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SCHEDULE 14F-1
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about August 26, 1997 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Bucyrus International, Inc. (the "Company") to the holders
of record of shares of Common Stock, par value $.01 per share, of the Company
(the "Shares"). You are receiving this Information Statement in connection with
the possible election of persons designated by the Parent (as defined below) to
a majority of the seats on the Board of Directors of the Company (the "Company
Board").
On August 21, 1997, the Company, Bucyrus Acquisition Corp., a Delaware
corporation (the "Purchaser"), and American Industrial Partners Acquisition
Company, LLC, a Delaware limited liability company and sole owner of the
Purchaser (the "Parent"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") in accordance with the terms and subject to the conditions
of which (i) the Parent has caused the Purchaser to commence a tender offer (the
"Offer") for any and all outstanding Shares at a price of $18.00 per Share, net
to the seller in cash, without interest thereon (the "Offer Price"), and (ii)
upon consummation of the Offer, the Purchaser will be merged with and into the
Company (the "Merger"). As a result of the Offer and the Merger, the Company
will become a wholly owned subsidiary of the Parent. The Parent and the
Purchaser are affiliates of, and are directly or indirectly wholly-owned by,
American Industrial Partners Capital Fund II, L.P. ("AIP Capital Fund"),
American Industrial Partners II, L.P. ("AIP") and American Industrial Partners
Corporation ("AIP Corp."). AIP Capital Fund, AIP and AIP Corp. are referred to
as the "AIP Entities."
The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, the Parent shall be
entitled to designate directors (the "Parent Designees") on the Company Board as
will give the Parent representation proportionate to its ownership interest. The
Merger Agreement requires the Company to take such action as the Parent may
request to cause the Parent Designees to be elected to the Company Board under
the circumstances described therein. This Information Statement is required by
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and Rule 14f-1 thereunder.
The following information is given as of the date of the Schedule 14D-9,
August 26, 1997, unless indicated otherwise. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action. Capitalized terms used herein and not otherwise defined herein shall
have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
August 26, 1997. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on Tuesday, September 23, 1997, unless extended.
The information contained in this Information Statement concerning the
Parent, the Purchaser, the AIP Entities and the individuals listed in Schedule I
to this Schedule 14F-1 has been furnished to the Company by the Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of August 21, 1997, there were
10,534,574 Shares outstanding. The Company Board currently consists of seven
members with no vacancies. Each director holds office until such director's
successor is elected and qualified or until such director's earlier resignation
or removal.
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RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of any
Shares pursuant to the Offer, and from time to time as additional Shares are
purchased, the Parent shall be entitled to designate such number of Parent
Designees as will give the Parent representation on the Company Board, and on
each committee of the Company Board, proportionate to the Parent's ownership
interest in the Company. To this end, the Company has agreed to expand the size
of the Company Board or to seek the resignation of one or more of the current
directors, as requested by the Parent. However, in the event that the Parent's
designees are elected to the Company Board, the Company Board must include at
least one director who is a director as of the date of execution of the Merger
Agreement and who is neither an officer of the Company nor a designee,
stockholder, affiliate or associate of the Parent (one or more of such directors
being the "Independent Directors"). If no Independent Directors remain, the
other directors will designate one person, to fill a vacancy created by
resignation of one or more directors, who is neither an officer of the Company
nor a designee, stockholder, affiliate or associate of the Purchaser, such
person so designated being deemed an Independent Director. The Company's
obligation to appoint the Parent's designees to the Company Board is subject to
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Following the election of the Parent Designees, any action to amend
or terminate the Merger Agreement on behalf of the Company, to exercise or waive
any of the Company's rights, benefits or remedies thereunder, to extend the time
for the performance of the Purchaser's or the Parent's obligations thereunder or
to take other action by the Company under the Merger Agreement shall be effected
only by the action of a majority of the directors of the Company then in office
who are Independent Directors.
The Parent has informed the Company that it will choose the initial Parent
Designees from among the persons listed in Annex A to this Schedule 14F-1, which
information has been provided to the Company by the Parent and for which the
Company takes no responsibility as to the accuracy or completeness. The Parent
has informed the Company that each of such individuals has consented to act as a
director, if so designated. The information with respect to such individuals on
such Annex A is incorporated herein by reference. If necessary, the Parent may
choose additional or other Parent Designees, subject to the requirements of Rule
14f-1.
Based solely on the information provided by the Parent, none of the Parent
Designees (i) is currently a director of, or holds any position with, the
Company, (ii) has a familial relationship with any directors or executive
officers of the Company or (iii) to the best knowledge of the Parent,
beneficially owns any securities (or rights to acquire such securities) of the
Company. The Company has been advised by the Parent that, to the best of the
Parent's knowledge, none of the Parent Designees has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed herein or in the
Schedule 14D-9.
It is expected that the Parent Designees may assume office at any time
following the purchase by the Purchaser of a majority of the outstanding Shares
pursuant to the Offer, which purchase cannot be earlier than September 24, 1997,
and that, upon assuming office, the Parent Designees will thereafter constitute
at least a majority of the Board of Directors.
BOARD OF DIRECTORS
Directors of the Company are elected annually and hold office until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. The executive officers of the Company serve at the discretion of
the Company Board. The Board held six meetings in 1996. Each director attended
at least 75% of the aggregate of (a) the total number of meetings of the Board
and (b) the total number of meetings held by all committees of the Board on
which the director served during 1996.
The Board has a standing Audit Committee ("Audit Committee") and a standing
Compensation and Management Development Committee (the "Compensation
Committee"). In 1996, the Audit Committee consisted of Messrs. Poole, Radecki
and Stark. The principal functions performed by the Audit Committee, which met
once in 1996, are to meet with the Company's independent public accountants
before the annual audit to review procedures and the scope of the audit; to
review the results of the audit; to review the financial
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control mechanisms used by the Company and the adequacy of the Company's
accounting and financial controls; and to annually recommend to the Board a firm
of independent public accountants to serve as the Company's auditors. The
Compensation Committee in 1996 consisted of Messrs. Bartlett and Swansen. The
principal functions of the Compensation Committee, which met once in 1996, are
to review and make recommendations to the Board concerning (i) the compensation
and related benefits of elected officers; (ii) incentive and bonus plans that
include elected officers; and (iii) long-range planning for executive
development and succession. It also reviews Company policies regarding
compensation for senior management and other employees, and establishes and
periodically reviews Company policies on management perquisites. In addition, a
committee consisting of Messrs. Bartlett and Stark administers the 1996
Employees' Stock Incentive Plan and Non-Employee Directors' Stock Option Plan.
The Board has no standing nominating committee.
The following table sets forth, for each of the seven directors of the
Company, information as of the date of this Schedule regarding their names,
ages, principal occupations, and other directorships in certain companies held
by them, and their length of continuous service as a director of the Company.
Except as otherwise noted, each director has engaged in the principal occupation
or employment and has held the offices shown for more than the past five years.
Unless otherwise indicated, each director listed below is a citizen of the
United States and the address of such person is the Company's principal
executive offices. There are no family relationships among directors and
executive officers of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE, PRINCIPAL OCCUPATION, AND DIRECTORSHIPS SINCE
---- -------------------------------------------- --------
<S> <C> <C>
Craig Scott Bartlett, Jr.......... Mr. Bartlett, age 63, has been a consultant on banking 1994
matters since 1990, and in conjunction with such
activities was Senior Vice President and Chief Credit
Officer of MTB Bank, a private banking firm, from 1992 to
1994. From 1984 to 1990, he was Executive Vice President,
Senior Lending Officer and Chairman, Credit Policy
Committee, of National Westminster Bank USA. Mr. Bartlett
is a director of MTB Bank, The Bibb Company, Harvard
Industries, Inc., Janus Industries, Inc., and NVR, Inc.
Willard R. Hildebrand............. Mr. Hildebrand, age 58, has been the President and Chief 1996
Executive Officer of the Company since March 11, 1996.
Mr. Hildebrand was President and Chief Executive Officer
of Great Dane Trailers, Inc. (a privately held
manufacturer of a variety of truck trailers) from 1991 to
1996. Prior to 1991, Mr. Hildebrand held a variety of
sales and marketing positions with Fiat-Allis North
America, Inc. and was President and Chief Operating
Officer from 1985 to 1991.
Frank W. Miller................... Mr. Miller, age 52, was the Interim President and Chief 1996
Executive Officer of the Company from August 1, 1995 to
March 11, 1996. Mr. Miller is President of Miller
Associates, Inc. ("Miller Associates"), a management
consulting and private investment corporation established
by Mr. Miller in January, 1995. From 1989 to 1994, Mr.
Miller was Vice Chairman and Chief Executive Officer of
Darling International, Inc. Mr. Miller is a director of
Sound Advice and M. F. Horan Company.
