<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1997.
REGISTRATION NO. 333-39359
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BUCYRUS INTERNATIONAL, INC.
BOONVILLE MINING SERVICES, INC.
MINSERCO, INC.
VON'S WELDING, INC.
(Exact names of Registrants as specified in their respective charters)
<TABLE>
<S> <C> <C>
DELAWARE 3531 39-0188050
DELAWARE 3531 36-3705811
DELAWARE 3531 39-1604081
WYOMING 3531 83-0251403
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification Nos.)
</TABLE>
P.O. BOX 500
1100 MILWAUKEE AVENUE
SOUTH MILWAUKEE, WI 53172-0500
(414) 768-4000
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
WILLARD R. HILDEBRAND
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BUCYRUS INTERNATIONAL, INC.
P.O. BOX 500
1100 MILWAUKEE AVENUE
SOUTH MILWAUKEE, WI 53172-0500
(414) 768-4000
(Address, including zip code, and telephone number, including area code, of
agent for service of process)
------------------------
Please address a copy of all communications to:
ANDREW J. GUZIKOWSKI, ESQ.
WHYTE HIRSCHBOECK DUDEK S.C.
111 EAST WISCONSIN AVENUE
SUITE 2100
MILWAUKEE, WISCONSIN 53202
(414) 273-2100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
================================================================================
<PAGE> 2
BUCYRUS INTERNATIONAL, INC.
BOONVILLE MINING SERVICES, INC.
MINSERCO, INC.
VON'S WELDING, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING THE
LOCATION IN THE PROSPECTUS OF THE RESPONSES TO THE ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
S-4 ITEM NO. AND DESCRIPTION LOCATED UNDER CAPTION IN PROSPECTUS
- ---------------------------------------------------- ------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION:
------------------------------------------
Forepart of Registration Statement and
1. Outside Front Cover Page of Prospectus.... Outside front cover page
Inside Front and Outside Back Cover Pages
2. of Prospectus............................. Inside front cover page; "Available
Information;" "Incorporation of Certain
Documents by Reference;" "Table of
Contents"
Risk Factors, Ratio of Earnings to Fixed
3. Charges and Other Information............. "Summary;" "Risk Factors"
Terms of the Transaction.................. "The Exchange Offer;" "Description of the
4. Notes"
Pro Forma Financial Information........... "Unaudited Pro Forma Combined Condensed
5. Financial Statements"
Material Contacts with Company Being
6. Acquired.................................. NOT APPLICABLE
Additional Information Required for Re-
7. offering by Persons and Parties Deemed to
be Underwriters........................... NOT APPLICABLE
Interests of Named Experts and Counsel.... NOT APPLICABLE
8.
Disclosure of Commission Position on
9. Indemnification for Securities Act
Liabilities............................... "Certain Relationships and Related
Transactions"
B. INFORMATION ABOUT THE REGISTRANT:
------------------------------------------
Information with Respect to S-3
10. Registrants............................... NOT APPLICABLE
Incorporation of Certain Information by
11. Reference................................. NOT APPLICABLE
Information with Respect to S-2 or S-3
12. Registrants............................... NOT APPLICABLE
Incorporation of Certain Information by
13. Reference................................. NOT APPLICABLE
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
14. Information with Respect to Registrants Other Than
S-2 or S-3 Registrants.............................. "Acquisition of the Company by AIP;"
"Capitalization;" "Selected Consolidated Financial
Data;" "Management's Discussion and Analysis of
Financial Condition and Results of Operations;"
"Business;" "Management;" "Certain Relationships and
Related Transactions;" "Principal Shareholders;"
"Revolving Credit Facility;" "Index to Financial
Statements"
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED:
----------------------------------------------------------------------------------------------------------
Information with Respect to S-3
15. Companies........................................... NOT APPLICABLE
Information with Respect to S-2 or S-3 Companies.... NOT APPLICABLE
16.
Information with Respect to Companies Other Than S-2
17. or S-3 Companies.................................... NOT APPLICABLE
D. VOTING AND MANAGEMENT INFORMATION:
----------------------------------------------------
Information if Proxies, Consents, or Authorizations
18. Are to be Solicited................................. NOT APPLICABLE
Information if Proxies, Consents, or Authorizations
19. Are Not to be Solicited in an Exchange Offer........ "Management;" "Principal Shareholders"
</TABLE>
<PAGE> 4
PROSPECTUS
BUCYRUS INTERNATIONAL, INC. BUCYRUS LOGO
OFFER TO EXCHANGE 9 3/4% SENIOR NOTES DUE 2007 FOR ANY AND ALL EXISTING NOTES
(AS DEFINED) AS DESCRIBED HEREIN. WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE
OFFER ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE OFFER
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER 18,
1997, UNLESS EXTENDED.
Bucyrus International, Inc., a Delaware corporation ("Bucyrus" and, together
with its subsidiaries, the "Company"), hereby offers (the "Exchange Offer"),
upon the terms and subject to the conditions set forth in this prospectus (the
"Prospectus") and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange up to $150,000,000 aggregate principal amount of its
9 3/4% Senior Notes Due 2007 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement (as defined) of which this Prospectus is a part, for a
like principal amount of its outstanding 9 3/4% Senior Notes Due 2007 (the
"Existing Notes" and, together with the Exchange Notes, the "Notes"). The
Existing Notes were originally issued in a transaction that was exempt from
registration under the Securities Act (the "Private Offering") and since such
issuance have been resold to (i) qualified institutional buyers in reliance on,
and subject to the restrictions imposed pursuant to, Rule 144A under the
Securities Act ("Rule 144A") and (ii) non-U.S. persons outside the United States
of America in accordance with Regulation S under the Securities Act ("Regulation
S"). The terms of the Exchange Notes are identical in all material respects to
the terms of the Existing Notes that are to be exchanged therefor except that
the Exchange Notes have been registered under the Securities Act and will not
bear legends restricting the transferability thereof, certain registration
rights relating to the Existing Notes will terminate upon completion of the
Exchange Offer, and, if the Exchange Offer is not consummated by March 23, 1998,
Liquidated Damages (as defined) will accrue until but not including the date the
Exchange Offer is consummated. See "Description of the Notes" and "Exchange
Offer; Registration Rights." For federal income tax purposes, an exchange made
pursuant to the Exchange Offer should not constitute a taxable exchange. See
"Exchange Offer; Registration Rights -- Certain Federal Tax Consequences."
Based on interpretations by the staff of the Securities and Exchange Commission
(the "Commission" or "SEC"), as set forth in no-action letters issued to third
parties, Bucyrus believes the Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than any such holder that is an "affiliate" of Bucyrus within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, such holders are not engaged in and do not intend to engage in, a
distribution of such Exchange Notes and such holders have no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. However, the Commission has not considered the Exchange Offer in
the context of a no-action letter and therefore there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as in such other circumstances.
SEE "RISK FACTORS" ON PAGE 13 FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE
EXCHANGE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 12, 1997.
<PAGE> 5
Each holder of Existing Notes that desires to participate in the Exchange Offer,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes and has no arrangement
or understanding to participate in a distribution of Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. As described more fully herein, for a period of one year after the
Expiration Date (as defined), Bucyrus will make this Prospectus available to any
Participating Broker-Dealer (as defined) for use in connection with any such
resale. See "The Exchange Offer" and "Plan of Distribution."
EXCEPT AS DESCRIBED IN THE PRECEDING PARAGRAPH, THIS PROSPECTUS MAY NOT BE USED
FOR AN OFFER TO RESELL, A RESALE OR ANY OTHER RETRANSFER OF EXCHANGE NOTES.
The Exchange Offer is not conditioned upon any minimum number of Existing Notes
being tendered. The Exchange Offer will expire at 5:00 p.m., New York City time,
on December 18, 1997, unless extended (the "Expiration Date"). Subject to the
terms and conditions of the Exchange Offer, including the reservation of certain
rights by Bucyrus and the right of holders of Existing Notes to withdraw tenders
prior to the acceptance thereof, Existing Notes validly tendered prior to the
Expiration Date will be accepted on or promptly after the Expiration Date.
Exchange Notes to be issued in exchange for properly tendered Existing Notes
will be mailed by the Exchange Agent (as defined herein) promptly after the
acceptance thereof. In the event Bucyrus terminates the Exchange Offer and does
not accept for exchange any Existing Notes, Bucyrus will promptly return the
Existing Notes to the holders thereof. See "The Exchange Offer."
The Notes will mature on September 15, 2007. Interest on the Notes will be
payable semiannually on March 15 and September 15 of each year, commencing March
15, 1998. The Existing Notes are, and the Exchange Notes will be, redeemable at
the option of Bucyrus, in whole or in part, at any time on or after September
15, 2002, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, at any time or from
time to time on or prior to September 15, 2000, Bucyrus may redeem Notes with
the net cash proceeds of one or more Public Equity Offerings (as defined) at a
redemption price equal to 109.75% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
at least 66% of the principal amount of the Notes originally issued remains
outstanding after each such redemption. Upon a Change of Control (as defined),
each holder of Notes will have the right to require Bucyrus to purchase all or a
portion of such holder's Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. See "Description of the Notes -- Optional Redemption" and "--
Change of Control."
The Existing Notes are, and the Exchange Notes will be, general unsecured
obligations of Bucyrus and rank senior in right of payment to all future
Indebtedness (as defined) of Bucyrus that is expressly subordinated in right of
payment to the Notes and pari passu in right of payment with all existing and
future unsecured obligations of Bucyrus that are not so subordinated. The
Existing Notes are, and the Exchange Notes will be, fully and unconditionally
guaranteed (collectively, the "Guarantees") by each domestic Restricted
Subsidiary (as defined) (collectively, the "Guarantors"). Each Guarantee is a
general unsecured obligation of the Guarantor thereof and ranks senior in right
of payment to all future Indebtedness of such Guarantor that is expressly
subordinated in right of payment to such Guarantee and pari passu in right of
payment with all existing and future unsecured obligations of such Guarantor
that are not so subordinated. The Existing Notes and the Guarantees are, and the
Exchange Notes will be, effectively subordinated to secured obligations of
Bucyrus and the Guarantors, respectively, to the extent of the assets securing
such obligations. The Existing Notes are, and the Exchange Notes will be,
<PAGE> 6
effectively subordinated to all existing and future liabilities, including
Indebtedness, of Bucyrus' foreign subsidiaries.
As of June 30, 1997, on a pro forma basis after giving effect to the
consummation of the Private Offering, the Bridge Loan (as defined), the
Revolving Credit Facility (as defined), the repayment of the Secured Notes (as
defined) and the payment of fees and expenses in connection with the foregoing
(collectively referred to herein as the "Transactions"), the Company would have
had approximately $36.0 million aggregate principal amount of secured
indebtedness, $6.1 million of outstanding letters of credit, and $47.0 million
of undrawn borrowings under the Company's $75.0 million credit facility entered
into with Bank One, Wisconsin, as of September 24, 1997 (the "Revolving Credit
Facility").
There has not previously been any public market for the Existing Notes or the
Exchange Notes. Bucyrus does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of a Public Market for
the Notes." Moreover, to the extent that Existing Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for untendered and
tendered but unaccepted Existing Notes could be adversely affected.
Bucyrus will not receive any proceeds from the Exchange Offer, but will bear
certain offering expenses pursuant to the Registration Agreement, dated
September 24, 1997 (the "Registration Agreement"), among Bucyrus and the Initial
Purchasers (as defined) of the Existing Notes. The Exchange Offer is intended to
satisfy certain of Bucyrus' obligations under the Registration Agreement,
including the obligation to register the Existing Notes under the Securities
Act. Upon the completion of the Exchange Offer, certain special rights under the
Registration Agreement will terminate with respect to Existing Notes, and
holders of Exchange Notes will not be entitled to such rights. See "The Exchange
Offer -- Termination of Certain Rights." No dealer manager is being utilized in
connection with the Exchange Offer.
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the term "Company" as used in this Prospectus means
Bucyrus International, Inc. and its subsidiaries, before the Marion Acquisition
described below. The pro forma information contained herein and elsewhere in
this Prospectus gives effect to the Marion Acquisition and the AIP Merger
(described below) as if both had occurred on January 1, 1996, or June 30, 1997,
as indicated. See "Unaudited Pro Forma Combined Condensed Financial Statements."
The principal executive offices of the Company are located at 1100 Milwaukee
Avenue, P.O. Box 500, South Milwaukee, WI 53172-0500, and its telephone number
is (414) 768-4000.
The industry size and growth, market share, and competitive position data
contained in this Prospectus are based on internal, industry, and other sources
that are believed to be reliable. Such data are inherently imprecise, but the
Company believes that such data are generally indicative of industry size and
growth and the Company's relative market share and competitive position.
BUSINESS OVERVIEW
The Company is one of the world's leading manufacturers of large-scale
excavation equipment used in surface mining and other earth moving operations,
including rotary blast hole drills, electric mining shovels, and draglines.
Bucyrus machines are used throughout the world by customers who mine coal, iron
ore, copper, gold, phosphate, bauxite, oil sands, and other minerals, as well as
for land reclamation activities. In addition to original equipment manufacturing
("OEM"), an important part of the Company's business consists of aftermarket
sales, such as supplying parts, providing maintenance and repair services, and
providing technical advice, as well as refurbishing and relocating older,
installed machines. After giving pro forma effect to the Marion Acquisition, the
Company's net sales for fiscal 1996 would have been $373.4 million, comprised of
$143.8 million (39%) of new equipment sales and $229.6 million (61%) of
aftermarket sales, fiscal 1996 EBITDA (as defined herein) would have been $34.0
million, and consolidated backlog would have been $243.5 million at June 30,
1997.
The Company manufactures the world's top selling rotary blast hole drills,
having produced a majority of the estimated 69 drills sold in the industry
during 1995 and 1996. The Company's electric mining shovels hold a significant
market position, particularly in developing areas of the world such as China and
Chile, where the Company had an estimated 83% and 65% market share,
respectively, over the last seven years. The Company also manufactures
draglines, which are the industry's largest and most expensive type of
equipment. While sales are sporadic, each dragline represents a significant
sales opportunity, and in September 1997, the Company signed an agreement with
an Australian mining company to build the world's fourth largest dragline, which
is scheduled for completion by December 31, 1999. This is expected to generate
net sales of approximately $57.5 million over the next two and a half years.
The Company's aftermarket parts and service business caters primarily to
its large installed equipment base. Aftermarket support is critical in enhancing
machine longevity and productivity in the field, and its importance is a
function of the size, expense, complexity, and long service life of this type of
equipment. Over the life of a machine, net sales generated from aftermarket
parts and services can exceed the original purchase price. As a result of the
Marion Acquisition, management estimates that the Company has an installed
equipment base of nearly 1,200 machines, consisting of approximately 380
operating draglines (approximately 90% of the world's installed base),
approximately 310 operating rotary blast hole drills (approximately 65% of the
world's installed base), and approximately 485 operating electric mining shovels
(approximately 30% of the world's installed base). Management estimates that the
replacement value of the Company's installed equipment base is in excess of $9
billion based upon current purchase prices for the same or similar machines.
<PAGE> 8
During the past three years, approximately 70% of the Company's new machine
and aftermarket net sales have been in international markets. Among the more
significant foreign markets for the Company's products and services are
Australia and South Africa, as well as developing areas such as Chile and China.
The Company has an established network of foreign subsidiaries and offices that
directly market the Company's products and provide ongoing aftermarket services
overseas. The Company believes that this approach offers better customer service
and support by providing international customers with direct access to the
Company's technological and engineering expertise.
THE MARION ACQUISITION
On August 26, 1997, the Company consummated the acquisition (the "Marion
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 (collectively
referred to herein as "Marion"). The purchase price for Marion was $40.1
million, subject to post-closing adjustments which would have reduced the
purchase price by approximately $3.7 million if the Marion Acquisition had taken
place on June 30, 1997.
The Company financed the Marion Acquisition and related fees and expenses
utilizing a $45.0 million unsecured bridge loan (the "Bridge Loan") provided by
a former affiliate of the Company which has been repaid in full with a portion
of the proceeds of the Private Offering.
Marion manufactured large-scale surface mining excavation equipment,
primarily draglines and electric mining shovels, and had a significant
aftermarket parts and services business. For the fiscal year ended October 31,
1996, Marion had total net sales of $109.6 million, consisting of $36.4 million
(33%) in new equipment sales and $73.2 million (67%) in aftermarket parts and
service sales. See "Business -- The Marion Acquisition."
The Marion Acquisition provides a number of benefits to the Company,
including a substantial increase in the Company's worldwide installed equipment
base, expansion of the Company's presence in several important markets, and the
opportunity to achieve significant cost savings.
INCREASED INSTALLED EQUIPMENT BASE. The Marion Acquisition increased
the Company's installed equipment base from approximately 900 machines to
nearly 1,200 machines worldwide, providing the Company with significantly
greater opportunities to market its aftermarket parts and services.
EXPANDED PRESENCE IN POTENTIALLY HIGH GROWTH MARKETS. The Marion
Acquisition provides the Company with an increased strategic presence in
markets that are anticipated to experience substantial growth over the next
several years, such as India and Russia, through Marion's established
relationships with local mining interests and governmental authorities.
SIGNIFICANT COST SAVINGS. The Marion Acquisition results in pro forma
cost savings of $12.5 million for fiscal 1996 as described below, and $5.9
million for the six months ended June 30, 1997, through the consolidation
of manufacturing operations and the rationalization of engineering and
administrative functions. In addition, the Company has identified an
estimated $3.0 million in potential annual cost savings that are not
reflected in the pro forma financial results. The cost savings reflected in
the pro forma results and summarized below, and other anticipated cost
savings, are based on assumptions and expectations that the Company
believes to be reasonable, but are dependent on a variety of important
factors. See "Risk Factors -- Realization of Benefits of the Marion
Acquisition; Integration of Marion" and "Unaudited Pro Forma Combined
Condensed Financial Statements."
The Company is consolidating all of Marion's manufacturing operations
into the Company's existing facilities as Marion's manufacturing facility
was not acquired as part of the Marion
2
<PAGE> 9
Acquisition. This consolidation results in pro forma manufacturing cost
savings of $5.0 million for fiscal 1996, including reductions in direct
facility costs, fixed manufacturing administrative costs, and nonpayroll
manufacturing costs. The Marion Acquisition also results in pro forma
general and administrative cost savings for fiscal 1996 of $5.3 million
through the consolidation of duplicative engineering, accounting, and other
administrative staff, because only selected Marion employees were hired by
the Company. In addition, the elimination of allocated corporate overhead
charges results in pro forma cost savings of $2.2 million for fiscal 1996.
The Company expects to generate the $3.0 million in additional cost
savings not reflected in the pro forma financial results by reducing direct
labor costs, consolidating engineering functions, eliminating marketing
personnel, and closing certain duplicative parts and service locations
resulting from the Marion Acquisition.
ACQUISITION OF THE COMPANY BY AIP
On August 21, 1997, Bucyrus entered into an Agreement and Plan of Merger
(the "AIP Agreement") with American Industrial Partners Acquisition Company, LLC
("AIPAC"), which is wholly owned by American Industrial Partners Capital Fund
II, L.P. ("AIP"), and Bucyrus Acquisition Corp. ("BAC"), a wholly owned
subsidiary of AIPAC. Pursuant to the AIP Agreement, on August 26, 1997, BAC
commenced an offer to purchase for cash 100% of the common stock of Bucyrus (the
"Common Stock") at a price of $18.00 per share (the "AIP Tender Offer").
Consummation of the AIP Tender Offer occurred on September 24, 1997, and BAC was
merged with and into Bucyrus on September 26, 1997 (the "AIP Merger"). Bucyrus
is the surviving entity in the AIP Merger and is currently wholly-owned by
AIPAC.
AIP is a private investment fund headquartered in San Francisco and New
York with committed capital of approximately $574 million. AIP seeks to invest
in companies with either a protected competitive position or proprietary
capability, ideally combined with a leading market share. The firm does not seek
to play a role in daily management; rather, AIP seeks to provide its portfolio
companies with access to the management expertise of its operating partners, all
of whom are former Chief Executive Officers of Fortune 500 corporations, through
active board-level participation as well as on-call advice when desired. See
"Acquisition of the Company by AIP."
On November 5, 1997, Robert L. Purdum, an operating partner of AIP and
former Chairman, President and Chief Executive Officer of Armco Inc., was
elected as the Company's Chairman of the Board. Although no specific
arrangements are in place AIP intends to offer the Company's executive officers
the opportunity to own up to 10% of the Company's equity through a combination
of direct investments and option programs.
