<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended July 31, 1997
Commission File Number 1-11160
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
-----------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2617871
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
2121 San Jacinto Street
Suite 2500, L. B. 31
Dallas, Texas 75201
- ------------------------------ ---------------------
(Address of principal executive (Zip Code)
offices)
(Registrant's telephone number, including area code) (214) 953-4500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No.
-----. ------.
At August 31, 1997, 22,067,447 shares of Common Stock, par value $0.25, of the
Registrant were outstanding.
Page 1 of 16
Exhibit Index Appears on Page 16
<PAGE>
INDEX
Number Page
- ------
Part I. Financial Information
Management's Representation 3
Consolidated Condensed Statements of Earnings for
the three months and nine months ended July 31, 1997
and 1996 4
Consolidated Condensed Balance Sheets as of
July 31, 1997 and October 31, 1996 5 - 6
Consolidated Condensed Statements of Cash Flows
for the nine months ended July 31, 1997 and 1996 7
Notes to Consolidated Condensed Financial Statements 8 - 10
Management's Discussion and Analysis 11 - 15
Part II. Other Information 16
Signature 16
2
<PAGE>
PART I
FINANCIAL INFORMATION
MANAGEMENT'S REPRESENTATION
The consolidated condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed. The Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated condensed financial statements should be read in conjunction
with the financial statements and the notes to consolidated financial statements
included in the Annual Report on Form 10-K/A for the fiscal year ended October
31, 1996.
In the opinion of the Company, all adjustments have been included in the
consolidated financial statements included herein that were necessary to present
fairly the financial position of Global Industrial Technologies, Inc. and
subsidiaries as of July 31, 1997; the results of operations for the three and
the nine months ended July 31, 1997 and 1996; and the cash flows for the nine
months ended July 31, 1997 and 1996. These adjustments consisted of normal
recurring adjustments. The results of operations for such interim periods do
not necessarily indicate the results for the full year.
3
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
----------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net sales and operating revenues $ 154.7 $ 170.7 $ 440.0 $ 474.9
Other 0.4 0.4 1.0 1.3
-------- -------- -------- --------
Total Revenues 155.1 171.1 441.0 476.2
-------- -------- -------- --------
Costs and Expenses
Cost of sales 112.4 121.6 314.1 344.0
Selling, engineering, administrative and
general expenses 30.8 33.5 91.7 97.4
Interest expense 2.7 1.0 7.8 4.8
Special charges 23.0 0.0 43.5 0.0
Other - net 0.1 (0.9) (0.5) (5.2)
-------- -------- -------- --------
Total Costs and Expenses 169.0 155.2 456.6 441.0
-------- -------- -------- --------
Earnings (loss) before income taxes (13.9) 15.9 (15.6) 35.2
Income tax (provision) benefit (0.5) (2.8) 0.0 (6.3)
-------- -------- -------- --------
Net earnings (loss) $ (14.4) $ 13.1 $ (15.6) $ 28.9
======== ======== ======== ========
Earnings (loss) per common share $ (0.64) $ 0.58 $ (0.69) $ 1.28
======== ======== ======== ========
Average common shares outstanding 22.4 22.7 22.6 22.6
======== ======== ======== ========
Depreciation, Depletion & Amortization 5.9 4.5 16.8 14.1
======== ======== ======== ========
Capital Expenditures 20.1 19.4 47.6 43.6
======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
July 31, 1997 October 31, 1996
ASSETS (Unaudited)
- ----------------- ---------------- ----------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 8.8 $ 11.5
Notes and accounts receivable
Public 123.0 129.2
Unconsolidated affiliates 0.7
---------------- ----------------
123.0 129.9
Less allowance for doubtful accounts 1.8 1.5
---------------- ----------------
121.2 128.4
Inventories
Finished products and work in process 95.5 93.0
Raw materials and supplies 46.4 40.6
---------------- ----------------
141.9 133.6
---------------- ----------------
Deferred income taxes 54.5 54.5
Asbestos insurance recoveries receivable 48.5 42.6
Prepaid expenses 5.3 4.9
---------------- ----------------
Total Current Assets 380.2 375.5
Investments in Unconsolidated Affiliates 5.3 20.5
Noncurrent Deferred Income Taxes 5.1 5.1
Goodwill - net 80.4 82.2
Other Assets 93.2 71.6
Property, Plant and Equipment - at cost
Land, land improvements and mineral deposits 35.4 33.0
Buildings 93.7 88.9
Machinery and equipment 384.9 354.6
---------------- ----------------
514.0 476.5
Less accumulated depreciation, depletion and amortization 275.2 278.8
---------------- ----------------
Total properties - net 238.8 197.7
---------------- ----------------
Total Assets $ 803.0 $ 752.6
================ ================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
July 31, 1997 October 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
- -------------------------------------------------------- ------------- ----------------
<S> <C> <C>
Current Liabilities
Accounts payable $ 43.5 $ 44.8
Notes payable and current portion of long-term debt 65.5 38.9
Advances from customers on contracts 5.1 3.3
Accrued compensation and benefits 14.8 26.4
Insurance reserves 12.0 13.2
Income taxes currently payable 9.9 14.1
Current deferred income taxes 7.5 7.6
Asbestos related liabilites 38.7 40.1
Other accrued liabilities 38.8 18.8
------------- ---------------
Total Current Liabilities 235.8 207.2
Long-term Debt 151.8 136.5
Pension Plans and Other Retiree Benefits 53.4 49.2
Noncurrent Deferred Income Taxes 7.4 7.5
Other Liabilities 73.0 52.3
Shareholders' Equity
Common stock 6.8 6.8
Capital in excess of par value 382.8 382.8
Retained earnings 14.3 29.9
Cumulative translation adjustment (53.4) (56.0)
Treasury stock, at cost (66.1) (60.8)
Other (2.8) (2.8)
------------- ---------------
Total Shareholders' Equity 281.6 299.9
------------- ---------------
Total Liabilites and Shareholders' Equity $ 803.0 $ 752.6
============= ===============
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Nine months ended
July 31,
----------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ (15.6) $ 28.9
Adjustments to reconcile net earnings to cash flow
Depreciation, depletion and amortization 16.8 14.1
Earnings from affiliated companies - (1.0)
Special charges 43.5 -
Decrease in receivables 4.7 1.8
Increase in inventories (8.0) (20.8)
(Increase) decrease in prepaid expenses (0.4) 3.1
Decrease in accrued compensation (11.6) (11.6)
Decrease in accounts payable and accrued liabilities (20.2) (12.9)
Increase (decrease) in advances from customers 1.7 (12.8)
Increase (decrease) in income taxes payable (4.6) 3.1
Other - net (0.9) (2.5)
-------- -------
Net cash generated (used) by operating activities 5.4 (10.6)
-------- -------
Cash flows from investing activities
Business acquisitions (12.8) (70.9)
Liquidation of investment in unconsolidated subsidiary 15.9 -
Business disposals 1.7 -
Capital expenditures (47.6) (43.6)
-------- -------
Net cash (used) by investing activities (42.8) (114.5)
-------- -------
Cash flows from financing activities
Proceeds from borrowings 41.8 121.0
Reduction of debt (1.4) (3.5)
Options exercised under employee benefit plans 1.1 1.8
Purchase of common shares (6.7) (2.5)
-------- -------
Net cash (used) by financing activities 34.8 116.8
-------- -------
Effect of translation adjustments on cash (0.1) (0.3)
-------- -------
Net decrease in cash and cash equivalents (2.7) (8.6)
Cash and cash equivalents, beginning of period 11.5 21.1
-------- -------
Cash and cash equivalents, end of period $ 8.8 $ 12.5
======== =======
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
7
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 31, 1997
NOTE A - INTRODUCTION
The Company, Global Industrial Technologies, Inc. (Global), together with its
subsidiaries and unconsolidated joint ventures conducts its business in five
segments: Specialty Equipment Products, Refractory Products, Minerals, Forged
Products, and Industrial Tools.
NOTE B - INVENTORIES
The determination of inventory values and cost of sales under the LIFO method
for interim financial results are based on management's estimates of expected
year-end inventories.
NOTE C - ACQUISITIONS
On June 2, 1997, the Company purchased the refractory business and related
assets of Refractarios Lota-Green Limitada (Lota-Green) and subsidiary
operations in Concepcion, Chile, for $13.6 million. The acquisition was
accounted for using the purchase method of accounting and the assets and
liabilities of Lota-Green were recorded at their fair values at the date of
acquisition. Results of Lota-Green's operations are included in the
accompanying consolidated condensed statement of earnings for the period
subsequent to June 2, 1997.
NOTE D - DIVESTITURES
In January 1997, the Company sold its joint venture interest in KOMDRESCO. Also
in January, the Company announced its strategic decision to divest itself of the
surface mining equipment business and its underground mining equipment business
in the United Kingdom. In connection with the divestitures, the Company
recognized a $20.5 million pre-tax charge to earnings in the first quarter of
1997. Effective February 1, 1997, the underground mining equipment business in
the United Kingdom was sold. The surface mining equipment business was sold
effective August 26, 1997 for $40.1 million.
During the third quarter of 1997, a definitive agreement to sell the assets of
the surface mining equipment business for $40 million was reached, and the
Company provided for additional losses on disposal in the amount of $23 million.
The additional provision was required as the terms of the definitive agreement
were less favorable
8
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 31, 1997
than those contemplated in the loss recorded during the first quarter of 1997,
primarily due to the expectation of receiving full book value of the assets
being conveyed. The loss provision also includes $6 million for severance pay
related to the termination of substantially all of the employees. The Company
retained the business' U.S. real property, which is being held for sale as of
August 26, 1997, the closing date of the sale. This loss has significantly
affected the Company's 1997 reported tax liability and therefore, the Company
has adjusted its reported tax provision to an effective rate of 0%. The
operations to be divested contributed $86 million to revenues and $1.3 million
to earnings before taxes for the first nine months of fiscal 1996.
NOTE E - CONTINGENCIES
The Company and its subsidiaries are involved in certain legal actions and
claims arising in the ordinary course of business which are described in Note H
to Consolidated Financial Statements contained in the Company's Annual Report on
Form 10-K/A for the fiscal year ended October 31, 1996. There were no
significant changes related to the Company's contingent liabilities during the
quarter ended July 31, 1997.
NOTE F - RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board adopted the Statement
of Financial Accounting Standards No. 128, "Earnings per Share". The Statement
is effective for financial statements issued for periods ending after December
15, 1997 and specifies new standards for the computation and presentation of
earnings per share. The Company's adoption of this standard will result in the
dual presentation of "basic" and "diluted" earnings per share on the face of the
Company's income statement. Diluted earnings per share calculated using the new
standard is not expected to materially differ from primary earnings per share
previously presented.
In June 1997, the Financial Accounting Standards Board released Statement No.
130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." Both statements become
effective for fiscal years beginning after December 15, 1997 with early adoption
permitted. These statements require disclosure of certain components of changes
in equity and certain information about operating segments and geographic areas
of operation. No decision has been made as to when the company will adopt the
statements. These statements will not have any effect on the results of
operations or financial position.
9
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 31, 1997
NOTE G - INFORMATION BY INDUSTRY SEGMENT
The Company's industry segments are Refractory Products, Minerals, Industrial
Tools, Specialty Equipment Products and Forged Products. Sales and operating
profits results are presented below for the three and the nine months ended July
31, 1997 and 1996.
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31 July 31
------------------ ------------------
1997 1996 1997 1996
------------------ ------------------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Sales and operating revenues:
Refractory Products $ 88.8 $ 75.7 $246.5 $219.2
Minerals 12.3 13.4 39.0 40.7
Industrial Tools 28.7 26.6 80.6 69.6
Specialty Equipment Products 18.6 15.1 50.5 37.8
Forged Products 12.1 12.7 39.6 37.4
Divested Operations 0.0 32.1 0.0 86.0
Intersegment sales (5.8) (4.9) (16.2) (15.8)
------- ------- ------ ------
Total sales and operating revenues $ 154.7 $ 170.7 $440.0 $474.9
======= ======= ====== ======
Operating Profit:
Refractory Products $ 8.9 $ 7.3 $ 22.3 $ 19.6
Minerals 1.3 1.9 4.9 8.6
Industrial Tools 4.6 4.3 11.3 9.7
Specialty Equipment Products (1.2) 1.8 0.3 3.5
Forged Products 2.0 3.7 8.2 10.0
Divested Operations 0.0 1.9 0.0 1.3
------ ------- ------ ------
Subtotal 15.6 20.9 47.0 52.7
------ ------- ------ ------
General corporate expenses ( 6.5) (5.0) (19.1) (17.5)
Special charges (23.0) 0.0 (43.5) 0.0
------ ------- ------ ------
Earnings (loss) before income taxes $(13.9) $(15.9) $(15.6) $ 35.2
====== ====== ====== ======
</TABLE>
10
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
July 31, 1997
RESULTS OF OPERATIONS
- ---------------------
Three months and nine months ended July 31, 1997 compared to July 31, 1996.
The Company had a net loss of $15.6 million or $.69 per share in the first nine
months of 1997 which included a $43.5 million pre-tax charge to earnings related
to the divestiture of three businesses. Excluding the effect of the charge-off
or any contribution from those three operating units, Global reported earnings
of $1.24 per share on revenues of $441.0 million and segment operating profits
of $47 million. For the same period a year ago, Global reported earnings of
$1.28 per share on revenues of $390.2 million and segment operating profits of
$51.4 million excluding the divested operations. No income tax expense was
recorded for the nine months ended July 31, 1997, compared to a tax provision of
$6.3 million for the prior year nine month period.
Revenues for the third quarter of 1997 of $155.1 million were $16.1 million or
12% higher than the $139 million in the prior year quarter excluding the
divested operations. Operating profits of $15.6 million compared to $19.0
million for the third quarter of 1996 excluding the divested operations.
Segment operating profit for the nine months was $47.0 million in fiscal 1997
compared to $52.7 million in 1996, a decrease of $5.7 million. General
corporate expenses were $1.6 million higher for the nine months ended July 31,
1997 versus 1996 due to an increase in interest expense of $3.0 million in 1997
over the first nine months of 1996, partially offset by a decrease in
headquarters expenses. For the quarter, 1997 general corporate expenses were
$6.5 million, or $1.5 million more than in the prior year period.
Consolidated revenues of $441.0 million for the first nine months of fiscal 1997
were down $35.2 million, or 7.4 percent, from $476.2 million in the prior year
period. The decrease was primarily due to the $86 million prior year
contribution of the divested operations, partially offset by 1997 revenues of
Corrosion Technology International, Inc. (CTI) and the Rotor Tool Company
(Rotor). CTI results were not included in the first three months of the prior
year and Rotor's contribution was not included in the first two months of fiscal
1996.
Total costs and expenses for the first six months of 1997 were $456.6 million,
up from $441.0 million for the same period in 1996. Costs of sales were $314.1
million, $29.9 million, or 8.7 percent, lower than the prior year period, due to
the exclusion from the current year results of the divested operations.
Selling, engineering, administrative and general expenses were $91.7 million for
the first nine months of 1997, $5.7 million, or 5.8 percent, lower than the
$97.4 million for the same period in 1996. Other - net is income of $.5 million
for the first nine months of
11
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
July 31, 1997
1997 compared to income of $5.2 million for the same period in 1996. The prior
year included a foreign exchange gain of $2.5 million, miscellaneous asset sales
of $1.6 million and $1.0 million in equity company earnings. For 1997, the
Other - net of income of $.5 million was primarily a $.3 million foreign
exchange gain.
For the quarter, total costs and expenses were $169 million, compared to $155.2
million for the prior year. Cost of sales of $112.4 million for the 1997 third
quarter were $9.2 million less than in 1996. Selling, engineering
administrative and general expenses of $30.8 million were $2.7 million less than
for the prior year quarter. Other - net for the 1997 third quarter was expense
of $.1 million compared to income of $.9 million for the prior year.
Global's consolidated backlog of unshipped orders was $161.4 million at July 31,
1997 compared to $151.4 million at October 31, 1996 and $157 million at July 31,
1996. The 6.6 percent increase in unshipped orders from the fiscal year end is
due primarily to increased demand for minerals and refractory products.
SEGMENT RESULTS
- ---------------
Refractory Products
- -------------------
Revenues and operating profit for the first nine months of fiscal 1997 of $246.5
million and $22.3 million compared to 1996 revenues of $219.2 million and
operating profit of $19.6 million. Revenues and earnings were moderately higher
(12.4 percent and 13.8 percent, respectively) in 1997 and reflected delayed
refractories shipments in the first quarter of 1997 compared to last year,
offset by an unusually large export order from a single customer that increased
shipments for the first nine months significantly.
For the third quarter of 1997, revenues and operating profits were $88.8 million
and $8.9 million, respectively, compared to 1996 revenues of $75.7 million and
operating profit of $7.3 million.
Effective June 2, 1997, RECSA, a wholly owned Chilean subsidiary of the Company,
purchased all the refractory related assets and business of Lota-Green in
Concepcion, Chile for $13.6 million. Subsequent to this, effective July 23,
1997, RECSA signed a three year contract valued at $27 million to supply
refractory products for the largest steel producer in Chile. The contract is the
largest refractory contract in the Company's history and would not have been
possible without the additional capacity provided by the Lota-Green acquisition.
12
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
July 31, 1997
Minerals
- --------
Minerals revenues of $39.0 million were down $1.7 million, or 4.2 percent, from
the same nine month period in the prior year mostly because of reduced exports
to Europe. Operating earnings were $4.9 million, down $3.7 million, or 43
percent, from 1996 operating profit of $8.6 million. Higher natural gas prices
and a strengthening dollar in European markets adversely affected operating
results.
Revenues of $12.3 million for the 1997 quarter were essentially the same as
$13.4 million of revenues for the prior year. Operating profit of $1.3 million
was down $.6 million, or 31.6 percent, from the year earlier quarter operating
profit of $1.9 million.
Industrial Tools
- ----------------
Revenues of $80.6 million for the first nine months of fiscal 1997 were $11
million, or 15.8 percent, higher than revenues of $69.6 million for the prior
year period. The increased sales volume was due primarily to strong aircraft and
automotive markets.
Segment operating profit of $11.3 million for the nine months ended July 31,
1997 is $1.6 million, or 16.5 percent, higher than for the first nine months of
1996 due to the increased sales volume.
For the third quarter of 1997, revenues and operating profits of $28.7 million
and $4.6 million, respectively, compared to revenues and operating profit of
$26.6 million and $4.3 million, respectively, for the year earlier period.
