> <C> <C>
Currency Amount US $ Equivalent Interest Rates
U. S. Dollars $89,600 $89,600 6.4% to 6.6%
British Pounds Sterling British Pound 8,100 $13,513 7.4% to 7.6%
German DeutscheMarks DM4,200 $2,428 3.8% to 3.9%
</TABLE>
As of June 30, 1997, there were no borrowings outstanding under the acquisition
facility.
On April 3, 1997, the Company issued $7,000 City of Pine Bluff, Arkansas
Tax- Exempt Adjustable Mode Industrial Development Revenue Bonds (Greenfield
Industries, Inc. Project), Series 1997 (Bonds) to pay for the planned equipment
purchases for its facility in Pine Bluff, Arkansas. The Bonds mature on April 3,
2009 and bear interest at 4.1% at June 30, 1997. The proceeds from the Bonds are
held in trust until needed for the equipment purchases. Approximately $1,222 has
been received from the Bonds as of June 30, 1997.
5. Company-Obligated, Mandatorily Redeemable Convertible Preferred
Securities of Subsidiary Greenfield Capital Trust Holding Solely Convertible
Junior Subordinated Debentures of the Company
On April 24, 1996, the Company completed a private placement to
institutional investors of $115,000 of 6% Convertible Preferred Securities
(liquidation preference $50 per Convertible Preferred Security). The placement
was made through the Company's wholly-owned subsidiary, Greenfield Capital Trust
(Trust), a newly-formed Delaware business trust. The securities represent
undivided beneficial ownership interests in the Trust. The sole asset of the
Trust is the $118,557 aggregate principal amount of the 6% Convertible Junior
Subordinated Deferrable Interest Debentures Due 2016 which were acquired with
the proceeds from the offering and the sale of Common Securities to the Company.
The Company's obligations under the Convertible Junior Subordinated Debentures,
the Indenture pursuant to which they were issued, the Amended and Restated
Declaration of Trust of the Trust and the Guarantee of Greenfield, taken
together, constitute a full and unconditional guarantee by Greenfield of amounts
due on the Convertible Preferred Securities. The Convertible Preferred
Securities are convertible at the option of the holders at any time into the
common stock of Greenfield at an effective conversion price of $41.25 per share
and are redeemable at Greenfield's option after
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April 15, 1999. The net proceeds of the offering of approximately $110,746 were
used by Greenfield to retire indebtedness. A registration statement relating to
resales of such Convertible Preferred Securities was declared effective by the
Securities and Exchange Commission on September 26, 1996.
6. Dividends
On March 31 and June 30, 1997, the Company paid a cash dividend of $0.05
per share to common stockholders of record on March 10 and June 10, 1997,
respectively. Total dividends paid for the six months ended June 30, 1997
approximated $1,640.
On March 31 and June 30, 1997, Greenfield Capital Trust paid quarterly cash
dividends totalling approximately $3,450 to holders of the convertible preferred
securities.
7. Supplemental balance sheet information
Supplemental balance sheet information is detailed below:
<TABLE>
<S> <C> <C>
June 30, December 31,
1997 1996
(Unaudited)
Inventories:
Raw material and component parts $ 67,636 $ 49,500
Work in process 39,490 38,055
Finished goods 69,455 65,104
$ 176,581 $ 152,659
Accrued liabilities:
Employee compensation and benefits $ 22,177 $ 19,151
Restructuring costs 2,204 3,371
Interest 2,040 1,656
Other 10,917 11,233
$ 37,338 $ 35,411
</TABLE>
8. Employee stock option plan
The Amended and Restated Employee Stock Option Plan (Employee Plan)
provides for the granting of options to purchase up to 1,000,000 shares of
common stock to the Company's executive officers and key employees at prices
equal to the fair market value of the stock on the date of grant. The Employee
Plan was amended effective May 6, 1997, to, among other things, increase the
number of options to purchase shares of common stock from 1,000,000 to
2,000,000.
Page 9
<PAGE>
9. Commitments and contingencies
The Company is involved in certain claims and legal proceedings in which
monetary damages are sought. The Company is vigorously contesting these claims.
However, resolution of these claims is not expected to occur quickly and their
ultimate outcome presently cannot be predicted. It is the opinion of management
that any liability of the Company for claims or proceedings will not materially
affect its financial position.
Page 10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of Greenfield Industries,
Inc. (Greenfield or the Company) for the three and six months ended June 30,
1997 compared to the three and six months ended June 30, 1996. This discussion
should be read in conjunction with the consolidated financial statements and
notes relating thereto included in the Company's Form 10-K for the year ended
December 31, 1996.
The Company has made the following acquisitions in the past two years:
January 1996 Rule Industries, Inc. (Rule)
June 1996 Boride Products, Inc. (Boride)
July 1996 Arkansas Cutting Tools, a division of Production
Carbide & Steel Company (ACT)
December 1996 Bassett Rotary Tool Company (Bassett)
March 1997 Hanita Metal Works, Ltd. (Hanita)
Certain statements included herein are forward-looking statements. Actual
results could differ materially from those anticipated as a result of various
factors, including cyclical or other downturns in demand for the Company's
products, manufacturing inefficiencies, the inability to achieve cost reductions
through consolidation and restructuring of acquired companies, and possible
future acquisitions that may not be complementary or additive.
Page 11
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net sales represented by certain items reflected in the Company's consolidated
statement of operations:
<TABLE>
<S> <C> <C>
Three months ended Six months ended
June 30, June 30,
(unaudited) (unaudited)
1997 1996 1997 1996
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 69.6 67.9 70.2 68.7
Gross profit 30.4 32.1 29.8 31.3
Selling, general and administrative
expenses 17.9 18.3 18.2 17.6
Operating income 12.5 13.8 11.6 13.7
Interest expense 2.2 2.0 2.2 2.4
Dividends at 6% per annum on company-
obligated, mandatorily redeemable
convertible preferred securities of subsidiary
Greenfield Capital Trust holding solely
convertible junior subordinated debentures
of the company 1.2 1.0 1.2 0.5
Income before provision for income taxes 9.1 10.8 8.2 10.8
Provision for income taxes 3.8 4.4 3.4 4.4
Net income 5.3% 6.4% 4.8% 6.4%
</TABLE>
Page 12
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1996
Net sales for the three months ended June 30, 1997 were $149.3 million, an
increase of $19.3 million, or 14.8%, over net sales of $130.0 million for the
three months ended June 30, 1996. Net sales for the three months ended June 30,
1997 were favorably affected by incremental sales of $13.0 million as a result
of acquisitions since June 30, 1996. Excluding the acquisitions, sales increased
primarily from strong sales in the energy and construction, engineered and
electronics products groups due to strong customer demand for those products.