BUSINESS STRATEGY
Following an in-depth, strategic review of management and operations in
1995, the Board of Directors refocused the Company's business strategy and hired
a new management team, including Willard R. Hildebrand, President and Chief
Executive Officer, and Daniel J. Smoke, Vice President and Chief Financial
Officer. In addition, the Board increased the responsibilities of four other
senior officers who had been with the Company for an average of 23 years. AIP
intends to continue the Company's existing business strategy, which includes the
following key elements:
GROW THE AFTERMARKET BUSINESS. The Company has increased its focus on
the important aftermarket business because of its attractive profit margins
and its greater stability and predictability compared to the market for new
equipment. In addition, providing aftermarket support, which is critical to
maintain machine longevity and productivity in the field, enhances the
Company's ability to secure new machine orders in the future. The Company's
focus on its aftermarket business is reflected in a number of recently
implemented strategic initiatives that include: (i) working with suppliers
to increase stock levels of replacement parts to shorten
3
<PAGE> 10
response times to customer inquiries; (ii) installation of a new
computerized parts quoting system to improve responsiveness to customer
inquiries; (iii) forming a dedicated engineering team to focus on reducing
manufacturing costs for replacement parts; (iv) enhancing relationships
with key suppliers in order to reduce raw material and purchased part
costs; (v) expanding the Company's facilities in important foreign markets,
such as Chile and South Africa; (vi) investing additional capital in the
Company's domestic repair and service subsidiaries, Boonville Mining
Services, Inc. and Minserco, Inc.; and (vii) purchasing Von's Welding,
Inc., an aftermarket supplier of mining machinery parts and services,
located in Gillette, Wyoming, in North America's most important coal mining
region.
INCREASE OEM QUALITY AND PROFITABILITY. The Company is committed to
increasing the profitability of OEM sales by improving the design and
engineering of its existing line of machines, as well as developing new
products. During 1996, the Company's engineering and service functions were
significantly restructured in response to feedback from a customer focus
group formed to provide direction to the Company's engineering development
activities. A continuation of this close relationship with customers is
fundamental to the Company's objective to become more market driven.
Specific goals included reducing lead times, improving product quality and
reliability, and improving profit margins on OEM sales. To further these
goals, the Company has increased its investment in work-in-process
inventory to reduce delivery times for new equipment orders. The Company's
commitment to quality has been formally recognized by its receipt of ISO
9001 Certification from Det Norske Veritas, one of the world's leading
standards organizations.
MODERNIZE PLANT AND EQUIPMENT. During 1996, the Company began a number
of initiatives to modernize its manufacturing facilities in order to reduce
lead times and inventory levels, provide quicker turn around, and reduce
overall costs of manufacturing both new machines and replacement parts. The
most significant initiative is a three-year, $20 million modernization
program at the Company's South Milwaukee facility. The program includes
replacing approximately 47 older, less efficient machines with 14
technologically advanced machines, and upgrading 10 existing machine tools.
As of June 30, 1997, approximately $5.5 million had been committed to this
project and seven of the 14 machines had been installed, with the remainder
scheduled for installation by early 1999. Following the completion of the
modernization program, the Company expects to realize significant annual
cost savings not reflected in the pro forma financial results through the
reduction of labor, overhead, and raw materials costs.
FOCUS ON STRATEGIC MARKETS. Although 76% of the Company's net sales of
new machines have come from foreign markets during the past five years,
management believes that North America (primarily the western United
States, western Canada, and Mexico) continues to be one of the world's most
important markets for surface mining equipment. Therefore, the Company's
focus includes the strategic placement of its new, quality-engineered
electric mining shovels in high-profile North American installations. The
Company sold the first of these shovels in Canada in 1995, and in the
United States and Mexico in 1996. The Company believes that these
installations will create opportunities for increased new machine sales in
North America. Management has been encouraged by repeat orders in 1997 for
two additional shovels from one of these customers and the receipt of a
shovel order from a new North American customer that has historically
purchased all its equipment from the Company's primary competitor.
EXPAND MARC PROGRAM. The Company is aggressively promoting its
Maintenance and Repair Contracts ("MARCs"), under which mine operators
outsource to the Company all regular maintenance services, repair functions
and, in some cases, operation of the equipment serviced. MARCs offer the
Company a generally predictable, high-margin revenue stream. The Company
currently operates eight MARCs and is seeking to expand the MARC program,
primarily in new mines.
4
<PAGE> 11
While a number of these initiatives have not been fully implemented and the
anticipated benefits have not yet been fully realized, from 1995 to 1996 the
Company's net sales increased 14%, from $231.9 million to $263.8 million, and
EBITDA (as defined herein) improved from $12.7 million (5.5% of net sales) to
$19.2 million (7.3% of net sales). For the first six months of 1997, as compared
to the first six months of 1996, net sales increased 10%, from $130.8 million to
$143.8 million, and EBITDA (as defined herein) improved from $9.3 million (7.1%
of net sales) to $12.9 million (9.0% of net sales). The Company's consolidated
backlog at June 30, 1997 increased 36% to $215.8 million from $158.7 million at
December 31, 1996. The Marion Acquisition provides the Company with increased
opportunities to implement these initiatives, particularly with respect to
Marion's aftermarket business.
RISK FACTORS
Before exchanging Existing Notes for the Exchange Notes offered hereby,
holders of Existing Notes should consider carefully the factors described in
"Risk Factors" and all other information set forth in this Prospectus.
5
<PAGE> 12
SUMMARY OF TERMS OF THE EXCHANGE OFFER
Registration Agreement........ The Existing Notes were sold by Bucyrus on
September 24, 1997 (the "Issue Date") to
Salomon Brothers Inc, Jefferies & Company,
Inc., and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial
Purchasers"), which resold the Existing Notes
to certain institutional investors in reliance
on Rule 144A under the Securities Act. In
connection therewith, Bucyrus executed and
delivered, for the benefit of the holders of
the Existing Notes, the Registration Agreement
providing for, among other things, the Exchange
Offer. See "The Exchange Offer -- General,"
"Exchange Offer; Registration Rights" and "Plan
of Distribution."
The Exchange Offer............ Bucyrus is offering to exchange up to
$150,000,000 aggregate principal amount of the
Exchange Notes for a like principal amount of
Existing Notes. Bucyrus will issue the Exchange
Notes on the earliest practicable date
following the Expiration Date.
Based on interpretations by the staff of the
Commission, as set forth in several no-action
letters issued to third parties, the Company
believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for
Existing Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder that is an
"affiliate" of Bucyrus within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired
in the ordinary course of such holder's
business and that such holder is not engaged
in, and does not intend to engage in, a
distribution of such Exchange Notes and has no
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes. The Commission, however, has
not considered the Exchange Offer in the
context of a no-action letter and there can be
no assurance that the staff of the Commission
would make a similar determination with respect
to the Exchange Offer as in such other
circumstances.
Each broker-dealer that receives Exchange Notes
for its own account in exchange for Existing
Notes pursuant to the Exchange Offer must
acknowledge that such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities and that it will deliver a
prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a broker-dealer for a period of one
year after the Expiration Date in connection
with resales of Exchange Notes received in
exchange for Existing Notes where such Existing
Notes were acquired by such broker-dealer as a
result of market-making activities or other
trading activities. Bucyrus has agreed that,
for a period of one year after the Expiration
Date, it will make this Prospectus available to
any broker-dealer (which may include the
Initial Purchasers) that elects to exchange
Existing Notes, acquired for its own account as
a result of market-making activities or other
6
<PAGE> 13
trading activities, for Exchange Notes
(collectively, "Participating Broker-Dealers")
for use in connection with any such resale. See
"Plan of Distribution."
Each holder of Existing Notes that desires to
participate in the Exchange Offer, other than a
broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no
arrangement or understanding to participate in
a distribution of Exchange Notes. See "The
Exchange Offer" and "Plan of Distribution."
Expiration Date............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on December 18, 1997,
unless the Exchange Offer is extended by
Bucyrus in its sole discretion, in which case
the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Exchange Notes and Existing
Notes....................... Holders of Existing Notes that are accepted for
exchange will not receive any accrued interest
thereon. However, each Exchange Note will bear
interest from the most recent date on which
interest has been paid on the corresponding
Existing Note, or, if no interest has been
paid, from September 24, 1997.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
Bucyrus. See "The Exchange Offer --
Conditions." The Exchange Offer is not
conditioned upon any minimum aggregate
principal amount of Existing Notes being
tendered for exchange.
Withdrawal Rights............. Subject to the conditions set forth herein,
tenders of Existing Notes may be withdrawn
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange Offer --
Withdrawal Rights."
Acceptance of Existing Notes
and Delivery of Exchange
Notes....................... Subject to the terms and conditions of the
Exchange Offer, including the reservation of
certain rights by Bucyrus, Bucyrus will accept
for exchange any and all Existing Notes that
are properly tendered in the Exchange Offer,
and not withdrawn, prior to 5:00 p.m., New York
City time, on the Expiration Date. Subject to
such terms and conditions, the Exchange Notes
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. Any Existing
Notes not accepted for exchange for any reason
will be returned without cost to the tendering
holder thereof promptly after the Expiration
Date. See "The Exchange Offer -- Acceptance of
Tenders."
Certain Federal Income Tax
Consequences................ For federal income tax purposes, the exchange
of an Existing Note for a Exchange Note should
not constitute a taxable exchange by its
holder. Accordingly, the holders should not
recognize any taxable gain or loss upon such
exchange. See "Exchange Offer; Registration
Rights -- Certain Federal Tax Consequences."
Untendered Existing Notes..... Holders of Existing Notes who do not tender
their Existing Notes in the Exchange Offer or
whose Existing Notes are not accepted for
exchange will continue to hold such Existing
Notes and will be entitled to all the rights
and preferences and will be subject to the
limitations applicable thereto under
7
<PAGE> 14
the Indenture (as defined), except for any such
rights, preferences or limitations which, by
their terms, terminate or cease to be effective
as a result of this Exchange Offer. All
untendered and tendered but unaccepted Existing
Notes will continue to be subject to certain
restrictions on transfer provided therein. See
"Risk Factors -- Restrictions on Transfer." To
the extent that Existing Notes are tendered and
accepted in the Exchange Offer, the trading
market, if any, for untendered and tendered but
unaccepted Existing Notes could be adversely
affected. See "Risk Factors -- Absence of a
Public Market for the Notes" and "The Exchange
Offer -- Certain Effects of the Exchange
Offer."
Broker-Dealers................ Each broker-dealer that receives Exchange Notes
for its own account in exchange for Existing
Notes, where such Existing Notes were acquired
by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a Prospectus in connection with any
resale of such Exchange Notes. See "Plan of
Distribution."
Exchange Agent/Trustee........ Harris Trust and Savings Bank is serving as
Exchange Agent (the "Exchange Agent") in
connection with the Exchange Offer and as
Trustee ("Trustee") under the Indenture (as
defined).
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The terms of the Exchange Notes and the Existing Notes are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Existing Notes and except that, if the Exchange Offer is
not consummated by March 23, 1998, Liquidated Damages (as defined in the
Registration Agreement) will accrue until but excluding the date of consummation
of the Exchange Offer.
Indenture..................... The Existing Notes were, and the Exchange Notes
will be, issued pursuant to an indenture dated
as of September 24, 1997 among Bucyrus, the
Guarantors, and the Trustee (the "Indenture").
Exchange Notes................ $150,000,000 in aggregate principal amount of
9 3/4% Senior Notes Due 2007 of Bucyrus
International, Inc. which have been registered
under the Securities Act.
Maturity Date................. September 15, 2007.
Interest Payment Dates........ Each March 15 and September 15, commencing
March 15, 1998.
Ranking; Guarantees........... The Existing Notes are, and the Exchange Notes
will be, general unsecured obligations of
Bucyrus and rank senior in right of payment to
all future Indebtedness of Bucyrus that is, by
its terms, expressly subordinated in right of
payment to the Notes and pari passu in right of
payment with all existing and future unsecured
obligations of Bucyrus that are not so
subordinated. The Existing Notes are, and the
Exchange Notes will be, fully and
unconditionally guaranteed by each domestic
Restricted Subsidiary. Each Guarantee is a
general unsecured obligation of the Guarantor
thereof and ranks senior in right of payment to
all future Indebtedness of such
8
<PAGE> 15
Guarantor that is, by its terms, expressly
subordinated in right of payment to such
Guarantee and pari passu in right of payment
with all existing and future unsecured
obligations of such Guarantor that are not so
subordinated. The Existing Notes and the
Guarantees are, and the Exchange Notes will be,
effectively subordinated to secured obligations
of Bucyrus and the Guarantors, respectively, to
the extent of the assets securing such
obligations. The Existing Notes are, and the
Exchange Notes will be, effectively
subordinated to all existing and future
liabilities, including Indebtedness, of
Bucyrus' foreign subsidiaries.
Sinking Fund.................. None.
Optional Redemption........... The Existing Notes are, and the Exchange Notes
will be, redeemable, at the option of Bucyrus,
in whole or in part, at any time on or after
September 15, 2002, at the redemption prices
set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time or from time to time on
or prior to September 15, 2000, Bucyrus may
redeem Notes with the net cash proceeds of one
or more Public Equity Offerings (as defined) at
a redemption price in cash equal to 109.75% of
the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of
redemption; provided, however, that at least
66% of the principal amount of the Notes
originally issued shall be outstanding after
each such redemption. See "Description of the
Notes -- Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control,
each holder of Notes will have the right to
require Bucyrus to purchase all or a portion of
such holder's Notes at a price in cash equal to
101% of the aggregate principal amount thereof,
plus accrued and unpaid interest, if any, to
the date of purchase. In the event of a Change
of Control, there can be no assurance that
Bucyrus will have the financial resources or be
permitted under the terms of its other
indebtedness to purchase the Notes. See
"Description of the Notes -- Change of
Control."
Certain Covenants............. The Indenture contains certain covenants that,
among other things, limit the ability of
Bucyrus and the Restricted Subsidiaries to: (i)
incur additional indebtedness; (ii) pay
dividends or make other distributions with
respect to capital stock; (iii) make certain
investments; (iv) sell certain assets; (v)
enter into certain transactions with
affiliates; (vi) create liens; (vii) enter into
certain sale and leaseback transactions; and
(viii) enter into certain mergers and
consolidations. Such covenants are subject to
important qualifications and limitations. See
"Description of the Notes -- Certain
Covenants."
Registration Rights........... The Company has filed a registration statement
on Form S-4 (together with any amendments
thereto, the "Registration Statement") with
respect to the Exchange Offer made hereby, and
has agreed to use its best efforts to cause the
9
<PAGE> 16
Registration Statement to become effective on
or prior to February 21, 1998. In the event
that any changes in law or the applicable
interpretations of the staff of the Commission
do not permit Bucyrus to effect the Exchange
Offer made hereby, if the Registration
Statement is not declared effective on or prior
to February 21, 1998, if the Exchange Offer is
not consummated on or prior to March 23, 1998
for any reason attributable to actions or
inactions of Bucyrus, or under certain other
circumstances, Bucyrus will, as promptly as
practicable, file with the Commission a shelf
registration statement with respect to the
resale of the Existing Notes (the "Shelf
Registration Statement"), use its best efforts
to cause such Shelf Registration Statement to
become effective generally within 30 days after
the date on which Bucyrus is required to file
the Shelf Registration Statement, and to keep
the Shelf Registration Statement effective
until three years after the effective date
thereof (or until one year after such effective
date if the Shelf Registration Statement is
filed at the request of an Initial Purchaser).
Upon consummation of the Exchange Offer,
Bucyrus generally will have no further
obligation to register the Existing Notes. See
"Exchange Offer; Registration Rights."
Termination of Certain
Rights........................ Holders of Exchange Notes will not be entitled
to certain rights under the Registration
Agreement, including the right to require
Bucyrus to file a registration statement with
respect to the Exchange Notes, and to file a
Shelf Registration Statement, except in certain
limited circumstances. See "The Exchange Offer
-- Termination of Certain Rights."
Absence of a Public Market for
the Exchange Notes............ The Exchange Notes will be new securities for
which there currently is no market. Although
the Initial Purchasers have informed the
Company that they currently intend to make a
market in the Exchange Notes, they are not
obligated to do so, and any such market making
may be discontinued at any time without notice.
Accordingly, there can be no assurance as to
the development or liquidity of any market for
the Exchange Notes. The Company does not intend
to apply for listing of the Exchange Notes on
any securities exchange or for quotation
through The Nasdaq National Market.
Use of Proceeds............... Bucyrus will not receive any proceeds from the
Exchange Offer. The net proceeds to Bucyrus
from the sale of the Existing Notes were used
to purchase or redeem 100% of the Company's
10.5% Secured Notes due December 14, 1999 (the
"Secured Notes") and to refinance indebtedness
incurred in connection with the Marion
Acquisition and the AIP Merger and to pay fees
and expenses related thereto.
For further information regarding the Exchange Notes, see "Description of
the Notes."
10
<PAGE> 17
SUMMARY FINANCIAL INFORMATION AND OTHER DATA
The following table presents selected historical financial data derived
from the consolidated financial statements of the Company and summary pro forma
combined data of the Company and Marion as of the dates and for each of the
periods indicated. The pro forma data were prepared to illustrate the estimated
effect of the Transactions as if the Transactions had occurred, in the case of
statement of operations data and other data, as of January 1, 1996, and in the
case of balance sheet data, as of June 30, 1997. In addition, the pro forma data
for the year ended December 31, 1996, have been prepared using Marion's results
for the fiscal year ended October 31, 1996. The results of Marion's operations
for the twelve month period ending October 31, 1996, are not necessarily
indicative of the results of Marion's operations for the twelve month period
ending December 31, 1996. The pro forma data do not purport to be indicative of
the results of operations or financial position of the Company and Marion that
actually would have been obtained if the Transactions had been completed as of
such dates or to project the results of operations or financial position of the
Company for any future date or period. The information should be read in
conjunction with "Unaudited Pro Forma Combined Condensed Financial Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the financial statements of the Company and of Marion and
related notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA(2)
PREDECESSOR ----------------------
COMPANY(1)
----------- FISCAL YEAR ENDED SIX MONTHS ENDED SIX
DECEMBER 31, JUNE 30, FISCAL YEAR MONTHS
1/1/94 TO 12/14/94 TO ------------------- ------------------- ENDED ENDED
12/13/94 12/31/94 1995 1996 1996 1997 12/31/96 6/30/97
--------- ----------- ---- ---- ---- ---- ----------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
New equipment sales........... $ 47,362 $ 2,072 $ 76,487 $107,396 $ 49,023 $ 55,148 $143,848 $ 59,087
Aftermarket sales............. 138,812 5,738 155,434 156,390 81,797 88,614 229,563 114,814
Total net sales............... 186,174 7,810 231,921 263,786 130,820 143,762 373,411 173,901
Gross profit.................. 28,993 877 26,369 48,660 23,797 27,501 60,584 33,284
Operating earnings
(loss)(3)................... (10,503) (222) (11,299) 12,190 5,943 9,156 6,471 6,705
Other income.................. 2,976 79 1,295 1,003 464 615 1,558 665
Earnings (loss) before
interest expense,
income taxes, and
extraordinary gain.......... (7,527) (143) (10,004) 13,193 6,407 9,771 8,029 7,370
Interest expense.............. 13,911 284 6,254 8,557 4,173 3,956 18,454 9,342
Income taxes.................. 1,395 125 2,514 1,758 1,324 2,392 1,362 2,203
Earnings (loss) before
extraordinary gain.......... (22,833) (552) (18,772) 2,878 910 3,423 (11,787) (4,175)
Net earnings (loss)........... $119,647 $ (552) $(18,772) $ 2,878 $ 910 $ 3,423 $(11,787) $ (4,175)
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents..... $ 16,209 $ 11,150 $ 15,763 $ 8,486 $ 11,350 $ 7,042
Receivables................... 26,220 35,603 32,085 43,453 54,271 63,950
Inventories................... 82,393 73,566 70,889 70,458 74,587 122,850
Total assets.................. 179,873 174,038 172,895 173,322 198,513 420,635
Total debt.................... 60,293 65,252 70,241 68,317 80,193 187,285
Total common shareholders'
investment.................. $ 53,617 $ 34,680 $ 37,461 $ 35,162 $ 41,067 $143,000(4)
OTHER DATA:
EBITDA (as defined
herein)(5).................. $ 12,883 $ 392 $ 12,672 $ 19,247 $ 9,333 $ 12,900 $ 34,020 $ 14,829
Capital expenditures.......... 2,616 190 3,006 4,996 1,305 2,433 6,757 3,116
Backlog (end of period)(6).... 72,346 118,024 158,727 184,117 215,767 179,213 243,471
Gross margin percentage....... 15.6% 11.2% 11.4% 18.4% 18.2% 19.1% 16.2% 19.1%
EBITDA as a percentage of net
sales....................... 6.9% 5.0% 5.5% 7.3% 7.1% 9.0% 9.1% 8.5%
</TABLE>
11
<PAGE> 18
(1) The "Predecessor Company" is B-E Holdings, Inc., the former parent of the
Company which was merged with and into the Company on December 14, 1994.