Joseph J. Radecki, Jr............. Since 1990, Mr. Radecki, age 39, has been an Executive 1994
Vice President of Jefferies & Company, Inc., an
investment banking and advisory firm. From 1983 to 1990,
Mr. Radecki was a First Vice President in the
International Capital Markets Group at Drexel Burnham
Lambert, Inc. where he specialized in financial
restructurings and recapitalizations. Mr. Radecki is a
director of Warehouse Entertainment, Inc.
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR
NAME AGE, PRINCIPAL OCCUPATION, AND DIRECTORSHIPS SINCE
- --------------------------------- ----------------------------------------------------------------------- -----------
<S> <C> <C>
F. John Stark, III............... Since 1990, Mr. Stark, age 38, has been a Senior Vice President, 1994
General Counsel and portfolio manager of the Special Investments
Portfolio for PPM America, Inc., an investment management company. Mr.
Stark is also a Senior Managing Director of the PPM America Special
Investments Fund, L.P. From 1989 to 1990, Mr. Stark was employed by
Washington Square Capital. From 1986 to 1989 he was Chief Operating
Officer and General Counsel of Rubber Research Elastomerics, Inc. in
Minneapolis, Minnesota, and from 1984 to 1986 he was employed by the
law firm of Briggs and Morgan in Minneapolis, Minnesota. Mr. Stark is a
director of PPM America, Inc.
Russell W. Swansen............... Mr. Swansen, age 40, has been President of PPM America, Inc. since 1994
1990. From 1987 to 1990, Mr. Swansen was an Executive Vice President of
Washington Square Capital, a financial services subsidiary of NWNL Co.,
where he headed its investment advisory division and was a director of
Washington Square Mortgage Company, a residential mortgage banking
firm. Mr. Swansen is a director of PPM America, Inc.
Armour F. Swanson................ Mr. Swanson, age 65, currently serves as Acting President and Chief 1997
Executive Officer of Carolina Steel Corporation (on an interim basis)
and was previously President and Chief Executive Officer of Zenith
Sintered Products, Inc. (a privately held manufacturer of powder metal
components) from 1985 to 1995. From 1983 to 1985, Mr. Swanson was
President of Universal Instruments Division of Dover Corporation and
from 1980 to 1983 he was President of Waukesha Bearings Division of
Dover Corporation.
</TABLE>
Approximately 40% of the Shares are owned by Jackson National Life
Insurance Company ("JNL"), an indirect, wholly-owned subsidiary of Prudential
Corporation plc, a corporation organized under the laws of the United Kingdom
("Prudential"). Three of the seven current members of the Company Board (Messrs.
Radecki, Stark and Swansen) were selected by JNL prior to December 14, 1994 to
serve as directors of the Company in connection with the Company's 1994
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Chapter 11 Reorganization") and two of these individuals (Messrs. Stark and
Swansen) are employees of another subsidiary of Prudential. Mr. Radecki is an
employee of Jefferies & Company, Inc. ("Jefferies"), financial adviser to the
Company in connection with the Marion Acquisition (as hereinafter defined) and
the Merger.
The Merger Agreement contemplates that, following completion of the Offer,
the Company will take steps, consistent with applicable law, either to increase
the size of the Company Board, or encourage the resignation of existing
directors, thereby creating vacancies on the Company Board consistent with the
percentage of Shares then owned by the Parent (and increased thereafter if such
percentage should increase, in all cases rounded up to the next whole number)
and to cause nominees designated by the Parent to be considered to fill such
vacancies. Accordingly, following completion of the Offer, a majority of the
Company Board may be designees of the Parent.
EXECUTIVE OFFICERS
Set forth below are the names, ages and present occupation of all executive
officers of the Company. Executive officers named therein (the "named executive
officers") are elected annually and serve at the pleasure of the Company Board.
Mr. Hildebrand is employed under a three-year employment agreement, which
automatically renews for additional one-year terms subject to the provisions of
the agreement.
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Messrs. Mackus, Onsager, Phillips, Smoke, and Sullivan are each employed under
one-year employment agreements which automatically renew for additional one-year
terms subject to the provisions thereof.
<TABLE>
<CAPTION>
EMPLOYED BY
THE COMPANY
NAME AGE, POSITION, AND BACKGROUND SINCE
---- ----------------------------- -----------
<S> <C> <C>
Willard R. Hildebrand............. Mr. Hildebrand, age 58, has served as President and 1996
Chief Executive Officer since he joined the Company in
March 1996. Biographical information for Mr.
Hildebrand is set forth above under "Directors."
Craig R. Mackus................... Mr. Mackus, age 45, has served as Secretary since May 1974
1996 and as Controller since February 1988. Mr. Mackus
was Division Controller and Assistant Corporate
Controller from 1985 to 1988, Manager of Corporate
Accounting from 1981 to 1982 and 1984 to 1985, and
Assistant Corporate Controller of Western Gear
Corporation from 1982 to 1984.
Michael G. Onsager................ Mr. Onsager, age 43, has served as Vice President -- 1976
Engineering since September 1996. He was Chief
Engineer -- Advanced Technology Development from 1995
to September 1996, Assistant Chief Engineer from 1990
to 1993 and 1994 to 1995, and Parts Product Manager
from 1993 to 1994.
Thomas B. Phillips................ Mr. Phillips, age 51, has served as Vice President -- 1970
Materials since March 1996. He was Director of
Materials from 1986 to 1996, Manufacturing Manager
from June 1986 to October 1986, and Materials Manager
from 1983 to 1986.
Daniel J. Smoke................... Mr. Smoke, age 48, has served as Vice President and 1996
Chief Financial Officer since he joined the Company in
November 1996. Mr. Smoke was Vice President Finance
and Chief Financial Officer of Folger Adam Company
from 1995 to 1996. From 1986 to 1994, Mr. Smoke held a
variety of financial and operating positions with
Eagle Industries, Inc.
Timothy W. Sullivan............... Mr. Sullivan, age 44, has served as Vice President -- 1976
Marketing since April 1995. He was the Director of
Business Development in 1994, Director of Parts Sales
and Subsidiary Operations from 1990 to 1994, and
Product Manager of Electric Mining Shovels and
International Sales from 1986 to 1990.
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company, other than full time employees, currently receive
$2,500 each month, regardless of whether meetings are held or the number of
meetings held. Messrs. Stark and Swansen have declined to accept any fees. For
the period January 1, 1996 to March 10, 1996, JNL directed that Messrs.
Swansen's and Stark's $2,000 monthly fees be paid by the Company to Jefferies,
of which Mr. Radecki is Executive Vice President. For the period March 11, 1996
to December 31, 1996, JNL directed that Messrs. Swansen's and Stark's $2,500
monthly fees be paid by the Company to Miller Associates, of which Mr. Miller is
President. No fees are paid for attendance at committee meetings, except for Mr.
Bartlett, who was paid $13,000 during 1996, at the rate of $1,000 per day for
the period January 1, 1996 to March 31, 1996, and $1,500 per day for the period
April 1, 1996 to December 31, 1996, for services performed as a member of
certain committees of the Board. Directors are also reimbursed for out-of-pocket
expenses.
In accordance with the terms of a non-employee directors' stock option plan
(the "Stock Option Plan"), each person who was a director on the effective date
of the Stock Option Plan automatically received an option (a "Stock Option" or
"Option") to acquire 2,000 Shares. The Stock Option Plan further provides that
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each person who was not a director on the effective date of the Stock Option
Plan automatically receives an Option for 2,000 Shares when first elected as a
non-employee director of the Company. In addition to the compensation described
above, each director who was not a full time employee of the Company
automatically received an Option for 2,000 Shares at an exercise price of $6.00
per Share on February 16, 1995, an Option for 2,000 Shares on February 8, 1996
at an exercise price of $9.25 per Share and an Option for 2,000 Shares on
February 5, 1997 at an exercise price of $7.50 per Share, Pursuant thereto, Mr.
Miller was granted an Option for 2,000 Shares on March 11, 1996 at an exercise
price of $9.00 per Share, and Mr. Swanson was granted an Option for 2,000 shares
on April 30, 1997 at an exercise price of $9.375 per Share. Subsequent to the
initial grant, each non-employee director (who continues to serve in such
capacity) automatically receives an Option to purchase an additional 2,000
Shares on the date of the first Board meeting of each calendar year for as long
as the plan remains in effect. Notwithstanding the above, Messrs. Stark and
Swansen have declined to accept any Options under the Stock Option Plan. The
exercise price for all Options granted under the Stock Option Plan is equal to
the last sale price of the Shares on The Nasdaq Stock Market on the date of
grant. Options granted to non-employee directors under the Stock Option Plan
terminate on the earlier of (a) ten years after the date of grant, (b) six
months after the non-employee director ceases to be a director by reason of
death, or (c) a time equal to the non-employee director's length of service on
the Board if the non-employee director ceases to be a director for any reason
other than death.