Net sales of the six product groups, including the effects of acquisitions, were
as follows:
<TABLE>
<S> <C> <C> <C>
($ in millions)
Three months
ended June 30,
Increase
1997 1996 (Decrease)
Industrial $ 78.5 $ 67.0 $ 11.5
Engineered 20.7 16.0 4.7
Energy & Construction 18.4 16.4 2.0
Electronics 15.8 14.5 1.3
Consumer 9.2 8.8 0.4
Marine 6.7 7.3 (0.6)
$149.3 $130.0 $19.3
</TABLE>
Gross profit increased 8.8% to $45.4 million from $41.7 million in the
comparable period in 1996 primarily as a result of the sales increases discussed
above. The gross profit margin decreased to 30.4% from 32.1%. The decrease in
gross profit margin results primarily from manufacturing inefficiencies
experienced at certain industrial and consumer products facilities.
Selling, general and administrative (SG&A) expenses increased $3.1 million
in the three months ended June 30, 1997 primarily as a result of acquisitions
while SG&A expenses, as a percentage of net sales, decreased to 17.9% from 18.3%
in the comparable period in 1996, primarily as a result of the leverage from
increased sales.
Interest expense increased $0.7 million to $3.4 million for the three
months ended June 30, 1997 from $2.6 million for the three months ended June 30,
1996. The increase in interest expense resulted from the increase in the debt
level of the Company primarily due to acquisitions.
Page 13
<PAGE>
Dividends on company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary Greenfield Capital Trust holding solely
convertible junior subordinated debentures of the company (Convertible Preferred
Securities) were $1.7 million for the quarter ended June 30, 1997 as compared to
$1.3 million for the quarter ended June 30, 1996. In April 1996, the Company
sold $115 million of 6% Convertible Preferred Securities. The proceeds from the
Convertible Preferred Securities, which are effectively guaranteed by the
Company, were used to repay existing indebtedness.
Net income decreased to $7.9 million for the three months ended June 30,
1997, a decrease of $0.5 million, or 5.4%, from the same period in 1996 as a
result of the factors noted above. Primary and fully diluted earnings per share
decreased to $0.48 and $0.47 from $0.51 and $0.50 for the three months ended
June 30, 1997 and 1996, respectively.
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<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED
JUNE 30, 1996
Net sales for the six months ended June 30, 1997 were $279.6 million, an
increase of $16.9 million, or 6.4%, over net sales of $262.7 million for the six
months ended June 30, 1996. Of the $16.9 million increase in sales, $17.6
million was due to the sales of newly acquired businesses, with the remaining
$0.7 million decrease resulting from decreased sales from existing businesses.
The increases in net sales of the industrial and engineered products groups were
primarily attributable to the sales of newly acquired businesses, while the
increase in net sales of the energy and construction products group was due to
strong customer demand. Including the effect of the newly acquired businesses,
net sales of the six product groups were as follows:
<TABLE>
<S> <C> <C> <C>
($ in millions)
Six months
ended June 30,
Increase
1997 1996 (Decrease)
Industrial Products $ 144.8 $137.7 $ 7.1
Engineered Products 39.2 32.5 6.7
Energy & Construction Products 34.3 30.7 3.6
Electronics Products 30.6 31.5 (0.9)
Consumer Products 17.9 17.4 0.5
Marine Products 12.8 12.9 (0.1)
$279.6 $262.7 $16.9
</TABLE>
Gross profit increased 1.2% to $83.3 million from $82.3 million in the
comparable period in 1996 primarily as a result of the sales increases discussed
above. The gross profit margin decreased to 29.8% from 31.3%. The decrease in
gross profit margins resulted primarily from manufacturing inefficiencies
experienced at certain industrial and consumer products facilities.
SG&A expenses increased $4.4 million in the six months ended June 30, 1997
and SG&A expenses as a percentage of net sales increased to 18.2% from 17.6% in
the comparable period in 1996, primarily as a result of acquisitions.
Dividends on the Convertible Preferred Securities were $3.5 million for the
six months ended June 30, 1997 compared to $1.3 million for the six months ended
June 30, 1996. In April 1996, the Company sold $115 million of 6% Convertible
Preferred
Page 15
<PAGE>
Securities. The proceeds from the Convertible Preferred Securities, which are
effectively guaranteed by the Company, were used to repay existing indebtedness.
Net income decreased to $13.6 million for the six months ended June 30,
1997, a decrease of $3.4 million, or 19.9%, from the six months ended June 30,
1996 as a result of the factors noted above. Primary and fully diluted earnings
per share decreased to $0.83 and $0.82 from $1.04 and $1.02 for the six months
ended June 30, 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, cash provided by operating
activities was approximately $9.6 million while during the six months ended June
30, 1996, cash used in operating activities was approximately $7.6 million. In
1996, the Company paid certain past due accounts payables of the acquired
business of Rule.
Cash provided by operating and financing activities during the six months
ended June 30, 1997 was used to fund the purchase of Hanita, to finance capital
expenditures of approximately $16.7 million and to pay dividends of
approximately $1.6 million on the common stock. Net borrowings of the Company
increased by approximately $41.8 million in the six months ended June 30, 1997.
During the six months ended June 30, 1996, cash provided by operating and
financing activities was used to acquire Rule and Boride for approximately $91.6
million, to finance capital expenditures of approximately $15.0 million and to
pay dividends of approximately $1.3 million on the common stock. Net borrowings
of the Company decreased by approximately $3.8 million in the six months ended
June 30, 1996, primarily due to repayment of indebtedness from the net proceeds
from the issuance of the Convertible Preferred Securities issued by the
Company's wholly-owned subsidiary Greenfield Capital Trust, offset by the
effects of the acquisitions of Rule and Boride.
On March 27, 1997, the Company acquired all of the outstanding capital
stock of Hanita for approximately $20.8 million, and assumed indebtedness of
approximately $14.6 million. Hanita is a leading manufacturer of high quality,
high performance end mills for the metalworking industry.