(2) Reflects the effects of the Transactions including certain estimated cost
savings resulting from the Marion Acquisition. See "Unaudited Pro Forma
Combined Condensed Financial Statements." In addition to the cost savings
reflected in the pro forma financial statements, the Company has identified
an estimated $3,000 in potential cost savings which depend upon the
Company's ability to successfully integrate the Marion operations into those
of the Company. See "Risk Factors -- Realization of Benefits of the Marion
Acquisition; Integration of Marion." The following table illustrates the
calculation of Supplemental EBITDA and the ratio of Supplemental EBITDA to
interest expense, which reflects such additional cost savings:
<TABLE>
<CAPTION>
PRO FORMA
------------------------
FISCAL YEAR SIX MONTHS
ENDED ENDED
12/31/96 6/30/97
----------- ----------
<S> <C> <C>
EBITDA (as defined herein).................................. $34,020 $14,829
Supplemental Adjustments:
Direct labor reductions................................... 1,319 660
Engineering and marketing salary and benefits
reductions.............................................. 1,292 646
Elimination of duplicative parts and service locations.... 389 194
------- -------
Supplemental EBITDA......................................... $37,020 $16,329
======= =======
Ratio of Supplemental EBITDA to interest expense............ 2.0x 1.7x
</TABLE>
The decrease in the ratio of Supplemental EBITDA to interest expense
reflects the deteriorated operating results of Marion for the six months
ended June 30, 1997. The Company believes that the factors that contributed
to such deterioration include (i) diversion of Global management's
attention to prepare Marion for its sale, (ii) decreased productivity among
Marion employees, many of whom were not hired by the Company, and (iii)
decreased customer orders due to the uncertainty created by pendency of the
sale during such period. Marion's net current assets and combined equity
decreased after June 30, 1997, and net sales decreased and the net loss
increased subsequent to June 30, 1997 as compared to the corresponding
period in the preceding year.
(3) Includes restructuring and reorganization charges of $9,338 and $3,496 for
the period January 1, 1994, through December 13, 1994, and the year ended
December 31, 1995, respectively.
(4) Following the Private Offering, the Company wrote off an estimated $3,463 of
borrowing costs incurred in connection with the Bridge Loan. Such write-off
was reflected in the results of operations for the three months ended
September 30, 1997 as a charge to earnings.
(5) For purposes of this Prospectus (other than "Description of the Notes"),
"EBITDA" is defined as earnings (loss) before (i) income taxes; (ii)
interest expense; (iii) extraordinary gain; (iv) depreciation; (v)
amortization; (vi) non-cash stock compensation; (vii) loss (gain) on sale of
fixed assets; (viii) restructuring expenses; (ix) reorganization items; (x)
inventory fair-value adjustment charged to cost of products sold; (xi) the
AIP Management Fee (as defined), which is subordinated to the Notes and
which the Company did not incur until the AIP Merger was consummated; and
(xii) in 1995 only, a non-cash charge related to the scrapping and disposal
of excess inventory related to certain older and discontinued machine
models. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- EBITDA." Since cash flow from operations is very
important to the Company's future, the EBITDA calculation provides a summary
review of cash flow performance. EBITDA (as defined herein) should not be
considered an alternative to operating income determined in accordance with
generally accepted accounting principles ("GAAP") as an indicator of
operating performance or to cash flows from operating activities determined
in accordance with GAAP as a measure of liquidity.
(6) Backlog includes the dollar value of orders placed for new equipment as well
as parts and services, including estimates of net sales expected to be
generated from MARCs, minus dollars billed through manufacturing contracts,
which are billed on a percentage of completion basis. MARC sales estimates
are based on payments expected for parts, maintenance, and operational
services over the life of each contract, some of which have terms through
2002. Backlog at June 30, 1997 includes $60,200 in net sales that were
expected to be generated by the sale of a dragline for which a letter of
intent had been received. The Company currently expects that this dragline
will generate net sales of $57,500 over the next two and a half years.
12
<PAGE> 19
RISK FACTORS
HOLDERS OF EXISTING NOTES SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION
SET FORTH IN THIS PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE FOLLOWING
RISKS BEFORE TENDERING THEIR EXISTING NOTES IN THE EXCHANGE OFFER, ALTHOUGH THE
RISK FACTORS SET FORTH BELOW ARE GENERALLY APPLICABLE TO THE EXISTING NOTES AS
WELL AS THE EXCHANGE NOTES.
This Prospectus contains statements which constitute forward looking
statements within the meaning of Section 27A of the Securities Act. Discussions
containing such forward looking statements may be found under the captions
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," as well as elsewhere within the
Prospectus. Forward looking statements include statements regarding the intent,
belief or current expectations of the Company, primarily with respect to the
future operating performance of the Company or related industry developments.
When used in this Prospectus, terms such as "anticipate," "believe," "estimate,"
"expect," "indicate," "may be," "objective," "plan," "predict," and "will be"
are intended to identify such statements. Investors in the Notes are cautioned
that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ from those described in the forward looking statements as a result of
various factors, many of which are beyond the control of the Company. Forward
looking statements are based upon management's expectations at the time they are
made. Actual results could differ materially from those projected in the forward
looking statements as a result of the risk factors set forth below and the
matters set forth in the Prospectus generally. The Company cautions the reader,
however, that this list of factors may not be exhaustive.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange them for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to certain
restrictions on transfer of such Existing Notes. In general, the Existing Notes
may not be reoffered or resold by their holders except pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from such registration, and the Existing Notes are legended to so
restrict their transfer. Based on interpretations by the staff of the SEC, as
set forth in no-action letters issued to third parties, the Company believes
that each holder (other than any holder who is an "affiliate" of Bucyrus within
the meaning of Rule 405 under the Securities Act) who duly exchanges Existing
Notes for Exchange Notes in the Exchange Offer will receive Exchange Notes that
are freely transferable under the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such holder's business and that
such holder is not engaged in, and does not intend to engage in, a distribution
of such Exchange Notes and has no arrangement or understanding with any person
to participate in the distribution of such Exchange Notes. By tendering Existing
Notes and executing the Letter of Transmittal, the holder thereof shall
represent and agree that (i) it is neither an affiliate of Bucyrus nor a
broker-dealer tendering Existing Notes acquired directly from Bucyrus for its
own account, (ii) it acquired the Exchange Notes in the ordinary course of its
business and (iii) it is not engaged in, and does not intend to engage in, a
distribution of the Exchange Notes and it has no arrangement or understanding to
participate in a distribution of Exchange Notes. The SEC, however, has not
considered the Exchange Offer in the context of a no-action letter, and
therefore there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Holders of Existing Notes who participate in such Exchange Offer
should be aware, however, that, except in the case of certain broker-dealers as
described below, if they accept Exchange Notes in the Exchange Offer for the
purpose of engaging in secondary resales, such Exchange Notes may not be
publicly reoffered or resold without complying with the registration and
prospectus delivery requirements of the Securities Act. The same registration
and prospectus delivery requirements would apply to any holder who is an
"affiliate" of Bucyrus within the meaning of Rule 405 under the Securities Act.
Each broker-dealer
13
<PAGE> 20
that receives Exchange Notes for its own account in exchange for Existing Notes,
where such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "The Exchange Offer," "Description of the Notes -- Registration Covenant;
Exchange Offer" and "Plan of Distribution."
The Existing Notes may be sold pursuant to the restrictions set forth in
Rule 144A, Regulation D under the Securities Act or Regulation S without
registration under the Securities Act.
SUBSTANTIAL LEVERAGE; RESTRICTIVE LOAN COVENANTS
As a result of the Private Offering, the Company has substantial
indebtedness and significant debt service obligations. As of June 30, 1997, on a
pro forma basis after giving effect to the Transactions, the Company would have
had total long-term indebtedness, including current maturities, of $176.2
million, as well as undrawn borrowings under the Revolving Credit Facility of
$47.0 million. The Indenture permits the Company to incur additional
indebtedness, including secured indebtedness, subject to certain limitations.
See "Capitalization," and "Description of the Notes -- Certain Covenants."
The Company's high degree of leverage could have important consequences to
the holders of Existing Notes and the holders of Exchange Notes, including,
without limitation: (i) a substantial portion of the Company's cash from
operations is committed to the payment of debt service and is not available to
the Company for other purposes; (ii) the Company's ability to obtain additional
financing in the future for working capital expenditures or acquisitions may be
limited; (iii) a substantial decrease in net operating cash flows or an increase
in expenses could make it difficult for the Company to meet its debt service
requirements and force it to modify its operations; (iv) the Company may be more
highly leveraged than its competitors, which may place it at a competitive
disadvantage; (v) certain indebtedness under the Revolving Credit Facility is at
variable rates of interest, which causes the Company to be vulnerable to
increases in interest rates; and (vi) all of the indebtedness outstanding under
the Revolving Credit Facility is secured by substantially all the assets of the
Company and will become due prior to the time the principal on the Notes will
become due. Any inability of the Company to service its indebtedness or obtain
additional financing as needed would have a material adverse effect on the
Company. See "Revolving Credit Facility" and "Description of the Notes."
The Company believes that based upon anticipated levels of operations
(assuming the timely integration of Marion's business into that of the Company)
it will be able to meet its debt service obligations, including interest
payments in respect of the Notes. If, however, the Company cannot generate
sufficient cash flow from operations to meet its obligations, the Company may be
required to refinance its debt or to dispose of assets to obtain funds for such
purpose. There is no assurance that refinancings or asset dispositions could be
effected on satisfactory terms or would be permitted by the terms of the
Revolving Credit Facility or the Indenture. See "-- Realization of Benefits of
the Marion Acquisition; Integration of Marion."
The Revolving Credit Facility and the Indenture contain numerous covenants
that limit the discretion of management with respect to certain business matters
and place significant restrictions on, among other things, the ability of the
Company to incur additional indebtedness, to create liens or other encumbrances,
to make certain payments or investments, loans and guarantees and to sell or
otherwise dispose of assets and merge or consolidate with another entity. See
"Revolving Credit Facility" and "Description of the Notes -- Certain Covenants."
The Revolving Credit Facility also contains a number of financial covenants that
require the Company to maintain certain financial ratios (including a
consolidated fixed charge coverage ratio, a consolidated interest coverage
ratio, and a consolidated leverage ratio) and tests (including maintenance of
the Company's net worth at a specified level). A failure to comply with the
obligations contained in the Revolving Credit Facility or the Indenture could
result in an event of default under the Revolving Credit Facility or an Event of
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Default (as defined herein) under the Indenture that, if not cured or waived,
would permit acceleration of the relevant debt and acceleration of debt under
other instruments that may contain cross-acceleration or cross-default
provisions. Other indebtedness of the Company and its subsidiaries could contain
amortization and other prepayment provisions, or financial or other covenants,
more restrictive than those applicable to the Notes.
REALIZATION OF BENEFITS OF THE MARION ACQUISITION; INTEGRATION OF MARION
Management estimates that significant cost savings can be achieved as a
result of the integration of Marion into the Company; however, the estimates of
potential cost savings are forward looking statements that are inherently
uncertain, and the actual cost savings, if any, could differ materially from
those projected. All of these forward looking statements are based on estimates
and assumptions made by management of the Company, which although believed to be
reasonable, are inherently uncertain and difficult to predict; therefore, undue
reliance should not be placed upon such estimates.
Full realization of the potential benefits and savings of the Marion
Acquisition depends upon a variety of factors, including (i) retention of a
substantial portion of Marion's net sales, particularly aftermarket sales; (ii)
achievement of significant reductions in operating costs through the
consolidation of operations and the restructuring of engineering, manufacturing,
selling, and administrative functions; and (iii) expansion of the Company's
presence in several markets where Marion has established relationships with
local mining interests and government authorities. Any material delays or
unexpected costs incurred in connection with the integration of Marion into the
Company could have a material adverse effect on the Company and its results of
operations, liquidity, and financial condition.
The integration of Marion will require substantial attention from the
Company's management team. The diversion of management's attention, as well as
any other difficulties which may be encountered in the transition and
integration process, could have a material adverse effect on the revenue and
operating results of the Company. There can be no assurance that the Company
will be able to integrate the operations of the Company and Marion successfully
or the extent to which the Company will be able to realize the potential
benefits of the Marion Acquisition or the timing of any such benefits. Failure
to achieve a substantial portion of these benefits within the time frame
expected by the Company could have a material adverse effect on the Company,
including its ability to make payments on the Notes. See "Unaudited Pro Forma
Combined Condensed Financial Statements" and "Business -- Integration
Strategies."
CYCLICAL NATURE OF INDUSTRY; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's business is cyclical in nature and sensitive to changes in
general economic conditions, including fluctuations in market prices for coal
and energy alternatives to coal, copper, iron ore, and phosphate. These
businesses are in turn influenced by a variety of factors beyond the Company's
control, including interest rates and general economic conditions throughout the
world. As a result of this cyclicality, the Company has experienced, and in the
future could experience, reduced net sales and margins, which may affect the
Company's ability to satisfy its debt service obligations, including payments on
the Notes, on a timely basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Company's net sales and operating results may fluctuate significantly
from period to period. Given the large sales price of the Company's machinery,
one or a limited number of machines may account for a substantial portion of net
sales in any particular period. As a result, in any given period, a single
customer may account for a large percentage of net sales. Losing the business of
any of its top customers could have an adverse effect upon the results of
operations and financial condition of the Company. Although the Company
recognizes net sales on a percentage-of-completion basis for new machines, the
timing of one or a small number of contracts
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in any particular period may nevertheless affect operating results. In addition,
net sales and gross profit may fluctuate depending upon the size and the
requirements of the particular contracts entered into in that period. As a
result of these and other factors, the Company may experience significant
fluctuations in net sales and operating results in future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
EFFECTIVE SUBORDINATION
The Existing Notes and the Guarantees are not, and the Exchange Notes will
not be, secured and are, or will be, effectively subordinated to secured
obligations of Bucyrus and the Guarantors, respectively, to the extent of the
assets securing such obligations. The obligations of Bucyrus under the Revolving
Credit Facility are secured by a pledge of the capital stock of certain of
Bucyrus' subsidiaries, by a security interest in substantially all of the
property of Bucyrus and certain of its subsidiaries, including inventory,
equipment, receivables, and intangible assets such as licenses, trademarks, and
customer lists. If Bucyrus becomes insolvent or is liquidated, or if payment
under the Revolving Credit Facility is accelerated, the lenders under the
Revolving Credit Facility would be entitled to exercise the remedies available
to a secured lender under applicable law and pursuant to the Revolving Credit
Facility. Accordingly, such lenders will have a prior claim on such assets of
the Company and such subsidiaries over the Noteholders.
The Existing Notes are, and the Exchange Notes will be, effectively
subordinated to all existing and future liabilities, including Indebtedness, of
Bucyrus' foreign subsidiaries. Claims of creditors of such subsidiaries,
including trade creditors, will generally have priority as to the assets of such
subsidiaries over the claims of Bucyrus and the holders of Bucyrus'
Indebtedness, including the Notes.
FOREIGN OPERATIONS
Both the Company and Marion have significant operations in foreign
countries and derive a substantial portion of their net sales from foreign
markets. During 1996, $279.6 million, or approximately 75%, of the Company's pro
forma net sales were generated outside the United States.
The value of the Company's foreign sales and earnings may vary with
currency exchange rate fluctuations. To the extent that the Company does not
take steps to mitigate the effects of changes in relative values, changes in
currency exchange rates could have an adverse effect upon the Company's results
of operations, which in turn could adversely affect the Company's ability to
meet its debt service obligations, including payments on the Notes. Furthermore,
international manufacturing, sales and service operations are subject to other
inherent risks, including labor unrest, political instability, restrictions on
transfer of funds (including by dividend), export duties and quotas, domestic
and foreign customs and tariffs, current and changing regulatory environments,
difficulty in obtaining distribution support, and potentially adverse tax
consequences. There can be no assurance that these factors will not have a
material adverse effect on the Company or its international operations or sales.
See "Business -- Foreign Operations."
COMPETITION
The Company operates in a highly competitive environment. It competes
directly and indirectly with other manufacturers of draglines, mining shovels
(both electric and hydraulic), and rotary blast hole drills, as well as with
manufacturers of parts and components for all of the foregoing. Some of the
Company's competitors are larger, have greater financial resources, and may be
less leveraged than the Company. See "Business -- Competition."
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PRINCIPAL SHAREHOLDER
As a result of the AIP Merger, AIPAC, which is controlled by AIP, is the
sole shareholder of Bucyrus and has the ability to designate all of the
Directors of Bucyrus. Currently all of the directors of Bucyrus are designees of
AIPAC. See "Principal Shareholders," "Management," and "Acquisition of the
Company by AIP." AIPAC, and indirectly AIP, are in a position to direct the
management and affairs of the Company and may cause the Company to enter into
transactions that in their judgment could ultimately enhance shareholder value
but involve risks to the holders of the Notes.
ENVIRONMENTAL AND RELATED MATTERS
The Company's operations and properties are subject to a broad range of
federal, state, local and foreign laws and regulations relating to environmental
matters, including laws and regulations governing discharges into the air and
water, the handling and disposal of solid and hazardous substances and wastes,
and the remediation of contamination associated with releases of hazardous
substances at Company facilities and at off-site disposal locations. These laws
are complex, change frequently and have tended to become more stringent over
time.
Based upon the Company's experience to date, the Company believes that the
future cost of compliance with existing environmental laws, regulations and
ordinances (or liability for known environmental claims) will not have a
material adverse effect on the Company's business, financial condition and
results of operations. Nevertheless, future events, such as compliance with more
stringent laws or regulations, or more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws
could require additional expenditures by the Company which may be material.
Certain laws, such as the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund") provide for strict joint and several
liability for investigation and remediation of spills and other releases of
hazardous substances. Such laws may apply to conditions at properties presently
or formerly owned or operated by an entity or its predecessors, as well as to
conditions at properties at which wastes or other contamination attributable to
an entity or its predecessors come to be located. The Company is currently a
Potentially Responsible Party ("PRP") under CERCLA at several sites. While no
assurance can be given, the Company believes that expenditures for compliance
and remediation will not have a material effect on its capital expenditures,
earnings or competitive position. See "Business -- Environmental Matters."
LABOR RELATIONS
As of July 31, 1997, 418 of the 797 employees at the Company's South
Milwaukee facility were represented by the United Steelworkers of America Union.
In May 1997, the union ratified a new four-year agreement with the Company that
expires on April 30, 2001. Although the Company believes that its relations with
its employees are satisfactory, a dispute between the Company and its employees
could have a material adverse effect on the Company. See "Business --
Employees."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or void the Notes (and
payments of principal and/or interest in respect thereof could be voided and
recovered) or the Guarantees in favor of other existing or future creditors of
the Company or the Guarantors.
Proceeds of the Private Offering were used, in part, to pay the
consideration for the Common Stock, options to purchase Common Stock and stock
appreciation rights with respect to the Common Stock in the AIP Tender Offer
and/or the AIP Merger. If a court in a lawsuit brought by an unpaid creditor or
representative of creditors, such as a trustee in bankruptcy or Bucyrus, or any
Guarantor, as a debtor-in-possession, were to find under relevant federal or
state fraudulent conveyance statutes that Bucyrus or any Guarantor did not
receive fair consideration or reasonably
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equivalent value for issuing the Notes or its Guarantee, as the case may be, and
that, at the time of such incurrence, Bucyrus or such Guarantor (i) was
insolvent; (ii) was rendered insolvent by reason of such incurrence or grant;
(iii) was engaged or about to engage in a business or transaction for which the
assets remaining with Bucyrus or such Guarantor, as the case may be, constituted
unreasonably small capital; or (iv) intended to incur, or believed or reasonably
should have believed that it would incur, debts beyond its ability to pay such
debts as they become due, then such court, subject to applicable statutes of
limitation, could void the Notes or such Guarantor's obligations under its
Guarantee, as the case may be, subordinate the Notes or such Guarantee to other
indebtedness of Bucyrus or such Guarantor, as the case may be, or take other
action detrimental to the holders of Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured. Moreover, regardless of solvency, a court could void an
incurrence of indebtedness, including the Notes and the Guarantees, if it
determined that such transaction was made with the intent to hinder, delay or
defraud creditors. In addition, a court could subordinate the indebtedness,
including the Notes and the Guarantees, to the claims of all existing and future
creditors on similar grounds.
There can be no assurance as to what standard a court would apply in order
to determine whether Bucyrus or a Guarantor was "insolvent" upon consummation of
the sale of the Notes or whether one or more Guarantors were "insolvent" upon
the incurrence of the Guarantees or that, regardless of the method of valuation,
a court would not determine that Bucyrus or one or more Guarantors was insolvent
as a result of the foregoing.
Based upon financial and other information currently available to it,
management of the Company believes that the indebtedness represented by the
Notes has been incurred for proper purposes and in good faith. Certain courts
have held, however, that a company's purchase of its own capital stock does not
constitute reasonably equivalent value or fair consideration for incurring
indebtedness. By extension, the retirement of options to purchase, or stock
appreciation rights in respect thereof, capital stock of a company may also be
viewed as not constituting reasonably equivalent value or fair consideration to
the company. The Company believes that it (i) is solvent and will continue to be
solvent after issuing the Exchange Notes, (ii) will have sufficient capital for
carrying on the business it intends to conduct after such issuance, and (iii)
will be able to pay its debts as they become due. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." There can be no assurance, however, that a court would
concur with such beliefs and positions.