The Merger Agreement provides that all issued and outstanding Stock Options
and stock appreciation rights ("SARs") will be cancelled upon the effective date
of the Merger and, regardless of whether such Stock Options or SARs have then
vested in the holders thereof or are exercisable, the holders will receive cash
equal to the difference between the Stock Option exercise price or SAR per Share
base price, as the case may be, and the Offer Price multiplied by the number of
Options or SARs held.
PRINCIPAL STOCKHOLDERS
The table below sets forth the beneficial ownership as of June 30, 1997, of
the outstanding Common Stock by each director, each of the executive officers
named in the Summary Compensation Table, and by all directors and executive
officers of the Company as a group, and by each person who is known to the
Company to be the beneficial owner of five percent or more of the outstanding
Common Stock.
Following consummation of the Merger, the Company will have a single
stockholder, the Parent, whose business address is One Maritime Plaza, Suite
2525, San Francisco, CA 94111.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
---------------- ----------------------- ----------
<S> <C> <C>
Craig Scott Bartlett, Jr.(3)................................ 6,000 *
Willard R. Hildebrand(4).................................... 500,000 4.7%
Craig R. Mackus(5).......................................... 972 *
Frank W. Miller(3).......................................... 4,500 *
Michael G. Onsager(5)....................................... 0 --
Thomas B. Phillips(5)....................................... 0 --
Joseph J. Radecki, Jr.(3)................................... 6,000 *
Daniel J. Smoke(6).......................................... 30,000 *
F. John Stark, III(7)....................................... 0 --
Timothy W. Sullivan(5)...................................... 324 *
Russell W. Swansen(8)....................................... 0 --
Armour F. Swanson(3)........................................ 2,100 *
All directors and executive officers as a group (12
persons).................................................. 549,896 5.1%
Jackson National Life Insurance Company(9).................. 4,228,382 40.1%
SSP, Inc. and Greycliff Partners(10)........................ 1,160,979 11.0%
Franklin Resources, Inc.(11)................................ 774,899 7.4%
</TABLE>
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- ---------------
(1) Unless otherwise noted, amounts indicated reflect Shares as to which the
beneficial owner possesses sole voting and dispositive powers. Also included
are Shares subject to Stock Options if such Options are exercisable within
60 days of the date of this Schedule.
(2) Percentage of total number of Shares outstanding, plus, for each individual
owning Options and for the group, the assumed exercise of that number of
Options which are included in the total number of Shares beneficially owned
by them. Asterisk denotes less than 1%.
(3) Includes Options granted under the Non-Employee Directors' Stock Option Plan
as follows: for Messrs. Bartlett and Radecki -- 6,000 Options each; for Mr.
Miller -- 4,000 Options; for Mr. Swanson -- 2,000 Options.
(4) Includes 200,000 Shares subject to the exercise of Options under the Stock
Incentive Plan, as well as 266,667 Restricted Shares issued under the Stock
Incentive Plan over which Mr. Hildebrand holds sole voting power.
(5) For each of Messrs. Mackus, Onsager, Phillips and Sullivan, does not include
30,000 Options granted under the Stock Incentive Plan on February 5, 1997 at
an exercise price of $7.50 per Share. These Options are not currently
exercisable, but will be purchased upon consummation of the Merger for cash
at the difference between the Offer Price of $18.00 per Share and the
exercise price, multiplied by the number of Options held.
(6) Includes 30,000 Options granted under the Stock Incentive Plan on November
7, 1996 at an exercise price of $8.75 per Share. These Options are not
currently exercisable, but will become fully exercisable upon a
change-in-control transaction (including the Merger). These options will be
purchased upon consummation of the Merger for cash at the difference between
the Offer Price of $18.00 per Share and the exercise price, multiplied by
the number of Options held.
(7) Mr. Stark is a director and an officer of PPM America, Inc., which is deemed
to be the beneficial owner of 4,228,382 Shares. Mr. Stark disclaims
beneficial ownership of all such Shares.
(8) Mr. Swansen is a director and an officer of PPM America, Inc., which is
deemed to be the beneficial owner of 4,228,382 Shares. Mr. Swansen disclaims
beneficial ownership of all such Shares.
(9) JNL's address is 5901 Executive Drive, Lansing, MI 48911-5333. According to
a Schedule 13D ("13D") statement dated December 23, 1994, as amended by
Amendments No. 1 and No. 2 and No. 3 thereto, dated April 4, 1995, March 11,
1996 and August 5, 1997, respectively, (i) JNL shares voting power and
dispositive power with PPM America, Inc. over all such Shares; (ii) PPM
America, Inc. serves as the investment advisor to JNL pursuant to a
Discretionary Investment Management Agreement between JNL and PPM America,
Inc. dated as of April 14, 1993; and (iii) JNL and PPM America, Inc. are
both indirect, wholly-owned subsidiaries of Prudential Corporation plc, a
corporation organized under the laws of the United Kingdom. JNL has granted
the Purchase Option to the Parent as provided in the Merger Agreement and
Stockholder Agreement.
(10) SSP, Inc.'s address is 3801 Kennett Pike, Wilmington, DE 19807 and
Greycliff Partners' address is 89 Headquarters Plaza, Morristown, NJ 07960.
According to a 13D dated June 16, 1995, Greycliff Partners shares voting
and dispositive power over 1,160,979 Shares with Mikael Salovaara and
Alfred C. Eckert, III, its general partners. The 13D also states that
Greycliff Partners is the investment advisor for and shares voting and
dispositive power with the South Street Corporate Recovery Fund I, L.P.,
the South Street Leveraged Corporate Recovery Fund, L.P. and the South
Street Corporate Recovery Fund I (International), L.P. (collectively the
"South Street Funds"), except that such powers held by Greycliff Partners
are subject to the supervision and control of the South Street Funds'
respective general partners. Such funds share voting and dispositive power
over 914,908 Shares, 223,297 Shares and 22,774 Shares, respectively. The
13D also states that SSP, Inc., the ultimate general partner for both the
South Street Corporate Recovery Fund I, L.P. and the South Street Leveraged
Corporate Recovery Fund, L.P., shares voting and dispositive power over
1,138,205 Shares, and that SSP International, Inc., the ultimate general
partner for the South Street Corporate Recovery Fund I
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(International), L.P., shares voting and dispositive power over 22,774
Shares. Notwithstanding the above reference to Greycliff Partners, it is
the Company's understanding that since the filing of the 13D, SSP, Inc. has
assumed direct responsibility for exercising the voting and dispositive
power over the South Street Corporate Recovery Fund I, L.P. and the South
Street Leveraged Corporate Recovery Fund, L.P. All such Shares over which
Greycliff Partners and the other parties described herein share beneficial
ownership were acquired upon the conversion of certain debt securities of
the Company during the pendency of the Chapter 11 Reorganization. JNL has
objected to the proofs of claim filed with the Bankruptcy Court by the
indenture trustees for the debt securities to the extent that such proofs
of claim related to debt securities beneficially owned by the South Street
Funds. As a result of such objection, the Company believes that the Shares
beneficially owned by the South Street Funds are being held in escrow
pursuant to an agreement between JNL and the South Street Funds pending
further order of the Bankruptcy Court with respect to JNL's objection.
(11) Franklin Resources, Inc.'s address is 777 Mariners Island Blvd., San Mateo,
CA 94404. Includes 741,331 Shares beneficially owned by Age High Income
Fund. Age High Income Fund, a Colorado organization, is a subsidiary of
Franklin Resources, Inc., a Delaware corporation. According to the Schedule
13G statement dated February 12, 1996 filed with the Commission by Franklin
Resources, Inc. and Age High Income Fund (i) Franklin Resources, Inc. has
shared dispositive power over and sole voting power over 774,899 Shares;
and (ii) Age High Income Fund has sole voting power over, shared
dispositive power over, the right to receive dividends from and the right
to receive proceeds from the sale of 741,331 Shares.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to each
person who served as the Company's Chief Executive Officer during fiscal 1996
and each of the four most highly compensated executive officers other than the
Chief Executive Officer who were in office on December 31, 1996. The persons
named in the table are sometimes referred to herein as the "named executive
officers."