The Company has a $180 million senior unsecured credit facility provided by
six institutions. The facility includes a $130 million multi-currency revolving
credit line and a $50 million U.S. acquisition line. The multi-currency
revolving facility provides for loans of up to DM30 million and British Pound 15
million. As of June 30, 1997, the Company had approximately $89.6 million,
British Pound 8.1 million and DM4.2 million outstanding under the revolving
credit line. The revolving credit line generally bears interest at floating
rates based upon the prime rate or LIBOR, at the option of the Company. As of
June 30, 1997, the interest rates on the revolving credit line ranged from
approximately 3.8% to 7.6%. As of June 30, 1997, the buying rates for British
pounds and German DeutscheMarks were $1.66 per British pound
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<PAGE>
and DM1.74 per dollar, respectively. As of June 30, 1997, the Company had no
borrowings outstanding under the acquisition line.
The senior unsecured multi-currency credit facility has a scheduled
maturity in December 2001. The agreement relating to the credit facility
contains provisions which, among other things, limit certain additional
borrowings and capital expenditures, require maintenance of certain
debt-to-capital and debt-to-cash-flow ratios and net worth levels. At June 30,
1997 and 1996, the Company was in compliance with such provisions.
On April 3, 1997, the Company issued $7 million City of Pine Bluff,
Arkansas Tax- Exempt Adjustable Mode Industrial Development Revenue Bonds
(Greenfield Industries, Inc. Project), Series 1997 (Bonds) to pay for the
planned equipment purchases for its facility in Pine Bluff, Arkansas. The Bonds
mature on April 3, 2009 and bear interest at 4.1% at June 30, 1997. The proceeds
from the Bonds are held in trust until needed for the equipment purchases.
Approximately $1.2 million has been received from the Bonds as of June 30, 1997.
On May 19, 1997, The Company repaid in full the South Carolina
Jobs-Economic Development Authority Tax-Exempt Adjustable Mode Economic
Development Revenue Bonds (Greenfield Industries, Inc. Project), Series 1995.
On March 31 and June 30, 1997, the Company paid a quarterly cash dividend
of $0.05 per share to common stockholders of record on March 10 and June 10,
1997, respectively.
On March 31 and June 30, 1997, Greenfield Capital Trust paid quarterly cash
dividends totalling approximately $3.5 million to holders of the Convertible
Preferred Securities.
As of June 30, 1997, the Company had a backlog of $47.3 million as compared
to $45.8 million as of December 31, 1996. The Company's backlog consists of firm
customer purchase orders which are subject to cancellation by the customer upon
notification. The Company anticipates that approximately 90% of its backlog at
any given time will be shipped within the next three month period.
Based on its current operating plans, the Company believes that it will
have sufficient cash from operations and its existing credit facilities to meet
its currently anticipated needs for liquidity and capital expenditures.
Page 17
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards No. 128,
Earnings Per Share, (FAS 128), was issued. Management intends to adopt FAS 128
for the quarter ending December 31, 1997 and does not expect any material effect
from this adoption.
FORWARD-LOOKING STATEMENTS
Certain statements included herein are forward-looking statements. Actual
results could differ materially from those anticipated as a result of various
factors, including cyclical or other downturns in demand for the Company
products, manufacturing inefficiencies, the inability to achieve cost reductions
through consolidation and restructuring of acquired companies, and possible
future acquisitions that may not be complementary or additive.
Page 18
<PAGE>
PART ll. OTHER INFORMATION
Item 4. Results of votes of security holders
On May 6, 1997, Greenfield Industries, Inc. held its fourth annual meeting
of stockholders since its initial public offering on July 29, 1993. At the
meeting, the following persons were elected to serve on the Board of Directors
until the next Annual Meeting of Stockholders:
For Withheld Authority
John W. Burge, Jr. 14,532,876 86,428
Peter S. Finley 14,532,876 86,428
Paul W. Jones 14,532,876 86,428
Robert E. Lefton 14,532,876 86,428
Donald E. Nickelson 14,532,876 86,428
Robert W. Pratt, Jr. 14,532,176 87,128
Julian M. Seeherman 14,532,376 86,928
Dennis W. Sheehan 14,532,876 86,428
Also at the meeting, the proposal to amend the Company's Amended and Restated
Employee Stock Option Plan was approved by the following votes:
For 12,549,504
Against 940,458
Abstain 32,860
Also at the meeting, the selection of Price Waterhouse LLP as independent
auditors of the Company was ratified by the following votes:
For 14,601,366
Against 7,065
Abstain 10,873
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Warrant, dated May 6, 1997, between Greenfield
Industries, Inc. and James C. Janning
Exhibit 10.2 Letter agreement, dated May 5, 1997, between
Greenfield Industries, Inc. and Paul W. Jones
Exhibit 10.3 Letter agreement, dated May 5, 1997, between
Greenfield Industries, Inc. and Gary L. Weller
Page 19
<PAGE>
Exhibit 10.4 Letter agreement, dated May 5, 1997, between
Greenfield Industries, Inc. and Peter K. Hunt
Exhibit 10.5 Letter agreement, dated May 5, 1997, between
Greenfield Industries, Inc. and Ajita G. Rajendra
Exhibit 10.6 Letter agreement, dated May 5, 1997, between
Greenfield Industries, Inc. and Roger B. Farley
Exhibit 10.7 Letter agreement, dated May 5, 1997, between
Greenfield Industries, Inc. and Mark R. Richards
Exhibit 11 Statement Re: Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On April 15, 1997, the Company filed a report on Form 8-K pertaining to the
acquisition of Hanital Metal Works, Ltd. on March 31, 1997.
On May 7, 1997, the Company filed a report on Form 8-K describing an open market
purchase program for the Company's common stock.
Page 20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREENFIELD INDUSTRIES, INC.
Date: August 13, 1997 /s/ Gary L. Weller
---------------------------------------
Gary L. Weller
Executive Vice President
Chief Financial Officer
(Principal Accounting and Financial Officer)
Page 21
THE WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED OR SOLD UNLESS (i) A
REGISTRATION STATEMENT UNDER SUCH LAWS IS THEN IN EFFECT WITH RESPECT THERETO,
OR (ii) A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED.
Number of Warrants
Represented Hereby -- 5,000
No. W-2
WARRANT
To Purchase Common Stock, par value $.01 per share, of
GREENFIELD INDUSTRIES, INC.
THIS CERTIFIES that, for value received,
James C. Janning
(the "Holder") is the owner of the above-indicated number of Warrants, each
Warrant entitling the Holder to subscribe for and purchase from Greenfield
Industries, Inc., a Delaware corporation (the "Company"), at the price of $15.50
per share (subject to adjustment as noted below) (the "Exercise Price") at any
time before 5:00 p.m., Eastern Standard Time, on July 29, 2003 (the "Exercise
Period") (subject to the provisions of Section 1 hereof), one fully paid and
nonassessable share of the Company's Common Stock, par value $.01 per share
(subject to adjustment as noted below) (the "Exercise Rate").