PURCHASE OF NOTES ON CHANGE OF CONTROL
Upon a Change of Control, Bucyrus is required, subject to certain
conditions, to offer to purchase all outstanding Notes at 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase. The source of funds for any such
purchase would be Bucyrus' available cash or cash generated from other sources,
including borrowings, sales of assets, sales of equity or funds provided by a
new controlling person. A Change of Control likely would constitute an event of
default under the Revolving Credit Facility that would permit the lenders to
accelerate the debt under the Revolving Credit Facility. In such event, Bucyrus
likely would attempt to refinance the indebtedness outstanding under the
Revolving Credit Facility and the Notes. There can be no assurance that
sufficient funds will be available at the time of any Change of Control to make
any required purchases of Notes tendered and to repay indebtedness under the
Revolving Credit Facility. See "Revolving Credit Facility" and "Description of
the Notes -- Change of Control."
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ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The Exchange Notes are being offered to the holders of Existing Notes. The
Existing Notes were originally issued on the Issue Date to the Initial
Purchasers pursuant to Section 4(2) of the Securities Act. The Company has been
advised that the Existing Notes subsequently have been resold to (i) qualified
institutional buyers as defined in Rule 144A ("Qualified Institutional Buyers"
or "QIBs") in reliance on, and subject to the restrictions imposed pursuant to,
Rule 144A, and (ii) certain non-U.S. persons outside the United States of
America in accordance with Regulation S. The Existing Notes beneficially owned
by Qualified Institutional Buyers are eligible for trading in the Private
Offering, Resale and Trading through Automated Linkages ("PORTAL") Market, which
is the National Association of Securities Dealers' screen-based automated market
for trading of securities eligible for resale under Rule 144A.
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. The Exchange Notes will
constitute a new issue of securities, have no established trading market and may
not be widely distributed. Although the Initial Purchasers have informed the
Company that they currently intend to make a market in the Exchange Notes, they
are not obligated to do so and may discontinue market making at any time without
notice. The Company does not intend to list the Notes on any national securities
exchange or to seek the admission thereof to trading in The Nasdaq National
Market. Accordingly, there can be no assurance as to the development or
liquidity of any market for either Exchange Notes or the Existing Notes. If a
market does develop, the Notes may trade at a discount from their principal
amount, and the price of the Notes may fluctuate depending on many factors
including, but not limited to, prevailing interest rates, the Company's
operating results and the market for similar securities, and liquidity may
therefore be limited. If a market for the Notes does not develop, purchasers may
be unable to resell such securities for an extended period of time, if at all.
THE EXCHANGE OFFER
PURPOSE
In connection with the initial sale of the Existing Notes, Bucyrus agreed,
subject to certain conditions, to use its best efforts to conduct the Exchange
Offer. Bucyrus' purpose in making the Exchange Offer is to comply with such
agreement and to avoid the payment of Liquidated Damages (as defined) which
would occur if the Exchange Offer were not duly and timely consummated. See
"Exchange Offer; Registration Rights." The full terms of Bucyrus' obligations
with respect to the Exchange Offer are set forth in the Registration Agreement
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Exchange Offer should provide holders of Existing
Notes, which are subject to trading restrictions, with the ability to effect,
for federal income tax purposes, a tax-free exchange of such Existing Notes for
Exchange Notes that should not be subject to such restrictions.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, the Company believes that the
Exchange Offer will provide holders of Existing Notes with Exchange Notes that
will generally be freely transferable by holders thereof (other than any holder
who is an "affiliate" of Bucyrus within the meaning of Rule 405 under the
Securities Act), who may offer for resale, resell or otherwise transfer such
Exchange Notes without complying with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of each such holder's business and such holders are not
engaged in, and do not intend to engage in, a distribution of such Exchange
Notes and have no arrangement or understanding with any person to participate in
a distribution of such Exchange Notes. Bucyrus has not sought, and does not
intend to seek, a no-action letter from the Commission with respect to the
effects of the Exchange Offer. By tendering Existing Notes and
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executing the Letter of Transmittal, the holder thereof shall represent and
agree that (i) it is neither an affiliate of Bucyrus nor a broker-dealer
tendering Existing Notes acquired directly from Bucyrus for its own account,
(ii) it acquired the Exchange Notes in the ordinary course of its business and
(iii) it is not engaged in, and does not intend to engage in, a distribution of
the Exchange Notes and it has no arrangement or understanding to participate in
a distribution of Exchange Notes. Holders of Existing Notes who participate in
the Exchange Offer should be aware that, except in the case of certain
broker-dealers as described below, if they accept the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes, they cannot
rely on such interpretations by the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a Prospectus with any resale
of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE OFFER
Bucyrus hereby offers, upon the terms and conditions set forth herein and
in the related Letter of Transmittal, to exchange Exchange Notes for a like
principal amount of outstanding Existing Notes. An aggregate of $150 million
principal amount of Existing Notes are outstanding. The Exchange Offer is not
conditioned upon any minimum principal amount of Existing Notes being tendered.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
December 18, 1997 unless extended. The term "Expiration Date" means 5:00 p.m.,
New York City time, on December 18, 1997, unless Bucyrus, in its sole
discretion, notifies the Exchange Agent that the period of the Exchange Offer
has been extended, in which case the term "Expiration Date" means the latest
time and date on which the Exchange Offer is so extended will expire. See
"-- Expiration and Extension."
In addition, Bucyrus reserves the right to waive any condition or otherwise
amend the Exchange Offer prior to the acceptance of tendered Existing Notes. If
any amendment by Bucyrus of the Exchange Offer or waiver by Bucyrus of any
condition thereto constitutes a material change in the information previously
disclosed to the holders of Existing Notes, Bucyrus will, in accordance with the
applicable rules of the Commission, promptly disseminate disclosure of such
change in a manner reasonably calculated to inform such holders of such change.
If it is necessary to permit an adequate dissemination of information regarding
such material change, Bucyrus will extend the Exchange Offer to permit an
adequate time for holders of Existing Notes to consider the additional
information.
CERTAIN EFFECTS OF THE EXCHANGE OFFER
Because the Exchange Offer is for any and all Existing Notes, the number of
Existing Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Existing Notes outstanding. As a result, the liquidity of
any remaining Existing Notes may be substantially reduced. The Existing Notes
beneficially owned by QIBs are currently eligible for sale pursuant to Rule 144A
through the PORTAL System. Because Bucyrus anticipates that most holders of
Existing Notes will elect to exchange such Existing Notes for Exchange Notes due
to the absence of restrictions on the resale of Exchange Notes under the
Securities Act, Bucyrus anticipates that the liquidity of the market for any
Existing Notes remaining after the consummation of the Exchange Offer may be
substantially limited.
The Existing Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities under the Securities Act.
Accordingly, such Existing Notes may be resold only (i) to Bucyrus, (ii)
pursuant to a registration statement that has been declared effective under the
Securities Act, (iii) for so long as the Existing Notes are eligible for resale
pursuant to
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Rule 144A, to a person it reasonably believes is a Qualified Institutional Buyer
that purchases for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the transfer is being made in
reliance on Rule 144A, (iv) pursuant to offers and sales to non-U.S. persons
that occur outside the United States within the meaning of Regulation S, (v) to
an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act and referred to in this
Prospectus as an "Institutional Accredited Investor") that is acquiring the
security for its own account or for the account of such an Institutional
Accredited Investor for investment purposes and not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act
or (vi) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases (a)
to any requirement of law that the disposition of its property or the property
of such investor account or accounts be at all times within its or their control
and (b) to compliance with any applicable state or other securities laws. After
the Exchange Offer is completed, holders of Existing Notes will not have certain
registration rights under the Registration Agreement. See "--Termination of
Certain Rights."
EXPIRATION AND EXTENSION
The Exchange Offer will expire at 5:00 p.m., New York City time, on
December 18, 1997, unless extended by Bucyrus. The Exchange Offer may be
extended by oral or written notice from Bucyrus to the Exchange Agent at any
time or from time to time, on or prior to the date then fixed for the expiration
of the Exchange Offer. Notwithstanding any extension of the Exchange Offer, if
the Exchange Offer is not consummated by March 23, 1998, Liquidated Damages (as
defined) will accrue. See "Exchange Offer; Registration Rights." Public
announcement of any extension of the Exchange Offer will be timely made by
Bucyrus, but, unless otherwise required by law or regulation, Bucyrus will not
have any obligation to communicate such public announcement other than by making
a release to the Dow Jones News Service.
ACCRUED INTEREST
Holders of Existing Notes that are accepted for exchange will not receive
any accrued interest thereon. However, each Exchange Note will bear interest
from the most recent date on which interest has been paid on the corresponding
Existing Note, or, if no interest has been paid, from September 24, 1997.
CONDITIONS
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to cause the
issuance of Exchange Notes in respect of any validly tendered Existing Notes not
accepted and, prior to the acceptance of tendered Existing Notes, may terminate
the Exchange Offer (by oral or written notice to the Exchange Agent and by
timely public announcement communicated, unless otherwise required by applicable
law or regulation, by making a release to the Dow Jones News Service) or,
subject to compliance with the applicable rules of the Commission, delay the
acceptance of the tendered Existing Notes, if any material change occurs which
is likely to affect the Exchange Offer, including, but not limited to, the
following:
(i) there shall occur (a) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (b) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (c) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any limitation by
any governmental agency or authority which adversely affects the extension
of credit or (d) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving the United
States, or, in the case of any of
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the foregoing existing at the time of the commencement of the Exchange
Offer, a material acceleration or worsening thereof;
(ii) any statute, rule or regulation shall have been proposed or
enacted, or any action shall have been taken or proposed to be taken by any
governmental authority which, in the sole judgment of the Company, would or
might prohibit, restrict or delay completion of the Exchange Offer;
(iii) there shall be instituted or threatened any action or proceeding
before any court or governmental agency challenging the Exchange Offer or
otherwise directly or indirectly relating to the Exchange Offer;
(iv) there shall occur any development in any pending action or
proceeding which, in the sole judgment of the Company, would or might
prohibit, restrict or delay consummation of the Exchange Offer;
(v) there exists, in the sole judgment of the Company, any actual or
threatened legal impediment (including a default or prospective default
under an agreement, indenture or other instrument or obligation to which
the Company is a party or by which it is bound) to the completion of the
Exchange Offer; or
(vi) prior to the completion of the Exchange Offer, the Company
determines there has been a change in law or applicable interpretation
thereof by the staff of the Commission such that the Exchange Notes that
would be received by holders in the Exchange Offer in exchange for Existing
Notes would not be transferable, upon receipt, by each such holder (other
than a holder that is an affiliate of the Company, a holder who acquires
the Exchange Notes outside the ordinary course of such holder's business, a
holder who is engaged in or intends to engage in a distribution of such
Exchange Notes or a holder who has arrangements or understandings with any
person to participate in the Exchange Offer for the purpose of distributing
the Exchange Notes) without restriction under the Securities Act.
Subject to the obligations under the Registration Agreement to use its best
efforts to complete the Exchange Offer, the Company expressly reserves the
right, at any time prior to the acceptance of tendered Existing Notes, to
terminate the Exchange Offer and not accept for exchange any Existing Notes upon
the occurrence of any of the foregoing conditions. In addition, the Company may
amend the Exchange Offer at any time prior to the acceptance of tendered
Existing Notes if any of the conditions set forth above occur. Moreover,
regardless of whether any of the foregoing conditions has occurred, the Company
reserves the right, in its reasonable discretion, to amend the Exchange Offer in
any manner prior to the acceptance of tendered Existing Notes, although it has
no current intention to do so.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company, in whole or in part, at any time and
from time to time in its sole discretion. Any determination made by the Company
concerning an event, development or circumstance described or referred to above
will be final and binding on all parties to the Exchange Offer.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
If the event referred to in clause (vi), above, shall occur, the Company
shall be under no continuing obligation under the Registration Agreement to
complete the Exchange Offer, but in lieu thereof will be obligated to file and
use its best efforts to secure and maintain the effectiveness
22
<PAGE> 29
under the Securities Act of a "shelf" registration statement providing for the
resale of Existing Notes. See "Exchange Offer; Registration Rights."
HOW TO TENDER
A holder of Existing Notes may tender Existing Notes by (i) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof), having their signatures guaranteed if required,
and delivering the same, together with the Existing Notes being tendered (or a
confirmation of an appropriate book-entry transfer), to the Exchange Agent on or
prior to the Expiration Date, or (ii) requesting a broker, dealer, bank, trust
company or other nominee to effect the transaction for such holder prior to the
Expiration Date.
Exchange Notes will not be issued in the name of a person other than that
of a registered holder of the Existing Notes appearing on the Note register.
The Exchange Agent will establish an account with respect to the Existing
Notes at The Depository Trust Company (the "Depository") for purposes of the
Exchange Offer promptly after the date of this Prospectus, and any financial
institution which is a participant in the Depository may make book-entry
delivery of the Existing Notes by causing the Depository to transfer such
Existing Notes into the Exchange Agent's account in accordance with the
Depository's procedure for such transfer. Although delivery of Existing Notes
may be effected through book-entry transfer into the Exchange Agent's account at
the Depository, the Letter of Transmittal, with any required signature
guarantees and any other required documents, must in any case be transmitted to
and received by the Exchange Agent on or prior to the Expiration Date at the
address set forth below under "--Exchange Agent," or the guaranteed delivery
procedure described below must be complied with. Delivery of documents to the
Depository does not constitute delivery to the Exchange Agent.
See "-- Exchanging Book-Entry Notes."
THE METHOD OF DELIVERY OF EXISTING NOTES AND ALL OTHER DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC, IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED,
AND PROPER INSURANCE BE OBTAINED.
If a holder desires to tender Existing Notes pursuant to the Exchange Offer
and such holder's Existing Notes are not immediately available or time will not
permit all of the above documents to reach the Exchange Agent prior to the
Expiration Date, or such holder cannot complete the procedure of book-entry
transfer on a timely basis, such tender may be effected if the following
conditions are satisfied:
(i) such tenders are made by or through an eligible guarantor
institution which is a member of one of the following Signature Guarantee
Programs: The Securities Transfer Agents Medallion Program (STAMP); The New
York Stock Exchanges Medallion Signature Program (MSP) and The Stock
Exchanges Medallion Program (SEMP) (each, an "Eligible Institution");
(ii) a properly completed and duly executed notice of guaranteed
delivery ("Notice of Guaranteed Delivery"), in substantially the form
provided by the Company, is received by the Exchange Agent as provided
below on or prior to the Expiration Date; and
(iii) the Existing Notes, in proper form for transfer (or confirmation
of book-entry transfer of such Existing Notes into the Exchange Agent's
account at the Depository as described above), together with a properly
completed and duly executed Letter of Transmittal and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three (3) New York Stock Exchange, Inc. trading days after the date
of execution of such Notice of Guaranteed Delivery.
23
<PAGE> 30
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Existing
Notes (or a timely confirmation received of a book-entry transfer of Existing
Notes into the Exchange Agent's account at the Depository) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Existing Notes tendered
pursuant to a Notice of Guaranteed Delivery by an Eligible Institution will be
made only against delivery of the Letter of Transmittal (and any other required
documents) and the tendered Existing Notes (or a timely confirmation received of
a book-entry transfer of Existing Notes into the Exchange Agent's account at the
Depository) to the Exchange Agent or confirmation of the Book-Entry Transfer
Facility Automated Tender Offer Program ("ATOP") procedures set forth below. See
" -- Exchanging Book-Entry Notes."
Partial tenders of Existing Notes may be made only if (i) the principal
amount tendered is equal to $1,000 or an integral multiple thereof and (ii) the
remaining untendered portion of such Existing Notes is in a principal amount of
$250,000, or any integral multiple of $1,000 in excess of such amount. Holders
tendering less than the entire principal amount of any Existing Note they hold
in accordance with the foregoing restrictions must appropriately indicate such
fact on the Letter of Transmittal accompanying the tendered Existing Note.
With respect to tenders of Existing Notes, Bucyrus reserves full discretion
to determine whether the documentation is complete and generally to determine
all questions as to tenders, including the date of receipt of a tender, the
propriety of execution of any document, and any other questions as to the
validity, form, eligibility or acceptability of any tender. Bucyrus reserves the
right to reject any tender not in proper form or otherwise not valid or the
acceptance of exchange of which, in the opinion of Bucyrus's counsel, may be
unlawful or to waive any irregularities or conditions, and Bucyrus's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions on the Letter of Transmittal) will be final. Bucyrus shall not be
obligated to give notice of any defects or irregularities in tenders and shall
not incur any liability for failure to give any such notice. The Exchange Agent
may, but shall not be obligated to, give notice of any irregularities or defects
in tenders, and shall not incur any liability for any failure to give any such
notice. Existing Notes shall not be deemed to have been duly or validly tendered
unless and until all defects and irregularities have been cured or waived. All
improperly tendered Existing Notes, as well as Existing Notes in excess of the
principal amount tendered for exchange, will be returned (unless irregularities
and defects are timely cured or waived), without cost to the tendering holder
(or, in the case of Existing Notes delivered by book-entry transfer within the
Depository, will be credited to the account maintained within the Depository by
the participant in the Depository which delivered such shares), promptly after
the Expiration Date.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Existing Notes.
If the Letter of Transmittal or any Existing Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
24
<PAGE> 31
EXCHANGING BOOK-ENTRY NOTES
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository may utilize ATOP to tender
Existing Notes.
Any Depository participant may make book-entry delivery of Existing Notes
by causing the Depository to transfer such Existing Notes into the Exchange
Agent's account in accordance with the Depository's ATOP procedures for
transfer. However, the exchange for the Existing Notes so tendered will only be
made after timely confirmation (a "Book-Entry Confirmation") of such book-entry
transfer of Existing Notes into the Exchange Agent's account, and timely receipt
by the Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by the Depository and
received by the Exchange Agent and forming part of a Book-Entry Confirmation,
which states that the Depository has received an express acknowledgment from a
participant tendering Existing Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who tenders Existing Notes (other than certain broker-dealers)
and executes the Letter of Transmittal will be required to represent and agree
that such tendering holder is neither an affiliate of Bucyrus nor a
broker-dealer tendering Existing Notes acquired directly from Bucyrus for its
own account, has acquired the Exchange Notes in the ordinary course of its
business, is not engaged in, and does not intend to engage in, the distribution
of the Exchange Notes and has no arrangement or understanding to participate in
a distribution of Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge, among other things,
that it will deliver a Prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Existing Notes tendered in exchange for Exchange Notes (or a timely
confirmation of a book-entry transfer of such Existing Notes into the Exchange
Agent's account at the Depository) must be received by the Exchange Agent, with
the Letter of Transmittal and any other required documents, by 5:00 p.m., New
York City time, on or prior to December 18, 1997, unless extended, or within the
time periods set forth above in " -- How to Tender" pursuant to a Notice of
Guaranteed Delivery from an Eligible Institution. The party tendering the
Existing Notes for exchange (the "Tendering Holder") shall be deemed to have
sold, assigned and transferred the Existing Notes to the Exchange Agent, as
agent of Bucyrus, and irrevocably constituted and appointed the Exchange Agent
as the Tendering Holder's agent and attorney-in-fact to cause the Existing Notes
to be transferred and exchanged. The Tendering Holder shall also warrant that it
has full power and authority to tender, exchange, sell, assign, and transfer the
Existing Notes and to acquire the Exchange Notes issuable upon the exchange of
such tendered Existing Notes, that the Exchange Agent, as agent of Bucyrus, will
acquire good and unencumbered title to the tendered Existing Notes, free and
clear of all liens, restrictions, charges and encumbrances, and that the
Existing Notes tendered for exchange are not subject to any adverse claims when
accepted by the Exchange Agent, as agent of Bucyrus. The Tendering Holder shall
also warrant that it will, upon request, execute and deliver any additional
documents deemed by Bucyrus or the Exchange Agent to be necessary or desirable
to complete the exchange, sale, assignment and transfer of the Existing Notes.
All authority conferred or agreed to be conferred in the Letter of Transmittal
by the Tendering
25
<PAGE> 32
Holder will survive the death or incapacity of the Tendering Holder and any
obligation of the Tendering Holder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of such Tendering Holder.
Signature(s) on the Letter of Transmittal will be required to be guaranteed
as set forth above in " -- How to Tender." All questions as to the validity,
form, eligibility (including time of receipt) and acceptability of any tender
will be determined by Bucyrus, in its sole discretion, and such determination
will be final and binding. Unless waived by Bucyrus, irregularities and defects
must be cured by the Expiration Date.
WITHDRAWAL RIGHTS
All tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date. To be effective, a notice of withdrawal must be timely received
by the Exchange Agent at the address set forth below under " -- Exchange Agent."
Any notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered the Existing Notes to be withdrawn. If the
Existing Notes have been physically delivered to the Exchange Agent, the
Tendering Holder must also submit the serial number shown on the particular
Existing Notes to be withdrawn. If the Existing Notes have been delivered
pursuant to the book-entry procedures set forth above under " -- How to Tender,"
any notice of withdrawal must specify the name and number of the participant's
account at the Depository to be credited with the withdrawn Existing Notes. The
Exchange Agent will return the properly withdrawn Existing Notes as soon as
practicable following receipt of the notice of withdrawal. All questions as to
the validity, including time of receipt, of notices and withdrawals will be
determined by Bucyrus, and such determination will be final and binding on all
parties.