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
-----------------------
RESTRICTED
ANNUAL COMPENSATION(1) STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL ----------------------- AWARDS UNDERLYING COMPENSATION
POSITION YEAR SALARY BONUS (2) OPTIONS(#) (3)
------------------ ---- ------ ----- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
WILLARD R. HILDEBRAND......... 1996 $323,816 $200,000 $2,700,000 200,000 $265,931
President and Chief
Executive Officer
FRANK W. MILLER............... 1996 (4) -- -- -- --
Interim President and 1995 (4) -- -- -- --
Chief Executive Officer(4)
CRAIG R. MACKUS............... 1996 $123,000 $ 26,975 -- -- $ 4,090
Secretary and Controller 1995 114,900 10,000 -- -- 3,732
1994 105,030 -- -- -- 3,447
MICHAEL G. ONSAGER............ 1996 $101,672 $ 22,666 -- -- $ 3,336
Vice President Engineering 1995 80,361 -- -- -- 2,617
1994 70,255 -- -- -- 2,291
THOMAS B. PHILLIPS............ 1996 $119,168 $ 26,976 -- -- $ 4,299
Vice President Materials 1995 104,202 10,000 -- -- 3,833
1994 97,096 -- -- -- 3,397
TIMOTHY W. SULLIVAN........... 1996 $128,004 $ 34,644 -- -- $ 4,260
Vice President Marketing 1995 114,932 10,000 -- -- 4,124
1994 102,507 -- -- -- 3,362
</TABLE>
- ---------------
(1) Certain personal benefits provided by the Company to the named executive
officers are not included in the table. The aggregate amount of such
personal benefits for each named executive officer in each year reflected in
the table did not exceed the lesser of $50,000 or 10% of the sum of such
officer's salary and bonus in each respective year.
(2) Represents the market value on the date of grant of restricted Shares
("Restricted Shares") granted under the 1996 Employees' Stock Incentive Plan
(the "Stock Incentive Plan"). At the end of the last fiscal year, the number
and value (based on the fiscal year-end closing price of $8.75 per Share) of
the aggregate holdings of Restricted Shares of the named individual were
300,000 and $2,625,000, respectively. Of the 300,000 Restricted Shares,
33,333 vested on March 11, 1997, 33,333 will vest on March 11, 1998, and
33,334 will vest on March 11, 1999. The remaining 200,000 Restricted Shares
vest under a Time Accelerated Restricted Stock Agreement, which provides for
vesting in eight years (assuming continued employment, with certain
exceptions) and provides for earlier release in the third, fourth, and fifth
years if certain earnings targets are reached by the Company. Dividends are
payable on the Restricted Shares at the same rate as on Shares that are not
Restricted Shares. The Merger Agreement provides that all issued and
outstanding Stock Options and SARs will be cancelled upon the effective date
of the Merger and, regardless of whether such Stock Options or SARs have
then vested in the holders thereof or are exercisable, the holders will
receive cash equal to the difference between the Stock Option exercise price
or SAR per Share base price, as the case may be, and the Offer Price. The
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<PAGE> 10
Restricted Shares are considered issued and outstanding and, pursuant to the
Merger Agreement, will be purchased in the Offer at the Offer Price whether
or not vested.
(3) "All Other Compensation" includes the employer match under the Company's
401(k) savings plan for 1996, 1995, and 1994, respectively: Mr. Hildebrand
($4,750), Mr. Mackus ($3,690, $3,403, $3,151), Mr. Onsager ($3,050, $2,411,
$2,108), Mr. Phillips ($3,262, $2,961, $2,913), and Mr. Sullivan ($3,840,
$3,798, $3,075); life insurance premium payments for 1996, 1995 and 1994,
respectively: Mr. Hildebrand ($2,775), Mr. Mackus ($400, $329, $296), Mr.
Onsager ($286, $206, $183), Mr. Phillips ($1,037, $872, $484), and Mr.
Sullivan ($420, $326, $287); and payments made in 1996 in connection with
employment agreements to Mr. Hildebrand ($258,406 including a relocation
allowance of $187,021 and a pension benefit of $71,385).
(4) Mr. Miller became Interim President and Chief Executive Officer pursuant to
a Management Agreement (the "Management Agreement"), dated July 21, 1995, as
amended, between the Company and Miller Associates. Amounts paid by the
Company under the Management Agreement were paid to Miller Associates and
Mr. Miller was separately compensated by Miller Associates. Pursuant to the
Management Agreement, Mr. Miller served as Interim President and Chief
Executive Officer until March 11, 1996 when Mr. Hildebrand was appointed as
President and Chief Executive Officer by the Board.
OPTION GRANTS TABLE
The following table shows all individual grants of Stock Options and SARs
under the Stock Incentive Plan to the named executive officers during 1996:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE PER EXPIRATION PRESENT
NAME GRANTED (#) 1996 SHARE ($/SH)(1) DATE VALUE ($)(2)
---- ------------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
W. R. Hildebrand................ 200,000(3) 71% $ 5.0875 3/10/2006 $1,310,000
</TABLE>
- ---------------
(1) The market price of the Shares on the date of grant, March 11, 1996, was
$9.00 per Share.
(2) Present value is determined as of the grant date, March 11, 1996, using the
Black-Scholes Model. This is a theoretical value for the Stock Options which
was constructed with the following underlying assumptions: a five year
expected period to time of exercise; a risk free rate of return of 6.34%; an
expected dividend yield of 0%; and a calculated volatility of 66.82%. The
amount realized from a Stock Option ultimately depends on the market value
of the stock at a future date. Pursuant to the Merger Agreement, all Options
will be canceled in exchange for a cash payment equal to the difference
between the Offer Price and the exercise price of such Options. In respect
of the Options held by Mr. Hildebrand, the amount to be received will be
$2,582,500 at the Offer Price of $18.00 per Share.
(3) Non-qualified Stock Options.
Executive officers of the Company are eligible to receive Stock Options,
SARs, Restricted Shares, and other awards under the Stock Incentive Plan. An
award of 30,000 Stock Options and 50,000 SARs was made to Mr. Daniel Smoke, the
Company's chief financial officer, upon his hiring in November, 1996, and on
February 5, 1997 the Board approved the award of Stock Options to various
employees, including the named executive officers (but not including Mr.
Hildebrand and Mr. Smoke). Pursuant to the Merger Agreement, all Options and
SARs will be canceled in exchange for a cash payment equal to the difference
between the Offer Price and the exercise price of such Options or per Share base
price of the SARs.
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<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides certain information about Stock Option
exercises and year-end values of Stock Options held by Mr. Hildebrand, who is
the only named executive officer who held Stock Options during the fiscal year
ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
ACQUIRED VALUE YEAR END (#) FISCAL YEAR END(1) ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Willard R. Hildebrand.......... 0 N/A 200,000 0 $732,500 N/A
</TABLE>
- ---------------
(1) Based on the $8.75 per Share market value of the Common Stock on December
31, 1996, determined with reference to the last sale price of the Common
Stock on that date as reported on The Nasdaq Stock Market. Options are
"in-the-money" if the fair market value of the stock on the date indicated
exceeds the exercise price.
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable on a
straight life annuity basis (prior to offset of one-half of estimated Social
Security benefits) to participating employees, including officers, upon
retirement at normal retirement age for the years of service and the average
annual earnings indicated under the Company's defined benefit pension plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
RENUMERATION 35 30 25 20 15
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................. $ 76,563 $ 65,625 $ 54,688 $ 43,750 $ 32,813
150,000................................. 91,875 78,750 65,625 52,500 39,375
175,000................................. 107,188 91,875 76,563 61,250 45,938
200,000................................. 122,500 105,000 87,500 70,000 52,500
225,000................................. 137,813 118,125 98,438 78,750 59,063
250,000................................. 153,125 131,250 109,375 87,500 65,625
300,000................................. 183,750 157,500 131,250 105,000 78,750
400,000................................. 245,000 210,000 175,000 140,000 105,000
450,000................................. 275,625 236,250 196,875 157,500 118,125
500,000................................. 306,250 262,500 218,750 175,000 131,250
</TABLE>
Covered compensation for purposes of the Company's defined benefit pension
plan consists of the average of a participant's highest total salary and bonus
(excluding compensation deferred pursuant to any non-qualified plan) for a
consecutive five year period during the last ten calendar years of service prior
to retirement.
The years of credited service under the defined benefit pension plan for
each of the named executive officers are as follows: Mr. Hildebrand (0), Mr.
Mackus (17), Mr. Onsager (17), Mr. Phillips (20) and Mr. Sullivan (18).
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, the Company has supplemental plans which authorize the payment out of
general funds of the Company of any benefits calculated under provisions of the
applicable retirement plan which may be above the limits under these sections.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company Board, subject to the approval of
the Company Board, is responsible for the compensation packages offered to the
Company's executive officers, including the Chief Executive Officer (the "CEO")
and the named executive officers. Prior to March 11, 1996, the Compensation
Committee consisted of Messrs. Bartlett and Stark; since March 11, 1996, the
Compensation Committee consists of Messrs. Bartlett and Swansen.
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<PAGE> 12
EXECUTIVE COMPENSATION
The Compensation Committee, in consultation with the CEO, establishes base
salaries for the executive officers of the Company which the Company believes
are commensurate with their respective responsibilities, position, and
experience. Consideration is also given to the compensation levels of similarly
situated personnel of other companies in the industry where such information is
available. When making adjustments in base salaries, the Compensation Committee
generally considers the foregoing factors as well as corporate financial
performance and return to stockholders. In individual cases where appropriate,
the Compensation Committee also considers nonfinancial performance measures,
such as increases in market share, manufacturing efficiency gains, improvements
in product quality, and improvements in relations with customers, suppliers, and
employees. Executive officer base salaries are reviewed annually. The
Compensation Committee generally begins its review by analyzing the current base
salaries of the executive officers. Based on such review, the corporate
performance of the Company, the individual contributions of the executive
officers, and the factors discussed above, the Compensation Committee then
recommends approval of its determinations to the Company Board.