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise of This Warrant. (a) The rights represented by this Warrant
shall become exercisable by the Holder with respect to all of the shares of
Common Stock subject to this Warrant on May 6, 1997, provided that this Warrant
shall cease to be exercisable at the expiration of the Exercise Period. Subject
to the preceding sentence, the rights represented by this Warrant may be
exercised by the Holder hereof, in whole or in part
<PAGE>
(but not as to a fractional share of Common Stock), by the surrender of this
Warrant (properly endorsed if required) at the of- fice of the Company, 2743
Perimeter Parkway, Building One Hundred, Suite 100, Augusta, Georgia 30909, or
such other office or agency of the Company as the Company may designate by
notice in writing to the Holder hereof at the address of such Holder appearing
on the books of the Company, at any time during the Exercise Period upon payment
to it of the Exercise Price for such shares in immediately available funds. The
Company agrees that the shares so purchased shall be deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for such
shares as aforesaid. Certificates for the shares so purchased shall be delivered
to the Holder hereof within a reasonable time, not exceeding five (5) business
days, after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the Holder within such time. The issuance
of certificates for shares of Common Stock upon the exercise of this Warrant
shall be made subject to the payment by the Holder of any original issue or
transfer tax in respect of the issuance of such certificates and the Holder
shall indemnify and hold the Company harmless with respect to any such tax. The
Company may require the Holder to make such representations and furnish such
information as the Company may consider appropriate or necessary under any
applicable federal or state securities laws in connection with the issuance of
any shares upon exercise of this Warrant.
(b) The Exercise Price and Exercise Rate shall be subject to the following
adjustments:
In the event that a dividend shall be declared on the Common Stock
payable in shares of Common Stock, the number of shares of Common Stock
with respect to which this War- rant has not been exercised shall be
adjusted by adding to each such share of Common Stock the number of shares
of Common Stock which would be distributable in respect thereof if such
shares had been outstanding on the record date for the issuance of such
stock dividend. In the event that the outstanding shares of Common Stock
shall be converted into or exchanged for a different number of shares or
other securities of the Company or of another corporation, whether through
stock split, recapitaliza- tion, split-up, merger, consolidation,
reorganization, combination or other issuance or exchange of shares, then
there shall be substituted for each share of Common Stock with respect to
which this Warrant has not been exercised, the number and kind of shares or
other securities which each outstanding share of Common Stock shall have
been so converted into or for which each share shall have been so
exchanged. In the case of any substitution or adjustment
<PAGE>
as provided in this Section, the Exercise Price of any shares with respect
to which this Warrant has not been exercised shall be adjusted so that
there will be no change in the aggregate purchase price payable upon
exercise of this Warrant in whole.
(c) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effect- ing the exercise of this Warrant, the full
number of shares of Common Stock then deliverable upon the exercise of this
Warrant. The Company shall take at all times such corporate action as shall be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant in
accordance with the provisions hereof, free from all liens, charges and security
interests with respect to the issue thereof. The Company in its discretion may
postpone the issuance and delivery of shares upon any exercise of this War- rant
until completion of a securities exchange listing or registration or other
qualification of such shares under any state or federal law, rule or regulation
as the Company may consider appropriate.
(d) No fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be issued upon any exercise of this Warrant.
2. No Rights as a Stockholder. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company.
3. No Transfer of Warrants. This Warrant and the rights hereunder may not
be assigned or transferred by Holder, in whole or in part, other than by will or
by the laws of descent and distribution, and may be exercised during the
lifetime of the Holder solely by the Holder.
4. Exchanges of Warrants. This Warrant is changeable, upon the surrender
hereof by the Holder to such office or agency of the Company, for new Warrants
of like tenor representing in the aggregate the right to subscribe for and
purchase the number of shares which may be subscribed for and purchased
hereunder, each of such new warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said Holder hereof at
the time of such surrender.
5. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and
<PAGE>
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
6. Remedies. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
7. Notices. Except as otherwise provided herein, any notices hereunder
shall be deemed to have been given five (5) days after having been mailed in the
United States by registered or certified mail, addressed if given to the Company
to the principal office of the Company, Attention: President, or if given to the
Holder addressed to the Holder at his address as the same shall appear on the
books of the Company.
8. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by both the
Company and the Holder. This Warrant is being delivered in the State of
Georgia and shall be construed and enforced in accordance with and governed by
the laws of such State (without giving effect to such jurisdiction's conflict of
laws principles).
The headings in this Warrant are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof.
9. Expiration of Warrants. At 5:00 p.m. Eastern Standard Time on the last
day of its Exercise Period, the Warrant, if not exercised prior thereto, shall
be and become wholly void and of no value or force and effect.
IN WITNESS WHEREOF, Greenfield Industries, Inc. has caused this Warrant to
be executed by its duly authorized officer, this Warrant to be dated May 6,
1997.
GREENFIELD INDUSTRIES, INC.
By:/s/ Gary L. Weller
Name: Gary L. Weller
Title: Senior Vice President
and Chief Financial
Officer
<PAGE>
Exercise Notice
(To be signed only upon exercise of Warrant)
To GREENFIELD INDUSTRIES, INC.
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________ shares of Common Stock, par value $.01 per
share, of GREENFIELD INDUSTRIES, INC. and herewith makes payment of $___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, ____________________, whose address is
_______________________________________________.
Dated: _________, _____
(Signature must conform in
all respects to name of
Holder as specified on the
face of the Warrant)
___________________________
(Warrant)
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building One Hundred, Suite 100
Augusta, Georgia 30909
May 5, 1997
Mr. Paul W. Jones
728 Michael Creek
Evans, GA 30809
Dear Mr. Jones:
Greenfield Industries, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; provided, however, that commencing on
January 1, 1999 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year unless at least 30 days
prior to such January 1st date, the Company shall have given notice that it
does not wish to extend this Agreement, and provided, further, that following a
change in control of the Company (as hereinafter defined) the term of this
Agreement shall automatically extend to the date which is two years following
such change in control.
<PAGE>
May 5, 1997
Page 2
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is (a) because
of your death or Retirement, (b) by the Company for Cause or Disability or (c)
by you other than for Good Reason.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full time
basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(B) Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to its salaried
employees or in accordance with any retirement arrangement established with your
consent with respect to you.