ACCEPTANCE OF TENDERS
Subject to the terms and conditions of the Exchange Offer, including the
reservation of certain rights by Bucyrus, Existing Notes tendered (either
physically or through book-entry delivery as described in " -- How to Tender")
with a properly executed Letter of Transmittal and all other required
documentation, and not withdrawn, will be accepted on or promptly after the
Expiration Date. At the option of the holder of an Exchange Note, such Exchange
Note may be held in the form of either (i) a certificated Exchange Note or (ii)
a beneficial interest in one or more of the Global Notes (as defined).
Beneficial interests in the Global Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depository and its
participants. Subject to the terms and conditions of the Exchange Offer,
certificated Exchange Notes to be issued in exchange for properly tendered
Existing Notes will be mailed by the Exchange Agent promptly after the
acceptance of such tendered Existing Notes and the Exchange Notes to be issued
in the form of Global Notes will be deposited with the Depository promptly after
acceptance of the related tendered Existing Notes. Acceptance of tendered
Existing Notes will be effected by the delivery of a notice to that effect by
Bucyrus to the Exchange Agent. Subject to the applicable rules of the
Commission, Bucyrus, however, reserves the right, prior to the acceptance of
tendered Existing Notes, to delay acceptance of tendered Existing Notes upon the
occurrence of any of the conditions set forth above under the caption "--
Conditions." Bucyrus confirms that its reservation of the right to delay
acceptance of tendered Existing Notes is subject to the provisions of Rule
14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which requires that a tender offeror pay the consideration offered or
return the tendered securities promptly after the termination or withdrawal of a
tender offer.
Although Bucyrus does not currently intend to do so, if it modifies the
terms of the Exchange Offer, such modified terms will be available to all
holders of Existing Notes, whether or not their Existing Notes have been
tendered prior to such modification. Any material modification will be disclosed
in accordance with the applicable rules of the Commission and, if required, the
Exchange
26
<PAGE> 33
Offer will be extended to permit holders of Existing Notes adequate time to
consider such modification.
The tender of Existing Notes pursuant to any one of the procedures set
forth in "-- How to Tender" will constitute an agreement between the Tendering
Holder and Bucyrus upon the terms and subject to the conditions of the Exchange
Offer.
EXCHANGE AGENT
Harris Trust and Savings Bank has agreed to provide certain services as
Exchange Agent for the Exchange Offer. Tendering Holders who require assistance
should contact the Exchange Agent. Letters of Transmittal and any inquiries with
respect to the Exchange Offer must be addressed to the Exchange Agent as
follows:
Facsimile Transmission Number
--------------------------
(For Eligible Institutions Only)
(212) 701-7636
Confirm Receipt of
-------------------
Facsimile by Telephone:
---------------------------
(212) 701-7624
By Hand/Overnight Delivery:
--------------------------------
Harris Trust and Savings Bank
c/o Harris Trust Company
of New York
88 Pine Street
19th Floor
New York, NY 10005
By Registered or Certified Mail:
-----------------------------------
Harris Trust and Savings Bank
c/o Harris Trust Company
of New York
P.O. Box 1010
Wall Street Station
New York, NY 10268-1010
Delivery to an address other than as set forth above or transmission via a
facsimile number other than as set forth above will not constitute a valid
delivery.
SOLICITATION OF TENDERS; EXPENSES
Except as described above under "-- Exchange Agent," Bucyrus has not
retained any agent in connection with the Exchange Offer and will not make any
payments to brokers, dealers or other persons for soliciting or recommending
acceptances of the Exchange Offer. Bucyrus, will, however, reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. Bucyrus will also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Prospectus and related documents to the beneficial
owners of the Existing Notes and in handling or forwarding tenders for their
customers.
TRANSFER TAXES
Bucyrus will pay all transfer taxes, if any, applicable to the transfer of
Existing Notes to it or its order pursuant to the Exchange Offer. If, however,
Exchange Notes and/or substitute Existing Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Existing Notes tendered, or if tendered
Existing Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Existing Notes to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable by the
Tendering Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such Tendering Holder.
ACCOUNTING TREATMENT
The carrying value of the Existing Notes is expected to become the carrying
value of the Exchange Notes at the time of the Exchange Offer. Accordingly, no
gain or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer will be amortized over the term of the Exchange Notes.
27
<PAGE> 34
TERMINATION OF CERTAIN RIGHTS
Holders of the Exchange Notes will not be entitled to certain special
rights under the Registration Agreement, which rights will terminate when the
Exchange Offer is completed. Pursuant to the Registration Agreement, the
Exchange Offer shall be deemed to be "completed" upon the occurrence of (i) the
filing and effectiveness under the Securities Act of a registration statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such registration statement continuously effective for a period
of not less than 30 days after notice has been sent to holders of Existing Notes
and (iii) the delivery by Bucyrus in exchange for all Existing Notes that have
been duly tendered and not validly withdrawn on or prior to the Expiration Date
of Exchange Notes transferable by each holder thereof (other than a holder that
is an affiliate of Bucyrus within the meaning of Rule 405 under the Securities
Act, a broker-dealer tendering Existing Notes acquired directly from Bucyrus for
its own account, a holder who acquires the Exchange Notes outside the ordinary
course of such holder's business or a holder who is engaged in or who intends to
engage in a distribution of the Exchange Notes or who has arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes) without restrictions under the
Securities Act. The rights that will terminate include the right to require the
Company (i) to file with the Commission, and use its best efforts to cause to
become effective under the Securities Act, a registration statement with respect
to the Exchange Notes and (ii) other than in certain limited circumstances, to
file with the Commission, use its best efforts to cause to become effective
under the Securities Act and keep continuously effective for a period of up to
three years a "shelf" registration statement providing for the registration of,
and the sale on a continuous or delayed basis by the holders of, Existing Notes.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of Bucyrus's obligations
under the Registration Agreement. Bucyrus will not receive any cash proceeds
from the issuance of the Exchange Notes offered hereby. In consideration for
issuing the Exchange Notes as contemplated in this Prospectus, Bucyrus will
receive in exchange Existing Notes in like principal amount, the form and terms
of which are identical in all material respects to the form and terms of the
Exchange Notes, except as otherwise described herein. The Existing Notes
surrendered in exchange for the Exchange Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the Exchange Notes will not result
in any increase in the indebtedness of Bucyrus.
The proceeds to Bucyrus for the sale of the Existing Notes were
approximately $145.5 million, net of Initial Purchasers' discount. The net
proceeds to Bucyrus from the sale of the Existing Notes were used to purchase or
redeem 100% of the Company's 10.5% Secured Notes due December 14, 1999 (the
"Secured Notes") and to refinance indebtedness incurred in connection with the
Marion Acquisition and the AIP Merger and fees and expenses related thereto.
28
<PAGE> 35
ACQUISITION OF THE COMPANY BY AIP
On August 21, 1997, Bucyrus entered into the AIP Agreement with AIPAC,
which is wholly owned by AIP, and BAC, a wholly-owned subsidiary of AIPAC.
Pursuant to the AIP Agreement, on August 26, 1997, BAC commenced an offer to
purchase for cash 100% of the Common Stock at a price of $18.00 per share (the
"AIP Tender Offer").
Following consummation of the AIP Tender Offer, and the satisfaction of
certain conditions set forth in the AIP Agreement, on September 26, 1997, BAC
merged with and into Bucyrus, and each shareholder of Bucyrus received $18.00 in
cash for each share of Common Stock (the "AIP Merger"). Bucyrus is the surviving
entity following the AIP Merger and AIPAC is its sole shareholder. The AIP
Merger was accomplished without submission to a shareholder vote, as permitted
under Delaware law.
The consideration in the AIP Tender Offer and the AIP Merger was funded by
(i) a $143.0 million cash common equity contribution from AIP (the "AIP Equity
Contribution"); and (ii) a loan to BAC from, or arranged by, AIP (the "AIP
Bridge Loan"). Upon consummation of the AIP Merger, the AIP Bridge Loan was
repaid, and the consideration in the AIP Merger was paid, with a portion of the
proceeds from the Private Offering.
All issued and outstanding restricted stock was purchased in the AIP Tender
Offer. In addition, all issued and outstanding stock options and SARs were
cancelled, and regardless of whether such stock options or SARs had then vested
or were exercisable, each holder of stock options or SARs received cash per
share equal to $18.00 less the "strike price" of such stock options or SARs.
On November 5, 1997, Robert L. Purdum, an operating partner of AIP and
former Chairman, President and Chief Executive Officer of Armco Inc., was
elected as the Company's Chairman of the Board. Although no specific
arrangements are in place, AIP presently intends to offer the Company's
executive officers the opportunity to own up to 10% of the Company's equity
through a combination of direct investments and option programs.
29
<PAGE> 36
CAPITALIZATION
The following table sets forth the actual and pro forma consolidated
capitalization of the Company as of June 30, 1997, after giving effect to the
Transactions. The table should be read in conjunction with "Unaudited Pro Forma
Combined Condensed Financial Statements" and the financial statements of the
Company and of Marion, and related notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------
PRO FORMA PRO FORMA AIP
MARION MERGER AND
ACTUAL ACQUISITION(1) PRIVATE OFFERING
------ -------------- ----------------
(UNAUDITED;
DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Short-term obligations............................. $ 11,438 $ 11,438 $ 11,057
Current maturities of long-term debt............... 416 416 416
Bridge Loan........................................ -- 45,000 --
-------- -------- --------
Total short-term debt................................ 11,854 56,854 11,473
-------- -------- --------
Long-term debt, less current maturities:
10.5% Secured Notes due December 14, 1999.......... 65,785 65,785 --
9 3/4% Senior Notes due 2007....................... -- -- 150,000
Revolving Credit Facility (2)...................... -- -- 23,258
Other.............................................. 2,554 2,554 2,554
-------- -------- --------
Total long-term debt, less current maturities........ 68,339 68,339 175,812
-------- -------- --------
Common shareholders' investment:
Common stock -- par value $.01 per share,
authorized 20,000,000 shares, issued and
outstanding 10,534,574 shares, actual and pro
forma for the Marion Acquisition; authorized,
issued and outstanding 1,000 shares, pro forma
for the AIP Merger.............................. 105 105 --
Additional paid-in capital......................... 57,739 57,739 143,000
Unearned stock compensation........................ (2,395) (2,395) --
Accumulated deficit................................ (13,023) (13,023) --
Cumulative translation adjustment.................. (1,359) (1,359) --
-------- -------- --------
Total common shareholders' investment................ 41,067 41,067 143,000
-------- -------- --------
Total capitalization (including short-term debt)..... $121,260 $166,260 $330,285
======== ======== ========
</TABLE>
- -------------------------
(1) Reflects an assumed net purchase price for Marion of $36,451. For the
purposes of calculating the amount of the assumed post-closing adjustment to
the purchase price, the Company has used Marion's June 30, 1997 balance
sheet.
(2) The Revolving Credit Facility provides for up to $75,000 of borrowing
availability, subject to a borrowing base limitation. See "Revolving Credit
Facility."
30
<PAGE> 37
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The Unaudited Pro Forma Combined Condensed Statements of Operations of the
Company for the year ended December 31, 1996, and the six months ended June 30,
1997 (the "Pro Forma Statements of Operations"), and the Unaudited Pro Forma
Combined Condensed Balance Sheet of the Company as of June 30, 1997 (the "Pro
Forma Balance Sheet" and together with the Pro Forma Statements of Operations,
the "Pro Forma Financial Statements"), have been prepared to illustrate the
estimated effect of the Transactions. The Pro Forma Financial Statements are
based on certain estimates and assumptions made by the management of the Company
as to the combined operations of the Company and Marion which the Company
believes to be reasonable. The Pro Forma Financial Statements do not purport to
be indicative of the results of operations or financial position of the Company
and Marion that actually would have been obtained had the Transactions been
completed as of the assumed dates, or to project the results of operations or
financial position of the Company for any future date or period.
The Pro Forma Balance Sheet gives pro forma effect to the Transactions as
if they had occurred on June 30, 1997. The Pro Forma Statements of Operations
give pro forma effect to the Transactions as if they had occurred on January 1,
1996. For purposes of the Pro Forma Statements of Operations for the year ended
December 31, 1996, Marion's historical Statement of Operations for the fiscal
year ended October 31, 1996, was combined with the Company's historical
Statement of Operations for the year ended December 31, 1996. For purposes of
the Pro Forma Statement of Operations for the six months ended June 30, 1997,
Marion's historical Statement of Operations for the six months ended June 30,
1997, was combined with the Company's historical Statement of Operations for the
six months ended June 30, 1997. Marion's results for the months of November and
December 1996 are not included in these Pro Forma Statements of Operations.
Marion's net sales and net loss for these two months were $9.5 million and $1.6
million, respectively. The Pro Forma Statements of Operations have been prepared
assuming retention of all of the Company's and Marion's net sales. See "Risk
Factors -- Realization of Benefits of the Marion Acquisition; Integration of
Marion."
The Marion Acquisition and the AIP Merger will be accounted for by the
purchase method of accounting. Under purchase accounting, the total purchase
price will be allocated to the tangible and intangible assets and liabilities
assumed based upon their respective fair values as of the closing of the Marion
Acquisition and the AIP Merger, respectively, based on valuations and studies
which are not yet available. A preliminary allocation of each purchase price has
been made to major categories of assets and liabilities in the accompanying Pro
Forma Financial Statements based on available information. The actual allocation
of the purchase prices and resulting effects on income from operations may
differ significantly from the pro forma amounts included herein. These pro forma
adjustments represent management's preliminary determination of purchase
accounting adjustments and are based upon available information and certain
assumptions that management believes to be reasonable. A balance sheet will be
prepared with respect to Marion's balance sheet as of the date of such closing,
on which the post-closing purchase price adjustment will be based. Management
does not expect that differences between the preliminary and final purchase
price allocation will have a material impact on the Company's financial position
and/or results of operations.
The Pro Forma Financial Statements should be read in conjunction with the
financial statements of the Company and of Marion, and the related notes
thereto, included elsewhere in this Prospectus. See also "Risk Factors --
Realization of Benefits of the Marion Acquisition; Integration of Marion" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
For purposes of the Pro Forma Financial Statements, the "Marion
Acquisition" includes the Company's acquisition of Marion and the financing
effected to consummate that acquisition, and the "AIP Merger" includes the
acquisition of the Company by AIP and the Private Offering.
31
<PAGE> 38
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------------------------------------------------
HISTORICAL PRO FORMA ADJUSTMENTS
------------------- ------------------------------------------------
SUBTOTAL
MARION COMBINED AIP COMBINED
BUCYRUS MARION ACQUISITION(1)(2) PRO FORMA MERGER(8)(9) PRO FORMA
-------- ------- ----------------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......... $ 11,350 $ 240 $ 452(3) $ 12,042 $ (5,000) $ 7,042
Receivables....................... 54,271 9,679 63,950 63,950
Inventories....................... 74,587 37,427 112,014 10,836(10) 122,850
Prepaid expenses and other current
assets.......................... 5,091 91 (1,892)(4) 3,290 (225)(11) 3,065
-------- ------- -------- -------- -------- --------
Total Current Assets.............. 145,299 47,437 (1,440) 191,296 5,611 196,907
OTHER ASSETS:
Restricted funds on deposit....... 1,079 -- 1,079 1,079
Goodwill.......................... -- -- 110,306(10) 110,306
Intangible assets -- net.......... 8,101 1,372 662(5) 10,135 16,515(10) 26,650
Other assets...................... 6,395 361 3,200(6) 9,956 3,287(12) 13,243
-------- ------- -------- -------- -------- --------
15,575 1,733 3,862 21,170 130,108 151,278
PROPERTY, PLANT AND EQUIPMENT --
NET:.............................. 37,639 9,146 (7,925)(5) 38,860 33,590(10) 72,450
-------- ------- -------- -------- -------- --------
$198,513 $58,316 $ (5,503) $251,326 $169,309 $420,635
======== ======= ======== ======== ======== ========
LIABILITIES AND COMMON SHAREHOLDERS'
INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses........................ $ 41,712 $ 9,401 $ (5,599)(7) $ 45,514 $ 45,514
Payable to affiliated entity...... -- 839 (839)(7) -- --
Liabilities to customers on
uncompleted contracts and
warranties...................... 7,170 4,011 11,181 11,181
Income taxes...................... 2,042 -- 2,042 2,042
Short-term obligations............ 11,438 -- 45,000 56,438 $(45,000) 11,057
(381)(13)
Current maturities of long-term
debt............................ 416 -- 416 416
-------- ------- -------- -------- -------- --------
Total Current Liabilities......... 62,778 14,251 38,562 115,591 (45,381) 70,210
LONG-TERM LIABILITIES:
Deferred income taxes............. 138 -- 138 138
Liabilities to customers on
uncompleted contracts and
warranties...................... 3,239 -- 3,239 3,239
Postretirement benefits........... 10,800 6,725 (6,725)(7) 10,800 2,569(14) 13,369
Deferred expenses and other....... 12,152 4,344 (4,344)(7) 12,152 2,715(15) 14,867
-------- ------- -------- -------- -------- --------
26,329 11,069 (11,069) 26,329 5,284 31,613
LONG-TERM DEBT, less current
maturities........................ 68,339 -- 68,339 (42,908)(16) 175,812
150,000
381(13)
COMMON SHAREHOLDERS' INVESTMENT:
Common stock...................... 105 -- 105 (105)(17) --
Additional paid-in capital........ 57,739 -- 57,739 85,261(17) 143,000
Unearned stock compensation....... (2,395) -- (2,395) 2,395(17) --
Accumulated deficit............... (13,023) -- (13,023) 13,023(17) --
Cumulative translation
adjustment...................... (1,359) -- (1,359) 1,359(17) --
Combined equity................... -- 32,996 (32,996) -- --
-------- ------- -------- -------- -------- --------
41,067 32,996 (32,996) 41,067 101,933 143,000
-------- ------- -------- -------- -------- --------
$198,513 $58,316 $ (5,503) $251,326 $169,309 $420,635
======== ======= ======== ======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Balance Sheet.
32
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) A summary of sources and uses of proceeds for the Marion Acquisition was as
follows:
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Gross proceeds from the Bridge Loan....................... $45,000
-------
Total Sources of Funds...................................... $45,000
=======
USES OF FUNDS:
Estimated purchase price for Marion*...................... $36,451
Bridge Loan borrowing costs of $3,463 less $1,338 paid by
the Company as of June 30, 1997........................ 2,125
Transaction costs of $6,195 (primarily relocation costs),
less $463 paid by the Company as of June 30, 1997...... 5,732
Increase to on-hand cash balances......................... 692
-------
Total Uses of Funds......................................... $45,000
=======
</TABLE>
- -------------------------
* The purchase price of Marion was approximately $40,120 plus or minus the
change in Marion's net assets from January 31, 1997, to the closing date. At
June 30, 1997, the change in the net assets is a decrease of $3,669 which
would reduce the estimated purchase price to $36,451.
(2) The Marion Acquisition included trade receivables, inventory, selected
current assets, selected other long-term assets, machinery and equipment,
trade payables and selected current liabilities. The estimated allocation of
the purchase price of Marion was as follows:
<TABLE>
<S> <C>
PURCHASE PRICE:
Cash...................................................... $36,451
Liabilities assumed....................................... 7,813
Transaction costs (primarily relocation costs)............ 6,195
-------
$50,459
=======
ALLOCATION OF PURCHASE PRICE:
Receivables............................................... $ 9,679
Inventories............................................... 37,427
Intangible assets (primarily engineering drawings)........ 2,034
Other assets.............................................. 98
Machinery and equipment................................... 1,221
-------
$50,459
=======
</TABLE>
(3) Reflects the net increase in cash related to the purchase of Marion:
<TABLE>
<S> <C>
Gross proceeds from the Bridge Loan......................... $ 45,000
Purchase of Marion.......................................... (36,451)
Payment of transaction costs................................ (5,732)
Payment of borrowing costs incurred in connection with the
Bridge Loan............................................... (2,125)
Elimination of Marion cash not acquired by the Company...... (240)
--------
$ 452
========
</TABLE>
33
<PAGE> 40
(4) The reduction in prepaid expenses reflects the following:
<TABLE>
<S> <C>
Reclassification of Bridge Loan borrowing costs and
transaction costs that have been paid by the Company as of
June 30, 1997............................................. $(1,801)
Elimination of Marion assets not acquired by the Company.... (91)
-------
$(1,892)
=======
</TABLE>
(5) Reflects the allocation of the purchase price to intangible assets and
machinery and equipment.
(6) Reflects the following:
<TABLE>
<S> <C>
Capitalization of borrowing costs incurred by the Company in
connection with the Bridge Loan........................... $3,463
Elimination of Marion assets not acquired by the Company.... (263)
------
$3,200
======
</TABLE>
Following the Private Offering, the Company wrote off its entire borrowing
costs incurred in connection with the Bridge Loan. Such write-off was
reflected in the results of operations for the three months ended September
30, 1997 as a charge to earnings.