Executive officers and other Company employees participated in the 1996
Management Incentive Plan. Under the 1996 Management Incentive Plan, the
Compensation Committee established a management incentive budget based on
budgeted earnings before interest expense, taxes, depreciation and amortization
("EBITDA") and, in consultation with the CEO, established target incentive bonus
percentages of between 10% and 30% of base salary for executive officers (other
than the CEO, whose target incentive bonus percentage is established pursuant to
his employment agreement -- see "Chief Executive Officer Compensation," below)
and certain employees. These targeted percentages were adjustable pursuant to a
formula based on a range of values whereby the target incentive bonus percentage
would be zero (and no bonuses would be paid) if actual EBITDA was less than 90%
of budgeted EBITDA, and a maximum bonus of two times the target incentive bonus
percentage would be paid if actual EBITDA was 150% or more of budgeted EBITDA.
In 1996, the Company's actual EBITDA exceeded budgeted EBITDA, and the target
incentive bonus percentages were increased by approximately 9%. After target
bonus amounts were established, actual bonuses were further adjusted, again in
consultation with the CEO, based on the achievement of preestablished individual
performance objectives. Various employees, including the named executive
officers, received bonuses under the 1996 Management Incentive Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary and certain awards under the Stock Incentive Plan for Mr.
Hildebrand, the Company's CEO, were established by negotiation between the
Company and Mr. Hildebrand at the time he was hired in 1996 and are set forth in
an employment agreement between the Company and Mr. Hildebrand. The factors
recited in the first paragraph above under "Executive Compensation," were
considered by the Compensation Committee and the Company Board in these
negotiations.
Mr. Hildebrand also participated in the 1996 Management Incentive Plan on
the same basis as the other employees who participated. Mr. Hildebrand's target
incentive bonus percentage of 50% of base salary was established pursuant to his
employment agreement. No individual performance adjustment was made for Mr.
Hildebrand.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
certain corporate taxpayers, such as the Company, is limited with respect to
compensation paid to certain executive officers unless such compensation is
based on performance objectives meeting specific regulatory criteria or is
otherwise excluded from the limitation. The compensation package of Mr.
Hildebrand, the Company's CEO, does not so qualify, nor does the 1996 Management
Incentive Plan meet the regulatory criteria for exclusion from the limitation.
Where practical, the Compensation Committee intends to qualify compensation paid
to the Company's executive officers in order to preserve the full deductibility
thereof under Section 162(m), although the Compensation Committee reserves the
right in individual cases to cause the Company to enter into
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<PAGE> 13
compensation arrangements which may result in some compensation being
nondeductible under Code Section 162(m).
BUCYRUS INTERNATIONAL, INC.
COMPENSATION COMMITTEE
C. Scott Bartlett, Jr.
F. John Stark, III (prior to March 11,
1996)
Russell W. Swansen (from March 11,
1996)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From July 25, 1995 to March 11, 1996, the Compensation Committee consisted
of Messrs. Bartlett and Stark. The Compensation Committee now consists of
Messrs. Bartlett and Swansen. Mr. Swansen is an Executive Officer of PPM
America, Inc., an affiliate of JNL, owner of approximately 40% of the
outstanding Shares. JNL is also a holder of approximately $63,963,000 face
amount of Secured Notes.
PERFORMANCE INFORMATION
The following graph compares the Company's cumulative total stockholder
return with the cumulative total return of the Standard & Poor's 500 Stock Index
and the Machinery (Diversified) Subgroup of the Standard & Poor's 500 Stock
Index. The graph assumes $100 was invested on December 31, 1994 and assumes the
reinvestment of dividends. The companies currently in the Machinery
(Diversified) Subgroup are Case Corp., Caterpillar, Inc., Cincinnati Milacron,
Cooper Industries, Deere & Co., Dover Corporation, Harnischfeger Industries,
Ingersoll-Rand, NACCO Industries and Timken Co. Data for only 1995 and 1996 is
presented since the Common Stock did not begin to publicly trade until December
22, 1994.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG BUCYRUS INTERNATIONAL, INC., STANDARD & POOR'S 500 STOCK INDEX
AND MACHINERY (DIVERSIFIED) SUBGROUP INDEX
LOGO
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
S&P 500 Stock Index......................................... $100 $137 $169
Machinery (Diversified) Subgroup Index...................... 100 124 154
Bucyrus International, Inc.................................. 100 116 125
</TABLE>
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<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company entered into the Management Agreement with Miller Associates,
pursuant to which the Company engaged Miller Associates to provide certain
management services, including those of Mr. Miller as Interim President and
Chief Executive Officer and James D. Annand as Interim Chief Financial Officer.
Mr. Miller is the President of Miller Associates.
The Management Agreement provided that Messrs. Miller and Annand and
certain other employees of Miller Associates (the "Project Team") would provide
management services and expertise to the Company and manage the operations of
the Company commencing on August 2, 1995 until terminated by the Company as
described below. Pursuant to the Management Agreement, the Company agreed to pay
Miller Associates a monthly fee of $65,000 for each of August and September 1995
and $55,000 for each month thereafter until the Company hired a new chief
executive officer and such person commenced employment with the Company. The
Company also agreed to reimburse Miller Associates for all reasonable
out-of-pocket expenses incurred by Miller Associates in connection with the
Project Team's performance under the Management Agreement. The Management
Agreement further provided that neither Mr. Miller or Mr. Annand, nor any other
employee of Miller Associates, would be considered an employee of the Company
and that Miller Associates would be responsible for payment of compensation,
disability benefits and unemployment insurance, and for the payment and
withholding of payroll taxes. The Management Agreement was terminated with the
hiring of Mr. Hildebrand as President and Chief Executive Officer on March 11,
1996. As provided by the Management Agreement, following the termination
thereof, Mr. Annand remained as Interim Chief Financial Officer through August
1996. The total cost to the Company in 1996 for these services was approximately
$268,000.
EMPLOYMENT AGREEMENTS; CHANGE OF CONTROL
The Company has entered into employment agreements with all of the named
executive officers. These agreements govern the compensation, benefits and
treatment upon termination under various circumstances, including voluntary
termination by either party, or termination by reason of retirement, death or
disability, or in the event of a change of control, as those terms are defined
in the agreements. Each employment agreement automatically renews for a one year
term upon the expiration of its initial term and any subsequent terms, unless
two months' written notice is given by either party of intent to terminate at
the end of that term. Each employment agreement may be terminated by either the
Company or the executive at any time by giving notice as required under the
agreement; provided, however, that if the named executive officer is terminated
by the Company without cause at any time, or if the executive terminates his
employment with good reason in connection with a change in control, as those
terms are defined in the agreement, then the executive will be entitled to
certain severance benefits as described in that executive's individual
agreement. Finally, each agreement imposes confidentiality restrictions on the
executive and places restrictions on the executive's involvement in activities
that may compete with the Company both during employment and following
termination. Violation of such confidentiality and non-competition provisions,
or other termination for cause, as defined in the agreements, may result in
forfeiture of severance and other benefits that may otherwise accrue. Individual
compensation, benefits and other salient features of each agreement are
described below. The consummation of the Merger and the transactions
contemplated under the Merger Agreement constitute a change in control for
purposes of these agreements.
Mr. Hildebrand serves as President and Chief Executive Officer under a
three-year employment agreement with the Company, dated March 11, 1996. Mr.
Hildebrand's base salary is $400,000 per year, subject to increase at the
discretion of the Board, and he is eligible to participate in the Company's
Management Incentive Plan ("Bonus Plan"), which, in Mr. Hildebrand's case,
provides for an annual cash incentive bonus equal to 50% of base salary in the
event of achievement of targeted performance and a maximum of 100% of base
salary in the event of exceptional performance, as determined in accordance with
the Bonus Plan. In addition, Mr. Hildebrand was granted 300,000 Restricted
Shares and Options for 200,000 Shares exerciseable at 55% of the market price of
the Shares on the date of the grant. Mr. Hildebrand is
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<PAGE> 15
entitled to participate in the Company's employee benefit plan for senior
executives and provided other fringe benefits, such as club membership, vacation
and the use of a Company car. Finally, Mr. Hildebrand's employment agreement
provided for one-time payments to compensate him for lost retirement benefits
and to reimburse him for costs associated with the relocation of his residence.