Specialty Equipment Products
- ----------------------------
The Specialty Equipment Products segment consists of CTI and the Company's
Processing Group. The segment's consolidated revenues for the first nine months
of fiscal 1997 of $50.5 million were up $12.7 million, or 33.6 percent, from the
same period in 1996 primarily because CTI results had not been included in the
first three months of 1996. Segment operating profit of $.3 million for the
first nine months of fiscal 1997 compared to profit of $3.5 million for 1996.
The 1997 operating profit of $.3 million includes a $2.5 million write down of
overstated Processing assets, primarily inventory, that the Company recognized
in the third quarter of 1997.
Revenues for the third quarter of 1997 were $18.6 million compared to $15.1
million for 1996, and reflected improved CTI sales volume. Operating losses for
1997 of $1.2 million compared to the 1996 third quarter profit of $1.8 million,
due to the write down of Processing assets.
13
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
July 31, 1997
Forged Products
- ---------------
Revenues of $39.6 million were up 6 percent from $37.4 million for the same
period a year ago and operating profit of $8.2 million compared to operating
profits of $10.0 million for the same period a year ago. The decrease in
operating profit was due to a drop-off in production volume because of problems
with production equipment that have since been resolved with replacement
equipment.
The 1997 third quarter revenues of $12.1 million were down 4.7 percent from 1996
revenues of $12.7 million. Operating profits for the third quarter were $2.0
million in 1997 and $3.7 million in the prior year.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
- ----------------------------------------------------
Cash and cash equivalents were $8.8 million at July 31, 1997, $2.7 million, or
23.5 percent, lower than at October 31, 1996. The net cash generated by
operating activities was $5.4 million for the first nine months of fiscal 1997,
which consisted of a decrease in accounts payable and accrued liabilities during
the period of $20.2 million, an $11.6 million decrease in accrued compensation,
a $8 million increase in inventories and a $4.6 million decrease in income taxes
payable, offset by the special charge of $43.5 million and $16.8 million of
depreciation and amortization. Investing activities consisted of $17.6 million
in proceeds from business disposals offset by $47.6 million for capital
expenditures at the operating units, the most significant being for the start-up
of the undercarriage business within the Forged Products Group. Financing
activities for the period generated $34.8 million consisting of $40.4 million of
proceeds from borrowings less repayments, and $5.6 million for the repurchase of
the Company's common shares, net of proceeds from stock options exercised under
employee benefit programs.
The Company's current ratio at July 31, 1997 of 1.6 to 1 decreased from a ratio
of 1.8 to 1 at October 31, 1996. The Company had outstanding debt of $217.3
million at July 31, 1997 compared to $175.4 million at October 31, 1996.
14
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
July 31, 1997
FORWARD-LOOKING STATEMENTS
- --------------------------
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements. The following important factors could cause actual results
to differ materially from those described in such statements: timing of
completion of divestitures and their effects upon the Company: recouping delayed
business on a schedule different than anticipated: development of new products:
changes in currency exchange rates: litigation: timing of additions to
manufacturing capacity: unanticipated production or shipment delays: and
significant variances in sales or costs at a major business unit.
15
<PAGE>
PART II
OTHER INFORMATION
Item 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10 Asset Purchase Agreement, dated as of July 21, 1997, between
The Marion Power Shovel Company and Bucyrus International,
Inc.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the third quarter ended
July 31, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBAL INDUSTRIAL TECHNOLOGIES, Inc.
By: /s/ Gary G. Garrison
-----------------------------------------------
Gary G. Garrison
Vice President Finance, Chief Financial Officer
(Authorized Officer and Principal Financial
Officer)
Dated: September 12, 1997
16
<PAGE>
EXHIBIT 10
ASSET PURCHASE AGREEMENT
Dated as of July 21, 1997
By and Among
The Marion Power Shovel Company,
Marion Power Shovel Pty. Ltd,
INTOOL International B.V., and
Global-GIX Canada Inc.,
(collectively, as Sellers)
and
Global Industrial Technologies, Inc., as Parent
and
Bucyrus International, Inc.,
Bucyrus (Australia) Proprietary Ltd.,
Bucyrus (Africa) (Proprietary) Limited, and
Bucyrus Canada Limited
(collectively, as Buyers)
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of July 21, 1997, by
and among (i) The Marion Power Shovel Company, a Delaware corporation ("Marion
USA"), (ii) Marion Power Shovel Pty. Ltd., an Australian corporation ("Marion
Australia"), (iii) INTOOL International B.V., a Netherlands corporation having a
South African branch ("Marion South Africa"), (iv) Global-GIX Canada Inc., a
Canadian corporation ("Marion Canada")(Marion USA, Marion Australia, Marion
South Africa and Marion Canada being heretofore referred to, individually, as
"Seller" and, collectively, as the "Sellers"), and (v) Global Industrial
Technologies, Inc., a Delaware corporation ("Parent"), and (vi) Bucyrus
International, Inc., a Delaware corporation ("Bucyrus USA"), (vii) Bucyrus
(Australia) Proprietary Ltd., an Australian corporation ("Bucyrus Australia"),
(viii) Bucyrus (Africa) (Proprietary) Limited, a South African corporation
("Bucyrus South Africa"), and (ix) Bucyrus Canada Limited, a Canadian
corporation ("Bucyrus Canada")(Bucyrus USA, Bucyrus Australia, Bucyrus South
Africa and Bucyrus Canada being heretofore referred to, individually, as "Buyer"
and, collectively, as the "Buyers").
INTRODUCTORY STATEMENTS
A. Sellers are engaged in the business of designing, manufacturing and
selling draglines and power shovels for surface mining along with components and
spare parts therefor, as well as spare parts for previously manufactured drills
(such business being herein referred to as the "Business").
B. Sellers are desirous of selling to Buyers, and Buyers are desirous of
purchasing, substantially all of Sellers' assets used in the Business, upon the
terms and conditions hereafter set forth.
ACCORDINGLY, in consideration of the premises and the mutual agreements,
covenants, representations and warranties hereafter set forth, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. For purposes of this Agreement, the terms
defined in this Article I shall have the meanings herein specified, unless the
---------
context otherwise requires. Accounting terms used in this Agreement, including
those defined in this Article I, shall, except as otherwise provided for herein,
---------
be construed in accordance with generally accepted accounting principles used in
the United States and as consistently applied by Sellers on a consolidated
basis.
"Addendum" shall have the meaning assigned to it in Section 3.08 of the
-------- ------------
Agreement.
"Affiliate," as to any individual or entity ("Person"), shall mean any
----------
other Person (i) who directly or indirectly controls such Person; (ii) who
beneficially owns ten (10%) percent or more
<PAGE>
of the voting stock of such other Person; (iii) ten (10%) or more of whose
voting stock is owned by such other Person; or (iv) that is an officer or
director of such other Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Assumed Liabilities" shall have the meaning assigned to it in Section 2.05
------------------- ------------
of this Agreement.
"Basis" shall have the meaning assigned to it in Section 3.07 of this
----- ------------
Agreement.
"Benefit Plans" shall mean any bonus, deferred compensation, incentive
-------------
compensation, stock purchase, stock option, profit sharing, pension, retirement,
severance, vacation, sickness, unemployment, disability, hospitalization,
medical, dental or life insurance plan, benefit, program or agreement, or any
other arrangement or understanding similar to the foregoing, whether or not
insured.
"Bill of Sale" shall have the meaning assigned to it in Section 3.02 of
------------ ------------
this Agreement.
"Books and Records" shall mean all books and records of each Seller used in
-----------------
connection with the Business of such Seller, including all computerized storage
media and the software. Books and Records shall not include the corporate seal,
minute books, bylaws, memoranda of association, articles of incorporation, stock
transfer records, federal income tax returns of Global Industrial Technologies,
Inc. and such other books and records as pertain to the organization, existence
or share capitalization of Sellers or as are necessary to enable Sellers to file
their respective tax returns and reports and perform their respective
obligations hereunder after the Closing Date or which Sellers are required to
keep confidential under terms of a written agreement with a third party.
"Bucyrus Australia" shall have the meaning assigned to it in the Preamble
-----------------
to this Agreement.
"Bucyrus Canada" shall have the meaning assigned to it in the Preamble to
--------------
this Agreement.
"Bucyrus South Africa" shall have the meaning assigned to it in the
--------------------
Preamble to this Agreement.
"Bucyrus USA" shall have the meaning assigned to it in the Preamble to this
-----------
Agreement.
"Business" shall have the meaning assigned to it in the Preamble to this
--------
Agreement.
"Buyers" shall have the meaning assigned to it in the Preamble to this
------
Agreement.
- 2 -
<PAGE>
"Buyer Group" shall mean Buyers, their respective officers, directors,
-----------
employees, subsidiaries and Affiliates.
"Buyer Indemnity Claim" shall have the meaning assigned to it in Section
--------------------- -------
11.01 of this Agreement.
- -----
"Closing" shall have the meaning assigned to it in Section 3.04 of this
------- ------------
Agreement.
"Closing Balance Sheet" shall have the meaning assigned to it in Section
--------------------- -------
3.01(b) of this Agreement.
- -------
"Closing Date" shall have the meaning assigned to it in Section 3.04 of
------------ ------------
this Agreement.
"Code" shall mean the Internal Revenue Code.
----
"Damages" shall mean all demands, claims, actions or causes of action,
-------
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties, punitive and exemplary damages, and
reasonable attorneys' fees and expenses.
"Documents" shall mean all ancillary documents to be delivered to Buyers by
---------
Sellers in connection with this Agreement.
"Encumbrances" shall mean any title defects or objections, mortgages,
------------
liens, claims, restrictive covenants, use restrictions, charges, pledges,
security interests or other encumbrances of any nature whatsoever including,
without limitation, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest retention
arrangements.
"Excluded Liabilities" shall have the meaning assigned to it in Section
-------------------- -------
2.06 of this Agreement.
- ----
"Final Determination" shall be deemed to occur with respect to a proposed
-------------------
or other adjustment forming the basis for a tax claim when (i) there is a
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
with respect to the indemnitee (i.e., all allowable appeals have been exhausted
by either party to the action or the time period within which such appeal may be
filed has expired), (ii) there is a closing agreement made under Section 7121 of
the Code (or any analogous provision under the laws of any other jurisdiction)
binding in respect of the indemnitee or other administrative settlement with the
Internal Revenue Service or other governmental authority, (iii) the time for
instituting a claim for refund in respect of the indemnified claim has expired,
or, if a claim was filed, the time for instituting suit with respect thereto has
expired or (iv) the taxes which are the subject of a proposed or other
adjustment are paid, and, pursuant to written agreements between Sellers and the
Buyers, no claim for refund is filed, and no other contest of such proposed or
other adjustment is made.
- 3 -
<PAGE>
"Government Body" shall mean any federal, state, local, foreign or other
---------------
governmental agency, department, commission, board, bureau, instrumentality or
body.
"Historical Financial Statements" shall have the meaning assigned to it in
-------------------------------
Section 4.01(e)(i) of this Agreement.
- ------------------
"Indemnitee" shall have the meaning assigned to it in Section 11.03(a) of
---------- ----------------
this Agreement.
"Indemnitee's Certificate" shall have the meaning assigned to it in Section
------------------------ -------
11.03(a) of this Agreement.
- --------
"Indemnitor" shall have the meaning assigned to it in Section 11.03(a) of
---------- ----------------
this Agreement.
"Instruments of Assignment" shall have the meaning assigned to it in
-------------------------
Section 3.02 of this Agreement.
- ------------
"Intangible Assets" shall mean all patents, trademarks, trademark licenses,
-----------------
trade names, copyrights, licenses, authorizations, inventions, processes, know-
how, formulas, trade secrets and other intangible assets, including any and all
associated goodwill (together with all pending applications, parents,
continuations, divisionals, continuations-in-part, foreign counterpart patents,
foreign counterpart patent applications, reissues and extensions for any of the
above) owned by any Seller or dedicated to the Business. For the purpose of
this definition, the phrase "dedicated to the Business" (or any similar phrase)
includes, without limitation, reliance upon and/or acceptance of the rights,
interests and privileges conferred on the Business or any Seller by any of the
Intangible Assets, regardless of whether or not such Intangible Assets generate
revenue or are presently exploited.
"Intercompany Payables" shall mean amounts owed by a Seller to Parent.
---------------------
"Intercompany Receivables" shall mean amounts owed to a Seller by Parent.
------------------------
"Interim Balance Sheet" shall have the meaning assigned to it in Section
--------------------- -------
4.01(e)(ii) of this Agreement.
- -----------
"Intracompany Payables" shall mean amounts owed by one Seller to another
---------------------
Seller.
"Intracompany Receivables" shall mean amounts owed to one Seller by another
------------------------
Seller.
"Interim Financial Statements" shall have the meaning assigned to it in
----------------------------
Section 4.01 (e)(ii) of this Agreement.
- --------------------
"Knowledge" shall mean with respect to matters relating to Sellers'
---------
Knowledge or Buyers' Knowledge (i) those facts and matters actually known by any
one or more officers or
- 4 -
<PAGE>
directors of Sellers, Parent or Buyers, as the case may be; and (ii) any fact or
matter which reasonably should be known by any one or more of such officers or
directors after "due inquiry" by such person, taking into account any and all
roles or positions which such person may hold and any and all duties and
responsibilities he or she may have vis-a-vis the Business of such Seller,
Parent or Buyer, as the case may be. The phrase "to Sellers' Knowledge" shall
include the Knowledge of both Sellers and Parent.
"Laws" shall mean all applicable laws (statutory and otherwise), rules,
----
regulations, orders, ordinances, judgments, decrees, orders, writs and
injunctions of all governmental authorities (federal, state, local, foreign or
otherwise).
"Leases" shall mean all leases (including all amendments thereof and
------
modifications thereto) pursuant to which each Seller leases real or personal
property.
"Lease Assignments" shall have the meaning assigned to it in Section 3.02
----------------- ------------
of this Agreement.
"Leased Property" shall have the meaning assigned to it in Section
--------------- -------
4.01(f)(ii) of this Agreement.
- -----------
"Licenses" shall have the meaning assigned to it in Section 4.01(l) of this
-------- ---------------
Agreement.
"Limitation Period" shall have the meaning assigned to it in Section 11.04
----------------- -------------
of this Agreement.
"Manufacturing Burden" shall mean all manufacturing costs (i.e., all costs
--------------------
that are included in inventory valuation under generally accepted accounting
principles), determined as of the time incurred, including all indirect
manufacturing costs, but excluding all costs for direct labor, direct materials
and selling, general, administrative and engineering expenses.
"Marion Australia" shall have the meaning assigned to it in the Preamble to
----------------
this Agreement.
"Marion Canada" shall have the meaning assigned to it in the Preamble to
-------------
this Agreement.
"Marion South Africa" shall have the meaning assigned to it in the Preamble
-------------------
to this Agreement.
"Marion USA" shall have the meaning assigned to it in the Preamble to this
----------
Agreement.
"Marion USA Facilities" shall have the meaning assigned to it in Section
--------------------- -------
3.05(m) of this Agreement.
- -------
- 5 -
<PAGE>
"Net Book Value" shall have the meaning set forth in Exhibit A hereto.
-------------- ---------
"Other Instruments" shall have the meaning assigned to it in Section 3.02
----------------- ------------
of this Agreement.
"Parent" shall have the meaning assigned to it in the Preamble to this
------
Agreement.
"Permitted Encumbrances" shall mean Encumbrances which secure the following
----------------------
obligations of Sellers arising in the ordinary course of the Business of Sellers
as historically conducted (other than obligations relating to indebtedness for
borrowed money) with respect to which Sellers are not in default: (i) liens
(including leases, title retention agreements under installment sales and
conditional sales contracts) securing liabilities or obligations to the extent
reflected in the Closing Balance Sheet, (ii) liens for current taxes not yet
due, (iii) mechanics' and materialmens' liens arising under applicable laws
securing obligations to the extent reflected in the Closing Balance Sheet, and
(iv) restrictions on use and transfer of assets imposed by applicable laws such
as those relating to protection of the environment and zoning.
"Permits" shall mean all licenses, permits and authorizations issued by any
-------
federal, state, local or foreign Government Body.
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
"Retained Assets" shall have the meaning assigned to it in Section 2.03 of
--------------- ------------
this Agreement.
"Selected Employees" shall mean those employees of Marion USA who attain
------------------
age 60 with 15 years of service, as determined for pension plan and retiree
medical purposes, during the period of June 23, 1997, through June 21, 1998.
"Sellers" shall have the meaning assigned to it in the Preamble to this
-------
Agreement.
"Sellers' Employees" shall have the meaning assigned to it in Section
------------------ -------
3.08(a) of this Agreement.
- -------
"Seller Group" shall mean Sellers, their respective officers, directors,
------------
employees, subsidiaries and Affiliates.
"Seller Indemnity Claims" shall have the meaning assigned to it in Section
----------------------- -------
11.02 of this Agreement.
- -----
"Settled Claims" shall have the meaning assigned to it in Section 11.05 of
-------------- -------------
this Agreement.
- 6 -
<PAGE>
"Taxes" shall mean all federal, state, local, or foreign taxes, excises,
-----
withholdings, assessments or levies on or measured by actual or deemed income,
revenue, gross receipts, payroll, the value or cost of real or personal
property, tangible or intangible, including, but not limited to, income, social
security, welfare, sales, use, occupancy, business, occupation, real estate,
capital stock and franchise taxes (including interest and penalties thereon and
including estimated taxes).
"Transferred Assets" shall have the meaning assigned to it in Section 2.02
------------------ ------------
of this Agreement.
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.01 ASSETS TO BE SOLD. At the Closing, subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Sellers, Parent, and Buyers contained herein, Sellers shall sell,
assign, convey and transfer to Buyers the Transferred Assets. Sellers shall
retain the Retained Assets.
(a) ASSETS TO BE PURCHASED BY BUCYRUS USA. Bucyrus USA shall purchase
(i) all of the Transferred Assets of Marion USA, (ii) the Intangible Assets
of Marion Australia, and (iii) the Intangible Assets of Marion South Africa
dedicated to the Business of such Seller.
(b) ASSETS TO BE PURCHASED BY BUCYRUS AUSTRALIA. Bucyrus Australia
shall purchase all of the Transferred Assets of Marion Australia, except
the Intangible Assets which shall be purchased by Bucyrus USA (as described
in Section 2.01(a), above).
---------------
(c) ASSETS TO BE PURCHASED BY BUCYRUS SOUTH AFRICA. Bucyrus South
Africa shall purchase all of the Transferred Assets of Marion South Africa,
except the Intangible Assets which shall be purchased by Bucyrus USA (as
described in Section 2.01(a), above).
---------------
(d) ASSETS TO BE PURCHASED BY BUCYRUS CANADA. Bucyrus Canada shall
purchase all of the Transferred Assets of Marion Canada.