(ii) Cause. The Company may terminate your employment for Cause. For the
purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial
<PAGE>
May 5, 1997
Page 3
performance is delivered to you by the Board which specifically identifies the
manner in which the Board believes that you have not substantially performed you
duties, or (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(iii) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement "Good Reason" shall mean:
(A) without your express written consent, the assignment to you of any
duties materially inconsistent with your positions, duties, responsibilities and
status with the Company immediately prior to a change in control;
(B) a reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the Company's requiring you to be based anywhere other than the
Company's facility where you performed your duties for the Company immediately
prior to a change in control; and;
(D) the failure by the Company to continue in effect any benefit or
compensation plan, pension plan, life insurance plan, health and accident plan
or disability plan in which you are participating at the time of a change in
control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(E) the failure of the Company to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in paragraph 5 hereof;
or
<PAGE>
May 5, 1997
Page 4
(F) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of subparagraph
(iv) below (and, if applicable, subparagraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by you pursuant to subparagraph (iii) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until this Agreement is
terminated pursuant to paragraph 3(i) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(ii) If your employment shall be terminated for Cause, the Company shall
pay you your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have no
further obligations to you under this Agreement.
(iii) If the Company shall terminate your employment other than pursuant to
paragraph 3(i) or 3(ii) hereof or if you shall terminate your employment for
<PAGE>
May 5, 1997
Page 5
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(A) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the sum of your
annual base salary at the rate in effect as of the Date of Termination
multiplied by (b) the number one (1);
(C) in lieu of a bonus under the Company's Executive Incentive Plan (or any
successor bonus plan or arrangement), an amount in cash equal to 50% of the
average bonus payment awarded under such plan for the three years prior to the
Date or Termination (or such lesser period of years as you have been employed by
the Company);
(D) in lieu of shares of common stock of the Company, par value $.01 per
share ("Company Shares"), issuable under the Company's Amended and Restated
Employee Stock Option Plan, as amended, or any other stock option plan adopted
from time to time by the Company for its key executives (the "Plan"), issuable
upon exercise of options ("Options") granted to you under the Company's Plan,
(which Options shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the aggregate spread
between the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the closing price of Company Shares as
reported on the National Association of Securities Dealers Automatic Quotation
System National Market System ("NASDAQ") on the Date of Termination (or the
closing price on any exchange on which the Company Shares are then traded, if
applicable), or (b) the highest price per Company Share actually paid in
connection with any change in control of the Company;
(E) the Company shall also pay all legal fees and expenses incurred by you
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(iv) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
<PAGE>
May 5, 1997
Page 6
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
(v) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
<PAGE>
May 5, 1997
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Georgia.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Augusta,
Georgia in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
paragraph 3(v) hereof. Amounts paid under this paragraph are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
May 5, 1997
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREENFIELD INDUSTRIES, INC.
By /s/ Donald E. Nickelson
-------------------------------------
Donald E. Nickelson
Chairman of the Board
AGREED TO THIS 5th DAY
OF MAY, 1997
/s/ Paul W. Jones
- ----------------------------
Paul W. Jones
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building One Hundred, Suite 100
Augusta, Georgia 30909
May 5, 1997
Mr. Gary L. Weller
3806 Medinah Court
Martinez, GA 30907
Dear Mr. Weller:
Greenfield Industries, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; provided, however, that commencing on
January 1, 1999 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year unless at least 30 days
prior to such January 1st date, the Company shall have given notice that it
does not wish to extend this Agreement, and provided, further, that following a
change in control of the Company (as hereinafter defined) the term of this
Agreement shall automatically extend to the date which is two years following
such change in control.
<PAGE>
May 5, 1997
Page 2
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is (a) because
of your death or Retirement, (b) by the Company for Cause or Disability or (c)
by you other than for Good Reason.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full time
basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(B) Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to its salaried
employees or in accordance with any retirement arrangement established with your
consent with respect to you.
(ii) Cause. The Company may terminate your employment for Cause. For the
purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial
<PAGE>
May 5, 1997
Page 3
performance is delivered to you by the Board which specifically identifies the
manner in which the Board believes that you have not substantially performed you
duties, or (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(iii) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement "Good Reason" shall mean:
(A) without your express written consent, the assignment to you of any
duties materially inconsistent with your positions, duties, responsibilities and
status with the Company immediately prior to a change in control;
(B) a reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the Company's requiring you to be based anywhere other than the
Company's facility where you performed your duties for the Company immediately
prior to a change in control; and;
(D) the failure by the Company to continue in effect any benefit or
compensation plan, pension plan, life insurance plan, health and accident plan
or disability plan in which you are participating at the time of a change in
control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(E) the failure of the Company to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in paragraph 5 hereof;
or
<PAGE>
May 5, 1997
Page 4
(F) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of subparagraph
(iv) below (and, if applicable, subparagraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by you pursuant to subparagraph (iii) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until this Agreement is
terminated pursuant to paragraph 3(i) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(ii) If your employment shall be terminated for Cause, the Company shall
pay you your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have no
further obligations to you under this Agreement.
(iii) If the Company shall terminate your employment other than pursuant to
paragraph 3(i) or 3(ii) hereof or if you shall terminate your employment for
<PAGE>
May 5, 1997
Page 5
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(A) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the sum of your
annual base salary at the rate in effect as of the Date of Termination
multiplied by (b) the number one (1);
(C) in lieu of a bonus under the Company's Executive Incentive Plan (or any
successor bonus plan or arrangement), an amount in cash equal to 50% of the
average bonus payment awarded under such plan for the three years prior to the
Date or Termination (or such lesser period of years as you have been employed by
the Company);
(D) in lieu of shares of common stock of the Company, par value $.01 per
share ("Company Shares"), issuable under the Company's Amended and Restated
Employee Stock Option Plan, as amended, or any other stock option plan adopted
from time to time by the Company for its key executives (the "Plan"), issuable
upon exercise of options ("Options") granted to you under the Company's Plan,
(which Options shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the aggregate spread
between the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the closing price of Company Shares as
reported on the National Association of Securities Dealers Automatic Quotation
System National Market System ("NASDAQ") on the Date of Termination (or the
closing price on any exchange on which the Company Shares are then traded, if
applicable), or (b) the highest price per Company Share actually paid in
connection with any change in control of the Company;
(E) the Company shall also pay all legal fees and expenses incurred by you
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(iv) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
<PAGE>
May 5, 1997
Page 6
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
(v) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
<PAGE>
May 5, 1997
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Georgia.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Augusta,
Georgia in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
paragraph 3(v) hereof. Amounts paid under this paragraph are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
May 5, 1997
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREENFIELD INDUSTRIES, INC.