(7) These adjustments represent the elimination of liabilities not assumed by
the Company.
(8) A summary of sources and uses of proceeds from the Private Offering and the
AIP Merger is as follows:
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Gross proceeds from the Private Offering.................. $150,000
Cash equity contribution by AIP........................... 143,000
Borrowings under Revolving Credit Facility................ 23,258
Cash...................................................... 5,000
--------
Total Sources of Funds...................................... $321,258
========
USES OF FUNDS:
Purchase of outstanding shares of Common Stock, stock
options and SARs....................................... $196,567
Repayment of Secured Notes................................ 65,785
Repayment of Bridge Loan.................................. 45,000
Repayment of existing credit facility..................... 381
Transaction costs......................................... 7,200
Debt issuance costs of $6,550 less $225 paid by the
Company as of June 30, 1997............................ 6,325
--------
Total Uses of Funds......................................... $321,258
========
</TABLE>
(9) The estimated allocation of the purchase of the Common Stock of the Company
is as follows:
<TABLE>
<S> <C>
PURCHASE PRICE:
Cash equity contribution by AIP........................... $143,000
Liabilities assumed....................................... 270,435
Transaction costs......................................... 7,200
--------
$420,635
========
ALLOCATION OF PURCHASE PRICE:
Current assets............................................ $196,907
Intangible assets (including goodwill of $110,306)........ 136,956
Other long-term assets.................................... 14,322
Property, plant and equipment............................. 72,450
--------
$420,635
========
</TABLE>
34
<PAGE> 41
(10) The adjustments reflect the write-up to fair market value.
- Inventory has been adjusted to its fair value as required by Accounting
Principles Board Opinion No. 16. This adjustment primarily relates to
finished parts which are being valued at their selling price, less cost
to sell, less a selling profit. As such inventory is sold, this
adjustment to fair value will be charged to cost of products sold. The
Company expects the inventory to be sold over a one year period.
- Goodwill is expected to be amortized over 30 years.
- Intangible assets consist of engineering drawings and bill of material
listings and are expected to be amortized over 20 years.
- Plant and equipment will be amortized over the estimated useful lives of
the respective assets using the straight-line method for financial
reporting purposes. Estimated useful lives are expected to be 20 years
for buildings and improvements and 10 years for machinery and equipment.
- The Company intends to review its property, plant and equipment and
intangible assets and obtain appraisals of these assets in order to
determine what revisions, if any, should be made to individual accounts.
The Company does not expect the appraised values to be materially
different than the values assigned in these pro forma financial
statements.
(11) Reflects the reclassification of debt issuance costs that have been paid by
the Company as of June 30, 1997.
(12) Reflects the following:
<TABLE>
<S> <C>
Capitalization of debt issuance costs incurred by the
Company in connection with the Notes which will be
amortized over the life of the Notes...................... $ 6,550
Elimination of capitalized borrowing costs incurred by the
Company in connection with the Bridge Loan................ (3,463)
Adjustment of pension assets to the amount of the fair value
of the assets in excess of the projected benefit
obligation................................................ 200
-------
$ 3,287
=======
</TABLE>
(13) Reflects the repayment of the existing credit facility.
(14) Reflects the adjustment of the reserve for postretirement life and medical
benefits to the amount of the accumulated postretirement benefit
obligation.
(15) Reflects the adjustment of the pension accrual to the excess of the
projected benefit obligation over plan assets.
(16) Reflects the following:
<TABLE>
<S> <C>
Repayment of Secured Notes.................................. $(65,785)
Borrowings under the Revolving Credit Facility, excluding
item (13) above........................................... 22,877
--------
$(42,908)
========
</TABLE>
(17) Reflects the elimination of the old equity of the Company and the AIP
Equity Contribution.
35
<PAGE> 42
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA ADJUSTMENTS
BUCYRUS MARION ----------------------------------------
YEAR ENDED YEAR ENDED SUBTOTAL
DECEMBER 31, OCTOBER 31, MARION COMBINED AIP COMBINED
1996 1996 ACQUISITION PRO FORMA MERGER PRO FORMA
------------ ----------- ----------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... $263,786 $109,625 $373,411 $373,411
Cost of products sold......... 215,126 93,026 $(7,404)(2)(4) 300,748 $ 12,079(5) 312,827
-------- -------- ------- -------- -------- --------
Gross profit.................. 48,660 16,599 7,404 72,663 (12,079) 60,584
Product development, selling,
administrative, and
miscellaneous expenses...... 36,470 16,514 (6,539)(3)(4) 46,445 7,668(6) 54,113
Allocation of parent
corporation administrative
and overhead expenses....... 2,200 (2,200)(3) -- --
-------- -------- ------- -------- -------- --------
Operating earnings............ 12,190 (2,115) 16,143 26,218 (19,747) 6,471
Other income.................. 1,003 555 1,558 1,558
-------- -------- ------- -------- -------- --------
Earnings before interest
expense and income taxes.... 13,193 (1,560) 16,143 27,776 (19,747) 8,029
Interest expense.............. 8,557 228 (7) 8,785 9,669(7) 18,454
-------- -------- ------- -------- -------- --------
Earnings (loss) before income
taxes....................... 4,636 (1,788) 16,143 18,991 (29,416) (10,425)
Income taxes.................. 1,758 (662) 5,551(8) 6,647 (5,285)(8) 1,362
-------- -------- ------- -------- -------- --------
Net earnings (loss)........... $ 2,878 $ (1,126) $10,592 $ 12,344 $(24,131) $(11,787)
======== ======== ======= ======== ======== ========
Net loss per share of Common Stock................................................................... --(9)
OTHER DATA:
EBITDA (as defined
herein)(10)................. $ 19,247 $ 434 $14,339 $ 34,020 $ 34,020
Capital expenditures.......... $ 4,996 $ 1,761 $ 6,757 $ 6,757
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements
of Operations.
36
<PAGE> 43
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL FOR THE PRO FORMA ADJUSTMENTS
SIX MONTHS ENDED ----------------------------------------
JUNE 30, 1997 SUBTOTAL
------------------- MARION COMBINED AIP COMBINED
BUCYRUS MARION ACQUISITION PRO FORMA MERGER PRO FORMA
-------- ------- ----------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales...................... $143,762 $31,549 $(1,410)(1) $173,901 $173,901
Cost of products sold.......... 116,261 27,824 (3,943)(2)(4) 140,142 $ 475(5) 140,617
-------- ------- ------- -------- ------- --------
Gross profit................... 27,501 3,725 2,533 33,759 (475) 33,284
Product development, selling,
administrative, and
miscellaneous expenses....... 18,345 7,254 (2,731)(3)(4) 22,868 3,711(6) 26,579
Allocation of parent
corporation administrative
and overhead expenses........ -- 1,246 (1,246)(3) -- --
-------- ------- ------- -------- ------- --------
Operating earnings............. 9,156 (4,775) 6,510 10,891 (4,186) 6,705
Other income................... 615 50 665 665
-------- ------- ------- -------- ------- --------
Earnings before interest
expense and income taxes..... 9,771 (4,725) 6,510 11,556 (4,186) 7,370
Interest expense............... 3,956 780 4,736 4,606(7) 9,342
-------- ------- ------- -------- ------- --------
Earnings (loss) before income
taxes........................ 5,815 (5,505) 6,510 6,820 (8,792) (1,972)
Income taxes................... 2,392 (2,125) 2,120(8) 2,387 (184)(8) 2,203
-------- ------- ------- -------- ------- --------
Net earnings (loss)............ $ 3,423 $(3,380) $ 4,390 $ 4,433 $(8,608) $ (4,175)
======== ======= ======= ======== ======= ========
Net loss per share of Common Stock.............................................................. --(9)
OTHER DATA:
EBITDA (as defined
herein)(10).................. $ 12,900 $(3,718) $ 5,647 $ 14,829 $ 14,829
Capital expenditures........... $ 2,433 $ 683 $ 3,116 $ 3,116
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements
of Operations.
37
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(1) Represents the adjustment to net sales to conform Marion's revenue
recognition policy for shovels (shipment method) to the Company's percentage
of completion method. The adjustment for 1996 is immaterial and is not
included in the 1996 Pro Forma Combined Condensed Statement of Operations.
(2) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Elimination of depreciation on buildings which are not
being purchased by the Company........................ $ (91) $ (46)
Elimination of the LIFO provision....................... (484) --
Reversal of provision for warranties on planetary
gearing on certain draglines not assumed by the
Company pursuant to the purchase contract............. (1,400) --
Adjustment to cost of sales to conform Marion's revenue
recognition policy for shovels (shipment method) to
the Company's percentage of completion method......... -- (1,182)
Adjustment to depreciation expense based on the assigned
fair value of machinery and equipment................. (443) (222)
Elimination of manufacturing costs related to
non-acquired assets and non-assumed employees (see
below)................................................ (4,986) (2,493)
------- -------
$(7,404) $(3,943)
======= =======
</TABLE>
As part of the purchase contract, the Company did not acquire the
manufacturing facility of Marion. The elimination of direct costs related
to this facility, including maintenance, security, taxes, insurance, etc.
results in reductions of approximately $2,239 and $1,120 for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively.
This does not include depreciation savings reflected in the table above.
Also as part of the purchase contract, the Company hired only specifically
identified Marion employees which reflected a department-by-department
evaluation of personnel required to handle the workload. Various
subsidiaries of Global have retained all liabilities related to employees
not permanently hired by the Company. The elimination of salaries and
benefits from administrative personnel in the fixed manufacturing
departments (plant management, purchasing, industrial relations, quality
assurance, etc.) who have not been hired results in savings of $1,773 and
$886 for the year ended December 31, 1996 and the six months ended June 30,
1997, respectively. An additional $974 and $487 for the year ended December
31, 1996 and the six months ended June 30, 1997, respectively, of
duplicative nonpayroll costs related to manufacturing (corporate
allocations, travel costs, outside consultants, and other manufacturing
items) have been identified.
38
<PAGE> 45
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(3) As part of the purchase contract, the Company hired only specifically
identified Marion employees. In addition, the Company has identified
redundant functions and costs at Marion. These include:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Salaries and benefits from the elimination of specific
administrative departments (executive, treasury, human
resources, and finance)............................... $(2,982) $(1,492)
Additional non-payroll related costs related to the
administrative functions of Marion.................... (1,287) (644)
Corporate overhead charges allocated from the parent of
Marion................................................ (2,200) (1,246)
Salaries and related costs from Marion's permanent
elimination of various engineering positions in
December 1996......................................... (1,000) --
------- -------
$(7,469) $(3,382)
======= =======
</TABLE>
In addition, the adjustments to reflect the impact of purchase accounting
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Adjustment to amortization of intangible assets based on
the assigned fair value of such assets................ $ (728) $(324)
Adjustment to depreciation expense based on the assigned
fair value of machinery and equipment................. (542) (271)
------- --------
$(1,270) $(595)
======= ========
</TABLE>
(4) In addition to the above pro forma adjustments, the Company expects to
realize significant additional annual cost savings related to headcount
reductions and related expenses at Marion which have not been included in
the Pro Forma Combined Condensed Statements of Operations. The primary cost
savings are related to reduced direct labor costs, engineering and marketing
headcount reductions, and future closing of parts and service locations as
summarized below:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Direct labor reductions................................. $(1,319) $ (660)
Engineering and marketing salary and benefit
reductions............................................ (1,292) (646)
Elimination of duplicative parts and service
locations............................................. (389) (194)
------- -------
$(3,000) $(1,500)
======= =======
</TABLE>
39
<PAGE> 46
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) Reflects the impacts of purchase accounting as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Inventory write-up charged to cost of products sold as
the inventory is sold.................................. $10,836 $ --
Adjustment to depreciation expense based on the assigned
fair value of property, plant and equipment............ 1,243 475
------- ------
$12,079 $475
======= ======
</TABLE>
Inventory has been adjusted to its fair value as required by Accounting
Principles Board Opinion No. 16. This adjustment primarily relates to
finished parts which are being valued at their selling price, less cost to
sell, less a selling profit. As such inventory is sold, this adjustment to
fair value will be charged to cost of products sold.
(6) Reflects the impacts of purchase accounting, the amortization of the fees,
and the AIP Management Fee incurred by the Company in connection with the
Private Offering as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Purchase Accounting:
Amortization of goodwill............................... $3,679 $1,840
Adjustment to depreciation expense based on the
assigned fair value of property, plant and
equipment........................................... 1,058 405
Adjustment to amortization of intangible assets based
on the assigned fair value of such assets........... 826 413
AIP Management Fee....................................... 1,450 725
Amortization of fees..................................... 655 328
------ --------
$7,668 $3,711
====== ========
</TABLE>
(7) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------------
<S> <C> <C>
Interest on the Notes at an assumed interest rate of
10.5%.................................................. $15,750 $ 7,875
Reversal of interest on the Secured Notes being
retired................................................ (7,783) (3,454)
Reversal of Marion's historical interest expense......... (228) (780)
Interest on borrowings under the Revolving Credit
Facility at an assumed interest rate of 8.4375%........ 1,930 965
------- -------
$ 9,669 $ 4,606
======= =======
</TABLE>
There is no pro forma interest expense adjustment reflected for the Bridge
Loan as it was repaid from the sale of the Existing Notes.
The impact of a 1/8 of 1% change in the interest rate on the Notes
approximates $188 per annum. Assuming an interest rate of 9 3/4%, interest
expense would have been $14,625 for the fiscal year ended December 31,
1996, and $7,313 for the six months ended June 30, 1997.
40
<PAGE> 47
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(8) Pro forma income taxes have been provided at local statutory rates by tax
jurisdiction. For the Marion Acquisition, income taxes provided on U.S.
operations are offset by pre-bankruptcy net operating loss carryforwards.
The benefit of such net operating loss carryforwards would be reflected as
a reduction of intangibles rather than the tax provision. As a result of
the AIP Merger, the tax benefit on U.S. operating losses has been
completely offset by valuation allowances due to uncertainty as to their
realization and the previous pro forma provision for the Marion Acquisition
is eliminated. This results in an overall net income tax provision for pro
forma purposes which primarily relates to taxes on foreign income.
(9) As a result of the AIP Merger, there are 1,000 outstanding shares of Common
Stock, all of which are owned by AIPAC; therefore, net loss per share of
Common Stock is not meaningful.
(10) For purposes of this Prospectus (other than "Description of the Notes"),
"EBITDA" is defined as earnings (loss) before (i) income taxes; (ii)
interest expense; (iii) extraordinary gain; (iv) depreciation; (v)
amortization; (vi) non-cash stock compensation; (vii) loss (gain) on sale
of fixed assets; (viii) restructuring expenses; (ix) reorganization items;
(x) inventory fair-value adjustment charged to cost of products sold; (xi)
the AIP Management Fee, which is subordinated to the Notes and was not
incurred by the Company until after the AIP Merger was consummated; and
(xii) in 1995 only, a non-cash charge related to the scrapping and disposal
of excess inventory related to certain older and discontinued machine
models. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- EBITDA." Since cash flow from operations is
very important to the Company's future, the EBITDA calculation provides a
summary review of cash flow performance. EBITDA (as defined herein) should
not be considered an alternative to operating income determined in
accordance with GAAP as an indicator of operating performance or to cash
flows from operating activities determined in accordance with GAAP as a
measure of liquidity.
(11) On September 24, 1997, all issued and outstanding stock options and SARs
were cancelled, and regardless of whether such stock options or SARs had
then vested or were exercisable, each holder of stock options or SARs
received cash per share equal to $18.00 less the "strike price" of such
stock options or SARs. As a result, the Company incurred a one-time non-
recurring pretax charge of approximately $7,000 in the three months ended
September 30, 1997. Such amount was funded by a portion of the proceeds
from the AIP Equity Contribution and is included in the sources and uses of
funds.
41
<PAGE> 48
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth historical financial information of the
Company as of and for the years or periods ended December 31, 1996, 1995, and
1994, and as of and for the six months ended June 30, 1997 and 1996, and for the
Predecessor Company as of and for the years or periods ended December 13, 1994,
December 31, 1993, and December 31, 1992. The Statement of Operations and
Balance Sheet information as of and for the years or periods ended December 31,
1996, 1995, and 1994, December 13, 1994, and December 31, 1993 and 1992, have
been derived from the audited consolidated financial statements of the Company.
The Statement of Operations and Balance Sheet information as of and for the six
months ended June 30, 1997 and 1996, were derived from the unaudited
consolidated financial statements of the Company, which include all adjustments
that management considers necessary to present fairly the financial results for
these interim periods, all of which were of a normal recurring nature. The
results of operations for the six month periods are not necessarily indicative
of results to be expected for the full year. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements of the Company, and
related notes thereto, and other financial information included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1)
-----------------------------------
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JANUARY 1 - DECEMBER 14 - DECEMBER 31, JUNE 30,
-------------------- DECEMBER 13, DECEMBER 31, ------------------- -------------------
1992 1993 1994 1994 1995 1996 1996 1997
---- ---- ------------ ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net sales.................... $242,468 $ 198,464 $186,174 $ 7,810 $231,921 $263,786 $130,820 $143,762
Cost of products sold........ 200,424 166,774 157,181 6,933 205,552 215,126 107,023 116,261
-------- --------- -------- -------- -------- -------- -------- --------
Gross profit................. 42,044 31,690 28,993 877 26,369 48,660 23,797 27,501
Product development, selling,
administrative, and
miscellaneous expenses..... 34,054 33,749 30,158 1,099 34,172 36,470 17,854 18,345
Restructuring and
reorganization charges..... -- 4,387 9,338 -- 3,496 -- -- --
-------- --------- -------- -------- -------- -------- -------- --------
Operating earnings (loss).... 7,990 (6,446) (10,503) (222) (11,299) 12,190 5,943 9,156
Other income................. 4,349 1,735 2,976 79 1,295 1,003 464 615
-------- --------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
interest expense, income
taxes, extraordinary gain,
and cumulative effects of
changes in accounting
principles................. 12,339 (4,711) (7,527) (143) (10,004) 13,193 6,407 9,771
Interest expense............. 28,146 35,065 13,911 284 6,254 8,557 4,173 3,956
-------- --------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income
taxes, extraordinary gain,
and cumulative effects of
changes in accounting
principles................. (15,807) (39,776) (21,438) (427) (16,258) 4,636 2,234 5,815
Income taxes................. 940 916 1,395 125 2,514 1,758 1,324 2,392
-------- --------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
extraordinary gain and
cumulative effects of
changes in accounting
principles................. (16,747) (40,692) (22,833) (552) (18,772) 2,878 910 3,423
Extraordinary gain........... -- -- 142,480 -- -- -- -- --
Cumulative effects of changes
in accounting principles... -- (11,298) -- -- -- -- -- --
-------- --------- -------- -------- -------- -------- -------- --------
Net earnings (loss).......... (16,747) (51,990) 119,647 (552) (18,772) 2,878 910 3,423
Redeemable preferred stock
dividends.................. (1,869) 50 (40) -- -- -- -- --
Preferred stock accretion.... (522) (689) (106) -- -- -- -- --
Reorganization item --
preferred stock............ -- -- (40,555) -- -- -- -- --
-------- --------- -------- -------- -------- -------- -------- --------
Net earnings (loss)
attributable to common
shareholders............... $(19,138) $ (52,629) $ 78,946 $ (552) $(18,772) $ 2,878 $ 910 $ 3,423
======== ========= ======== ======== ======== ======== ======== ========
Weighted average number of
shares outstanding (in
thousands)................. 6,355 8,933 9,269 10,170 10,203 10,259 10,235 10,345
======== ========= ======== ======== ======== ======== ======== ========
Earnings (loss) per share of
Common Stock............... $ (3.01) $ (5.89) $ 8.52 $ (0.05) $ (1.84) $ 0.28 $ 0.09 $ 0.33
======== ========= ======== ======== ======== ======== ======== ========
</TABLE>
42
<PAGE> 49
<TABLE>
<CAPTION>
PREDECESSOR COMPANY(1)
-----------------------------------
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JANUARY 1 - DECEMBER 14 - DECEMBER 31, JUNE 30,
-------------------- DECEMBER 13, DECEMBER 31, ------------------- -------------------
1992 1993 1994 1994 1995 1996 1996 1997
---- ---- ------------ ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash equivalents.... $ 16,020 $ 13,696 $ 16,209 $ 11,150 $ 15,763 $ 8,486 $ 11,350
Receivables.................. 27,125 25,731 26,220 35,603 32,085 43,453 54,271
Inventories.................. 67,009 63,671 82,393 73,566 70,889 70,458 74,587
Total assets................. 206,805 188,811 179,873 174,038 172,895 173,322 198,513
Total debt................... 198,652 207,702 60,293 65,252 70,241 68,317 80,193
Total common shareholders'
investment (deficiency in
assets).................... $(89,002) $(143,110) $ 53,617 $ 34,680 $ 37,461 $ 35,162 $ 41,067
OTHER DATA:
EBITDA (as defined
herein)(2)................. $ 25,347 $ 11,694 $12,883 $ 392 $ 12,672 $ 19,247 $ 9,333 $ 12,900
Capital expenditures......... 3,750 2,990 2,616 190 3,006 4,996 1,305 2,433
Gross margin percentage...... 17.3% 16.0% 15.6% 11.2% 11.4% 18.4% 18.2% 19.1%
EBITDA as a percentage of net
sales...................... 10.5% 5.9% 6.9% 5.0% 5.5% 7.3% 7.1% 9.0%
Ratio of earnings to fixed
charges(3)................. -- -- -- -- -- 1.5x 1.5x 2.3x
</TABLE>
- -------------------------
(1) The "Predecessor Company" is B-E Holdings, Inc., the former parent of the
Company, which was merged with and into the Company on December 14, 1994.