(e) GOING CONCERN. Buyers and Sellers hereby acknowledge that Buyers
are purchasing the assets of a going concern with respect to the Transferred
Assets of Marion USA, Marion Australia and Marion South Africa.
- 7 -
<PAGE>
SECTION 2.02 TRANSFERRED ASSETS. With respect to Marion USA and Marion
Australia, the term "Transferred Assets" shall mean (i) all assets and
properties owned by each such Seller as of the Closing Date; and (ii) all of
each such Seller's rights and interests in and to assets and properties not
owned by such Seller, but dedicated to the Business of such Seller as of the
Closing Date. With respect to Marion South Africa and Marion Canada, the term
"Transferred Assets" shall mean (i) all assets and properties owned by each such
Seller as of the Closing Date and dedicated to the Business of such Seller; and
(ii) all of each such Seller's rights and interests in and to assets and
properties not owned by such Seller, but dedicated to the Business of such
Seller. With respect to Marion USA and Marion Australia, the Transferred Assets
include, but are not limited to, the assets, properties, rights, and interests
described in paragraphs (a) through (r), below, or listed as assets of such
Sellers in the Schedules and Exhibits to this Agreement, except the Retained
Assets and only to the extent that such assets do not constitute Retained
Assets. With respect to Marion South Africa and Marion Canada, the Transferred
Assets include, but are not limited to, the assets, properties, rights, and
interests described in paragraphs (a) through (r), below, dedicated to the
Business of such Sellers or listed as assets of such Sellers in the Schedules
and Exhibits to this Agreement, except the Retained Assets and only to the
extent that such assets do not constitute Retained Assets.
(a) all leasehold interests (the "Leased Property");
(b) all Intangible Assets;
(c) all accounts receivable and notes receivable;
(d) all Intracompany Receivables;
(e) the account receivable in connection with the Settlement Agreement
between Marion USA, Dresser Industries, Construction Mining Services, Inc.,
Ronald J. Ortyl, Sr. and Ronald J. Ortyl, Jr. (the "Receivable From BMSI");
(f) all furniture and fixtures;
(g) all machinery, equipment, tools, dies, molds, patterns, and all
related spare, replacement and maintenance parts therefor;
(h) all automobiles, trucks and other vehicles;
(i) all inventory, including, without limitation, all raw materials, work-
in-process, finished products, goods in transit, office, manufacturing and
advertising supplies, containers and packaging and shipping materials, and all
inventory in the hands of suppliers for which each Seller is contractually
committed as of the Closing Date;
(j) all leasehold improvements;
- 8 -
<PAGE>
(k) to the extent transferrable or assignable, all rights and interests
in, to, and under all leases, contracts, agreements, arrangements, commitments
and understandings (whether written or oral) to which any Seller is a party,
excluding those items set forth on Schedule 2.02(k) and excluding insurance
----------------
policies relating to the Transferred Assets;
(l) all rights, interests and claims under insurance policies for damage
to Transferred Assets to the extent that any damaged Transferred Assets have not
been repaired or replaced prior to Closing;
(m) to the extent transferrable or assignable, all Permits relating to the
Transferred Assets;
(n) all prepaid expenses related to tooling, patterns and supplies;
(o) all Books and Records;
(p) all technical documentation owned by each Seller including, without
limitation, material and tooling specifications, purchasing specifications,
invention records, research records, inspection processes and equipment lists;
(q) all claims and causes of action of each Seller relating to or arising
out of the Business of each Seller, except (i) those listed on Schedule 2.02(q)
----------------
attached hereto, and (ii) any claim or cause of action against third parties
that can be used as a defense, counterclaim or offset against any suit brought
by third parties against each Seller, particularly with respect to any Excluded
Liabilities; and
(r) all right, title, and interest in and to the goodwill, going concern
value and proprietary know-how of the Business of each Seller.
SECTION 2.03 RETAINED ASSETS. The term "Retained Assets" shall mean the
specified assets of Sellers that are listed on Schedule 2.03.
-------------
SECTION 2.04 ALL ASSETS. The Transferred Assets shall constitute
substantially all of the assets dedicated to the Business of each Seller as of
the Closing Date.
SECTION 2.05 LIABILITIES ASSUMED. At the Closing, subject to the terms and
conditions herein set forth, Sellers shall assign to Buyers, and Buyers shall
assume from Sellers, certain liabilities of Sellers set forth on Schedules
---------
2.05(a) through (d) below (the "Assumed Liabilities"), but with respect to such
- -------------------
liabilities, only to the extent (and only in such amounts) that such liabilities
are actually reflected on the Closing Balance Sheet.
- 9 -
<PAGE>
(a) LIABILITIES ASSUMED BY BUCYRUS USA. Marion USA shall assign to
Bucyrus USA, and Bucyrus USA shall assume from Marion USA, the Assumed
Liabilities of Marion USA specified on Schedule 2.05(a).
----------------
(b) LIABILITIES ASSUMED BY BUCYRUS AUSTRALIA. Marion Australia shall
assign to Bucyrus Australia, and Bucyrus Australia shall assume from Marion
Australia, the Assumed Liabilities of Marion Australia specified on
Schedule 2.05(b).
----------------
(c) LIABILITIES ASSUMED BY BUCYRUS SOUTH AFRICA. Marion South Africa
shall assign to Bucyrus South Africa, and Bucyrus South Africa shall assume
from Marion South Africa, the Assumed Liabilities of Marion South Africa
specified on Schedule 2.05(c).
----------------
(d) LIABILITIES ASSUMED BY BUCYRUS CANADA. Marion Canada shall assign
to Bucyrus Canada, and Bucyrus Canada shall assume from Marion Canada, the
Assumed Liabilities of Marion Canada specified on Schedule 2.05(d).
----------------
(e) ASSIGNMENT AND ASSUMPTION AGREEMENTS. Buyers' assumption of the
Assumed Liabilities shall be evidenced by the documents of assignment and
assumption specified on Schedule 2.05(e), which shall be reasonably
----------------
satisfactory to Buyers and Sellers in form and substance. Buyers shall (a)
timely pay and discharge and (b), upon demand by Sellers, indemnify and
defend Sellers and hold them harmless from and against any Damages relating
to or arising out of any liability or obligation expressly assumed by
Buyers hereunder.
SECTION 2.06 LIABILITIES NOT ASSUMED. Except for the Assumed Liabilities,
Buyers assume no past, present or future obligations or liabilities (known,
unknown, accrued, or contingent) of Sellers, and shall have no liability or
obligation with respect to any such liability or obligation of Sellers other
than the Assumed Liabilities (all such liabilities of Sellers other than the
Assumed Liabilities are herein referred to as the "Excluded Liabilities"). The
Excluded Liabilities include, without limitation, the following: (i) any
liabilities or obligations of Sellers arising from or relating to any violation
of Laws by Sellers including, but not limited to, Laws relating to
environmental conditions at any properties owned or used by Sellers prior to the
Closing Date and any liabilities or obligations of Sellers under or pursuant to
environmental laws arising from or relating to Sellers' operations prior to the
Closing Date; (ii) any liabilities or obligations of Sellers related to any
Benefit Plans maintained by Sellers prior to the Closing Date, except, and only
to the extent that, any such liabilities and obligations have been expressly
assumed by Buyers pursuant to the Addendum as provided in Section 3.08; and
------------
(iii) the liabilities of Sellers related to the Planetary Swing-Drive Systems of
the Walking Draglines as set forth in Section 7.06. Sellers shall (a) pay and
------------
discharge, and (b) Sellers and Parent, jointly and severally, shall indemnify
and defend Buyers and hold them harmless from and against any Damages relating
to or arising out of the Excluded Liabilities. The obligation of Sellers and
Parent to indemnify, defend and hold harmless Buyers from and against any such
Damages
- 10 -
<PAGE>
arising from or relating to Sellers' failure to pay the Excluded Liabilities
(other than those described in clause (iii) above) shall not be subject to the
maximum indemnification limits set forth in Section 11.07 hereof.
-------------
ARTICLE III
PRICE AND TERMS
SECTION 3.01 CONSIDERATION.
(a) PURCHASE PRICE. Subject to the terms and conditions of this Agreement,
in consideration of the sale, conveyance, assignment, transfer and delivery of
the Transferred Assets and the Documents, and in addition to the liabilities
assumed and covenants made by Buyers hereunder, Buyers shall deliver or cause to
be delivered at the Closing in full payment for the Transferred Assets the sum
of Forty Million, One Hundred Twenty Thousand United States Dollars (US
$40,120,000) (the "Purchase Price"); provided however, to the extent Sellers are
not required to provide enhanced benefits to the Selected Employees, the
Purchase Price shall be Forty Million United States Dollars (U.S.$40,000,000).
The Purchase Price shall be paid as set forth below by wire transfer of federal
or other immediately available funds to one or more accounts designated in
writing by Sellers. Subject to final adjustments pursuant to Section 3.01(b)
---------------
below, (i) Bucyrus USA shall pay to Marion USA at the Closing Twenty Million
Three Hundred Eighty Six Thousand United States Dollars (U.S.$20,386,000) for
the Transferred Assets of Marion USA, the Intangible Assets of Marion Australia
and the Intangible Assets of Marion South Africa dedicated to the Business of
such Seller, as described in Section 2.01(a), (ii) Bucyrus Australia shall pay
---------------
to Marion Australia at the Closing Twelve Million Two Hundred Seventy Four
Thousand United States Dollars (U.S.$12,274,000) for the Transferred Assets as
described in Section 2.01(b), (iii) Bucyrus South Africa shall pay to Marion
----------------
South Africa at the Closing One Million Eight Hundred Thirty Eight Thousand
United States Dollars (U.S.$1,838,000) for the Transferred Assets as described
in Section 2.01(c), and (iv) Bucyrus Canada shall pay to Marion Canada at the
---------------
Closing Five Million Six Hundred Twenty Two Thousand United States Dollars
(U.S.$5,622,000) for the Transferred Assets as described in Section 2.01(d).
---------------
(b) PURCHASE PRICE ADJUSTMENT. Sellers and Buyers shall jointly, within
sixty (60) calendar days after the Closing Date, prepare (i) a consolidated
balance sheet of Sellers as of the Closing Date, (ii) a consolidating balance
sheet of Sellers as of the Closing Date, and (iii) a balance sheet of each
Seller as of the Closing Date (the "Closing Balance Sheets"). For Purchase
Price adjustment considerations, the Closing Balance Sheets shall be prepared on
a consistent basis with the accounting practices and procedures applied by
Sellers in the preparation of the Interim Balance Sheet and, for purposes of
this Section 3.01(b), in the absence of manifest error (which shall not include
---------------
any matters relating to practices and procedures applied by Sellers in preparing
the Interim Balance Sheet), the only adjustments to accounting reserves and
accruals reflected therein shall be those made to reflect changes in such
reserves and accruals between the date of the Interim Balance Sheet and the date
of the Closing Balance Sheet. In the event of a
- 11 -
<PAGE>
dispute between the parties regarding the preparation of the Closing Balance
Sheets, which dispute cannot be reconciled by the mutual agreement of the
parties within fifteen (15) business days after one of the parties has notified
the other party thereof, the parties shall together select a mutually acceptable
Big Six public accounting firm (which shall be unrelated to, and not in any
manner affiliated with, either Buyers or Sellers or Parent or their respective
shareholders, officers, or Affiliates, and not currently or within the two-year
period employed or engaged by either Buyers or Sellers or Parent or their
respective shareholders, officers, or Affiliates), which firm shall make an
independent determination of the disputed item or items consistent with the
criteria set forth in this Section 3.01(b). Such independent determination shall
---------------
(in the absence of fraud, bad faith, undue influence, or the like, or manifest
error) be final and binding on all of the parties hereto. All fees, costs and
expenses incurred in retaining such independent accounting firm shall be paid in
equal shares by Buyers and Sellers. Within ten (10) calendar days after (i) the
completion of mutually agreed upon Closing Balance Sheets or (ii) the resolution
of any dispute relating thereto submitted to an independent Big Six public
accounting firm, whichever the case may be, the following Purchase Price
Adjustment shall be paid by the parties:
A. ADJUSTMENT PAID TO SELLERS. If the Net Book Value of the
Transferred Assets minus the Assumed Liabilities of a Seller as
shown on the Closing Balance Sheet of such Seller is greater by
more than U.S.$10,000 than the Net Book Value of the Transferred
Assets minus the Assumed Liabilities of such Seller as shown on
the Interim Balance Sheet, then the difference between such Net
Book Value amounts shall be paid to such Seller by the Buyer who
is purchasing the Transferred Assets of such Seller.
B. ADJUSTMENT PAID TO BUYERS. If the Net Book Value of the
Transferred Assets minus the Assumed Liabilities of a Seller as
shown on the Closing Balance Sheet of such Seller is less by
more than U.S.$10,000 than the Net Book Value of the Transferred
Assets minus the Assumed Liabilities of such Seller as shown on
the Interim Balance Sheet, then the difference between such Net
Book Value amounts shall be paid by such Seller to the Buyer of
such Seller's Transferred Assets.
C. METHOD OF PAYMENT AND ALLOCATION. The payment by either Sellers
or Buyers under paragraphs A or B of this Section 3.01(b) (the
---------------
"Adjustment") shall be made by wire transfer of immediately
available funds to a bank account designated in writing by the
payee. The Adjustment paid to or by any Buyer shall be allocated
to the Transferred Assets purchased by such Buyer in the manner
set forth in Section 3.07 hereof.
------------
SECTION 3.02 DOCUMENTS OF SALE AND CONVEYANCE. The sale, conveyance,
assignment, transfer and delivery of the Transferred Assets shall be effected by
delivery by each Seller to each Buyer of (i) a duly executed bill of sale in
substantially the form as Exhibit B attached
---------
- 12 -
<PAGE>
hereto (the "Bills of Sale"), (ii) assignments with respect to any real or
personal property leases included in the Transferred Assets in substantially the
form as Exhibit C attached hereto (the "Lease Assignments"), and assignments
---------
with respect to all patents, trademarks, service marks, copyrights and all
applications therefor relating to the Business of Sellers in substantially the
form as Exhibit D attached hereto (the "Instruments of Assignment"), and (iii)
---------
such other good and sufficient instruments of conveyance and transfer as shall
be necessary to vest in Buyers good and valid title to the Transferred Assets
(the "Other Instruments").
SECTION 3.03 BULK SALE; SALES AND TRANSFER TAXES. Bucyrus USA and Marion
USA have agreed not to comply with the bulk transfer provisions of the Uniform
Commercial Code Bulk Transfer laws as adopted in the State of Ohio and with any
similar article under the Uniform Commercial Code enacted in any other
jurisdiction in which any of the Transferred Assets are located. Except for the
Assumed Liabilities, there shall be no liability or obligation of Buyers to
Sellers' creditors arising from the sale by Sellers of the Transferred Assets to
Buyers under the provisions of this Agreement. Any sales, use or similar
transfer taxes, and any transfer, recording or similar fees and charges arising
in connection with the transfer of the Transferred Assets from Sellers to Buyers
(except those value added taxes for which Buyers would receive a full refund
through input credits or similar credits; and except as otherwise set forth in
Section 6.14) shall be borne by Sellers.
- ------------
SECTION 3.04 CLOSING DATE. Within fifteen (15) business days after the
earlier of (i) expiration of the waiting period for completion of the
transactions contemplated by this Agreement imposed by Title II of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), or (ii)
termination of such waiting period prior to its expiration (each of clause (i)
and (ii) being hereinafter referred to as the "HSR Date"), and unless this
Agreement shall have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to the provisions of Article X, a closing
---------
with respect to the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Global Industrial Technologies, Inc., 2121
San Jacinto Street, Suite 2500, Dallas, Texas 75201 (the "Closing Date"). If
the Closing occurs later than five (5) calendar days after the HSR Date, Buyers
shall pay to Sellers at Closing interest on the Purchase Price from the sixth
(6th) calendar day after the HSR Date through either (A) the fifteenth (15th)
business day after the HSR Date or (B) the Closing Date, whichever first occurs,
at the rate set forth in Bucyrus USA's Commitment Letter from PPM America
Special Investments Fund, L.P. dated April 14, 1997.
SECTION 3.05 DELIVERIES BY SELLERS. At the Closing, Sellers shall deliver
to Buyers (unless delivered previously), the following:
(a) copies of the resolutions of the board of directors of Parent
and each Seller, and the resolution of the shareholders of each
Seller authorizing the execution, delivery and performance by
such party of this Agreement and the consummation by such party
of the transactions contemplated hereby, and authorizing such
party's officers, employees and agents to carry out
- 13 -
<PAGE>
and perform the terms and provisions hereof and thereof,
certified by the corporate secretary of such party;
(b) a copy of the Certificate of Incorporation (or comparable
document) of Parent and each Seller, as amended to date,
certified by the applicable government authority, and dated as
of a date not more than ten (10) calendar days prior to the
Closing Date, if such applicable government authority will issue
such a certificate;
(c) a certificate of good standing of Parent and each Seller issued
by the applicable governmental authority for the jurisdiction in
which such party is incorporated or, as to each Seller, is
required to be qualified to transact business as a foreign
corporation, dated not more than ten (10) calendar days prior to
the Closing Date, if such applicable governmental authority will
issue such a certificate;
(d) duly executed Bills of Sale;
(e) duly executed Lease Assignments;
(f) duly executed Instruments of Assignment;
(g) duly executed Other Instruments;
(h) duly executed documents evidencing transfers of Permits, if
transferable;
(i) duly executed documents evidencing transfers of motor vehicles
and registrations thereof;
(j) the officers' certificates referred to in Sections 8.01(a), (b)
---------------------
and (c) hereof;
-------
(k) the opinion of the General Counsel of Parent substantially in
the form of Exhibit E attached hereto;
---------
(l) the Books and Records of each Seller;
(m) a duly executed lease agreement, substantially in the form of
Exhibit G attached hereto, regarding the facilities located at
617 W. Center Street and 747 Perry Street, Marion, Ohio
(collectively, the "Marion USA Facilities"); and
(n) all other duly executed instruments and documents required by
this Agreement to be delivered by Sellers or Parent to Buyers,
and such other
- 14 -
<PAGE>
instruments and documents which Buyers or its counsel may
reasonably request not inconsistent with the provisions hereof,
so as to effectively transfer to Buyers all of Sellers' right,
title and interest in and to the Transferred Assets as provided
by this Agreement.