By /s/ Paul W. Jones
-------------------------------------
Paul W. Jones
President and Chief Executive Officer
AGREED TO THIS 5th DAY
OF MAY, 1997
/s/ Gary L. Weller
- ----------------------------
Gary L. Weller
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building One Hundred, Suite 100
Augusta, Georgia 30909
May 5, 1997
Mr. Peter K. Hunt
578 Medinah Drive
Martinez, GA 30907
Dear Mr. Hunt:
Greenfield Industries, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; provided, however, that commencing on
January 1, 1999 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year unless at least 30 days
prior to such January 1st date, the Company shall have given notice that it
does not wish to extend this Agreement, and provided, further, that following a
change in control of the Company (as hereinafter defined) the term of this
Agreement shall automatically extend to the date which is two years following
such change in control.
<PAGE>
May 5, 1997
Page 2
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is (a) because
of your death or Retirement, (b) by the Company for Cause or Disability or (c)
by you other than for Good Reason.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full time
basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(B) Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to its salaried
employees or in accordance with any retirement arrangement established with your
consent with respect to you.
(ii) Cause. The Company may terminate your employment for Cause. For the
purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial
<PAGE>
May 5, 1997
Page 3
performance is delivered to you by the Board which specifically identifies the
manner in which the Board believes that you have not substantially performed you
duties, or (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(iii) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement "Good Reason" shall mean:
(A) without your express written consent, the assignment to you of any
duties materially inconsistent with your positions, duties, responsibilities and
status with the Company immediately prior to a change in control;
(B) a reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the Company's requiring you to be based anywhere other than the
Company's facility where you performed your duties for the Company immediately
prior to a change in control; and;
(D) the failure by the Company to continue in effect any benefit or
compensation plan, pension plan, life insurance plan, health and accident plan
or disability plan in which you are participating at the time of a change in
control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(E) the failure of the Company to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in paragraph 5 hereof;
or
<PAGE>
May 5, 1997
Page 4
(F) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of subparagraph
(iv) below (and, if applicable, subparagraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by you pursuant to subparagraph (iii) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until this Agreement is
terminated pursuant to paragraph 3(i) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(ii) If your employment shall be terminated for Cause, the Company shall
pay you your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have no
further obligations to you under this Agreement.
(iii) If the Company shall terminate your employment other than pursuant to
paragraph 3(i) or 3(ii) hereof or if you shall terminate your employment for
<PAGE>
May 5, 1997
Page 5
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(A) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the sum of your
annual base salary at the rate in effect as of the Date of Termination
multiplied by (b) the number one (1);
(C) in lieu of a bonus under the Company's Executive Incentive Plan (or any
successor bonus plan or arrangement), an amount in cash equal to 50% of the
average bonus payment awarded under such plan for the three years prior to the
Date or Termination (or such lesser period of years as you have been employed by
the Company);
(D) in lieu of shares of common stock of the Company, par value $.01 per
share ("Company Shares"), issuable under the Company's Amended and Restated
Employee Stock Option Plan, as amended, or any other stock option plan adopted
from time to time by the Company for its key executives (the "Plan"), issuable
upon exercise of options ("Options") granted to you under the Company's Plan,
(which Options shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the aggregate spread
between the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the closing price of Company Shares as
reported on the National Association of Securities Dealers Automatic Quotation
System National Market System ("NASDAQ") on the Date of Termination (or the
closing price on any exchange on which the Company Shares are then traded, if
applicable), or (b) the highest price per Company Share actually paid in
connection with any change in control of the Company;
(E) the Company shall also pay all legal fees and expenses incurred by you
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(iv) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
<PAGE>
May 5, 1997
Page 6
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
(v) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
<PAGE>
May 5, 1997
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Georgia.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Augusta,
Georgia in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
paragraph 3(v) hereof. Amounts paid under this paragraph are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
May 5, 1997
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREENFIELD INDUSTRIES, INC.
By /s/ Paul W. Jones
-------------------------------------
Paul W. Jones
President and Chief Executive Officer
AGREED TO THIS 5th DAY
OF MAY, 1997
/s/ Peter K. Hunt
- ----------------------------
Peter K. Hunt
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building One Hundred, Suite 100
Augusta, Georgia 30909
May 5, 1997
Mr. Ajita G. Rajendra
1210 BonAir Drive
Augusta, GA 30907
Dear Mr. Rajendra:
Greenfield Industries, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; provided, however, that commencing on
January 1, 1999 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year unless at least 30 days
prior to such January 1st date, the Company shall have given notice that it
does not wish to extend this Agreement, and provided, further, that following a
change in control of the Company (as hereinafter defined) the term of this
Agreement shall automatically extend to the date which is two years following
such change in control.
<PAGE>
May 5, 1997
Page 2
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is (a) because
of your death or Retirement, (b) by the Company for Cause or Disability or (c)
by you other than for Good Reason.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full time
basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(B) Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to its salaried
employees or in accordance with any retirement arrangement established with your
consent with respect to you.
(ii) Cause. The Company may terminate your employment for Cause. For the
purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial
<PAGE>
May 5, 1997
Page 3
performance is delivered to you by the Board which specifically identifies the
manner in which the Board believes that you have not substantially performed you
duties, or (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(iii) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement "Good Reason" shall mean:
(A) without your express written consent, the assignment to you of any
duties materially inconsistent with your positions, duties, responsibilities and
status with the Company immediately prior to a change in control;
(B) a reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the Company's requiring you to be based anywhere other than the
Company's facility where you performed your duties for the Company immediately
prior to a change in control; and;
(D) the failure by the Company to continue in effect any benefit or
compensation plan, pension plan, life insurance plan, health and accident plan
or disability plan in which you are participating at the time of a change in
control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(E) the failure of the Company to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in paragraph 5 hereof;
or
<PAGE>
May 5, 1997
Page 4
(F) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of subparagraph
(iv) below (and, if applicable, subparagraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by you pursuant to subparagraph (iii) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until this Agreement is
terminated pursuant to paragraph 3(i) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(ii) If your employment shall be terminated for Cause, the Company shall
pay you your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have no
further obligations to you under this Agreement.