(2) For purposes of this Prospectus (other than "Description of the Notes"),
"EBITDA" is defined as earnings (loss) before (i) income taxes; (ii)
interest expense; (iii) extraordinary gain; (iv) depreciation; (v)
amortization; (vi) non-cash stock compensation; (vii) loss (gain) on sale of
fixed assets; (viii) restructuring expenses; (ix) reorganization items; (x)
inventory fair-value adjustment charged to cost of products sold; (xi) the
AIP Management Fee, which is subordinated to the Notes and was not incurred
by the Company until after the AIP Merger was consummated; and (xii) in 1995
only, a non-cash charge related to the scrapping and disposal of excess
inventory related to certain older and discontinued machine models. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- EBITDA." Since cash flow from operations is very important to
the Company's future, the EBITDA calculation provides a summary review of
cash flow performance. EBITDA (as defined herein) should not be considered
an alternative to operating income as determined in accordance with GAAP as
an indicator of operating performance or to cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity. For
1993, EBITDA (as defined herein) also excluded the cumulative effect of
changes in accounting principles.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and fixed
charges. Fixed charges consist of interest expense and amortization of debt
fees. Earnings were inadequate to cover fixed charges in certain years. The
deficiency amounted to approximately $15,807 for 1992, $39,776 for 1993,
$21,438 for the period January 1 to December 13, 1994, $427 for the period
December 14 to December 31, 1994, and $16,258 for 1995.
43
<PAGE> 50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The reorganization of the Company under Chapter 11 of the Bankruptcy Code
was effective December 14, 1994. The reorganization was accounted for using the
principles of fresh start reporting as required by AICPA Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code." Under the principles of fresh start reporting, total assets were recorded
at their assumed reorganization value, with the reorganization value allocated
to identifiable tangible and intangible assets on the basis of their estimated
fair value, and liabilities were adjusted to the present values of amounts to be
paid where appropriate. The consolidated financial statements for periods
subsequent to December 14, 1994, include the related amortization charges
associated with the fair value adjustments.
As a result of the implementation of fresh start reporting, the
consolidated financial statements of the Company are not comparable to the
consolidated financial statements of periods prior to December 14, 1994. The
consolidated financial statements presented for prior periods are not the
Company's, but instead are those of B-E Holdings, Inc. (the "Predecessor
Company"), the former parent of the Company, which was merged with and into the
Company on December 14, 1994.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
NET SALES. Net sales for the first six months of 1997 were $143.8 million
compared with $130.8 million for the first six months of 1996. Net sales of
repair parts and services were $88.6 million, which is an increase of 8% from
the first six months of 1996. The increase in repair parts and service net sales
occurred primarily at foreign locations. Net machine sales were $55.1 million,
which is an increase of 13% from the first six months of 1996. Net sales of
electric mining shovels increased 39% from the first six months of 1996. The
increase in electric mining shovel volume was primarily in copper markets. Net
sales of blast hole drills decreased 28% from the first six months of 1996.
There has been an overall decline in worldwide blast hole drill sales activity
in 1997.
OTHER INCOME. Other income, which consists primarily of interest income,
was $0.6 million and $0.5 million for the six months ended June 30, 1997 and
1996, respectively.
COST OF PRODUCTS SOLD. Cost of products sold for the first six months of
1997 was $116.3 million, or 81% of net sales, compared with $107.0 million, or
82% of net sales, for the first six months of 1996. The increase in gross margin
percentage was primarily due to improved machine margins.
PRODUCT DEVELOPMENT, SELLING, ADMINISTRATIVE AND MISCELLANEOUS
EXPENSES. Product development, selling, administrative and miscellaneous
expenses for the first six months of 1997 were $18.3 million, or 13% of net
sales, compared with $17.9 million, or 14% of net sales, for the first six
months of 1996.
INTEREST EXPENSE. Interest expense for the first six months of 1997 was
$4.0 million compared with $4.2 million for the first six months of 1996. The
Company had the option of paying interest on the Secured Notes in cash at 10.5%
or in kind (issuance of additional Secured Notes) at 13%. For the first six
months of 1997, interest was accrued at 10.5% since the Company paid this
interest in cash. For the first six months of 1996, interest was accrued at 13%
since the Company paid this interest in kind. Interest was accrued on a higher
principal balance in 1997 since all interest was paid in kind through December
31, 1996.
INCOME TAXES. For the six months ended June 30, 1997, income tax expense
consists primarily of foreign taxes at applicable statutory rates and a non-cash
income tax provision on United States taxable income at applicable statutory
rates. For the component of the United States tax provision relating to tax
benefits realized from reductions in the valuation allowance established as of
44
<PAGE> 51
December 14, 1994 (the date the Company reorganized under chapter 11 of the
Bankruptcy Code), a corresponding $0.5 million reduction of intangible assets
was recorded in accordance with AICPA Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code." For the
component of the United States tax provision relating to reductions in the
valuation allowance established after December 14, 1994, an income tax benefit
was recorded.
For the six months ended June 30, 1996, income tax expense consists
primarily of foreign taxes at applicable statutory rates. For United States tax
purposes there was a loss for which there was no income tax benefit.
NET EARNINGS. Net earnings for the first six months of 1997 were $3.4
million compared with $0.9 million for the first six months of 1996. The
increase in net earnings was primarily due to increased sales volume and
improved gross margin percentage.
INVENTORY, BACKLOG AND NEW ORDERS. The Company maintains a substantial
inventory of partially manufactured machines and components, as well as finished
goods inventory, primarily consisting of replacement parts, in order to reduce
lead times and respond quickly to customers' delivery requirements. Inventories
at June 30, 1997 were $74.6 million (27% of net sales for the twelve months
ended June 30, 1997), compared with $70.5 million (28% of net sales for the
twelve months ended June 30, 1996) at June 30, 1996. At June 30, 1997 and 1996,
$48.1 million and $43.4 million, respectively, were held as finished goods
inventory.
The Company's consolidated backlog at June 30, 1997, was $215.8 million
compared with $158.7 million at December 31, 1996, and $184.1 million at June
30, 1996. Machine backlog at June 30, 1997, was $103.8 million, which is an
increase of 112% from December 31, 1996, and an increase of 12% from June 30,
1996. The Company received a letter of intent from BHP Coal Pty. Ltd., an
Australian mining company, to purchase a 257OWS walking dragline which is
scheduled for completion by December 31, 1999. This was expected to generate net
sales of approximately $60.2 million and is included in machine backlog at June
30, 1997. The Company currently expects that this dragline will generate net
sales of $57.5 million over the next two and one half years. Machine backlog for
electric mining shovels and blast hole drills has decreased 53% from June 30,
1996. Repair parts and service backlog at June 30, 1997 was $112.0 million,
which is an increase of 2% from December 31, 1996, and an increase of 23% from
June 30, 1996. The increase in repair parts and service backlog from June 30,
1996, was at both United States and foreign locations. Backlog includes the
dollar value of orders placed for new equipment as well as parts and services,
including estimates of revenues expected to be generated from MARCs, minus
dollars billed through manufacturing contracts, which are billed on a percentage
of completion basis. MARC revenue estimates are based on payments expected for
parts and for maintenance and operational services over the life of each
contract, some of which have terms through 2002.
New orders for the first six months of 1997 were $200.8 million, which is
an increase of 2% from the first six months of 1996. New machine orders were
$109.9 million, which is an increase of 44% from the first six months of 1996.
Included in new machine orders for the first six months of 1997 was
approximately $60.2 million for the aforementioned 257OWS dragline for BHP Coal
Pty. Ltd. of Australia. New machine orders for electric mining shovels for the
first six months of 1997 were even with last year while new machine orders for
blast hole drills have decreased. There has been an overall decline in worldwide
blast hole drill orders in 1997, which was anticipated as a result of a
temporary lower demand for copper. During the first six months of 1996, a
multiple machine order was received from one South American customer in the
copper market resulting in new machine orders substantially higher than
historical levels in that six months. As a result of a decline in copper prices
in 1996 from historically high levels, demand from this market segment has
remained low. However, due to a resurgence in copper prices in late 1996, which
the Company expects to continue through 1997, there should be continued demand
from this market segment for electric mining shovels and blast hole drills.
There also was an increase in iron ore production in late 1994 that was
sustained through 1995 and 1996. The Company anticipates that some iron ore
producers will continue to replace aged electric mining shovel and blast hole
drill fleets with new
45
<PAGE> 52
machines in an effort to reduce iron ore production costs. Also, price increases
for hard coking coal in 1995 and 1996 have brought new demand for machines in
western Canada and Australia in recent months. New repair parts and service
orders were $90.9 million for the first six months of 1997, which is a decrease
of 25% from the first six months of 1996. Included in new repair parts and
service orders for the first six months of 1996 were large maintenance and
repair contract orders at foreign locations.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
NET SALES. Net sales for 1996 were $263.8 million compared with $231.9
million for 1995. Net sales of repair parts and services for 1996 were $156.4
million, which is an increase of 1% from 1995. This increase consists of an
increase in net sales at Minserco, Inc., a mining service subsidiary of the
Company, offset by a decrease in net sales of repair parts, primarily at foreign
locations. Net machine sales for 1996 were $107.4 million, which is an increase
of 40% from 1995. The increase in net machine sales was primarily due to
increased electric mining shovel shipments, primarily in copper markets.
Net sales for 1995 were $231.9 million compared with $194.0 million for
1994. Net sales of repair parts and services for 1995 were $155.4 million, which
is an increase of 8% from 1994. The increase in repair parts and service net
sales was primarily due to increased repair parts net sales at foreign locations
as a result of higher demand for replacement parts. Net machine sales for 1995
were $76.5 million, which is an increase of 55% from 1994. The increase was due
to increased blast hole drill and electric mining shovel shipments, primarily in
copper, coal, and iron ore markets.
OTHER INCOME. Other income, which consists primarily of interest income,
was $1.0 million, $1.3 million, and $3.1 million for 1996, 1995, and 1994,
respectively. Included in the amount for 1994 was a favorable insurance
settlement of $1.4 million.
COST OF PRODUCTS SOLD. Cost of products sold for 1996 was $215.1 million,
or 82% of net sales, compared with $205.6 million, or 89% of net sales, for
1995, and $164.1 million, or 85% of net sales, for 1994. Included in cost of
products sold for 1995 and 1994 were charges of $10.1 million and $0.4 million,
respectively, as a result of the fair value adjustment to inventory. This
adjustment was made in accordance with the principles of fresh start reporting
adopted in 1994 and was charged to cost of products sold as the inventory was
sold. Also included in cost of products sold for 1995 was a charge of $4.4
million for the scrapping and disposal of excess inventory which related to
certain older and discontinued machine models. Excluding the effects of the
inventory fair value adjustment and excess inventory charge, cost of products
sold as a percentage of net sales for 1995 was 82%.
PRODUCT DEVELOPMENT, SELLING, ADMINISTRATIVE, AND MISCELLANEOUS
EXPENSES. Product development, selling, administrative, and miscellaneous
expenses for 1996 were $36.5 million, or 14% of net sales, compared with $34.2
million, or 15% of net sales, in 1995, and $31.3 million, or 16% of net sales,
in 1994. The dollar increase for 1996 was primarily due to higher product
development and service costs to provide increased support to customers.
INTEREST EXPENSE. Interest expense for 1996 was $8.6 million compared with
$6.3 million for 1995. The increase for 1996 was primarily due to an increase in
the interest rate on the Secured Notes from 10.5% to 13% effective December 14,
1995, for interest paid in kind by adding the interest to the principal balance.
Also, interest on the Secured Notes was accrued on a higher principal balance in
1996 since all interest was paid in kind through December 31, 1996. The Company
had the option of paying interest on the Secured Notes in cash at 10.5% or in
kind at 13%.
Interest expense for 1995 was $6.3 million compared with $14.2 million for
1994. The decrease was primarily due to the exchange of unsecured debt
securities of B-E Holdings, Inc. and the Company for shares of the Company's
common stock in connection with the Company's reorganization.
46
<PAGE> 53
RESTRUCTURING EXPENSES. Restructuring expenses of $2.6 million in 1995
consist of employee severance expenses recorded to reflect the cost of reduced
employment and the severance costs related to the resignation of three officers
of the Company. See Note B to the Company's audited financial statements
appearing elsewhere herein.
REORGANIZATION ITEMS. Reorganization items represent the expenses incurred
as a result of the Company's efforts to reorganize under Chapter 11 of the
Bankruptcy Code. In 1995, reorganization items consist entirely of legal and
professional fees. Reorganization items in 1994 consist of $8.0 million of legal
and professional fees, $41.1 million to adjust debt and redeemable preferred
stock to the amount of the allowed claims in the Amended Plan, and a $1.1
million write-off of capitalized financing costs. These expenses were partially
offset by $0.4 million of interest income earned from the Petition Date through
December 13, 1994, on accumulated cash balances of B-E Holdings, Inc. and the
Company.
INCOME TAXES. Income tax expense consists primarily of foreign taxes at
applicable statutory rates.
NET EARNINGS (LOSS). Net earnings for 1996 were $2.9 million compared with
a net loss of $18.8 million for 1995. During 1995, the Company undertook a
restructuring of its corporate headquarters and foreign subsidiaries and
completed an evaluation of its inventories and other items. The Company, in
evaluating its inventory, determined that excess levels existed for certain
older and discontinued machine models. Accordingly, a charge of $4.4 million was
made in 1995 for the eventual scrapping and disposal of this inventory.
Severance costs of $2.6 million were also recorded to reflect the cost of
reduced employment at the corporate headquarters and foreign subsidiaries, and
the resignation of three former officers. In addition, a $1.0 million charge
resulting from the reestimation of certain customer warranty reserves was
recorded in 1995, and a $0.9 million charge was made for reorganization items
related to issues continuing from the bankruptcy proceedings. Net loss for 1995
also included $8.6 million (net of income taxes) of the inventory fair value
adjustment related to fresh start reporting.
Net loss for 1995 was $18.8 million compared with net earnings of $119.1
million for 1994. Included in net earnings for 1994 was an extraordinary gain on
debt discharge of $142.5 million which was partially offset by reorganization
items of $9.3 million.
INVENTORY, BACKLOG, AND NEW ORDERS. Inventories at December 31, 1996, were
$70.9 million (27% of net sales) compared with $73.6 million (32% of net sales)
at December 31, 1995, and $82.4 million (42% of net sales) at December 31, 1994.
At December 31, 1996, 1995, and 1994, $44.1 million, $44.5 million, and $51.9
million, respectively, were held as finished goods inventory.
The Company's consolidated backlog on December 31, 1996 was $158.7 million
compared with $118.0 million at December 31, 1995 and $72.3 million at December
31, 1994. Machine backlog at December 31, 1996 was $49.0 million, which is a
decrease of 26% from December 31, 1995. The decrease in machine backlog from
December 31, 1995 was primarily in electric mining shovel volume. Repair parts
and service backlog at December 31, 1996 was $109.7 million, which is an
increase of 110% from December 31, 1995. The increase in repair parts and
service backlog from December 31, 1995, was primarily at foreign locations and
reflect new orders related to long-term maintenance and repair contracts which
will be completed in the next three to five years.
New orders for 1996 were $304.5 million, which is an increase of 10% from
1995. New machine orders for 1996 were $90.6 million, which is a decrease of 22%
from 1995. The decrease in new machine orders for 1996 was primarily in electric
mining shovel volume and represented low machine net sales activity during the
second half of 1996, primarily related to copper markets. New repair parts and
service orders for 1996 were $213.9 million, which is an increase of 33% from
1995. The increase in repair parts and service orders for 1996 was primarily due
to large maintenance and repair contract orders at foreign locations in the
first three months of 1996.
47
<PAGE> 54
LIQUIDITY AND CAPITAL RESOURCES
Working capital and current ratio are two financial measurements which
provide an indication of the Company's ability to meet its short-term
obligations. These measurements at December 31, 1994, 1995, and 1996, and June
30, 1997, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------- JUNE 30,
1994 1995 1996 1997
---- ---- ---- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Working capital................................. $ 78,208 $ 65,330 $ 78,814 $ 82,521
Current ratio (ratio of current assets to
current liabilities).......................... 2.6 to 1 2.2 to 1 2.9 to 1 2.3 to 1
</TABLE>
The decrease in the current ratio from December 31, 1996 to June 30, 1997,
was primarily due to increased liabilities in order to support increased
production of machines. The increase in working capital and the current ratio
for the year ended December 31, 1996, was primarily due to a decrease in current
liabilities to customers on uncompleted contracts and warranties and a decrease
in outstanding project financing borrowings. The decrease in working capital and
the current ratio for the year ended December 31, 1995, was primarily due to the
inventory fair value adjustment of $10.1 million being charged to cost of
products sold as the inventory was sold and an inventory obsolescence provision
of $4.4 million. See "Results of Operations -- Comparison of Fiscal Years Ended
December 31, 1996, 1995, and 1994 -- Cost of Products Sold."
Equipment Assurance Limited, a subsidiary of Bucyrus, has pledged $1.1
million of its cash to secure its reimbursement obligations for outstanding
letters of credit at June 30, 1997. This collateral amount is classified as
Restricted Funds on Deposit in the Company's Consolidated Condensed Balance
Sheets.
The Company believes that current levels of cash and liquidity, together
with funds generated by operations, funds available from the Revolving Credit
Facility, and other project financing arrangements will be sufficient to permit
the Company to satisfy its debt service requirements and fund operating
activities through at least 1998. The Company is subject to significant
business, economic, and competitive uncertainties that are beyond its control.
Accordingly, there can be no assurance that the Company's financial resources
will be sufficient for the Company to satisfy its debt service obligations and
fund operating activities under all circumstances. See "Revolving Credit
Facility."
The Company had outstanding letters of credit and guarantees of $6.1
million at June 30, 1997. Of this amount, $4.7 million is related to the
Company's existing credit agreement with Bank One, Wisconsin, with the remainder
provided by various banks and insurance companies.
At June 30, 1997, the Company had approximately $2.3 million of approved
but unspent capital appropriations. Included in this amount is the remaining
$1.2 million to be spent for a new service shop facility in Chile which is being
financed primarily with a local bank in Chile.
In addition, at June 30, 1997, the Company had committed approximately $5.5
million of a planned $20.0 million machine shop tool modernization project. The
initial machine tools have been financed with operating leases and the remaining
machine tools are expected to be financed using internally generated cash,
borrowings under the Revolving Credit Facility, or operating leases.
48
<PAGE> 55
EBITDA
For purposes of this Prospectus (other than "Description of the Notes"),
"EBITDA" is defined as earnings (loss) before (i) income taxes; (ii) interest
expense; (iii) extraordinary gain; (iv) depreciation; (v) amortization; (vi)
non-cash stock compensation; (vii) loss (gain) on sale of fixed assets; (viii)
restructuring expenses; (ix) reorganization items; (x) inventory fair-value
adjustment charged to cost of products sold; (xi) the AIP Management Fee, which
is subordinated to the Notes and was not incurred by the Company until after the
AIP Merger was consummated; and (xii) in 1995 only, a non-cash charge related to
the scrapping and disposal of excess inventory related to certain older and
discontinued machine models. Since cash flow from operations is very important
to the Company's future, the EBITDA calculation provides a summary review of
cash flow performance. In addition, the Revolving Credit Facility requires the
calculation of EBITDA for certain ratios and covenants. EBITDA (as defined
herein) should not be considered an alternative to operating income determined
in accordance with GAAP as an indicator of operating performance or to cash
flows from operating activities determined in accordance with GAAP as a measure
of liquidity. The following table reconciles the Company's historical earnings
(loss) before income taxes and extraordinary gain to EBITDA (as defined herein).