SECTION 3.06 DELIVERIES BY BUYER. At the Closing, Buyers shall deliver to
Sellers (unless delivered previously) the following:
(a) copies of the resolutions of each Buyer's board of directors
authorizing the execution, delivery and performance by each
Buyer of this Agreement and the consummation by each Buyer of
the transactions contemplated hereby, and authorizing each
Buyer's officers, employees and agents to carry out and perform
the terms and provisions hereof and thereof, certified by the
corporate secretary of each Buyer;
(b) a copy of the Certificate of Incorporation (or comparable
document) of each Buyer, as amended to date, certified by the
applicable government authority, and dated as of a date not more
than ten (10) calendar days prior to the Closing Date, if such
applicable government authority will issue such a certificate;
(c) a certificate of good standing of each Buyer issued by the
applicable governmental authority for each jurisdiction in which
each Buyer is incorporated or, as to each Buyer other than
Bucyrus USA, is required to be qualified to transact business as
a foreign corporation, dated not more than ten (10) calendar
days prior to the Closing Date, if such applicable governmental
authority will issue such a certificate;
(d) the wire transfer or transfers referred to in Section 3.01
------------
hereof;
(e) the officer's certificates referred to in Sections 9.01(a),
-----------------
(b) and (c) hereof;
-----------
(f) the opinion of Buyers' counsel, substantially in the form of
Exhibit F attached hereto;
---------
(g) a duly executed lease agreement, substantially in the form of
Exhibit G attached hereto, regarding the Marion USA Facilities;
---------
and
(h) all other duly executed instruments and documents required by
this Agreement to be delivered by Buyers to Sellers, and such
other instruments and documents which Sellers or its counsel may
reasonably request not inconsistent with the provisions hereof.
- 15 -
<PAGE>
SECTION 3.07 ALLOCATION OF PURCHASE PRICE. The sum of (i) the Purchase
Price, (ii) the Purchase Price Adjustments (described in Section 3.01(b)
---------------
hereof), and (iii) the amount of the Assumed Liabilities reflected in the
Closing Balance Sheet (collectively, the "Basis") shall be allocated among the
Transferred Assets as set forth in Schedule 3.07 attached hereto. Such
-------------
allocation and Basis shall be conclusive and binding on both Buyers and Sellers
for purposes of their federal and, where applicable, foreign, state and local
income tax returns, and the parties hereto agree not to take positions on any
tax return inconsistent with such allocation and Basis. Bucyrus USA and Marion
USA shall prepare and timely file all such reports and returns as may be
required by Section 1060 of the Code to report such allocation and Basis.
SECTION 3.08 EMPLOYEE MATTERS.
(a) EMPLOYEES. On or prior to the Closing Date, each Seller shall
terminate or cause to be terminated as of the Closing Date the employment of its
respective employees (the "Sellers' Employees") or transfer them to other
employment with Parent or an Affiliate of Parent. Sellers agree to cooperate
with Buyers by permitting Buyers throughout the period prior to the Closing Date
(i) to meet with Sellers' Employees at such times as shall be approved by a
representative of Sellers; (ii) to have access to the personnel files of
Sellers' Employees; and (iii) to distribute to Sellers' Employees such forms and
other documents setting forth the terms and conditions upon which employment, if
any, by Buyers is offered and any other forms and documents relating to
employment after the Closing Date by Buyers as Buyers may request.
(b) SEVERANCE PAY. Sellers shall be responsible for all severance pay,
severance benefits, and similar obligations arising under Sellers' plans,
programs or contracts relating to the termination of such employees employment
with Sellers on or prior to the Closing Date including, but not limited to, any
and all severance pay and benefits provided for under any collective bargaining
agreements or addendums thereto and which are Sellers' obligations under the
addendum. Buyers agree not to permanently hire any of Sellers' Employees for a
four (4) month period from the date such employee is terminated by Buyers from
Buyers' temporary employment, unless Buyers reimburse Sellers for severance
payments made to such employees. Subject to the Addendum (as defined below),
determination as to the amount of severance pay and the eligibility requirements
of severance shall be at the sole discretion of Sellers.
(c) UNION EMPLOYEE COLLECTIVE BARGAINING AGREEMENTS. Bucyrus USA agrees to
assume as of the Closing Date the collective bargaining agreements applicable to
Marion USA union employees if such collective bargaining agreements include
substantially the same terms as provided in Exhibit H attached hereto (the
---------
"Addendum"); provided, however, Bucyrus USA's assumption shall be only with
respect to those obligations to be undertaken by Bucyrus USA (and not Sellers)
under the terms of the Addendum. Bucyrus USA agrees to defend, indemnify, and
hold Sellers harmless from any and all Damages arising out of the failure of
Bucyrus USA to fulfill the express obligations of Bucyrus USA under the
Addendum. Prior to the date hereof, Sellers shall provide Bucyrus USA with a
list of all Sellers' union employees and their wage rates as of June 22, 1997.
Sellers shall defend, indemnify and hold Buyers harmless from any
- 16 -
<PAGE>
and all Damages relating to or arising out of the collective bargaining
agreements and Addendum, except for the specific obligations undertaken by
Bucyrus USA above, or as Bucyrus USA may otherwise undertake in writing.
(d) TEMPORARY EMPLOYEES. Prior to the Closing Date and subject to the
Addendum, Buyers shall identify those Sellers' Employees to whom Buyers will
offer temporary employment following the Closing Date. On or prior to the
Closing Date, but contingent upon consummation of the Closing, Buyers shall
offer to temporarily employ such employees as are identified by Buyers pursuant
to the immediate preceding sentence on such terms and conditions as Buyers shall
in Buyers' sole discretion determine (except that Bucyrus USA shall pay to
Sellers or Sellers' insurer for each such employee temporarily employed who
elects COBRA coverage under Sellers' medical plans, the COBRA premium for the
periods such employee is temporarily employed with Bucyrus USA) provided,
however, that each such employee shall be for all purposes, unless otherwise
specified in this Agreement, a new employee of Buyers (collectively, "Temporary
Employees") and each Temporary Employee's employment may be discontinued at the
will of Buyers, at any time and for any reason with or without cause. Sellers
understand and agree that Buyers will not assume, or accept any transfer of, any
pension, bonus, profit sharing, stock option, or employee benefit plans,
policies, programs or arrangements maintained by Sellers (or to which the
Sellers contribute or are required to contribute) or which, prior to the Closing
Date, cover any of Sellers' Employees. Further, Sellers shall retain sole
responsibility for all such plans, policies, programs or arrangements and their
related trusts, if any, and compliance with the provisions of ERISA, and all
other applicable laws, rules and regulations. Buyers shall be solely
responsible for the selection or non-selection of Sellers' Employees for offers
of temporary employment with Buyers. Buyers shall indemnify, defend and hold
harmless Sellers for any and all Damages relating to (i) selection or non-
selection by Buyers of any Seller's Employee for an offer of temporary
employment, or (ii) , without limiting any obligation of Sellers under this
Section 3.08, violation by Buyers of any laws applicable to the employment or
- ------- ----
termination by Buyers of those Sellers' Employees who accept offers of temporary
employment by Buyers.
(e) PERMANENT EMPLOYEES. To the extent Buyers hire on a permanent basis
any of Sellers' Employees, Buyers shall be responsible for all future
obligations relating to such of Sellers' Employees, including, without
limitation, worker's compensation and future severance benefits. Buyers shall be
solely responsible for the selection or non-selection of Sellers' Employees for
offers of permanent employment with Buyers. Buyers shall indemnify, defend and
hold harmless Sellers for any and all Damages relating to (i) selection or non-
selection by Buyers of any Sellers' Employee for an offer of permanent
employment, or (ii), without limiting any obligations of Sellers under this
Section 3.08, violation by Buyers of any laws applicable to the employment or
- ------------
termination by Buyers of those Sellers' Employees who accept offers of permanent
employment by Buyers.
(f) SELLERS' LIABILITY FOR SELLERS' EMPLOYEES. Sellers agree to defend,
indemnify and hold Buyers harmless from and against any and all Damages which
relate solely to periods of
- 17 -
<PAGE>
employment with Sellers, including suspension, layoff, termination or other
cessation of employment of, Sellers' Employees with Sellers, including, without
limitation, damages for wages, overtime or premium pay, back pay, front pay,
reinstatement, medical and dental insurance, life insurance, worker's
compensation or disability insurance, unemployment compensation benefits,
pension benefits, retirement benefits, vacation or sick pay, severance pay or
benefits, compensatory or punitive damages, or any other type or form of
compensation, benefit or damage of any kind; provided, however, nothing herein
is intended to relieve Buyers of their obligations under any law, including,
without limitation, statutory, common or other with respect to offering
employment to Sellers' Employees, the terms of such offer, the retention of such
employees, or any promise or commitment Buyers make to Sellers' Employees,
including, without limitation, crediting periods of employment with Sellers for
purposes of eligibility and amount of benefits under any employee benefit plans
of Buyers. Buyers agree to defend, indemnify and hold Sellers harmless from and
against any and all Damages which otherwise arise out of Buyers' obligations in
the preceding sentence.
(g) WARN NOTICES. Sellers shall, on behalf of Sellers and Buyers, at least
sixty (60) calendar days before closing the Marion USA Facilities, provide
notices under the Worker Adjustment and Retraining Notification Act ("WARN") to
all of Sellers' Employees (and appropriate government agencies and labor
organizations) of a plant closing and loss of employment on the Closing Date.
Sellers shall defend, indemnify and hold Buyers harmless from any and all
Damages under WARN resulting from Sellers' termination of the employment of
Sellers' Employees not employed by Buyers to the extent Sellers fail to provide
the requisite sixty (60) day notice prior to the Closing Date or otherwise fail
to properly notify other aforementioned parties entitled to notice.
SECTION 3.09 MAIL RECEIVED AFTER CLOSING. On or after the Closing, Buyers
may receive and open all mail addressed to Sellers and deal with the contents
thereof in their discretion to the extent that such mail and the contents
thereof relate to the Business or any of the Assumed Liabilities. Buyers agree
to deliver or to cause to be delivered within seven (7) business days of receipt
to Sellers all other mail received which is addressed to Sellers or Sellers'
employees and which relates to Excluded Liabilities or which does not relate to
the Transferred Assets, the Business of Sellers or the Assumed Liabilities.
SECTION 3.10 PRORATION OF LEASE PAYMENTS, UTILITY CHARGES AND OTHER
PAYMENTS. In any case where the Closing Date shall fall on a date other than
the date on which payments are due with respect to (i) any leases or (ii)
utility or similar regular periodic charges with respect to the Transferred
Assets for which a final billing has not been requested by Sellers, any
installment of rental payments and any such utility or similar charge payable
with respect to the current period in which the Closing Date occurs shall be
prorated between Sellers and Buyers on the basis of the actual number of days
elapsed from the first day of such period to the Closing Date.
SECTION 3.11 PRORATION OF TAXES. All property taxes and special
assessments payable, but not yet due, with respect to any of the Transferred
Assets shall be prorated between Sellers
- 18 -
<PAGE>
and Buyers on the basis of the actual number of days elapsed between the
commencement of the current fiscal tax year and the Closing Date, based on a
365-day year and so reflected in the Closing Balance Sheet; provided, however,
that all such assessments which Sellers have agreed to pay on an installment
basis shall be paid in full at or prior to the Closing Date to the extent such
installments are then due. In connection with such proration of taxes, in the
event that actual tax figures for the year of Closing are not available at the
Closing Date, an estimated, provisional proration of taxes shall be made using
tax figures from the preceding year. When actual tax figures for the year of the
Closing become available, a corrected and definitive proration of taxes shall be
promptly made. In the event that taxes for the year of the Closing exceed the
amount estimated in such provisional proration, Sellers shall pay Buyers their
pro rata share of the amount by which the actual taxes exceed the estimated
taxes. Similarly, in the event that taxes from the year of the Closing are less
than the amount estimated in such provisional proration, Buyers shall pay
Sellers their pro rata share of the amount by which the estimated taxes exceed
the actual taxes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS AND PARENT
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF SELLERS AND PARENT. For
purposes of this Article IV, no specific representation or warranty shall limit
the applicability of a more general representation or warranty. Exhibit I sets
forth a complete and correct list of all officers and directors of Sellers and
Parent.
Sellers and Parent hereby represent and warrant (each Seller represents and
warrants individually only as to those matters pertaining to the Business of
such Seller, while Parent represents and warrants to all matters of each such
Seller) to Buyers the following:
(a) ORGANIZATION AND GOOD STANDING. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction under which it was incorporated, and has all requisite corporate
power and authority to conduct the Business of such Seller as is now being
conducted and to own and lease the properties and assets it now owns and leases.
Each Seller is in good standing and is duly qualified or licensed as a foreign
corporation in each jurisdiction in which the properties owned or leased by such
Seller or the nature of the business of such Seller makes such qualification or
licensing necessary, except those jurisdictions wherein the failure to so
qualify would not have a material adverse effect on such Seller, the Business of
such Seller or any of the Transferred Assets.
(b) AUTHORITY. Each Seller and Parent have all requisite corporate power
and corporate authority to execute, deliver and perform this Agreement and any
other instruments, documents or agreements to be executed or delivered by them
hereunder or in connection with the transactions contemplated hereby, and to
carry out the transactions contemplated hereby and their obligations hereunder.
Each Seller's Board of Directors and its sole shareholder and Parent's Board of
Directors have duly authorized the execution and delivery of this Agreement
- 19 -
<PAGE>
by each Seller and Parent, respectively, and the consummation by each Seller and
Parent, respectively, of the transactions contemplated hereby, and no other
corporate action by any Seller or Parent is required by law, their Certificate
of Incorporation (or comparable document), By-Laws or otherwise to authorize the
execution and delivery by each Seller or Parent of this Agreement or the
consummation by each Seller or Parent of the transactions contemplated hereby.
This Agreement and any other agreement to be executed or delivered hereunder by
any Seller and/or Parent is, or will be, a legal, valid and binding obligation
of such Seller or Parent, enforceable against it/them in accordance with its
terms (subject to applicable bankruptcy, insolvency, and similar laws affecting
creditors' rights generally and subject as to enforceability to general
principles of equity (regardless whether enforcement is sought in a proceeding
in equity or at law)).
(c) NO VIOLATION. Neither the execution and delivery by Sellers or Parent
of this Agreement nor the consummation by Sellers or Parent of the transactions
contemplated hereby (i) will result in any violation of, or be in conflict with,
the Certificate of Incorporation (or comparable document) or Bylaws of any
Seller or Parent; (ii) will, to Sellers' Knowledge, result in any breach of or
default under any provision of, or give any third party the right to cancel, any
contract or agreement of any kind to which any Seller or Parent is a party or
which is applicable to any Seller, Parent, the Business of any Seller, or the
Transferred Assets; (iii) is prohibited by or requires any Seller to obtain any
consent, authorization or approval of, or make any filing or registration with,
any governmental or regulatory agency or authority which has not been obtained,
except for the approvals contemplated by Section 6.03 herein; (iv) will require
------------
the consent of any third party, except as set forth on Schedule 4.01(c); or (v)
----------------
will violate any judgment, decree, order, writ, injunction, statute, regulation
or rule of any court or governmental authority having jurisdiction over any
Seller or Parent, in each case ((ii) - (v)), if such would have a material
adverse effect on the Business of Sellers, taken as a whole, or each Seller's
ability to perform the terms of this Agreement.
(d) BROKERS. Neither Sellers nor Parent have employed any broker, agent or
finder in connection with any transaction contemplated by this Agreement other
than The Beacon Group.
(e) FINANCIAL STATEMENTS.
(i) Sellers have previously delivered to Buyers copies of Sellers'
unaudited consolidated balance sheets as of October 31, 1992, 1993, 1994, 1995
and 1996, and the related statements of income for the fiscal years then ended.
The aforesaid financial statements are hereinafter referred to collectively as
the "Historical Financial Statements." The Historical Financial Statements have
been extracted from the audited financial statements of Parent, and, subject to
the statements contained in the draft management representation letter to Arthur
- 20 -
<PAGE>
Andersen attached hereto as Exhibit J, fairly present the financial position of
---------
Sellers as of the effective dates of, and for the periods covered by, such
Historical Financial Statements.
(ii) Attached hereto as Schedule 4.01(e)(ii) is the unaudited
--------------------
consolidated balance sheet of Sellers as of January 31, 1997 (the "Interim
Balance Sheet"), and the related statements of income, stockholders' equity and
changes in financial position of Sellers for the year to date and month then
ended (collectively, the "Interim Financial Statements").
(iii) The Historical Financial Statements: (A) have been prepared
from, and are consistent with, the books and records of Sellers and have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") as consistently applied by Sellers during the periods covered thereby;
and (B) fairly present the financial condition, results of operations and cash
flows of Sellers, as a whole, as of the dates and for the periods stated
therein.
(f) TITLE TO PROPERTY AND RELATED MATTERS.
(i) Except as set forth in Schedule 4.01(f)(i), each Seller will have,
-------------------
as of the Closing Date, good and marketable title to all of such Seller's
Transferred Assets which it owns or purports to own, including, without
limitation, the properties and assets reflected on the Closing Balance Sheet,
free and clear of any Encumbrances except Permitted Encumbrances.
(ii) Schedule 4.01(f)(ii) sets forth a complete and correct list of
--------------------
all real property leases to which any Seller is a party (either as lessee or
lessor) and which are to be assigned to and assumed by Buyers) (the "Leased
Property"), together with a brief description of the property leased and
identifying the date and term of the lease, the amount and timing of lease
payments and any renewal or purchase options. Each Seller has previously made
available to Buyers complete and correct copies of each lease (and any
amendments thereto) listed in Schedule 4.01(f)(ii). Each such lease is in full
--------------------
force and effect; all lease payments due to date on any such lease have been
paid, and neither Sellers nor, to Sellers' Knowledge, any other party is in
default in any material respect under any such lease, and no event has occurred
which constitutes, or with the lapse of time or the giving of notice or both
would constitute, a material default by any Seller or, to Sellers' Knowledge,
any other party under such lease; there are no disputes or disagreements between
any Seller and, to Sellers' Knowledge, any other party with respect to any such
lease. The structures, plants, improvements, systems (including, without
limitation, electrical, plumbing, fire prevention, lighting, air conditioning,
heating, ventilation, and elevator) and fixtures located on each such parcel of
Leased Property conform in all material respects with all federal, state and
local statutes and laws and all ordinances, rules, regulations and similar
governmental and regulatory requirements where the failure to so conform has
had, or could have, a material adverse effect, and are in good operating
condition and repair, ordinary wear and tear excepted. Each such parcel of
Leased Property, in view of the purposes for which it is currently used,
conforms with all material covenants or restrictions of record, and current,
valid certificates of occupancy (or equivalent governmental approvals) have been
issued for each item of Leased Property to the extent required by law, and
Sellers have no Knowledge of any
- 21 -
<PAGE>
proposed change in any such governmental or regulatory requirements or in any
such zoning requirements. Each Seller has all material easements, rights-of-way
and similar rights necessary to conduct its business as presently conducted, and
(A) all such easements and rights are valid, binding and in full force and
effect, and neither Sellers nor, to Sellers' Knowledge, any other party thereto
is in default thereunder; and (B) there exists no event or condition affecting
Sellers or, to Sellers' Knowledge, any other party thereto, which, with the
passage of time or notice or both, would constitute a material default
thereunder. No such easement or right will be breached by, nor, to Sellers'
Knowledge, will any party thereto be given a right of termination as a result
of, the transactions contemplated by this Agreement.