Mr. Smoke serves as Chief Financial Officer under a one-year employment
agreement with the Company, dated November 7, 1996. Mr. Smoke's base salary is
$175,000 per year, subject to increase at the discretion of the Board, and he is
eligible to participate in the Bonus Plan, which, in Mr. Smoke's case, provides
for an annual cash incentive bonus equal to 35% of base salary in the event of
achievement of targeted performance and a maximum of 70% of base salary in the
event of exceptional performance, as determined in accordance with the Bonus
Plan. In addition, Mr. Smoke was granted Options for 30,000 Shares, as well as
SARs to 50,000 Shares. Mr. Smoke is entitled to participate in the Company's
employee benefit plan for senior executives and provided other fringe benefits,
such as club membership, vacation and the use of a Company car. Finally, Mr.
Smoke's employment agreement provides for one-time payments to reimburse him for
costs associated with the relocation of his residence.
Messrs. Sullivan, Mackus, Phillips and Onsager each serve under similar
one-year employment agreements with the Company dated May 21, 1997. Each of
these agreements provides for the executive's position and base salary, which is
subject to merit increases in accordance with the Company's normal salary merit
increase review policy. In addition, the executive is entitled to participate in
such employee and fringe benefits plans as the Company provides to other
similarly situated management employees.
The Merger Agreement provides that all issued and outstanding Stock Options
and SARs will be cancelled upon the effective date of the Merger and, regardless
of whether such Stock Options or SARs have then vested in the holders thereof or
are exercisable, the holders will receive cash equal to the difference between
the Stock Option exercise price or SAR per Share base price, as the case may be,
and the Offer Price.
Consummation of the Offer and the Merger will constitute a change in
control under employment agreements with executive officers of the Company.
Under certain circumstances constituting an actual or constructive termination
of employment within 6 months before, or 24 months after, a change of control,
the Company is obligated to pay Mr. Hildebrand's base salary for the greater of
(i) the remainder of the employment term, or (ii) one (1) year. In addition, Mr.
Hildebrand is to receive the average of the bonus compensation paid to him in
the past two (2) years, or if bonus compensation has been paid for one (1) year
or less preceding the termination of employment, a fractional share of such
bonus. Under certain circumstances constituting an actual or constructive
termination of employment within 6 months after a change of control, the Company
is obligated to pay Mr. Smoke's base salary and insurance benefits for a period
of 18 months following the termination of employment. The agreements with each
of Messrs. Hildebrand and Smoke provide that if any compensation which would be
payable under the agreement contingent on a change in control would result in
the imposition of an excise tax on them pursuant to the Internal Revenue Code or
in the non-deductibility of such compensation by the Company for Federal income
tax purposes, then arrangements shall be made to pay them one dollar less than
the maximum which each of them would receive without becoming subject to the
excise tax or which the Company may pay without losing its deduction; provided,
however, such reduction will be made only if it results in them receiving a
greater net benefit than they would have received had a reduction not occurred
and an excise tax been paid.
FINANCIAL ADVISORY AGREEMENTS
The Company entered into a letter agreement (the "Letter Agreement") dated
March 7, 1997, with Jefferies pursuant to which Jefferies has acted as the
Company's exclusive financial advisor in connection with the acquisition of
certain assets and liabilities of The Marion Power Shovel Company, a subsidiary
of Global Industrial Technologies, Inc. ("Global"), and of certain subsidiaries
and divisions of Global that represent Global's surface mining equipment
business in Australia, Canada, and South Africa (the "Marion Acquisition"). The
Company agreed pursuant to the Letter Agreement to pay Jefferies a one-time
retainer fee of $100,000, and a fee of $150,000 for each fairness opinion that
Jefferies issues in connection with the Marion Acquisition. However, no fairness
opinions were issued in connection with the Marion Acquisition. The
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<PAGE> 16
Company will, in addition, pay Jefferies a success fee of $250,000 and all
reasonable out-of-pocket expenses incurred by Jefferies in connection with the
Letter Agreement. The Letter Agreement also contains standard indemnification
provisions whereby the Company will indemnify and hold harmless Jefferies and
certain related parties from liabilities arising out of the Letter Agreement.
Consummation of the Marion Acquisition was expected to occur on or before August
26, 1997. Consummation of the Offer and the Merger are subject to successful
closing of the Marion Acquisition.
The Company has retained Jefferies to act as its exclusive financial
advisor with respect to the Merger pursuant to a letter agreement, dated July
30, 1997 (the "Jefferies Engagement Letter"), between Jefferies and the Company.
The Jefferies Engagement Letter provides for the payment to Jefferies by the
Company of a retainer advisory fee of $250,000 with respect to the Merger,
payable upon execution, and a "success fee" of $1,250,000 payable upon
successful consummation of the Merger and related transactions. The Company has
also agreed to reimburse Jefferies for Jefferies' out-of-pocket expenses,
including fees and expenses of Jefferies' legal counsel. In the event the
Company terminates Jefferies' services and completes a transaction similar to
the Merger within one year of such termination, the Company agrees to pay to
Jefferies the "success fee" referred to above upon consummation of the other
transaction. Under the Jefferies Engagement Letter, Jefferies has also been
retained to render its opinion as to the fairness of the Merger to the Company's
stockholders (the "Fairness Opinion"). Jefferies will receive $250,000 for
issuing the Fairness Opinion. In addition, the Company agreed to indemnify
Jefferies against certain liabilities, including liabilities arising under
federal securities laws. The Jefferies Engagement Letter is a separate and
distinct from the Letter Agreement.
Jefferies has provided financial advisory services to the Company and to
entities related to the Company and may in the future provide financial advisory
services to the Company or such other entities, for which it has received or
expects to receive customary fees. JNL has informed the Company that Jefferies
has advised JNL in connection with discussions that JNL has had from time to
time to dispose of all or a substantial portion of its equity interest in the
Company.
SENIOR NOTES OFFERING
In connection with the Marion Acquisition and the Merger, the Company is
preparing to issue $150 million Senior Notes due 2007 (the "Senior Notes") in a
private placement transaction (the "Senior Notes Offering") pursuant to Rule
144A under the Securities Act of 1933, as amended (the "Securities Act"). The
Company presently expects the Senior Notes Offering to commence on August 29,
1997.
THE SENIOR NOTES DESCRIBED IN THIS SCHEDULE WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THIS SCHEDULE 14F-1,
AND ANY REFERENCE TO THE SENIOR NOTES HEREIN, SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE
SENIOR NOTES IN ANY STATE OR JURISDICTION WHERE SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE OR JURISDICTION.
Promptly following consummation of the Marion Acquisition, the Company
expects to file with the Commission a Current Report on Form 8-K (the "Marion
Acquisition Form 8-K") that will provide certain information concerning the
Company and its business that has not otherwise been made public and that will
be provided to potential purchasers of the Senior Notes in connection with their
consideration of an investment in the Senior Notes. Such information may also be
material to a decision by a stockholder of the Company to tender, withdraw, sell
on the open market or hold Shares held by such stockholder.
The net proceeds to the Company from the Senior Notes Offering are
estimated to be approximately $145.5 million. Together with borrowings under the
Company's Revolving Credit Facility with its bank and available cash, the
proceeds of the Senior Notes Offering are expected to be used (i) to refinance
the Bridge Loan (as hereinafter defined); (ii) to pay fees and expenses incurred
in connection with the Senior Notes Offering; (iii) to refinance the Secured
Notes plus accrued interest from June 30, 1997, to the date of redemption; and
(iv) to fund, in part, the purchase of Shares in the Offer in the event that at
least 90% of the
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<PAGE> 17
outstanding Shares are tendered in the Offer and not withdrawn and the Merger
becomes effective without a meeting of stockholders of the Company in accordance
with the DGCL. In the event that fewer than 90% percent of the outstanding
Shares are tendered in the Offer and not withdrawn, AIP Capital Fund, or an
affiliate, will loan the Purchaser an amount that, together with the AIP
Entities' equity contribution of $143 million, will be sufficient to complete
the acquisition of Shares in the Offer and Merger, such loan to be repaid upon
consummation of the Merger with a portion of the proceeds of the Senior Notes
Offering. Upon consummation of the Senior Notes Offering, the portion of the
proceeds being used to refinance the Secured Notes will be applied to such
purpose following satisfaction or waiver of certain notice and other procedural
requirements applicable to redemption of the Secured Notes. As of August 21,
1997, approximately $64.0 million of the Secured Notes (approximately 97%) were
held by JNL. Consummation of the Offer and the Merger are subject to successful
consummation of the Senior Notes Offering and consummation of the Senior Notes
Offering is subject to consummation of the Offer to Purchase.
BRIDGE LOAN
The Company financed the Marion Acquisition utilizing an unsecured bridge
loan (the "Bridge Loan") funded on August 26, 1997 and provided by PPM America
Special Investments Fund, L.P. (the "PPM Fund"), an affiliate of JNL, in the
approximate amount of $45 million. A portion of the proceeds of the Senior Notes
Offering are intended to be used to refinance the Bridge Loan.