(iii) If the Company shall terminate your employment other than pursuant to
paragraph 3(i) or 3(ii) hereof or if you shall terminate your employment for
<PAGE>
May 5, 1997
Page 5
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(A) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the sum of your
annual base salary at the rate in effect as of the Date of Termination
multiplied by (b) the number one (1);
(C) in lieu of a bonus under the Company's Executive Incentive Plan (or any
successor bonus plan or arrangement), an amount in cash equal to 50% of the
average bonus payment awarded under such plan for the three years prior to the
Date or Termination (or such lesser period of years as you have been employed by
the Company);
(D) in lieu of shares of common stock of the Company, par value $.01 per
share ("Company Shares"), issuable under the Company's Amended and Restated
Employee Stock Option Plan, as amended, or any other stock option plan adopted
from time to time by the Company for its key executives (the "Plan"), issuable
upon exercise of options ("Options") granted to you under the Company's Plan,
(which Options shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the aggregate spread
between the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the closing price of Company Shares as
reported on the National Association of Securities Dealers Automatic Quotation
System National Market System ("NASDAQ") on the Date of Termination (or the
closing price on any exchange on which the Company Shares are then traded, if
applicable), or (b) the highest price per Company Share actually paid in
connection with any change in control of the Company;
(E) the Company shall also pay all legal fees and expenses incurred by you
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(iv) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
<PAGE>
May 5, 1997
Page 6
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
(v) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
<PAGE>
May 5, 1997
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Georgia.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Augusta,
Georgia in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
paragraph 3(v) hereof. Amounts paid under this paragraph are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
May 5, 1997
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREENFIELD INDUSTRIES, INC.
By /s/ Paul W. Jones
-------------------------------------
Paul W. Jones
President and Chief Executive Officer
AGREED TO THIS 5th DAY
OF MAY, 1997
/s/ Ajita G. Rajendra
- ----------------------------
Ajita G. Rajendra
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building One Hundred, Suite 100
Augusta, Georgia 30909
May 5, 1997
Mr. Roger B. Farley
4109 Heritage Ridge
Evans, GA 30809
Dear Mr. Farley:
Greenfield Industries, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; provided, however, that commencing on
January 1, 1999 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year unless at least 30 days
prior to such January 1st date, the Company shall have given notice that it
does not wish to extend this Agreement, and provided, further, that following a
change in control of the Company (as hereinafter defined) the term of this
Agreement shall automatically extend to the date which is two years following
such change in control.
<PAGE>
May 5, 1997
Page 2
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is (a) because
of your death or Retirement, (b) by the Company for Cause or Disability or (c)
by you other than for Good Reason.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full time
basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(B) Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to its salaried
employees or in accordance with any retirement arrangement established with your
consent with respect to you.
(ii) Cause. The Company may terminate your employment for Cause. For the
purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial
<PAGE>
May 5, 1997
Page 3
performance is delivered to you by the Board which specifically identifies the
manner in which the Board believes that you have not substantially performed you
duties, or (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(iii) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement "Good Reason" shall mean:
(A) without your express written consent, the assignment to you of any
duties materially inconsistent with your positions, duties, responsibilities and
status with the Company immediately prior to a change in control;
(B) a reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the Company's requiring you to be based anywhere other than the
Company's facility where you performed your duties for the Company immediately
prior to a change in control; and;
(D) the failure by the Company to continue in effect any benefit or
compensation plan, pension plan, life insurance plan, health and accident plan
or disability plan in which you are participating at the time of a change in
control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(E) the failure of the Company to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in paragraph 5 hereof;
or
<PAGE>
May 5, 1997
Page 4
(F) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of subparagraph
(iv) below (and, if applicable, subparagraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by you pursuant to subparagraph (iii) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until this Agreement is
terminated pursuant to paragraph 3(i) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(ii) If your employment shall be terminated for Cause, the Company shall
pay you your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have no
further obligations to you under this Agreement.
(iii) If the Company shall terminate your employment other than pursuant to
paragraph 3(i) or 3(ii) hereof or if you shall terminate your employment for
<PAGE>
May 5, 1997
Page 5
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(A) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the sum of your
annual base salary at the rate in effect as of the Date of Termination
multiplied by (b) the number one (1);
(C) in lieu of a bonus under the Company's Executive Incentive Plan (or any
successor bonus plan or arrangement), an amount in cash equal to 50% of the
average bonus payment awarded under such plan for the three years prior to the
Date or Termination (or such lesser period of years as you have been employed by
the Company);
(D) in lieu of shares of common stock of the Company, par value $.01 per
share ("Company Shares"), issuable under the Company's Amended and Restated
Employee Stock Option Plan, as amended, or any other stock option plan adopted
from time to time by the Company for its key executives (the "Plan"), issuable
upon exercise of options ("Options") granted to you under the Company's Plan,
(which Options shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the aggregate spread
between the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the closing price of Company Shares as
reported on the National Association of Securities Dealers Automatic Quotation
System National Market System ("NASDAQ") on the Date of Termination (or the
closing price on any exchange on which the Company Shares are then traded, if
applicable), or (b) the highest price per Company Share actually paid in
connection with any change in control of the Company;
(E) the Company shall also pay all legal fees and expenses incurred by you
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(iv) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
<PAGE>
May 5, 1997
Page 6
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
(v) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
<PAGE>
May 5, 1997
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Georgia.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Augusta,
Georgia in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
paragraph 3(v) hereof. Amounts paid under this paragraph are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
May 5, 1997
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREENFIELD INDUSTRIES, INC.
By /s/ Paul W. Jones
-------------------------------------
Paul W. Jones
President and Chief Executive Officer
AGREED TO THIS 5th DAY
OF MAY, 1997
/s/ Roger B. Farley
- ----------------------------
Roger B. Farley
GREENFIELD INDUSTRIES, INC.
2743 Perimeter Parkway
Building One Hundred, Suite 100
Augusta, Georgia 30909
May 5, 1997
Mr. Mark R. Richards
598 Medinah Drive
Martinez, GA 30907
Dear Mr. Richards:
Greenfield Industries, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; provided, however, that commencing on
January 1, 1999 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year unless at least 30 days
prior to such January 1st date, the Company shall have given notice that it
does not wish to extend this Agreement, and provided, further, that following a
change in control of the Company (as hereinafter defined) the term of this
Agreement shall automatically extend to the date which is two years following
such change in control.
<PAGE>
May 5, 1997
Page 2
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 5(f) of Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing a majority of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is (a) because
of your death or Retirement, (b) by the Company for Cause or Disability or (c)
by you other than for Good Reason.
(i) Disability; Retirement.