(iii) Except as set forth in Schedule 4.01(f)(iii), all material
---------------------
items of equipment, machinery, vehicles, furniture, fixtures and other tangible
personal property owned or used by each Seller and to be transferred to Buyers
are adequate for the operations of the Business of such Seller as presently
conducted and are (A) in good operating condition and repair, ordinary wear and
tear excepted, and (B) owned outright by each Seller, or validly leased by each
Seller under one of the leases set forth in Schedule 4.01(f)(ii). Except as set
--------------------
forth in Schedule 4.01(f)(iii), no item of tangible personal property owned or
---------------------
used by any Seller and to be transferred to Buyers is subject to any conditional
sale agreement, installment sale agreement or title retention or security
agreement or arrangement of any kind.
(iv) Schedule 4.01(f)(iv) sets forth a complete and correct list and
--------------------
summary description of all tangible personal property leases to which any Seller
is a party (either as landlord or tenant) and which are to be assigned to and
assumed by Buyers. Each Seller has previously made available to Buyers complete
and correct copies of each lease (and any amendments thereto) listed in Schedule
--------
4.01(f)(iv). Except as set forth in Schedule 4.01(f)(iv): (A) each such lease
- ----------- --------------------
is in full force and effect; (B) neither Sellers nor, to Sellers' Knowledge, any
other party is in default in any material respect under any such lease, and no
event has occurred which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a material default by such Seller or, to
Sellers' Knowledge, any other party under such lease; and (C) there are no
material disputes or disagreements between such Seller and, to Sellers'
Knowledge, any other party with respect to any such lease.
(v) The Transferred Assets constitute all of the assets required
(other than the Retained Assets) for the Business of each Seller as presently
conducted.
(g) COMPLIANCE WITH APPLICABLE LAW. To Sellers' Knowledge, each Seller has
complied in all material respects with all laws (other than environmental laws),
rules, regulations, ordinances, codes, orders, judgments, injunctions, writs or
decrees of any court or governmental body which are applicable to the Business
of such Seller, the noncompliance with which would have a material adverse
effect on the Business of such Seller, taken as a whole, or the Transferred
Assets, or on such Seller's ability to perform the terms of this Agreement.
Neither Sellers nor Parent have received any notice alleging any such violation,
nor does any Seller or Parent have any Knowledge of any inquiry, investigation
or proceeding relating thereto.
- 22 -
<PAGE>
(h) TAXES. Each Seller has (i) timely filed all returns and reports
required to be filed by it on or before the Closing Date with respect of Taxes,
(ii) paid or contested all Taxes shown to have become due pursuant to such
returns and (iii) paid or contested all other Taxes for which a notice of
assessment or demand for payment has been received, except to the extent that
the failure by such Seller to have done so could not have a material adverse
effect on the Business of Sellers, taken as a whole, or each Seller's ability to
perform the terms of this Agreement. Except as set forth in Schedule 4.01(h):
----------------
(A) there are no actions or proceedings currently pending or, to Sellers'
Knowledge, threatened against such Seller by any governmental authority for the
assessment or collection of Taxes; (B) no claim for the assessment or collection
of Taxes has been asserted or, to Sellers' Knowledge, threatened, against such
Seller; and (C) there are no matters under discussion by such Seller with any
governmental authority regarding claims for the assessment or collection of
Taxes against such Seller. There are no agreements, waivers, or applications by
such Seller for an extension of time for the assessment or payment of any Taxes.
(i) CONTRACTS AND COMMITMENTS.
(i) Except as set forth in Schedule 4.01(i) (or in any other
----------------
Disclosure Schedule) no Seller is a party to, or subject to:
(A) any contract, arrangement or understanding, or series of
related contracts, arrangements or understandings, other than
Sales Orders and Purchase Orders (as hereinafter defined),
which involves annual expenditures or receipts by any Seller
of more than $10,000;
(B) any contract, arrangement or understanding not made in the
ordinary course of business and consistent with past
practice;
(C) any license agreement (other than those listed on Schedule
--------
4.01(j));
-------
(D) any note, bond, indenture, credit facility, mortgage,
security agreement or other instrument or document relating
to or evidencing indebtedness for money borrowed or a
security interest or mortgage in the assets of any Seller;
(E) any warranty, indemnity or guaranty issued by any Seller,
except with regard to obligations imposed as a matter of law;
(F) any contract, arrangement or understanding granting to any
person the right to use any material item of property or
property right of any Seller;
- 23 -
<PAGE>
(G) any outstanding offer or commitment to enter into any
contract or arrangement of the nature described in
subsections (A) through (F) of this Section 4.01(i).
---------------
For purposes of this Agreement, the term "Sales Orders" shall mean those
purchase orders of each Seller's customers (including distributors) and other
contracts for the sale of each Seller's products and services received or
entered into by each Seller from or with its customers in the ordinary course of
business; and the term "Purchase Orders" shall mean those purchase orders of
each Seller and other contracts and commitments issued or entered into by such
Seller to or with its suppliers and vendors for the purchase of goods, products
and supplies in the ordinary course of business.
(ii) Sellers have previously delivered to Buyers complete and
correct copies of each written contract or agreement (and any amendments
thereto) listed on Schedule 4.01(i) or identified in any other Disclosure
----------------
Schedule, and a complete and correct description of each oral contract to which
any Seller is a party or bound and which is listed on Schedule 4.01(i) or in any
----------------
other Disclosure Schedule. Except as set forth in Schedule 4.01(i): (A) each
----------------
such contract and all Sales Orders and Purchase Orders (the "Contracts") are in
full force and effect, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally; (B) neither Sellers nor, to Sellers' Knowledge, any
other party is in default under any such Contract in which such default is
likely to result in Damages to the non-defaulting party in excess of
U.S.$25,000, and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a material default by any
Seller or by any other party; and (C) there are no material disputes or
disagreements between any Seller and any other party with respect to any such
Contract.
(j) INTANGIBLE ASSETS. Schedule 4.01(j) sets forth a complete and
----------------
correct list of all Intangible Assets and all licenses and other agreements
allowing Sellers to use the intangible rights of third parties (the "Licensed
Intangible Rights") in the United States or foreign countries. Except as set
forth on Schedule 4.01(j) and except for those Intangible Assets that have
----------------
irretrievably lapsed, expired or been canceled as of the date of this Agreement,
including, without limitation, those Intangible Assets that have irretrievably
lapsed, expired or been canceled due to expiration of a time limit for
recordation of a transfer of ownership required in the respective jurisdiction
or county: (i) Sellers are the owner of, and have good and marketable title to,
all of the Intangible Assets free and clear of all Encumbrances, and (ii) no
governmental registration of any of the Intangible Assets or Licensed Intangible
Rights has lapsed, expired or been canceled, opposed or become the subject of a
re-examination request. Except as set forth in Schedule 4.01(j): (A) there are
----------------
no licenses, agreements or commitments outstanding or effective granting any
other person any right to use, operate under, license or sublicense the
Intangible Assets, and (B) to Sellers' Knowledge, neither the use of the
Intangible Assets, nor the use of the Licensed Intangible Rights, infringes upon
or conflicts with the intellectual property rights of any person. Except as
disclosed in Schedule 4.01(j): (X) there are no unresolved claims, and, to
----------------
Sellers' Knowledge, there is no basis for any claim challenging the ownership,
scope, validity or
- 24 -
<PAGE>
enforceability of any of the Intangible Assets or Licensed Intangible Rights;
and (Y) there are no instances where it has been held, claimed, or alleged,
whether directly or indirectly, and there is no basis which in the good faith
opinion of Sellers are likely to prevail upon which a claim may be made, that
any of the Intangible Assets or Licensed Intangible Rights infringes upon or
conflicts with the rights of any third party, or that any activity of any third
party infringes upon or conflicts with any of the Intangible Assets or Licensed
Intangible Assets.
(k) LITIGATION. Except as set forth on Schedule 4.01(k), there are no
----------------
suits, proceedings (including, without limitation, arbitral and administrative
proceedings), claims, or actions pending or any governmental inquiries,
investigations or audits pending, and, to Sellers' Knowledge, none of the
foregoing are threatened against or affecting any Seller, the Transferred Assets
or the transactions contemplated hereby in any court or before any arbitration
panel of any kind or before or by any Governmental Body. Except as set forth on
Schedule 4.01(k), there is no judgment, order, writ, injunction, decree or award
- ----------------
(whether issued by a court, an arbitrator, a governmental body or agency thereof
or otherwise) to which any Seller is a party and involving the Transferred
Assets, which is unsatisfied or which requires continuing compliance therewith
by any Seller.
(l) PERMITS, LICENSES, ETC. Schedule 4.01(l) sets forth all material
----------------
approvals, authorizations, consents, licenses, filings, orders and permits of
all governmental and regulatory authorities (collectively, "Licenses") held by
or granted to any Seller. Except as disclosed in Schedule 4.01(l), each of the
----------------
Licenses is in full force and effect. Schedule 4.01(l) indicates those Licenses
----------------
which are assignable to Buyers without the consent of the issuers thereof.
Except as disclosed in Schedule 4.01(l), no Seller has received a notice of any
----------------
action to terminate or change any provision of any License. The Licenses set
forth in Schedule 4.01(l) include all such approvals, authorizations, consents,
----------------
licenses, filings, orders and permits which are required for the ownership of
the Transferred Assets and the conduct of the Business of each Seller as it is
presently conducted, the absence of any of which, if not obtained, would have a
material adverse effect on such Seller, the Business or the Transferred Assets
taken as a whole.
(m) BOOKS AND RECORDS. Each Seller maintains its books, accounts, and
records (including, but not limited to, those kept for financial reporting
purposes and for tax purposes) in accordance with good business practices and in
sufficient detail to reflect accurately and fairly the transactions and
dispositions of its assets, liabilities and equities.
(n) NO MATERIAL ADVERSE CHANGE.
(A) Since the date of the Interim Balance Sheet, each Seller has
carried on its business in the ordinary course and consistent with past
practice. Except as set forth in Schedule 4.01(n), and except to the extent
----------------
such would not have a material adverse effect of such Seller, the Business of
such Seller or the Transferred Assets taken as a whole, since the date of the
Interim Balance Sheet, no Seller has:
- 25 -
<PAGE>
(i) incurred any obligation or liability (whether absolute, accrued,
contingent or otherwise), except in the ordinary course of
business and consistent with past practice;
(ii) suffered any damage, destruction or loss, whether or not covered
by insurance, affecting its properties, assets or business,
exceeding $10,000 individually or in the aggregate;
(iii) mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of its assets, tangible or intangible, except in
the ordinary course of business and consistent with past
practice;
(iv) sold or transferred any of its assets, except in the ordinary
course of business and consistent with past practice, or
canceled or compromised any material debts or waived any claims
or rights of a material nature;
(v) leased, licensed or granted to any person or entity any rights
in any of its assets or properties outside the ordinary course
of business and inconsistent with past practice;
(vi) made any change in any accounting principle or practice or in
its method of applying any such principle or practice; or
(vii) entered into any agreement or commitment to do any of the
foregoing.
(B) Except as set forth in Schedule 4.01(n), and except to the
----------------
extent such would not have a material adverse effect on Sellers, the Business of
Sellers taken as a whole, or the Transferred Assets taken as a whole, since the
date of the Interim Balance Sheet, Sellers have not, taken as a whole,
experienced any material adverse change in their financial condition, results of
operations, cash flows, assets, liabilities, Business or operations.
(o) PRODUCT WARRANTIES AND PRODUCT LIABILITIES. Schedule 4.01(o) contains
----------------
a true, correct and complete copy of Sellers' standard warranty or warranties
for sales of the products of the Business of such Sellers. To Sellers'
Knowledge, Schedule 4.01(o) sets forth a complete and correct list of each
----------------
Seller's outstanding warranty obligations and claims on all of such Seller's
material machine contracts. Schedule 4.01(o) lists and describes in summary form
----------------
all claims made or, to Sellers' Knowledge, threatened during the five (5) year
period preceding the date of this Agreement alleging personal injury or property
damage relating to the products of the Business.
(p) ACCOUNTS RECEIVABLE. Except as set forth in Schedule 4.01(p), all
----------------
accounts receivable reflected in the Interim Balance Sheet or to be reflected in
the Closing Balance Sheet, represent valid claims for bona-fide, arms-length
sales of goods or services actually made by
- 26 -
<PAGE>
each Seller in the ordinary course of such Seller's Business, and none of the
accounts receivable is subject to any set-off or counterclaim or is in dispute.
Except as set forth in Schedule 4.01(p), to Sellers' Knowledge, no accounts
----------------
receivable to be reflected in the Closing Balance Sheet will be past due
according to their terms and all accounts receivable will be collectible in the
ordinary course of business using normal collection practices at the aggregate
recorded amounts thereof (net of the allowance for uncollectible accounts).
(q) INVENTORY. The items comprising the inventory, whether reflected in
the Interim Balance Sheet or to be reflected in the Closing Balance Sheet, are,
or will be, accounted for on a lower of cost first-in, first-out or market basis
consistently applied. Except as set forth in Schedule 4.01(q), the inventory of
----------------
Sellers reflected in the Interim Balance Sheet or to be reflected in the Closing
Balance Sheet does not, and will not, include any items which are obsolete or
not usable or salable in the ordinary course of such Seller's Business, except
those items the values of which have been written down in the above-described
balance sheets to net realizable value or with respect to which adequate
reserves have been provided in the above-described balance sheets, in either
case in accordance with generally accepted accounting principles as consistently
applied by Sellers.
(r) TRANSACTIONS WITH AFFILIATES. Except for compensation to officers and
routine travel advances to officers and employees, Schedule 4.01(r) contains an
----------------
accurate and complete list and description of all agreements, arrangements and
understandings (including outstanding indebtedness) which are currently in
effect between any Seller and any Affiliate.
(s) RELIANCE. The representations and warranties of Sellers and Parent
made in this Agreement are made by Sellers and Parent with the knowledge and
expectation that Buyers are placing reliance thereon in entering into, and
performing their obligations under this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY BUYERS
SECTION 5.01 REPRESENTATIONS AND WARRANTIES BY BUYERS. Buyers hereby
represent and warrant the following:
(a) ORGANIZATION AND GOOD STANDING. Each Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was incorporated. Each Buyer is duly qualified or
licensed as a foreign corporation in each jurisdiction in which the property
owned or leased by such Buyer or the nature of the business of such Buyer makes
such qualification or licensing necessary, except those jurisdictions wherein
the failure to so qualify could not have a material adverse effect on such
Buyer.
(b) AUTHORITY. Each Buyer has all requisite corporate power and corporate
authority to execute, deliver and perform this Agreement and any other
instruments, documents or agreements to be executed or delivered by it hereunder
or in connection with the transactions
- 27 -
<PAGE>
contemplated hereby, and to carry out the transactions contemplated hereby and
its obligations hereunder. Each Buyer's board of directors has duly authorized
the execution and delivery of this Agreement by such Buyer and the consummation
by such Buyer of the transactions contemplated hereby, and no other corporate
action by such Buyer is required by law, its Certificate of Incorporation (or
comparable document), By-Laws or otherwise to authorize the execution and
delivery by such Buyer of this Agreement or the consummation by such Buyer of
the transactions contemplated hereby.
(c) NO VIOLATION. Neither the execution and delivery by any Buyer of this
Agreement nor the consummation by any Buyer of the transactions contemplated
hereby (i) will violate the Certificate of Incorporation (or comparable
document) or Bylaws of any Buyer, (ii) will result in any breach of or default
under any provision of any contract or agreement of any kind to which any Buyer
is a party or by which any Buyer is bound, (iii) is prohibited by or requires
any Buyer to obtain any consent, authorization or approval of, or make any
filing with, any governmental agency or authority which has not been obtained,
except for the approval contemplated by Section 7.01 herein, or (iv) will
------------
violate any judgment, decree, order, writ, injunction, regulation or rule of any
court or governmental authority having jurisdiction over any Buyer, in each case
in such a way as would have a material adverse effect on any such Buyer's
ability to perform the terms of this Agreement. This Agreement and any other
agreement to be executed or delivered hereunder by any Buyer is, or will be, a
legal, valid and binding obligation of such Buyer, enforceable against it in
accordance with its terms (subject to applicable bankruptcy, insolvency, and
similar laws affecting creditors' rights generally and subject as to
enforceability to general principles of equity (regardless whether enforcement
is sought in a proceeding in equity or at law)).
(d) BROKERS. No Buyer has employed any broker, agent or finder in
connection with any transaction contemplated by this Agreement.
(e) FINANCIAL CAPABILITY. Each Buyer has, and will have as of the Closing
Date, the financial resources to perform its obligations under this Agreement,
including all necessary financial resources to pay the Purchase Price and
perform or meet any other obligations of each Buyer hereunder.
ARTICLE VI
AGREEMENTS BY SELLERS
SECTION 6.01 CONDUCT OF THE BUSINESS OF SELLERS PRIOR TO CLOSING. Sellers
covenant and agree with Buyers that, between the date hereof and the Closing
Date (except as otherwise agreed in writing by the Buyers):
- 28 -
<PAGE>
(a) The Business of Sellers shall be conducted in the ordinary
course and consistent with past practice;
(b) Sellers shall use their best efforts to preserve the assets,
business and goodwill of Sellers, and shall endeavor to keep
available the services of the present employees of Sellers,
provided that Sellers shall not be authorized (without the prior
written consent of Buyers) to make any commitment on behalf of
Buyers;
(c) Sellers shall not enter into any contract or commitment, or
series of related contracts or commitments (except for Purchase
Orders and Sales Orders) unless each such contract or
commitment, or series of related contracts or commitments, (i)
arises in the ordinary course of business, or (ii) involves
expenditures or revenues of less than $25,000 in the aggregate;
(d) Sellers shall promptly, after obtaining Knowledge of the
following, advise Buyers in writing of (i) the commencement or
threat of any suit, proceeding or investigation against,
relating to, or involving Sellers or which could otherwise
affect the Transferred Assets or the Business of Sellers,
whether or not covered by insurance; (ii) any material adverse
change in the assets, liabilities, financial condition, business
or operations of Sellers; and (iii) any event, condition or
state of facts which will, or may, result in the failure to
satisfy any of the conditions in Article VIII hereof;
------------
(e) Sellers shall not create, or permit to become effective, any
Encumbrance on the assets, tangible or intangible, of Sellers,
except in the ordinary course of business consistent with past
practice;
(f) Sellers shall maintain their current liability, casualty,
property and other insurance coverages in full force and effect
without reduction in coverage;
(g) Sellers shall not make any change in the accounting principles
or practices reflected in the Interim Balance Sheet or in their
methods of applying such principles or practices; and
(h) Sellers shall not enter into any agreement or commitment to do
any of the foregoing.