The Company obtained a commitment dated April 14, 1997 from the PPM Fund to
provide the Bridge Loan ("Bridge Loan Commitment"). Upon execution of the Bridge
Loan Commitment, the Company paid a $550,000 Proposal and Commitment Fee to the
PPM Fund. The Bridge Loan Commitment provides for a fee of $450,000 (the
"Facility Fee") to be paid upon execution of the definitive purchase agreement
for the Marion Acquisition. The Bridge Loan Commitment provided for a closing
date of the Marion Acquisition of not later than July 15, 1997. On June 30,
1997, the Company and the PPM Fund agreed to extend the deadline for the closing
date until August 30, 1997 (the "Extension Agreement"). As a condition to the
Extension Agreement, however, the PPM Fund required the Company to pay a
$337,500 Extension Fee and to pay the $450,000 Facility Fee at the time the
Extension Agreement was signed.
The Bridge Loan matures on February 23, 1998 (180 days from funding) and
bears interest at 5% over the Adjusted Eurodollar Rate, as defined in the Bridge
Loan.
The Bridge Loan Commitment was amended as of August 20, 1997 to provide
that upon consummation of the Marion Acquisition and the funding of the Bridge
Loan, the Company would pay an $800,000 Financing Fee to the PPM Fund and a
Bridge Loan Funding Fee of $1.125 million, and additional compensation under the
Bridge Loan as follows: (i) if the Bridge loan is outstanding 30 days after
funding, the Company will pay a "Maintenance Fee" of $800,000; (ii) if the
Bridge Loan is outstanding 90 days after funding, the Company will pay
$3,200,000; and (iii) if the Bridge Loan is outstanding at Maturity, the Company
will pay $3,200,000. The Company presently anticipates that the Senior Notes
Offering will be completed on or prior to September 25, 1997, and, accordingly,
that none of the Maintenance or other fees described in this paragraph will be
payable.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the terms of the Second Amended Joint Plan of Reorganization
(the "Amended Plan"), under which the Company emerged from Bankruptcy on
December 14, 1994, the Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") which grants rights to each person entitled to
receive in the aggregate 1,000,000 or more shares of Common Stock (a "Relevant
Holder") pursuant to the provisions of the Amended Plan. To the knowledge of the
Company, JNL is the only person or entity entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement, a
Relevant Holder has the right to (a) require the Company under certain
circumstances to file a registration statement under the Securities Act, to
permit a public offering of Common Stock owned by such Relevant Holders; and (b)
participate in certain other registrations of Common Stock under the Securities
Act made on behalf of the Company for other holders of Common Stock. Under the
terms of the Registration
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<PAGE> 18
Rights Agreement, Relevant Holders holding 15% or more of the shares of Common
Stock then entitled to the benefits of such agreement may request the Company to
file one or more registration statements under the Securities Act with respect
to their shares of Common Stock, and the Company is required to use its best
efforts to effect such registration provided that the Company generally will not
be required to effect more than three such registrations. Relevant Holders also
may participate in offerings proposed by the Company. These rights are subject
to certain conditions and limitations, among them the right of the Company to
postpone for a reasonable period of time (but not exceeding 120 days) the
requested filing of a registration statement if the Company determines such
registration would interfere with a material corporate transaction, development
or other specified matters. Pursuant to the terms of the Registration Rights
Agreement, the Company must pay all expenses, other than fees and commissions of
underwriters, incident to the registration and sale of shares of Common Stock
held by Relevant Holders. The registration rights, if not fully exercised,
terminate on December 14, 1999.
OWNERSHIP OF SECURED NOTES
On December 14, 1994, pursuant to the Amended Plan, the Company issued an
aggregate principal amount of $52.1 million of 10.5% Secured Notes due December
14, 1999 (the "Secured Notes") to South Street Corporate Recovery Fund I, L.P.,
South Street Leveraged Corporate Recovery Fund, L.P., and South Street Corporate
Recovery Fund I (International), L.P. (collectively, the "South Street Funds")
in exchange for the Company's outstanding Series A 10.65% Senior Secured Notes
due July 1, 1995 and Series B 16.5% Senior Secured Notes due January 1, 1996 and
the Company's obligations under a sale and leaseback financing arrangement. In
1996, the South Street Funds (other than South Street Corporate Recovery Fund I
(International), L.P.) sold approximately $56 million face amount (97%) of the
Secured Notes to JNL.
The Secured Notes accrue interest semi-annually at a rate of 10.5% per
annum, if paid in cash, or 13.0% per annum if paid in kind. Interest on the
Secured Notes is payable in kind at the discretion of the Company. At June 30,
1997, JNL held approximately $64.0 million of the Secured Notes, or
approximately 97% of the $65.8 million of Secured Notes outstanding. The Secured
Notes are secured by a security interest on substantially all of the Company's
property (other than land and buildings), the Shares of the Company's United
States subsidiaries and 65% of the Shares of certain non-United States
subsidiaries, subject, however, to a prior security interest in such assets
securing not more than $16.0 million of indebtedness.
STOCKHOLDER AGREEMENT
In connection with the execution of the Merger Agreement, the Parent, the
Purchaser and JNL entered into a Stockholder Agreement, dated as of August 21,
1997, (the "Stockholder Agreement"), pursuant to which and subject to the terms
thereof, JNL agreed to tender, or cause to be tendered, all shares of the Common
Stock of the Company owned by it into the Offer. In the Stockholder Agreement,
JNL represented that it owns, in the aggregate, 4,228,382 Shares and $63,963,000
in principal amount of Secured Notes. JNL has agreed to tender all Shares owned
by it into the Offer and that it will not withdraw any Shares so tendered.
Pursuant to the Stockholder Agreement, JNL has granted to the Parent during
the term of the Merger Agreement an irrevocable proxy to vote its Shares, or
grant a consent or approval in respect of such Shares, in connection with any
meeting of the stockholders of the Company (i) in favor of the Merger and (ii)
against any action or agreement which would impede, interfere with or prevent
the Merger, including any other extraordinary corporate transaction such as a
merger, reorganization or liquidation involving the Company and a third party or
any other proposal by a third party to acquire the Company.
During the term of the Stockholder Agreement, JNL has agreed that it will
not (subject to certain exceptions) take certain actions with respect to JNL's
Shares or Secured Notes that would in any way restrict, limit or interfere with
the performance of its obligations pursuant to the Stockholder Agreement. In
addition, JNL has agreed to notify the Purchaser of any inquiry JNL receives
which might lead to an acquisition of the Company by a third party; and JNL will
waive, if requested, the provisions of the Indenture relating to the prior
notice of redemption of the Secured Notes, or will agree, immediately following
consummation of the Senior Notes Offering (as hereinafter defined) and subject
to being indemnified by the Parent and Purchaser,
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<PAGE> 19
to sell JNL's Secured Notes to the Company at face value plus accrued interest
from June 30, 1997 through the date of purchase.
The Stockholder Agreement terminates upon the earlier of (i) nine months
following the date upon which the Merger Agreement is terminated in accordance
with its terms, or (ii) the date that the Purchaser pays for JNL's Shares,
provided that certain provisions specified in the Stockholder Agreement will
survive such termination. Neither party has any other unilateral right to
terminate the Stockholder Agreement.
In the Stockholder Agreement, JNL grants to the Parent an irrevocable
option (the "Purchase Option") to purchase the Shares at a purchase price per
share of $18.00 per Share, or such higher price as is paid in the Offer (the
"Exercise Price"). At any time or from time to time prior to the termination of
the Purchase Option, the Parent (or its designee) may exercise the Purchase
Option, in whole or in part, if on or after the date thereof, any Third Party
(as defined therein) shall have taken certain defined steps that could lead to
acquisition of or exercise of control over the Company.
If, following exercise of the Purchase Option, a person other than the
Parent or any of its affiliates acquires a majority of the Shares at a price
higher than the Exercise Price (an "Alternative Transaction"), then JNL will be
entitled to receive 50% of the Total Profit (as defined) that would be realized
by the Parent through participation in the Alternative Transaction.
JOINT PROSECUTION AGREEMENT
Contemporaneously with the execution of the Stockholder Agreement, the
Company and JNL entered into the Joint Prosecution Agreement (the "Joint
Prosecution Agreement") relating to various claims the Company and JNL have or
may have resulting from the Company's reorganization in 1994 under Chapter 11 of
the United States Bankruptcy Code (the "Chapter 11 Reorganization") against the
law firm of Milbank, Tweed, Hadley & McCloy ("Milbank") for disgorgement of fees
(the "Disgorgement Claim") and other claims (collectively, the "Milbank
Claims"). All proceeds of the Milbank Claims will be allocated as follows: (i)
first, to pay, or to reimburse the prior payment of, all bona fide third-party
costs, expenses and liabilities incurred on or after September 1, 1997 in
connection with prosecuting the Milbank Claims (the "Joint Prosecution")
including, without limitation, the reasonable fees and disbursements of counsel
and other professional advisors, which are to be advanced by JNL; (ii) the next
$8.675 million of proceeds from the Milbank Claims, if any, will be paid to JNL,
provided that the Company will retain ten percent of the proceeds of the
Disgorgement Claim, if any, and will direct payment to JNL of the balance of
such proceeds; and (iii) all additional proceeds of the Milbank Claims will be
divided equally between JNL and the Company. Notwithstanding the foregoing, the
Company shall also receive the benefit of any reduction of any obligation it may
have to pay Milbank's outstanding fees if any. JNL will indemnify the Company in
respect of any liability resulting from the Joint Prosecution other than in
respect of legal fees and expenses incurred prior to September 1, 1997. The
Joint Prosecution Agreement will continue in force irrespective of whether the
Merger is consummated. The Joint Prosecution may involve lengthy and complex
litigation and there can be no assurance whether or when any recovery may be
obtained or, if obtained, whether it will be in an amount sufficient to result
in the Company receiving any portion thereof under the formula described above.