(A) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full time
basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(B) Termination by the Company or you of your employment based on
"Retirement" shall mean termination in accordance with the Company's retirement
policy, including early retirement, generally applicable to its salaried
employees or in accordance with any retirement arrangement established with your
consent with respect to you.
(ii) Cause. The Company may terminate your employment for Cause. For the
purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial
<PAGE>
May 5, 1997
Page 3
performance is delivered to you by the Board which specifically identifies the
manner in which the Board believes that you have not substantially performed you
duties, or (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this paragraph and specifying the particulars
thereof in detail.
(iii) Good Reason. You may terminate your employment for Good Reason. For
purposes of this Agreement "Good Reason" shall mean:
(A) without your express written consent, the assignment to you of any
duties materially inconsistent with your positions, duties, responsibilities and
status with the Company immediately prior to a change in control;
(B) a reduction by the Company in your base salary as in effect on the date
hereof or as the same may be increased from time to time;
(C) the Company's requiring you to be based anywhere other than the
Company's facility where you performed your duties for the Company immediately
prior to a change in control; and;
(D) the failure by the Company to continue in effect any benefit or
compensation plan, pension plan, life insurance plan, health and accident plan
or disability plan in which you are participating at the time of a change in
control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(E) the failure of the Company to obtain the assumption of the agreement to
perform this Agreement by any successor as contemplated in paragraph 5 hereof;
or
<PAGE>
May 5, 1997
Page 4
(F) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of subparagraph
(iv) below (and, if applicable, subparagraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by you pursuant to subparagraph (iii) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to subparagraph (iii)
above, the date specified in the Notice of Termination, and (C) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(i) During any period that you fail to perform your duties hereunder as a
result of incapacity due to physical or mental illness, you shall continue to
receive your full base salary at the rate then in effect until this Agreement is
terminated pursuant to paragraph 3(i) hereof. Thereafter, your benefits shall be
determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(ii) If your employment shall be terminated for Cause, the Company shall
pay you your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have no
further obligations to you under this Agreement.
(iii) If the Company shall terminate your employment other than pursuant to
paragraph 3(i) or 3(ii) hereof or if you shall terminate your employment for
<PAGE>
May 5, 1997
Page 5
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(A) your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given;
(B) in lieu of any further salary payments to you for periods subsequent to
the Date of Termination, an amount equal to the product of (a) the sum of your
annual base salary at the rate in effect as of the Date of Termination
multiplied by (b) the number one (1);
(C) in lieu of a bonus under the Company's Executive Incentive Plan (or any
successor bonus plan or arrangement), an amount in cash equal to 50% of the
average bonus payment awarded under such plan for the three years prior to the
Date or Termination (or such lesser period of years as you have been employed by
the Company);
(D) in lieu of shares of common stock of the Company, par value $.01 per
share ("Company Shares"), issuable under the Company's Amended and Restated
Employee Stock Option Plan, as amended, or any other stock option plan adopted
from time to time by the Company for its key executives (the "Plan"), issuable
upon exercise of options ("Options") granted to you under the Company's Plan,
(which Options shall be cancelled upon the making of the payment referred to
below), you shall receive an amount in cash equal to the aggregate spread
between the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the closing price of Company Shares as
reported on the National Association of Securities Dealers Automatic Quotation
System National Market System ("NASDAQ") on the Date of Termination (or the
closing price on any exchange on which the Company Shares are then traded, if
applicable), or (b) the highest price per Company Share actually paid in
connection with any change in control of the Company;
(E) the Company shall also pay all legal fees and expenses incurred by you
as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement).
(iv) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
<PAGE>
May 5, 1997
Page 6
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
(v) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 4 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to you, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
6. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
<PAGE>
May 5, 1997
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Georgia.
8. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Augusta,
Georgia in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
paragraph 3(v) hereof. Amounts paid under this paragraph are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
May 5, 1997
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
GREENFIELD INDUSTRIES, INC.
By /s/ Paul W. Jones
-------------------------------------
Paul W. Jones
President and Chief Executive Officer
AGREED TO THIS 5th DAY
OF MAY, 1997
/s/ Mark R. Richards
- ----------------------------
Mark R. Richards
GREENFIELD INDUSTRIES, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
(In thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE: 1997 1996 1997 1996
------ ------ ------ ------
Weighted average number of common shares outstanding 16,402 16,308 16,394 16,290
------ ------ ------ ------
------ ------ ------ ------
Net income $7,907 $8,357 $13,564 $16,926
------ ------ ------ ------
------ ------ ------ ------
Net income per common share $0.48 $0.51 $0.83 $1.04
------ ------ ------ ------
------ ------ ------ ------
FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of common shares outstanding 16,402 16,308 16,394 16,290
Shares issued upon assumed conversion of the
Mandatorily Redeemable Convertible Preferred
Securities 2,788 2,083 2,788 1,042
------ ------ ------ ------
Weighted average number of common and common
equivalent shares outstanding 19,190 18,391 19,182 17,332
------ ------ ------ ------
------ ------ ------ ------
Net income $7,907 $8,357 $13,564 $16,926
Interest expense on Mandatorily Redeemable
Convertible Preferred Securities, net of
applicable income 1,035 771 2,070 771
------ ------ ------ ------
Net income, adjusted $8,942 $9,128 $15,634 $17,697
------ ------ ------ ------
------ ------ ------ ------
Net income per common share $0.47 $0.50 $0.82 $1.02
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
(1) All numbers of shares in this exhibit are weighted on the basis of the
number of days the shares were outstanding or assumed to be outstanding during
each period. The effect of shares to be issued upon the exercise of outstanding
stock options using the treasury stock method is not material.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ATTACHED QUARTERLY REPORT ON FORM 10-q FOR THE PERIOD FOR THE PERIOD ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 102,056
<ALLOWANCES> 4,440
<INVENTORY> 176,581
<CURRENT-ASSETS> 280,208
<PP&E> 232,584
<DEPRECIATION> 67,447
<TOTAL-ASSETS> 629,419
<CURRENT-LIABILITIES> 76,058
<BONDS> 197,566
115,000
0
<COMMON> 164
<OTHER-SE> 212,310
<TOTAL-LIABILITY-AND-EQUITY> 629,419
<SALES> 279,644
<TOTAL-REVENUES> 279,644
<CGS> 196,394
<TOTAL-COSTS> 196,394
<OTHER-EXPENSES> 50,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,029
<INCOME-PRETAX> 23,026
<INCOME-TAX> 9,462
<INCOME-CONTINUING> 13,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,564
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.82
</TABLE>