SECTION 6.02 SUPPLYING OF INFORMATION. Sellers shall promptly furnish to,
or provide access to, Buyers or their representatives, from time to time as
reasonably requested by Buyers, complete and accurate information in cooperation
with any audit, review, investigation or examination of the Books and Records,
assets and operations of Sellers. In connection therewith,
- 29 -
<PAGE>
Sellers shall direct and authorize their accountants to make available to Buyers
and their accountants all working papers reasonably requested by Buyers. Sellers
shall also allow Buyers or their representatives to have full and complete
access to the assets and properties of Sellers, provided that Buyers'
investigation shall occur at such times and in such a manner as Sellers
reasonably determine to be appropriate to protect the confidentiality of the
transactions contemplated by this Agreement and to avoid unreasonable disruption
of the Business.
SECTION 6.03 ANTITRUST NOTIFICATION.
(a) HART-SCOTT-RODINO. Sellers shall cooperate with Buyers in filing,
as promptly as practicable after the execution of this Agreement, all reports,
notifications and other information in connection with this transaction pursuant
to the HSR Act or any other applicable federal, state or foreign notification
requirement, and shall use their best efforts to respond as promptly as
practicable to all inquiries from Government Bodies relating to the transactions
contemplated by this Agreement and to cause an early termination of the waiting
period established by the HSR Act.
(b) FOREIGN. Buyers and Sellers shall use their best efforts to
obtain, as soon as practicable after the date of this Agreement, all approvals,
authorizations or no-action letters in Australia and South Africa in connection
with the transactions contemplated herein with Marion Australia and Marion South
Africa, respectively.
SECTION 6.04 OTHER TRANSACTIONS. Prior to the Closing Date, neither
Sellers nor any of Sellers' officers, directors, stockholders or other
representatives, shall, directly or indirectly, solicit or initiate discussions
or negotiations with, or provide any information or assistance to, any
corporation, partnership, person, or other entity or group (other than Buyers
and their representatives) concerning any merger, sale of securities, sale of
substantial assets, investment proposals or similar transaction involving
Sellers.
SECTION 6.05 DISCHARGE OF LIENS. Sellers shall cause all Encumbrances on
any real or personal property owned by or leased to Sellers which is included in
the Transferred Assets (other than Permitted Encumbrances and Encumbrances
otherwise permitted by this Agreement such as related to the Assumed
Liabilities) to be terminated or otherwise discharged at or prior to the
Closing.
SECTION 6.06 NAME CHANGE. On the Closing Date, Marion USA, Marion
Australia and Marion South America, S.A., a Chilean corporation, shall each
change its corporate name so that it is not similar to its current corporate
name and shall terminate all of its assumed name filings. After the Closing
Date, Parent and Sellers shall cease using the name "Marion" and any names
similar thereto.
SECTION 6.07 TAXES. Sellers shall be responsible for, and shall promptly
cause to be paid when due, all Taxes (including, but not limited to, any reserve
for Taxes accrued on Sellers'
- 30 -
<PAGE>
books) attributable to income or other gain accrued, earned or otherwise
generated by Sellers for all time periods up to and including the Closing Date.
Sellers shall be responsible for, and shall pay when and if due, except as
provided in Section 3.03 herein, all applicable sales, transfer, excise, use,
documentary stamps or any other similar taxes or stamp duties which may be
imposed in any jurisdiction, or by any authority, in connection with, or arising
from the sale of the Transferred Assets. Except as provided in Section 3.03
herein, Sellers shall prepare and file all appropriate sales, transfer, excise,
use, documentary stamps and other tax returns and other documents and shall make
timely payment of any sales, transfer, excise, use and other taxes due in any
jurisdiction in connection with the transactions contemplated hereunder.
SECTION 6.08 BEST EFFORTS. Sellers agree that, prior to the Closing, they
shall use their best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
SECTION 6.09 CONSENTS. At or prior to the Closing, Sellers shall endeavor
to obtain all written consents and releases from parties whose consent is
necessary to the assignment by Sellers to Buyers of the contracts, agreements,
and arrangements agreed to be assigned to and assumed by Buyers prior to
Closing. In the case of contract rights which, at the Closing Date, have not
been effectively transferred due to the lack of consent of third parties,
Sellers shall, if such consents are unobtainable, use their best efforts to make
available to Buyers the benefits thereof in some other manner.
SECTION 6.10 REPURCHASE OF ACCOUNTS RECEIVABLE. After the Closing, Buyers
agree to use their normal and customary collection procedures (excluding
institution of litigation) as in effect on the Closing Date, to collect the
accounts receivable of Sellers existing on the Closing Date and reflected on the
Closing Balance Sheet (the "Transferred Receivables"). In the event any
Transferred Receivables remain uncollected in whole or in part, above the amount
reserved for on the Closing Balance Sheet, on the later of one hundred fifty
calendar (150) days after (i) the Closing; or (ii) after the time which such
Transferred Receivable was due and payable according to its terms, Sellers shall
repurchase from Buyers such uncollected Transferred Receivables at a purchase
price equal to ninety percent (90%) of the difference between (x) the aggregate
uncollected face amount of the Transferred Receivables, minus (y) the reserve
for uncollectible receivables on the Closing Balance Sheet.
SECTION 6.11 BOOKS AND RECORDS. Parent and Sellers agree to permit Buyers,
upon the request of Buyers at any time within seven (7) years after the Closing
Date, to inspect and copy at Buyers' expense, all books and records not included
as part of the Books and Records during regular business hours in order to
permit Buyers to (i) prepare for, dispute or respond to any claim, lawsuit or
proceeding relating to Sellers' Business for which Buyers are responsible under
this Agreement, including, without limitation, audits in connection with tax
returns or proceedings under the Internal Revenue Code, and (ii) comply with
governmental requirements applicable to Buyers or any of their Affiliates;
provided, however, that any such inspection
- 31 -
<PAGE>
pursuant to this Section 6.11 shall be conducted in such a manner so as not to
------------
unreasonably disrupt Sellers' or Parent's business. Parent and Sellers also
agree that they shall not destroy any such books and records for a period of
seven (7) years after Closing without first notifying Buyers.
SECTION 6.12 NON-COMPETITION. Parent and Sellers agree that for a period
of three (3) years following the Closing Date, none of them will directly or
indirectly engage anywhere throughout the world in any business which competes
with the Business. The preceding prohibition shall not prohibit Parent or
Sellers from (i) acquiring a competing business as part of a larger acquisition,
provided that the sales of the competing business constitute less than twenty-
five (25%) percent of the overall sales of the acquired business, or (ii)
selling parts or components of the type previously sold by Sellers, but which
were not manufactured by Sellers.
SECTION 6.13 ENVIRONMENTAL LIABILITIES. Sellers and Parent, jointly and
severally, agree to hold harmless, defend, and indemnify Buyers from and against
any and all Third Party Claims (as hereinafter defined) against Buyers, and all
Damages related thereto, against Buyers regarding environmental liabilities and
obligations arising from or directly or indirectly relating to (i) Sellers'
operation of the Business prior to the Closing Date; and (ii) Buyers' temporary
operation of the Marion USA Facilities and the facilities leased by Marion
Australia and Marion South Africa after the Closing, except (and only to the
extent) such liabilities or obligations (described in this clause (ii)) result
from the failure of Buyers to comply with any environmental laws applicable to
activities of Buyers on the premises of the Marion USA Facilities or the leased
facilities of Marion Australia and Marion South Africa. The obligation of
Sellers and Parent to indemnify, defend and hold harmless Buyers from and
against any such Damages relating to these Excluded Liabilities shall not be
subject to the maximum indemnification limits set forth in Section 11.07 hereof.
-------------
SECTION 6.14 INTANGIBLE ASSETS. Sellers shall promptly provide, or cause
to be provided, to Buyers all pertinent facts and documents relating to the
Intangible Assets and legal equivalents as may be known or accessible to
Sellers, and Sellers shall testify, at Buyers' expense, as to the same in any
interference, opposition, litigation or other proceeding related thereto and
shall promptly execute and deliver to Buyers or their legal representatives any
and all lawful recordable assignments (provided by Buyers to Sellers) required
to record all transfers of title and any owner name changes for the Intangible
Assets, including, but not limited to, any and all such assignments and name
changes required to record all transfers of title from the last recorded owner
to the Buyers with the appropriate governmental agencies, such as patent and
trademark offices worldwide. Sellers and Parent, jointly and severally, shall
indemnify Buyers for all costs including, but not limited to, attorney's fees,
foreign associate fees and government fees required for recording in the
respective governmental agencies all transfers of title and owner name changes
from the last recorded owner to the Sellers with respect to the Intangible
Assets being transferred to the Buyers (except for those Intangible Assets which
have irretrievably lapsed, expired or been canceled as of the date of this
Agreement, including, without limitation, those Intangible Assets that have
irretrievably lapsed, expired or been canceled due to expiration of a time limit
for recordation of a transfer of ownership required in the respective
jurisdiction or country).
- 32 -
<PAGE>
ARTICLE VII
AGREEMENTS BY BUYERS
SECTION 7.01 HART-SCOTT-RODINO ANTITRUST NOTIFICATION. Buyers shall
cooperate with Sellers in filing, as promptly as practicable after the execution
of this Agreement, all reports, notifications and other information required to
be filed in connection with this transaction pursuant to the HSR Act or any
other applicable federal, state or foreign notification requirement and shall
use their best efforts to respond as promptly as practicable to all inquiries
from Government Bodies relating to the transactions contemplated by this
Agreement and to cause an early termination of the waiting period established by
the HSR Act.
SECTION 7.02 ACCESS TO PERSONNEL. After the Closing, Buyers and their
Affiliates shall allow Sellers and Sellers' accountants, counsel and other
representatives reasonable access from time to time during normal business
hours, at Sellers' sole cost and expense, to employees of Buyers, including
those employees of the Business of Sellers on the Closing Date who become
employees of Buyer after the Closing Date, for such reasonable purposes as
Sellers may request, including, without limitation, access to such personnel for
information, testimony, statements and other similar matters pertaining to
litigation, claims (including workers' compensation claims), proceedings, tax
contests, audits and other matters involving Sellers' operation of the Business
of Sellers on or prior to Closing; provided, however, that such access does not
unreasonably disrupt Buyers' business.
SECTION 7.03 MAINTENANCE OF RECORDS. Buyers and their affiliates shall
keep and maintain, for a period of seven (7) years after the Closing Date, all
Books and Records relating to the Business acquired pursuant to the transactions
contemplated in this Agreement. Upon request, Buyers shall make the Books and
Records available to Sellers or their designated representatives for inspection
and copying, at Sellers' expense, during regular business hours in order to
permit Sellers to (i) prepare for, dispute or respond to any claim, lawsuit or
proceeding, including, without limitation, audits in connection with tax returns
or proceedings under the Internal Revenue Code and (ii) comply with governmental
requirements applicable to Sellers or any of their affiliates; provided,
however, that any such inspection pursuant to this Section 7.03 shall be
------------
conducted in such a manner so as not to unreasonably disrupt Buyers' business.
SECTION 7.04 BEST EFFORTS. Buyers agree that, prior to the Closing, they
shall use their best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
SECTION 7.05 GENERAL WARRANTY OBLIGATIONS (OTHER THAN PLANETARY SWING-
DRIVE SYSTEM).
- 33 -
<PAGE>
(a) PAYMENT RESPONSIBILITIES. Sellers shall transfer at the Closing to
Buyers the warranty reserve as reflected on the Closing Balance Sheet (the
"Warranty Reserve"). Except with respect to expenses incurred by Sellers for
the repair and modification of the Planetary Swing-Drive Systems on the Walking
Draglines (as defined in Section 7.06 below), to the extent Buyers incur
------------
Warranty Expense for the repair and modification of equipment under a warranty
which was delivered by Sellers prior to the Closing Date, Buyers shall credit
all such Warranty Expense against the Warranty Reserve.
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
Bucyrus USA shall administer the post-Closing warranty obligations of
Sellers which are the subject of this Section 7.05 and use its best efforts
------------
to attempt to resolve the claims thereunder in accordance with customary
business practices in the industry.
(b) NOTIFICATION.
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
(c) DISPUTES. Unless Sellers and Parent object in writing within five (5)
business days of receipt of the notice described in Section 7.05(b) above,
---------------
Sellers and Parent shall reimburse Buyers for the cost of such work performed by
Buyers in accordance with the method set forth in Section 7.05 (a) above. In
----------------
the event Sellers and Parent, within such period, object in writing, the dispute
shall be submitted to an arbitrator mutually agreed to by the parties for final
and binding arbitration. If the parties cannot agree to an arbitrator within
thirty (30) calendar days, each of Sellers and Buyers shall designate within the
following thirty (30) calendar days an arbitrator (who has no personal or
financial interest in the parties or the outcome of the arbitration and who is
experienced in the matters of the type disputed), which arbitrators shall select
a third arbitrator. The parties shall instruct the arbitrator or arbitrators
to render their award within ninety (90) calendar days after having been
appointed. The arbitrators shall have discretion to determine the procedural
rules for the arbitration. In the event that the arbitrator(s) determine that
all or any portion of the warranty work performed by Buyers was not justified in
view of Sellers' legal obligations to the customer, Buyers shall be responsible
for all Warranty Expenses in excess of the amount so determined to be justified.
In the event the arbitrator(s) determine that all or any part of the work
performed by Buyers was justified in view of Sellers' legal obligations, Sellers
shall pay for all Warranty Expenses so determined to be justified. The parties
shall pay the fees and disbursements of the arbitrator(s) in the manner (and in
the amounts assigned to each party) as determined to be appropriate by the
arbitrator(s).
(d) INDEMNIFICATION. The parties agree that Warranty Expenses paid
(reimbursed) by Sellers to Buyers under this Section 7.05 shall apply against
------------
the maximum indemnification limits set forth in Section 11.07 hereof.
-------------
- 34 -
<PAGE>
SECTION 7.06
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
(c) SERVICES AND REPAIRS. In the event a Seller or Parent agrees with a
customer to perform any repair or modification with respect to an Issue, such
services shall be performed by Buyers only if a Seller or Parent, in its sole
and absolute discretion, request the Buyers in writing to perform such work.
Parent and Sellers shall reimburse Buyers for the Warranty Expenses incurred by
Buyers in performing the work so requested by Parent or any of Sellers.
(d) THIRD PARTY CLAIMS. In the event any claims are asserted in connection
with an Issue ("Litigation"), Parent and Sellers, subject to the limitation of
Section 11.07 hereof, shall be solely responsible for all Damages incurred in
- -------------
connection with or as a result of such Litigation and shall control the defense
of such Litigation; provided, however, Parent and Sellers shall keep Buyers
reasonably informed as to the progress of such Litigation. Buyers shall
cooperate with Sellers in all reasonable respects in connection with such
Litigation, including without limitation, (i) providing access to personnel as
provided in Section 7.02 herein, and (ii) providing such services of Buyers'
------------
personnel as Sellers may reasonably request in connection with such Litigation,
such as testifying as an expert witness. If the amount of Damages which Sellers
are likely to incur as a result of such Litigation, if adversely determined,
would exhaust the Maximum Indemnified Loss (as defined in Section 11.07 herein)
-------------
and the portion of such Damages which would exceed such Maximum Indemnified Loss
is greater than the portion for which Sellers must indemnify Buyers under
Section 11.07, Sellers shall tender the defense of such Litigation to Buyers and
- -------------
provide reasonable assistance to Buyers in connection with such defense.
(e) INDEMNIFICATION. The parties agree that all Damages incurred by
Sellers under this Section 7.06 shall apply against the maximum indemnification
------------
limits set forth in Section 11.07 hereof.
-------------
SECTION 7.07 PERFORMANCE GUARANTEES, ETC. Parent has issued in connection
with the Business of Sellers, the performance guarantees, surety bonds and bank
stand-by-letters of credit (collectively, "Parent's Instruments") as set forth
on Schedule 7.07. Buyers agree to (i) use their best efforts to replace
-------------
Parent's Instruments with performance guarantees, surety bonds and bank stand-
by-letters of credit of Buyers on the Closing Date and, (ii) subject to the
provisions of Sections 7.05 and 7.06, indemnify, defend and hold harmless
----------------------
Parent from any and all claims made against Parent's Instruments after Closing.
SECTION 7.08 PRODUCT LIABILITY RESPONSIBILITIES. Buyers assume all
liabilities for property damage and personal injuries which are alleged to be
caused by or result from defects (including, but not limited to, design and
manufacturing defects) in products of the Business sold by Sellers prior to the
Closing Date for which the date of loss occurs after the Closing Date
- 35 -
<PAGE>
and shall defend, indemnify and hold harmless Sellers with respect thereto (an
"Assumed Product Liability Claim"). Sellers and Parent assume all liabilities
for property damage and personal injuries which are alleged to be caused by or
result from defects (including, but not limited to, design and manufacturing
defects) in products of the Business sold by Sellers prior to the Closing Date
for which the date of loss occurred prior to the Closing Date and shall defend,
indemnify and hold harmless the Buyers with respect thereto (a "Retained Product
Liability Claim"). Parent and/or Sellers shall notify Buyers in writing and
tender defense of each Assumed Product Liability Claim to Buyers by the earlier
of (a) fifteen (15) business days after obtaining Knowledge of the Assumed
Product Liability Claim or (b) within five (5) business days after being served
with a summons and complaint or similar documentation initiating litigation with
respect to the Assumed Product Liability Claim and shall cooperate in the
defense thereof. Buyers shall notify Parent and/or Sellers in writing and tender
defense of each Retained Product Liability Claim to Sellers and/or Parent by the
earlier of (a) fifteen (15) business days after obtaining Knowledge of the
Retained Product Liability Claim or (b) within five (5) business days after
being served with a summons and complaint or similar documentation initiating
litigation with respect to the Retained Product Liability Claim and shall
cooperate in the defense thereof. In the event any party fails to timely comply
with the preceding requirements, such party shall indemnify and hold harmless
the other party from any and all Damages incurred as a result of such failure.