SETTLEMENT AGREEMENT
During the pendency of the Chapter 11 Reorganization, JNL filed a claim
(the "503(b) Claim") against the Company with the United States Bankruptcy
Court, Eastern District of Wisconsin ("Bankruptcy Court") for reimbursement of
approximately $3.3 million of professional fees and disbursements incurred in
connection with the Chapter 11 Reorganization pursuant to Section 503(b) of the
Bankruptcy Code. By order dated June 3, 1996, the Bankruptcy Court awarded JNL
the sum of $500. JNL appealed the decision to the United States District Court
for the Eastern District of Wisconsin. On June 26, 1997, the District Court
denied the appeal as moot but returned the matter to the Bankruptcy Court for
further proceedings with leave to appeal again after further determination of
the Bankruptcy Court. On July 11, 1997, JNL moved the Bankruptcy Court for
relief from the final judgment entered on the 503(b) Claim. Pursuant to a
Settlement Agreement between the Company and JNL dated as of August 21, 1997,
subject to Bankruptcy Court approval, JNL will
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<PAGE> 20
settle and release the Company from the 503(b) Claim in consideration of the
payment to JNL by the Company of $200,000.
TRANSACTIONS WITH THE AIP ENTITIES FOLLOWING CONSUMMATION OF THE MERGER
At the close of the Merger, AIP Capital Fund will be paid a fee of $4
million and reimbursed for out-of-pocket expenses in connection with the
negotiation of the Merger Agreement and for providing certain investment banking
services to the Company including the arrangement and negotiation of the terms
of the Senior Notes and for other financial advisory and management consulting
services.
AIP Capital Fund expects to provide substantial ongoing financial and
management services to the Company utilizing the extensive operating and
financial experience of AIP Capital Fund's principals. AIP Capital Fund will
receive an annual fee of $1 million for providing general management, financial
and other corporate advisory services to the Company, payable semiannually 45
days after the scheduled interest payment date for the Senior Notes, and will be
reimbursed for out-of-pocket expenses. The fees will be paid to AIP Capital Fund
pursuant to a management services agreement among AIP Capital Fund, the Company
and certain Company affiliates and will be subordinated in right of payment to
the Senior Notes.
AIP Capital Fund has discussed with the Company in broad terms AIP Capital
Fund's general policy that stock in the companies acquired by the AIP Entities,
or their affiliates, be made available to executive officers of such acquired
companies, typically in the form of stock options. However, there is currently
no agreement, arrangement or understanding specifically implementing this policy
in respect of the Company or management, nor is there expected to be any such
agreement, arrangement or understanding until following consummation of the
Merger. Following consummation of the Merger, AIP Capital Fund expects to cause
the Surviving Corporation to issue and sell additional Shares to certain members
of management and to adopt a performance-based stock option plan for management
which, in the aggregate, would comprise approximately 10% of the common stock of
the Surviving Corporation.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") and with The Nasdaq Stock Market reports of
ownership and changes in ownership of common stock and other equity securities
of the Company. Directors, executive officers and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of such reports furnished to the Company or written
representations that no other reports were required, the Company believes that,
during the 1996 fiscal year, all filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners were
complied with except two reports on Form 5, each covering one transaction, which
were filed late by Mr. Victor and Mr. Radecki, each a director of the Company.
In addition, the following individuals and entities failed to file a required
Form 3 to report their acquisition of securities arising out of the distribution
to them of Common Stock under the Amended Plan in December, 1994: Greycliff
Partners; Alfred C. Eckert, III; Mikael Salovaara; South Street Corporate
Recovery Fund I, L.P.; South Street Corporate Recovery Fund I (International),
L.P.; South Street Leveraged Corporate Recover Fund I, L.P.; SSP Advisers, L.P.;
SSP, Inc.; SSP International, Inc.; SSP International Partners, L.P., and SSP
Partners, L.P. These failures to file have been corrected by the filing of Form
5's by each of the above-named persons and entities in October, 1996.
Form 5 is not required to be filed if there are no previously unreported
transactions or holdings to report. Nevertheless, the Company is required to
disclose the names of directors, executive officers and greater than 10%
beneficial owners who did not file a Form 5, unless the Company has obtained a
written statement that no filing is required. At the date hereof, the Company
has received such written statements from all reporting persons who did not file
a Form 5.
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<PAGE> 21
ANNEX A
PARENT DESIGNEES
The Parent has informed the Company that it will choose the initial Parent
Designees from among the persons listed below, which information has been
provided to the Company by the Parent.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- --- --------------------------------------
<S> <C> <C>
W. Richard Bingham................... 62 Mr. Bingham is a Director, the President, Treasurer, and
Assistant Secretary of American Industrial Partners
Corporation. He co-founded AIP Management Co. and has
been a director and officer of AIP Management Co. since
1989. Mr. Bingham is also a director of Sweetheart
Holdings, Inc. ("Sweetheart"), Day International Group,
Inc. and Easco Corporation ("Easco"). He formerly served
on the boards of Avis, Inc., ITT Life Insurance
Corporation and Valero Energy Corporation.
Kenneth J. Diekroeger................ 35 Mr. Diekroeger joined the San Francisco office of
American Industrial Partners in 1996 from The Shansby
Group, a private equity investment firm, where he had
been employed since before January 1, 1992, and where he
sourced, executed, and served as a director for several
middle-market investments and buyouts.
Robert J. Klein...................... 33 Mr. Klein has been an employee of American Industrial
Partners since 1992. From 1991 to 1992, he was an
associate at The First Boston Corporation and prior
thereto was an associate with Rosecliff, Inc., an
affiliate of Acadia Partners, L.P. Mr. Klein is a
director of Easco, RBX Corporation and SMI Holdings,
Inc.
Kim A. Marvin........................ 36 Mr. Marvin is a Director, the Secretary and a Vice
President of both Bucyrus Acquisition Corp. and American
Industrial Partners Acquisition Company, LLC. Mr. Marvin
joined the San Francisco office of American Industrial
Partners in 1997 from the Mergers & Acquisitions
Department of Goldman, Sachs & Co. where he was employed
since 1994.
Kenneth A. Pereira................... 36 Mr. Pereira is a Director and a Vice President of both
Bucyrus Acquisition Corp. and American Industrial
Partners Company, LLC. Mr. Pereira joined the San
Francisco office of American Industrial Partners in 1989
and specializes in the tax and accounting aspects of
acquisitions. He also serves as the Controller of
American Industrial Partners Corporation.
Robert L. Purdum..................... 62 Mr. Purdum is a Director and a Managing Director of
American Industrial Partners Corporation. The Parent
anticipates that Mr. Purdum will become the Chairman of
the Bucyrus Board following the Merger. Mr. Purdum
retired as Chairman of Armco Inc. ("Armco") in 1994.
From November 1990 to 1993, Mr. Purdum was Chairman and
Chief Executive Officer of Armco. Mr. Purdum has been a
director of AIP Management Co. since joining American
Industrial Partners in 1994. Mr. Purdum is also a
director of Holephane Corporation, Berlitz
International, Inc., AIP Management Co., Day
International Group, Inc. and GMI Engineering &
Management Institute, Inc.
</TABLE>
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<PAGE> 22
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- --- --------------------------------------
<S> <C> <C>
Theodore C. Rogers................... 63 Mr. Rogers is a Director, the Chairman of the Board and
the Secretary of American Industrial Partners
Corporation. He co-founded AIP Management Co. and has
been a director and officer of the firm since 1989. He
is currently a director of Easco, Sweetheart and Derby
International.
Lawrence W. Ward, Jr................. 45 Mr. Ward is a Director and the President of both Bucyrus
Acquisition Corp. and American Industrial Partners
Acquisition Company, LLC. Mr. Ward has been an employee
of American Industrial Partners, since 1992. From 1989
to 1992, he was Vice President and Chief Financial
Officer of Plantronics, Inc., a telecommunications
equipment company. Mr. Ward is currently a director of
Easco, Day International Group, Inc. and RBX
Corporation.
</TABLE>
AA-2