Parent and Bucyrus USA shall cause the issuers of their respective insurance
policies to waive their rights of subrogation with respect to losses for which
each has assumed liability under this Section 7.08, and each of them shall cause
------------
the other to be named as an additional insured under their respective insurance
policies to the extent of the liabilities so assumed and the defense and
indemnity obligations undertaken in this Section 7.08.
------------
SECTION 7.09 SUPPLEMENTS TO DISCLOSURE SCHEDULES. Buyers agree that from
time to time after the execution of this Agreement and up to three (3) business
days prior to the Closing Date, Sellers shall supplement and/or amend the
Disclosure Schedules with respect to any matter hereafter arising which, if
existing on the date of this Agreement, would have been required to be set forth
or described in the Disclosure Schedules (such supplements and/or amendments are
hereinafter referred to as the "Disclosure Supplements"). In the event any
matter set forth in such Disclosure Supplements (i) would have a material
adverse effect on the Transferred Assets or the Assumed Liabilities, or (ii) was
known to Sellers and Parent on the date of this Agreement and intentionally
omitted by them from the Disclosure Schedules, Buyers shall have the option not
to proceed with the Closing and shall be entitled to unilaterally terminate this
Agreement in accordance with Article X herein; provided however, Buyers provide
to Sellers and Parent written notice of such election to terminate this
Agreement on the earlier of three (3) business days after receipt of the
Disclosure Supplement or the Closing Date.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYERS TO CLOSE
- 36 -
<PAGE>
SECTION 8.01 CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYERS TO CLOSE.
The obligation of Buyers to consummate the transactions contemplated by this
Agreement shall be subject to the following conditions precedent:
(a) FULFILLMENT OF COVENANTS. Sellers and Parent shall have performed and
complied in all material respects with all covenants and obligations set forth
in this Agreement to be so performed or complied with by them at or prior to the
Closing, and Parent and each Seller shall deliver to Buyers a certificate so
stating, dated as of the Closing Date and executed by the President or any Vice
President of such Seller or Parent.
(b) CORPORATE APPROVAL. Buyers shall have received a certified copy of the
resolutions of the shareholders and board of directors of each Seller, certified
by such Seller's Secretary or an Assistant Secretary, and a resolution of the
board of directors of Parent certified by its Secretary or an Assistant
Secretary, authorizing the execution of this Agreement and the consummation of
the transactions contemplated hereby.
(c) REPRESENTATIONS AND WARRANTIES. Each and every representation and
warranty of Parent and/or Sellers contained in this Agreement and the Disclosure
Schedules and Exhibits thereto, subject to the qualifications set forth in the
next sentence, shall be complete and accurate on the date when made and as of
and as though made on the Closing Date. Each Seller and Parent shall deliver to
Buyers a certificate, dated as of the Closing Date and executed by the President
or any Vice President of such Seller or Parent stating that such representations
and warranties are complete and accurate as of and as though made on the Closing
Date except (i) for any changes expressly permitted by the terms of this
Agreement (including the Disclosure Supplements) , or (ii) where the inaccuracy
of the representation and warranty would not have a material adverse effect on
the Business of Sellers, taken as a whole. The preceding qualifications of the
representations and warranties of Parent and Sellers relate solely to Buyers'
obligation to close and shall in no way limit or diminish the rights of Buyers
pursuant to the terms of this Agreement to recover Damages for the breach or
inaccuracy of any representation or warranty of Sellers or Parent (but in no
event shall Buyers seek indirect, special or consequential damages due to the
effects of any matter set forth in any Disclosure Supplement).
(d) NO PROCEEDING OR LITIGATION. No statute, rule or regulation shall have
been enacted or promulgated which would make any of the transactions
contemplated by this agreement illegal or would otherwise prevent the
consummation thereof. There shall not be instituted or pending any suit,
action, investigation, inquiry, order, judgment, decree, writ, injunction or
other proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting an order, judgment, decree, writ
or injunction which (a) restrains or prohibits the consummation of the
transactions contemplated hereby, (b) if adversely determined, would have a
material adverse effect on Buyers' ability to exercise control over or manage
the Business of Sellers after the Closing, or (c) if adversely determined, would
have a material adverse effect on the Transferred Assets or on the operations,
condition (financial or otherwise), liabilities, assets, earnings or prospects
of the Business of Sellers taken as a whole.
- 37 -
<PAGE>
(e) DELIVERY OF CLOSING DOCUMENTS. Sellers shall have delivered to Buyers
the documents referred to in Section 3.05 hereof, in form and substance
------------
reasonably satisfactory to Buyers and their counsel.
(f) HART-SCOTT-RODINO ACT. The waiting period shall have expired or early
termination shall have been granted pursuant to the HSR Act, as more
particularly described in Section 6.03 hereof.
------------
(g) APPROVALS, PERMITS, ETC. All material consents, authorizations,
approvals, exemptions, licenses or permits of, or registrations, qualifications,
declarations or filings with, any governmental body or agency thereof that are
required in connection with the sale and transfer of the Transferred Assets to
Buyers pursuant to this Agreement and the consummation of the transactions
contemplated hereby, other than any required under the antitrust laws of
jurisdictions other than the United States, shall have been duly obtained or
made in form and substance reasonably satisfactory to Buyers and their counsel
and shall be effective at, and as of, the Closing Date. Adequate arrangements
satisfactory to Buyers shall have been made to obtain any third party or other
governmental consents, approvals or permits after the Closing, except to the
extent that the failure to obtain the same would not have material adverse
effect on Sellers, the Business or the Transferred Assets taken as a whole.
(h) NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the financial condition, results of operations, cash flows, assets,
liabilities, business or operations (collectively, "Financial Condition") of
Sellers, as a whole, during the period between May 31, 1997 and the Closing
Date, provided, that if the Financial Condition of Sellers, as a whole, between
the date of the Interim Balance Sheet and May 31, 1997 was not substantially as
set forth in the financial reports and presentations furnished to Bucyrus USA on
June 24, 1997, (or did not favorably differ therefrom), the period for
determining whether a material adverse change in the Financial Condition of
Sellers, as a whole, shall be the period between the date of the Interim Balance
Sheet and the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS TO CLOSE
SECTION 9.01 CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS TO CLOSE.
The obligation of Sellers to consummate the transactions contemplated by this
Agreement shall be subject to the following conditions precedent:
(a) FULFILLMENT OF COVENANTS. Each Buyer shall have performed and complied
in all material respects with all covenants and obligations set forth in this
Agreement to be so performed or complied with by it at or prior to the Closing,
and each Buyer shall deliver to Sellers a certificate so stating, dated as of
the Closing Date and executed by the President or any Vice President of such
Buyer.
- 38 -
<PAGE>
(b) CORPORATE APPROVAL. Sellers shall have received a certified copy of
the resolutions of the board of directors of each Buyer, certified by such
Buyer's Secretary or an Assistant Secretary, authorizing the execution of this
Agreement and the consummation of the transactions contemplated hereby.
(c) REPRESENTATIONS AND WARRANTIES. Each and every representation and
warranty of each Buyer contained in this Agreement shall be complete and
accurate in all material respects on the Closing Date to the same extent as if
made on such date, except for any changes expressly permitted by the terms of
this Agreement. Each Buyer shall deliver to Sellers a certificate to such
effect, dated as of the Closing Date and executed by the President or any Vice
President of such Buyer.
(d) NO INJUNCTION. There shall be no injunction, writ, preliminary
restraining order or any order of any nature issued by a court of competent
jurisdiction which is in effect on the Closing Date and which directs that the
transactions provided for herein or any of them may not be consummated as so
provided.
(e) DELIVERY OF CLOSING DOCUMENTS. Sellers shall have received the
documents referred to in Section 3.06 hereof in form and substance reasonably
------------
satisfactory to Sellers and their counsel.
(f) HART-SCOTT-RODINO ACT. The waiting period shall have expired or early
termination shall have been granted pursuant to the HSR Act, as more
particularly described in Section 7.01 hereof.
------------
ARTICLE X
TERMINATION OF AGREEMENT
SECTION 10.01 TERMINATION OF AGREEMENT. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of Parent, Sellers and Buyers; or
(b) by Buyers, pursuant to Section 7.09 herein; or
------------
(c) by either Buyers or Parent and Sellers if the Closing shall not
have occurred by September 15, 1997.
SECTION 10.02 PROCEDURE UPON TERMINATION. In the event of termination of
this Agreement by Sellers and Buyers pursuant to Section 10.01 above written
-------------
notice thereof shall forthwith be given to the other party or parties, and the
agreement and the transactions contemplated thereby this Agreement shall become
null and void, without further action by either party or parties. If the
transactions contemplated by this Agreement are terminated as provided in this
Section 10.01:
- -------------
- 39 -
<PAGE>
(a) each of Parent, Sellers and Buyers shall return all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same; and
(b) there shall be no liability on the part of any party hereto or their
affiliates, except that such termination shall not in any way limit or restrict
the rights and remedies of any party hereto against any other party which has
breached any of the agreements or other provisions of this Agreement prior to
termination hereof.
ARTICLE XI
INDEMNIFICATION
SECTION 11.01 PARENT AND SELLERS' AGREEMENT TO INDEMNIFY. Subject to the
terms and conditions of this Article XI, Sellers and Parent, jointly and
----------
severally, agree to indemnify, defend and hold harmless the Buyer Group from and
against all Damages, asserted against, relating to, imposed upon or incurred by
the Buyer Group or any member thereof, directly or indirectly, arising out of,
based upon, or resulting from (i) any inaccuracy in or any breach of any
representation and warranty of Sellers or Parent contained in this Agreement,
the Disclosure Schedules, or any of the Documents, or any certificate or other
written instrument or document delivered by Sellers or Parent pursuant hereto or
thereto, (ii) any breach or nonfulfillment of, or any failure to perform, any of
the covenants, agreements or undertakings of Sellers or Parent contained in, or
made pursuant to, this Agreement (including, without limitation, the failure of
Sellers to pay or discharge the Excluded Liabilities) and any of the Documents,
or any certificate or other written instrument or document delivered by Sellers
or Parent pursuant hereto, (iii) any liabilities or obligations arising out of
any and all actions, claims, suits, proceedings, demands, assessments,
judgments, recoveries, damages, costs and expenses or deficiencies incident to
any matter which is the subject of indemnification under this Article XI ("Buyer
----------
Indemnity Claim"), (iv) all interest, penalties, costs and expenses (including,
without limitation, all out-of-pocket expenses, reasonable investigation
expenses and reasonable fees and disbursements of accountants and counsel)
arising out of, or related to, any such Buyer Indemnity Claims, and (v) any
claim or liability for brokerage commissions or finders fees incurred by reason
of any action taken by Sellers or Parent.
SECTION 11.02 BUYERS' AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article XI, Buyers, jointly and severally, agree to
----------
indemnify, defend and hold harmless the Seller Group from and against all
Damages asserted against, relating to, imposed upon or incurred by the Seller
Group or any member thereof, directly or indirectly, arising out of, based upon,
or resulting from (i) any inaccuracy in, or any breach of, any representation
and warranty of Buyers contained in this Agreement or any of the Documents, or
any certificate or other written instrument or document delivered by Buyers
pursuant hereto or thereto; (ii) any breach or
- 40 -
<PAGE>
nonfulfillment of, or failure to perform, any of the covenants, agreements or
undertakings of Buyers contained in, or made pursuant to this Agreement
(including, without limitation, the failure of Buyers to pay or discharge the
Assumed Liabilities) or any other of the Documents, or any certificate or other
written instrument or document delivered by Buyers pursuant hereto or thereto;
(iii) any obligations or liabilities arising out of any and all actions, claims,
suits, proceedings, demands, assessments, judgments, recoveries, damages, costs
and expenses or deficiencies incident to any matter which is the subject of
indemnification under this Article XI ("Seller Indemnity Claims"); (iv) all
----------
interest, penalties, costs and expenses (including, without limitation, all out-
of-pocket expenses, reasonable investigation expenses and reasonable fees and
disbursements of counsel and accountants) arising out of, or related to, any
Seller Indemnity Claims asserted under this Section 11.02; and (v) any claim or
-------------
liability for brokerage commissions or finder's fees incurred by reason of any
action taken by Buyers.
SECTION 11.03 PROCEDURES FOR RESOLUTION AND PAYMENT OF CLAIMS FOR
INDEMNIFICATION.
(a) If, prior to the expiration of any applicable limitation period
described in Section 11.04 hereof (the "Limitation Period"), a person or entity
-------------
entitled to be indemnified under this Article XI (the "Indemnitee") shall incur
----------
any Damages or determine that it is likely to incur any Damages, including
without limitation, Third Party Claims as described in Section 11.03(d) hereof,
----------------
and believes that it is entitled to be indemnified against such Damages by a
party hereunder (the "Indemnitor"), such Indemnitee shall deliver (as promptly
as reasonably practical) to the Indemnitor a certificate (an "Indemnitee's
Certificate") signed by the Indemnitee, which shall:
(i) state that the Indemnitee has paid or properly accrued Damages,
or anticipates that it will incur Damages for which such Indemnitee is
entitled to indemnification pursuant to this Agreement; and
(ii) specify in reasonable detail each individual item of Damages
included in the amount so stated, the date such item was paid or properly
accrued, the basis for any anticipated liability, the basis upon which the
claim for indemnification is being made, and a computation of the amount to
which such Indemnitee claims to be entitled hereunder (including, without
limitation, the Indemnitee's good faith estimate of the costs and expenses,
including reasonable attorney's fees, expected to be incurred in connection
therewith).
(b) In case the Indemnitor shall object to the indemnification of an
Indemnitee in respect of any claim or claims specified in any Indemnitee's
Certificate, the Indemnitor shall, within thirty (30) calendar days after
receipt by the Indemnitor of such Indemnitee's Certificate, deliver to the
Indemnitee a written notice to such effect and the Indemnitor and the Indemnitee
shall, within the thirty (30) day period beginning on the date of receipt by the
Indemnitee of such written objection, attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims to which
the Indemnitor shall have so objected. If the Indemnitee
- 41 -
<PAGE>
and the Indemnitor shall succeed in reaching agreement on their respective
rights with respect to any of such claims, the Indemnitee and the Indemnitor
shall promptly prepare and sign a memorandum setting forth such agreement.
Should the Indemnitee and the Indemnitor be unable to agree as to any particular
item or items or amount or amounts, then the Indemnitee and the Indemnitor shall
employ the arbitration procedure set forth in Section 12.06 to resolve such
-------------
dispute.
(c) Claims for Damages specified in any Indemnitee's Certificate to which
an Indemnitor shall not object in writing, claims for Damages covered by a
memorandum of agreement of the nature described in Section 11.03(b) above,
----------------
claims for Damages the validity and amount of which have been the subject of
arbitration as described in Section 11.03(b) above, and claims for Damages the
----------------
validity and amount of which shall have been the subject of a final judicial
determination are hereinafter referred to, collectively, as "Agreed Claims".
(d) Promptly after the assertion by any third party of any claim (a "Third
Party Claim") against any Indemnitee that, in the judgment of such Indemnitee,
may result in such Indemnitee incurring Damages for which such Indemnitee would
be entitled to indemnification pursuant to this Agreement, such Indemnitee shall
deliver to the Indemnitor a written notice describing in reasonable detail such
claim, and such Indemnitor may, at its option, assume the defense of the
Indemnitee against such claim (including the employment of counsel, who shall be
reasonably satisfactory to such Indemnitee, and the payment of expenses
thereto). Failure to receive notice from the Indemnitee of a Third Party Claim
shall not relieve the Indemnitor of any liability which it might otherwise have
to the Indemnitee under Sections 11.01 or 11.02 or 11.03 hereof, unless (and
-------------- ----- -----
only to the extent that) such failure or delay actually prejudices the ability
of the Indemnitor to defend such Third Party Claim. The burden of proving the
actual prejudice described in the preceding sentence shall lie with the
Indemnitor. The Indemnitee shall cooperate with and make available to the
Indemnitor such assistance and materials as may be reasonably requested of the
Indemnitee. Any Indemnitee shall have the right to employ separate counsel in
any such action or claim and to participate in the defense thereof, however, the
Indemnitor shall not be responsible for the fees and expenses of such counsel
unless (i) the Indemnitor shall have failed, within a reasonable time after
having been notified by the Indemnitee of the existence of such claim as
provided in the preceding sentence, to assume the defense of such claim, (ii)
the employment of such counsel has been specifically authorized by the
Indemnitor, (iii) the named parties to any such action (including any impleaded
parties) include both such Indemnitee and Indemnitor, and such Indemnitee shall
have furnished the Indemnitor an opinion of counsel to the effect that there may
be one or more legal defenses available to the Indemnitee which are different
from or additional to those available to Indemnitor, in which event the
Indemnitor shall only be responsible for the fees and expenses of one separate
firm of attorneys for all Indemnitees, or (iv) the proceeding involves a matter
solely of concern to the Indemnitee in addition to the claim(s) for which
indemnification under this Article XI is being sought.
----------
- 42 -
<PAGE>
(e) The Indemnitor shall have the right to settle and compromise any Third
Party Claim with respect to which it controls the defense only with the consent
of the Indemnitee, which consent shall not be unreasonably withheld or delayed.
If the proceeding involves a matter solely of concern to the Indemnitee in
addition to the claim for which indemnification under this Article XI is being
----------
sought, the Indemnitee shall have the right to control the defense and
settlement of such additional claim in its own discretion and with its own
counsel. If the Indemnitor, within a reasonable time after notice of any Third
Party Claim, fails to defend the Indemnitee against such claim, or notifies the
Indemnitee of its refusal to conduct a defense against a Third Party Claim, or
does not have the right to assume such defense, the Indemnitee shall (upon
further notice to the Indemnitor) have the right to conduct a defense against
such claim and shall have the right to settle and compromise such claim without
the consent of the Indemnitor (except as provided in Section 11.04(f)). Except
-----------------
as otherwise herein provided, no Indemnitor shall be liable to indemnify any
Indemnitee for any settlement of any such action or claim effected without the
consent of the Indemnitor; but if settled with the written consent of the
Indemnitor, or if there be a final judgment for the plaintiff or claimant in any
such action, the Indemnitor shall indemnify and hold harmless each Indemnitee
from and against any loss or liability by reason of such settlement or judgment.
(f) Notwithstanding anything to the contrary in the foregoing, Buyers
shall have the right to control the defense of any Third Party Claim, provided,
that Buyers shall keep Sellers reasonably informed as to the nature and conduct
of such claim and Sellers shall be afforded an opportunity to monitor
developments in connection therewith. Buyers shall have the right to settle any
such matter with the consent of Sellers, such consent not to be unreasonably
withheld or delayed.
(g) Notwithstanding anything in this Section 11.03 to the contrary, (i) if
-------------
there is a reasonable probability that a Third Party Claim may materially and
adversely affect the Indemnitee other than as a result of money damages or other
money payments, the Indemnitee shall have the right, at its own cost and
expense, to defend, compromise or settle such claim; provided, however, that if
such claim is settled without the Indemnitor's prior written consent (which
consent shall not be unreasonably withheld or delayed), the Indemnitee shall be
deemed to have waived all rights hereunder against the Indemnitor for money
damages arising out of such claim, and (ii) the Indemnitor shall not, without
the prior written consent of the Indemnitee (which consent shall not be
unreasonably withheld or delayed), settle or compromise any claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnitee of a
release from all liability in respect to such claim.
SECTION 11.04 DURATION.
(a) REPRESENTATIONS AND WARRANTIES. Except as otherwise provided in this
Agreement, all representations and warranties of the parties contained in, or
made pursuant to, this Agreement shall be true, complete and correct as of the
Closing Date as though such
- 43 -
<PAGE>
representations and warranties were made at and as of the Closing Date, and the
rights of the parties to seek indemnification with respect thereto shall survive
the Closing; provided however, that, except in respect of any claims for
indemnification as to which an Indemnitee's Certificate shall have been duly
given prior to the relevant expiration date set forth below, if any (which
notice shall preserve such claim pending resolution thereof pursuant to the
terms hereof), the following representations and warranties, and the right to
make any indemnification claims relating thereto, shall expire on the following
dates:
(i) in the case of any claims relating to any breach of the
representations and warranties set forth in Section 4.01(h) (Taxes), the date of
-----------------------
expiration of the relevant statute of limitations, including any extensions
thereof (whether by wavier or otherwise); provided that, notwithstanding
anything to the contrary in the foregoing, the indemnity obligations of Sellers
and Parent hereunder shall survive with respect to any and all costs, expenses
and liabilities (including, without limitation, reasonable attorney's fees and
investigation expenses) incurred by any member of the Buyer Group as applicable,
in establishing or in seeking to establish, whether in a judicial proceeding or
otherwise, that the underlying matter giving rise to such claim for
indemnification is time-barred under the applicable statute of limitations,
whether or not such efforts are successful;
(ii) in the case of any claims of Buyers relating to breaches of
representations or warranties, other than claims relating to any breach of the
representations and warranties set forth in Section 4.01(h) (Taxes) or Sections
-----------------------------------
4.01(a), (b), (c), (e), (f), (i), (j), and (k) (such representations and
- ----------------------------------------------
warranties (other than those relating to Section 4.01(h)) being collectively
----------------
referred to as "Sellers' Special Representations"), on the second anniversary of
the Closing Date; and
(iii) in the case of any claims of Sellers, relating to breaches
of representations or warranties, other than claims relating to any breach of
the representations and warranties set forth in Sections 5.01(a), (b), and (c)
------------------------------
(such representations and warranties being collectively referred to as "Buyers'
Special Representations"), on the second anniversary of the Closing Date.
The parties acknowledge and agree that the Sellers' Special
Representations and the Buyers' Special Representations shall survive
indefinitely, and that any claims in respect thereof may be made at any time
following the Closing.
(b) COVENANTS, AGREEMENTS AND UNDERTAKINGS. Except as otherwise provided
in this Agreement, the rights of the parties to seek indemnification pursuant to
this Agreement for any breach or nonfulfillment of, or any failure to perform,
any of the covenants, agreements or undertakings of the parties contained in, or
made pursuant to, this Agreement and any of the Documents, or any certificate or
other written instrument or documents delivered by the parties pursuant hereto
shall survive indefinitely and any claims thereof may be made at any time
following the Closing.
- 44 -
<PAGE>
SECTION 11.05 LIMITATIONS.
(a) Any claim by an Indemnitee against an Indemnitor with respect to
the breach or inaccuracy of any representation or warranty under this Agreement
shall be payable by the Indemnitor only in the event that the accumulated amount
of all claims with respect to the breach or inaccuracy of all representations or
warranties that have been Definitively Resolved (as hereinafter defined) (for
purposes hereof, "Settled Claims") against all such Indemnitors in the Seller
Group, if the claim is against a Seller, or all such claims against Indemnitors
in the Buyer Group, if the claim is against a Buyer, shall exceed the amount of
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
(the "Indemnification Threshold"). At such time as the aggregate amount of
Settled Claims (involving breaches and/or inaccuracies of representations or
warranties under this Agreement) against Indemnitors that constitute the Seller
Group or the Buyer Group, as the case may be, shall exceed the Indemnification
Threshold, such party shall then be liable on a dollar-for-dollar basis for the
amount of all claims which exceed the Indemnification Threshold. The
Indemnification Threshold shall not apply to any claims other than those
involving a breach or inaccuracy of a representation or warranty under this
Agreement.
(b) For purposes hereof, a claim shall be deemed to have been
"Definitively Resolved" when any of the following events has occurred:
(i) a claim is settled by mutual agreement of Buyers and
Sellers;
(ii) a final judgment, order or award of a court of competent
jurisdiction deciding such claim has been rendered, as evidenced by a certified
copy of such judgment, provided that such judgment is not appealable or the time
for taking an appeal has expired; or
(iii) a claim is the subject of a "Final Determination."
SECTION 11.06 REMEDIES EXCLUSIVE. Except as expressly provided to the
contrary in this Agreement, the indemnification rights described in this Article
-------
XI shall constitute the exclusive remedies of the parties against each other
- --
with respect to disputes arising out of or related in any way to this Agreement
and the Documents and the transactions contemplated by this Agreement and the
Documents.
SECTION 11.07 MAXIMUM INDEMNIFIED LOSS. Notwithstanding anything contrary
in this Agreement or the Documents, the aggregate amount of Damages for which
Sellers and Parent shall be obligated to indemnify the Buyer Group under this
Agreement with respect to
"CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED WITH SECURITIES AND EXCHANGE
COMMISSION"
- 45 -
<PAGE>
The parties agree that Sellers and Parent shall not be required to pay, and
shall have no liability or obligation with respect to, Damages arising from (a),
(b), and (c) above, exceeding the Maximum Indemnified Loss, and Buyers agree to
indemnify and defend Sellers and Parent and hold them harmless from and against
any such Damages arising therefrom which exceed the Maximum Indemnified Loss.
The preceding limitation shall not apply to Excluded Liabilities (other than
liabilities relating to the Planetary Swing-Drive Systems of the Walking Drag
Lines as described in clause (iii) of Section 2.06).
------------
SECTION 11.08 LOSSES, NET OF INSURANCE AND TAXES. In determining the
amount of any claim by an Indemnitee, for all purposes hereunder, there shall be
taken into account any federal, state or local income or other tax benefit or
insurance proceeds which the Indemnitee may actually have received or be
entitled to receive (if in the future, at its present value) as a result of the
Damages forming the basis of such claim, and there shall also be taken into
account any income or other tax cost which the Indemnitee would incur as a
result of its receipt of any indemnification payment from the Indemnitor
(including any such indemnification payment which the Indemnitee would be
entitled to receive but for the provisions of Section 11.05). In addition,
-------------
Buyers and Sellers each agree to provide the other with the benefit of its
insurance, if any, with respect to claims for which one of the parties is
indemnified, and each agrees to name the other as an additional insured (where
insurance policies are in place and where it is possible to name the other party
as an additional insured) for this specific purpose.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 REFORMATION AND SEVERABILITY. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof
(a) in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision
as similar in terms to such il legal, invalid or unenforceable provision as
may be possible which is legal, valid and enforceable; and
(b) the legality, validity and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
SECTION 12.02 FURTHER ASSURANCES. Each party hereto shall, from time to
time after the Closing, at the request of any other party hereto and without
further consideration, execute and deliver such other instruments of conveyance,
assignment, transfer and assumption, and take such other actions, as such other
party may reasonably request to more effectively consummate the transactions
contemplated by this Agreement.
- 46 -
<PAGE>
SECTION 12.03 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be sent by
certified mail, return receipt requested (or by the most nearly comparable
method if mailed from or to a location outside of the United States), or by
cable, telex, telegram or facsimile transmission, or delivered by hand or by
overnight or similar delivery service, fees prepaid, to the party to whom it is
to be given at the address of such party set forth below or to such other
address for notice as such party shall provide in accordance with the terms of
this section. Except as otherwise specifically provided in this Agreement,
notice so given shall, in the case of notice given by certified mail (or by such
comparable method) be deemed to be given and received three (3) business days
after the time of certification thereof (or comparable act), in the case of
notice so given by overnight delivery service, on the date of actual delivery,
and, in the case of notice so given by cable, telegram, facsimile transmission,
telex or personal delivery, on the date of actual transmission or, as the case
may be, personal delivery.
If to any Buyer: Bucyrus International, Inc.
Attn: Chief Financial Officer
P.O. Box 500
1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172-0500
Telecopy No. (414) 768-5060
With a copy to: Whyte Hirschboeck Dudek S.C.
Attn: James A. Feddersen
Suite 2100
111 East Wisconsin Avenue
Milwaukee, WI 53202
Telecopy No: (414) 223-5000
If to any Seller: The Marion Power Shovel Company
Attention: President
c/o Global Industrial Technologies, Inc.
2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Telecopy No: (214) 953-4596
With a copy to: Global Industrial Technologies, Inc.
Attention: General Counsel
2121 San Jacinto, Suite 2500
Dallas, Texas 75201
Telecopy No: (214) 953-4597
- 47 -
<PAGE>
SECTION 12.04 HEADINGS. The headings of sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
SECTION 12.05 WAIVER. The failure of any party to insist, in any one or
more instances, upon performance of any of the terms, covenants or conditions of
this Agreement shall not be construed as a waiver or a relinquishment of any
right or claim granted or arising hereunder or of the future performance of any
such term, covenant, or condition, and such failure shall in no way affect the
validity of this Agreement or the rights and obligations of the parties hereto.
Any failure by any of the parties hereto to comply with any obligation, covenant
or agreement or to fulfill any condition herein may be waived only by a written
notice from the party entitled to the benefits thereof.
SECTION 12.06 ARBITRATION; CHOICE OF LAW.
(a) Any dispute, controversy, difference or claim arising out of or
in connection with this Agreement, or the breach, termination or validity
thereof, which cannot be amicably resolved by the parties within thirty
(30) calendar days after receipt by a party of written notice from any
other party that such a dispute, controversy, difference or claim exists
shall be settled by final and binding arbitration conducted in Atlanta,
Georgia in accordance with the International Arbitration Rules of the
American Arbitration Association (the "AAA Rules"). The disputes shall be
settled by three arbitrators; the Buyer Group and the Seller Group each
shall select an arbitrator, which two arbitrators shall then select the
third arbitrator and appoint the presiding arbitrator. Should the third
arbitrator fail to be appointed within thirty (30) calendar days after the
date of the appointment of the last arbitrator selected by the Buyer Group
and the Seller Group, the American Arbitration Association domiciled in
Atlanta, Georgia, may choose any person whom it deems suitable. In the
event that either the Buyer Group or the Seller Group fails to nominate its
respective arbitrator within thirty (30) calendar days of receipt of notice
for arbitration issued by the other, such arbitrator shall be nominated by
the American Arbitration Association upon request.
(b) The parties agree that the award of the arbitral tribunal (the
"Arbitration Award"): (i) shall be conclusive, final and binding upon the
parties; (ii) shall be the sole and exclusive remedy between the parties
regarding any and all claims and counterclaims presented to the arbitral
tribunal; and (iii) if containing elements of injunctive relief as provided
in Section 12.08, may be made in such interim manner (pending final
-------------
resolution of the controversy presented) as the arbitral tribunal may deem
appropriate to protect the interests of any aggrieved or potentially
aggrieved party.
(c) The Arbitration Award shall be based on the provisions of this
Agreement and the Documents; provided, however, that to the extent that the
subject matter for the Arbitration Award is not set forth within this
Agreement or the Documents, it shall be
- 48 -
<PAGE>
based on the laws of the State of Delaware. In addition, in the case of any
conflict between the provisions of the AAA Rules and the provisions of this
Agreement or the Documents, the provisions of this Agreement or the
Documents shall govern.
(d) The parties further agree: (i) that their mutual decision to
resolve their disputes by arbitration as provided in this Agreement is an
explicit waiver of immunity against enforcement and execution of the
arbitration award and any judgment thereon; and (ii) that the Arbitration
Award and any judgment thereon, if unsatisfied, may be entered in and shall
be enforceable by the courts of any state having jurisdiction over the
person or property of the party against whom the Arbitration Award has been
rendered; and (iii) that any right they may have under applicable law to
have the Arbitration Award reviewed is hereby waived, whether such review
would relate to matters of substantive law, procedural law, conduct of the
proceedings, of fundamental fairness or otherwise.
(e) All notices to be given in connection with the arbitration shall
be as provided in Section 12.03 of this Agreement.
-------------
(f) In the event any party to this Agreement commences legal
proceedings to enforce the Arbitration Award, the expense of such
litigation (including reasonable attorneys' fees and costs of court) shall
be borne by the party or parties not prevailing therein.
(g) Notwithstanding the foregoing, the parties shall obtain the
agreement of arbitrators to the following: (i) the arbitrators shall
provide a written ruling, stating in separate sections the findings of fact
and conclusions of law on which their ruling is based, and (ii) their
ruling shall be due no later than ninety (90) calendar days after their
final hearing and within twelve (12) months after commencement of the
arbitration.
SECTION 12.07 ATTORNEY'S FEES AND COSTS. All costs of arbitration and
enforcement thereof, including reasonable attorney's fees and court costs, costs
of expert witnesses, transportation, lodging and meal costs of the parties and
witnesses, costs of transcript preparation and other reasonable and necessary
direct and incidental costs shall be apportioned by a majority of the
arbitrators selected pursuant to Section 12.06 hereof.
-------------
SECTION 12.08 SPECIFIC PERFORMANCE. In the event of any breach by a party
of the terms of this Agreement or the Documents which would cause any
nonbreaching party to be irreparably harmed or for which such nonbreaching party
could not be made whole by monetary damages, then in such circumstances such
nonbreaching party, in addition to any other remedy to which it may be entitled
at law or in equity, shall be entitled to compel specific performance of this
Agreement or the Documents and in any action instituted in any court of
applicable jurisdiction to enforce any interim or final Arbitration Award
rendered pursuant to Section 12.06.
-------------
- 49 -
<PAGE>
SECTION 12.09 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together shall constitute one and the same instrument, notwithstanding
that all parties are not signatories to each counterpart.
SECTION 12.10 ASSIGNABILITY AND BINDING EFFECT. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any rights, duties
or obligations shall be assigned by any party hereto (other than to an Affiliate
or in connection with the transfer of substantially all of the assets of such
party) without the prior written consent of the other parties, and any attempted
assignment or transfer without such prior written consent shall be null and
void. No transfer or assignment shall relieve a party of its liabilities or
obligations under this Agreement.
SECTION 12.11 AMENDMENTS. This Agreement may not be modified, amended or
supplemented nor may performance of any provision hereof be waived, except by an
agreement in writing signed by all of the parties hereto.
SECTION 12.12 EXPENSES. Except as otherwise provided herein, each of the
parties hereto shall pay all fees and expenses incurred by it or any of its
affiliates or subsidiaries in connection with this Agreement.
SECTION 12.13 THIRD PARTIES. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person other than
the parties hereto and their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
SECTION 12.14 NUMBER AND GENDER OF WORDS. When the context so requires in
this Agreement, words of gender shall include either or both genders and the
singular number shall include the plural.
SECTION 12.15 ENTIRE AGREEMENT. This Agreement and the executed Documents,
the forms of which are attached hereto as Exhibits or referred to herein,
together with the Schedules hereto and thereto, shall constitute the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and shall supersede all prior negotiations, understandings
and agreements.
SECTION 12.16. MONIES OWED. Unless otherwise provided for in this
Agreement, to the extent one party owes any monies to another party pursuant to
this Agreement, the party owing such money shall pay, within thirty (30)
calendar days after receipt of an invoice from the other party, such monies
owed. The parties agree that any amounts ultimately determined to be owed which
were not paid within such initial thirty (30) day period shall, from the end of
such thirty (30) day period until the date of actual payment, bear interest at
the rate or rates which would be paid by such party had it borrowed a like
amount under a credit facility of under which borrowings the owing party
constitute senior indebtedness.
[The remainder of this page intentionally blank]
- 50 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SELLERS:
THE MARION POWER SHOVEL COMPANY (Marion USA)
By: /s/ GRAHAM L. ADELMAN
--------------------------------------------------
Graham L. Adelman
Vice President
MARION POWER SHOVEL PTY LTD (Marion Australia)
By: /s/ GRAHAM L. ADELMAN
--------------------------------------------------
Graham L. Adelman
Director
INTOOL INTERNATIONAL B.V. (Marion South Africa)
By: /s/ GRAHAM L. ADELMAN
--------------------------------------------------
Graham L. Adelman
Managing Director
GLOBAL-GIX CANADA INC. (Marion Canada)
By: /s/ GRAHAM L. ADELMAN
--------------------------------------------------
Graham L. Adelman
Vice President
PARENT:
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ GRAHAM L. ADELMAN
--------------------------------------------------
Graham L. Adelman
Senior Vice President
- 51 -
<PAGE>
BUYERS:
BUCYRUS INTERNATIONAL, INC. (Bucyrus USA)
By: /s/ DANIEL J. SMOKE
--------------------------------------------------
Daniel J. Smoke
Vice President and Chief Financial Officer
BUCYRUS (AUSTRALIA) PROPRIETARY LTD.
(Bucyrus Australia)
By: /s/ DANIEL J. SMOKE
--------------------------------------------------
Daniel J. Smoke
Assistant Secretary
BUCYRUS (AFRICA) (PROPRIETARY) LIMITED
(Bucyrus South Africa)
By: /s/ DANIEL J. SMOKE
--------------------------------------------------
Daniel J. Smoke
Secretary
BUCYRUS CANADA LIMITED (Bucyrus Canada)
By: /s/ DANIEL J. SMOKE
--------------------------------------------------
Daniel J. Smoke
Secretary
- 52 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 123
<ALLOWANCES> 2
<INVENTORY> 142
<CURRENT-ASSETS> 380
<PP&E> 514
<DEPRECIATION> 275
<TOTAL-ASSETS> 803
<CURRENT-LIABILITIES> 236
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 275
<TOTAL-LIABILITY-AND-EQUITY> 803
<SALES> 440
<TOTAL-REVENUES> 441
<CGS> 314
<TOTAL-COSTS> 457
<OTHER-EXPENSES> 43
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (16)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16)
<EPS-PRIMARY> (.69)
<EPS-DILUTED> (.69)
</TABLE>