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------ YEARS ENDED SIX MONTHS ENDED
JANUARY 1- DECEMBER 14- DECEMBER 31, JUNE 30,
DECEMBER 13, DECEMBER 31, ------------------ -----------------
1994 1994 1995 1996 1996 1997
------------ ------------ ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income
taxes and extraordinary gain.... $(21,438) $(427) $(16,258) $ 4,636 $ 2,234 $ 5,815
Restructuring expenses............ -- -- 2,577 -- -- --
Reorganization items.............. 9,338 -- 919 -- -- --
Inventory fair value adjustment
charged to cost of products
sold............................ -- 362 10,065 -- -- --
Non-cash expenses:
Depreciation.................... 7,356 145 3,671 3,882 1,980 2,179
Amortization.................... 3,679 23 1,194 1,142 584 534
Stock compensation.............. -- -- -- 668 116 420
(Gain) loss on sale of fixed
assets........................ 37 5 (166) 362 246 (4)
Payment in kind interest on the
Secured Notes and deferred
rent (interest) on sale and
leaseback financing
arrangement (Predecessor
Company)...................... 7,287 258 5,691 7,783 3,767 --
Amortization of debt discount... 71 -- -- -- -- --
Cash interest expense(1).......... 6,553 26 563 774 406 3,956
-------- ----- -------- ------- ------- -------
Adjusted EBITDA(2)(3)............. 12,883 392 8,256 19,247 9,333 12,900
Excess inventory charge(3)........ -- -- 4,416 -- -- --
-------- ----- -------- ------- ------- -------
EBITDA (as defined herein)(3)..... $ 12,883 $ 392 $ 12,672 $19,247 $ 9,333 $12,900
======== ===== ======== ======= ======= =======
</TABLE>
- -------------------------
(1) Cash interest expense for the Predecessor Company includes all accrued but
unpaid interest prior to February 18, 1994, the date the Predecessor Company
commenced voluntary petitions under Chapter 11 of the Bankruptcy Code (the
"Petition Date"). Contractual interest of $20.3 million on the unsecured
debt of the Predecessor Company did not accrue subsequent to the Petition
Date. Excludes interest on the Secured Notes that has been paid in kind,
amortization of debt discount, and deferred rent (interest) on the sale and
leaseback financing arrangement.
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(2) The Company has historically reported "Adjusted EBITDA" in its financial
disclosures to highlight the effects that fresh start accounting,
restructuring expenses, and reorganization items have on reported net
earnings.
(3) For the year ended December 31, 1995, the Company recognized a charge of
$4.4 million to cost of products sold for the scrapping and disposal of
excess inventory which related to certain older and discontinued machine
models. See Note E to the Company's audited financial statements appearing
elsewhere herein. The Company is presenting an alternative calculation of
EBITDA (as defined herein) as compared to Adjusted EBITDA, to reflect the
non-cash impact of this charge for comparison purposes.
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BUSINESS
GENERAL
The Company (formerly known as Bucyrus-Erie Company) was incorporated in
Delaware in 1927 as the successor to a business that has been in continuous
operation since 1880. The Company is one of the world's leading manufacturers of
large-scale excavation equipment used in surface mining and other earth moving
operations, including rotary blast hole drills, electric mining shovels, and
draglines. Bucyrus machines are used throughout the world by customers who mine
coal, iron ore, copper, gold, phosphate, bauxite, oil sands, and other minerals,
as well as for land reclamation activities.
An important part of the Company's business consists of aftermarket sales,
such as supplying parts, providing maintenance and repair services, providing
technical advice, as well as refurbishing and relocating older, installed
machines. The importance of aftermarket products and services in this industry
is a function of the equipment's size, expense, complexity, and long life.
Through domestic and foreign subsidiaries and overseas offices, the Company
offers a global network of comprehensive direct marketing services and
aftermarket support, which is critical to enhance machine longevity and
productivity in the field. This network caters primarily to the Company's own
installed equipment base; however, it also provides repair parts and maintenance
services for other manufacturers' equipment on a limited basis.
For the fiscal year ended December 31, 1996, the Company had total net
sales of $263.8 million, comprised of $107.4 million (41%) in new equipment
sales and $156.4 million (59%) in aftermarket parts and service sales, and had
EBITDA (as defined herein) of $19.2 million. See the Company's consolidated
financial statements appearing elsewhere herein.
THE MARION ACQUISITION
On August 26, 1997, the Company consummated the Marion Acquisition. The
purchase price for Marion was $40.1 million, subject to post-closing adjustments
which would have reduced the purchase price by approximately $3.7 million if the
Marion Acquisition had taken place on June 30, 1997. For the fiscal year ended
October 31, 1996, Marion had total net sales of $109.6 million, comprised of
$36.4 million (33%) in new equipment sales and $73.2 million (67%) in
aftermarket parts and service sales.
The Company financed the Marion Acquisition and related fees and expenses
utilizing a $45.0 million unsecured bridge loan (the "Bridge Loan") provided by
a former affiliate of the Company which has been repaid in full with a portion
of the proceeds of the Private Offering.
Like the Company, Marion manufactured large surface mining excavation
equipment, primarily draglines and electric mining shovels, and had a
significant aftermarket parts and services business supporting its installed
base of over 300 machines throughout the world. The aftermarket business
provides Marion-engineered components and replacement parts, as well as ongoing
electrical and mechanical service assistance on an as-required basis. Marion's
principal customers for both new machines and aftermarket parts and services
were operators of surface coal mines worldwide. Coal producers accounted for
approximately 70% of Marion's total net sales in recent years, with copper, iron
ore, phosphate rock and oil sands mining primarily accounting for the balance.
Australia, Canada, India, South Africa, and the United States were Marion's
largest geographical markets, although sales volume by country varied
substantially from year to year. In recent years, approximately 70% of Marion's
total net sales were in markets outside the United States.
As described below, the Marion Acquisition provides a number of benefits to
the Company, including a substantial increase in the Company's worldwide
installed equipment base, expansion of the Company's presence in several
important markets, and the opportunity to achieve significant
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cost savings. See "Risk Factors -- Realization of Benefits of the Marion
Acquisition; Integration of Marion."
INCREASED INSTALLED EQUIPMENT BASE. The Marion Acquisition increased
the Company's installed equipment base from approximately 900 machines to
nearly 1,200 machines worldwide, providing the Company with significantly
greater opportunities to market its aftermarket parts and services.
EXPANDED PRESENCE IN POTENTIALLY HIGH GROWTH MARKETS. The Marion
Acquisition provides the Company with an increased strategic presence in
markets that are anticipated to experience substantial growth over the next
several years, such as India and Russia, through Marion's established
relationships with local mining interests and governmental authorities.
SIGNIFICANT COST SAVINGS. The Marion Acquisition results in pro forma
cost savings of $12.5 million for fiscal 1996 as described below, and $5.9
million for the six months ended June 30, 1997, through the consolidation
of manufacturing operations and the rationalization of engineering and
administrative functions. In addition, the Company has identified an
estimated $3.0 million in potential annual cost savings that are not
reflected in the pro forma financial results. The cost savings reflected in
the pro forma results and summarized below, and other anticipated cost
savings, are based on assumptions and expectations that the Company
believes to be reasonable, but are dependent on a variety of important
factors. See "Risk Factors -- Realization of Benefits of the Marion
Acquisition; Integration of Marion" and "Unaudited Pro Forma Combined
Condensed Financial Statements."
The Company is consolidating all of Marion's manufacturing operations
into the Company's existing facilities as Marion's manufacturing facility
was not acquired as part of the Marion Acquisition. This results in pro
forma manufacturing cost savings of $5.0 million for fiscal 1996, and $2.5
million for the six months ended June 30, 1997, including reductions in
direct facility costs, fixed manufacturing administrative costs, and
nonpayroll manufacturing costs. Cost savings of $2.2 million (excluding
depreciation) for fiscal 1996, and $1.1 million for the six months ended
June 30, 1997, are attributed to the elimination of direct costs related to
the operation of Marion's primary facility in Marion, Ohio. The Company
hired only certain of Marion's manufacturing employees, resulting in pro
forma cost savings of $1.8 million for fiscal 1996, and $0.9 million for
the six months ended June 30, 1997. The elimination of overhead expenses
relating to manufacturing, including corporate allocations, travel costs,
and consulting expenses, results in pro forma cost savings of $1.0 million
for fiscal 1996, and $0.5 million for the six months ended June 30, 1997.
Management believes that the Company has adequate capacity to integrate
Marion's manufacturing operations.
The Marion Acquisition also results in pro forma cost savings of $7.5
million for fiscal 1996, and $3.4 million for the six months ended June 30,
1997, through the consolidation of duplicative product development,
general, and administrative functions. The Company hired only certain of
Marion's administrative employees, with the associated elimination of
salaries and related expenses resulting in pro forma cost savings of $4.3
million for fiscal 1996, and $2.1 million for the six months ended June 30,
1997. The elimination of general and administrative overhead expenses,
primarily relating to allocated corporate expenses, results in pro forma
cost savings of $2.2 million for fiscal 1996, and $1.2 million for the six
months ended June 30, 1997. In late 1996, Marion eliminated various
full-time engineering positions, resulting in pro forma cost savings of
$1.0 million for fiscal 1996. Based on a department-by-department analysis,
management believes that the Company's current operations, which have been
supplemented by employees hired from Marion, will be adequately staffed for
the foreseeable future; however, there can be no assurance that this will
be the case.
The Company expects to generate the $3.0 million in additional cost
savings not reflected in the pro forma financial results by reducing direct
labor costs, consolidating engineering functions, eliminating marketing
personnel, and closing certain parts and service locations. The
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Company hired only certain of Marion's engineering and marketing staff
which is expected to result in incremental annual cost saving of
approximately $1.3 million. The Company's current engineering staff, along
with selected individuals from Marion's engineering staff, is expected to
be adequate to handle the engineering function. Application of the
Company's direct labor operating efficiencies to the former Marion
operations is expected to result in annual cost savings of approximately
$1.3 million. Since Marion operates administrative and sales offices, parts
warehouses and repair facilities in the same geographical areas as the
Company, the consolidation of these functions is expected to result in
annual cost savings of approximately $0.4 million.
After giving pro forma effect to the Marion Acquisition, the Company's net
sales for fiscal 1996 would have been $373.4 million, comprised of $143.8
million (39%) of new equipment sales and $229.6 million (61%) of aftermarket
sales, and in fiscal 1996 EBITDA (as defined herein) would have been $34.0
million. See "Unaudited Pro Forma Combined Condensed Financial Statements."
BUSINESS STRATEGY
Following an in-depth, strategic review of management and operations in
1995, the Board of Directors refocused the Company's business strategy and hired
a new management team, including Willard R. Hildebrand, President and Chief
Executive Officer, and Daniel J. Smoke, Vice President and Chief Financial
Officer. In addition, the Board increased the responsibilities of four other
senior officers who had been with the Company for an average of 23 years. AIP
intends to continue the Company's existing business strategy, which includes the
following key elements:
GROW THE AFTERMARKET BUSINESS. The Company has increased its focus on
the important aftermarket business because of its attractive profit margins
and its greater stability and predictability compared to the market for new
equipment. In addition, providing aftermarket support, which is critical to
maintain machine longevity and productivity in the field, enhances the
Company's ability to secure new machine orders in the future. The Company's
focus on its aftermarket business is reflected in a number of recently
implemented strategic initiatives that include: (i) working with suppliers
to increase stock levels of replacement parts to shorten response times to
customer inquiries; (ii) installation of a new computerized parts quoting
system to improve responsiveness to customer inquiries; (iii) forming a
dedicated engineering team to focus on reducing manufacturing costs for
replacement parts; (iv) enhancing relationships with key suppliers in order
to reduce raw material and purchased part costs; (v) expanding the
Company's facilities in important foreign markets, such as Chile and South
Africa; (vi) investing additional capital in the Company's domestic repair
and service subsidiaries, Boonville Mining Services, Inc. and Minserco,
Inc.; and (vii) purchasing Von's Welding, Inc., an aftermarket supplier of
mining machinery parts and services, located in Gillette, Wyoming, in North
America's most important coal mining region.
The Company has formed relationships with key suppliers of Bucyrus
products to reduce costs, advance product technology, and improve customer
support. In addition, the Company is working with suppliers to increase
their average stock levels of parts in an effort to improve response time
to customer inquiries. Since 1995, average stock levels have increased from
approximately $1.0 million to approximately $5.5 million.
Because approximately 64% of the Company's installed equipment base is
located in international markets, and 76% of the Company's new machine
sales over the past five years have been to international customers, the
Company is committed to providing first-rate customer service on a
worldwide basis. In 1996 and 1997, the Company invested capital in a new
expanded service center and office complex in Antofagasta, Chile, which
will primarily service nearby copper mining customers, and an important new
warehouse facility located in Middleburg, in the heart of the South African
coal fields.
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Domestically, the Company remains committed to strengthening
operations at its two wholly-owned subsidiaries, Boonville Mining Services,
Inc. ("BMSI") and Minserco, Inc. ("Minserco"). BMSI provides replacement
parts and repair and rebuild services for surface mining equipment
manufactured both by the Company and by its competitors. Among other
things, BMSI competes directly with "will-fitters" who sell non-OEM and
knock off replacement parts, and provides additional manufacturing capacity
for the Company. Minserco services the mining industry with comprehensive
structural and mechanical engineering, non-destructive testing, repairs and
rebuilds of machine components, product and component upgrades, contract
maintenance, turnkey erections, and machine moves. Minserco's new orders
have increased from $13.7 million in 1994 to $28.5 million in 1996. In June
1997, the Company purchased 100% of the stock of Von's Welding, Inc.
("Von's") for approximately $2.0 million, including the assumption of
approximately $1.1 million in liabilities. Von's, located in Gillette,
Wyoming, is engaged in the business of providing replacement parts and
aftermarket services for mining equipment and trucks. Von's business will
be consolidated into Minserco, which will maintain Von's operating facility
and employees. This acquisition will enhance the Company's presence and
ability to provide tooling and repair services and replacement parts in
North America's most important coal mining region.
INCREASE OEM QUALITY AND PROFITABILITY. The Company is committed to
increasing the profitability of OEM sales by improving the design and
engineering of its existing line of machines, as well as developing new
products. During 1996, the Company's engineering and service functions were
significantly restructured in response to feedback from a customer focus
group formed to provide direction to the Company's engineering development
activities. A continuation of this close relationship with customers is
fundamental to the Company's objective to become more market driven.
Specific goals included reducing lead times, improving product quality and
reliability, and improving profit margins and OEM sales. To further these
goals, the Company has increased its investment in work-in-process
inventory to reduce delivery times for new equipment orders. The Company's
commitment to quality has been formally recognized by its receipt of ISO
9001 Certification from Det Norske Veritas, one of the world's leading
standards organizations.
MODERNIZE PLANT AND EQUIPMENT. During 1996, the Company began a number
of initiatives to modernize its manufacturing facilities in order to reduce
lead times and inventory levels, provide quicker turn around, and reduce
overall costs of manufacturing both new machines and replacement parts. The
most significant initiative is a three-year, $20 million modernization
program at the Company's South Milwaukee facility. The program includes
replacing approximately 47 older, less efficient machines with 14
technologically advanced machines, and upgrading 10 existing machine tools.
Some older machines will be retained by the Company to replace the
manufacturing capacity of certain Marion machines that will not be
transferred to the Company's South Milwaukee facility. As of June 30, 1997,
approximately $5.5 million had been committed to this project and seven of
the 14 machines had been installed, with the remainder scheduled for
installation by early 1999. The significant reduction in the number of
machines will open floor space, allowing the Company to increase capacity
and to complete the fabrication of Marion's current in-progress inventory
in South Milwaukee. Following the completion of the modernization program,
the Company expects to realize significant annual cost savings not
reflected in the pro forma financial results through the reduction of
labor, overhead, and raw materials costs.
FOCUS ON STRATEGIC MARKETS. Although 76% of the Company's net sales of
new machines have come from foreign markets during the past five years
(primarily Australia, Chile, China, and South Africa), management believes
that North America (primarily western Canada, the western United States,
and Mexico) continues to be one of the world's most important markets for
surface mining equipment. Therefore, the Company's focus includes the
strategic placement of its new, quality-engineered electric mining shovels
in high-profile North American
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installations. The Company sold the first of these shovels in Canada in
1995, and in the United States and Mexico in 1996. The Company believes
that these installations will create opportunities for increased new
machine sales in North America. Management has been encouraged by repeat
orders in 1997 for two additional shovels from one of these customers, and
the receipt of a shovel order from a new North American customer that has
historically purchased all its equipment from the Company's primary
competitor.
EXPAND MARC PROGRAM. The Company is aggressively promoting its
Maintenance and Repair Contracts, under which mine operators outsource to
the Company all regular maintenance services, repair functions and, in some
cases, operation of the equipment serviced. MARCs offer the Company a
generally predictable, high-margin revenue stream. New mines are the
primary target for MARCs because it is difficult and expensive for a mining
company to establish infrastructures for necessary and ongoing maintenance
and repair in undeveloped or remote areas. The Company currently operates
eight MARCs and is seeking to expand the MARC program. See "-- Aftermarket
Parts and Services."
While a number of these initiatives have not been fully implemented and the
anticipated benefits have not yet been fully realized, from 1995 to 1996 the
Company's net sales increased 14%, from $231.9 million to $263.8 million, and
EBITDA (as defined herein) improved from $12.7 million (5.5% of net sales) to
$19.2 million (7.3% of net sales). For the first six months of 1997, as compared
to the first six months of 1996, net sales increased 10%, from $130.8 million to
$143.8 million, and EBITDA (as defined herein) improved from $9.3 million (7.1%
of net sales) to $12.9 million (9.0% of net sales). The Company's consolidated
backlog increased 36% from $158.7 million at December 31, 1996 to $215.8 million
at June 30, 1997. The Marion Acquisition provides the Company with increased
opportunities to implement these initiatives, particularly with respect to
Marion's aftermarket business.
INTEGRATION STRATEGIES
Following a detailed review of Marion's business, the Company has developed
a comprehensive plan to integrate Marion's operations into those of the Company.
The Marion Acquisition results in substantial pro forma cost savings, primarily
through the consolidation of Marion's manufacturing operations into the
Company's existing facilities and the rationalization of engineering and
administrative functions. In addition, the Marion Acquisition enhances the
Company's product offering and, through application of the Company's established
business strategies, creates opportunities to capture additional new machine and
aftermarket sales. See "Risk Factors -- Realization of Benefits of the Marion
Acquisition; Integration of Marion" and "Unaudited Pro Forma Combined Condensed
Financial Statements."
CONSOLIDATION OF OPERATIONS. Management expects to realize significant
cost savings through the integration of Marion's manufacturing operations
into those of the Company. The Company will relocate some of Marion's
production machinery and fabricating equipment from the Marion facility to
the Company's manufacturing operations in South Milwaukee, Wisconsin, and
Boonville, Indiana. Machinery and tooling that cannot be used in the
Company's existing facilities will be sold. The estimated annual cost
savings from the consolidation of manufacturing operations included in the
pro forma adjustments are approximately $5.0 million. The Company will
commence the integration of Marion's manufacturing operations as soon as
possible.
CONSOLIDATION OF SALES, SERVICE, AND ADMINISTRATIVE
FUNCTIONS. Management expects to realize significant cost savings through
the rationalization of Marion's and the Company's sales, service, and
administrative functions. The Company has performed a detailed,
department-by-department assessment of Marion's existing administrative
functions and has identified a number of redundant and duplicative
positions and functions, the elimination of which results in pro forma
annual cost savings of $6.5 million. The pro forma statements do not
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include any consolidation of sales functions, although it is anticipated
that numerous positions will be eliminated. In addition, because Marion
operates administrative and sales offices, parts warehouses, and repair
facilities in the same geographical areas as the Company, the consolidation
plan includes closing certain of the former Marion facilities, including
warehouses and/or repair facilities in Ohio, Wyoming, Alberta, Quebec, and
South Africa. These cost savings are not reflected in the pro forma
adjustments. In Australia, the Company plans to close its administrative
and sales offices and operate out of facilities acquired from Marion.
Although numerous duplicative positions will be eliminated, certain key
personnel from Marion's offices, warehouses, and repair facilities will be
hired and integrated into the Company's administrative, sales, and service
staff.
CONSOLIDATION OF ENGINEERING FUNCTIONS. The Company hired certain of
Marion's best-qualified engineers and technicians to assist with the
integration process and the continued development and production of high
quality machines. As of December 31, 1996, Marion had already eliminated
various engineering positions, resulting in the $1.0 million in annual cost
savings reflected in the pro forma adjustments. The anticipated elimination
of additional engineering positions is expected to generate additional cost
savings that are not reflected in the pro forma adjustments. The Company
currently employs an engineering staff of 70 and believes that this staff,
in conjunction with the hiring of certain Marion engineers, will provide
the Company with sufficient engineering support for the foreseeable future;
however, there can be no assurance that this will be the case.
EXPANSION OF AFTERMARKET BUSINESS. The Marion Acquisition
significantly increases the Company's aftermarket parts and service
business, which generated $73.2 million, or approximately 67% of Marion's
total net sales, during fiscal 1996. By converting Marion's aftermarket
customers to the Company's service and support programs as soon as
practicable, the Company seeks not only to maintain existing levels of
aftermarket sales, but to increase its aftermarket penetration of Marion
accounts. Although the Company already has relationships with substantially
all of Marion's customers, to better serve these customers, the Company has
hired a number of Marion's field personnel, who will continue to be
responsible for servicing Marion's installed equipment base. The Company
also believes that the Marion Acquisition creates additional opportunities
to expand BMSI's and Minserco's operations, helping the Company to become
more competitive in the aftermarket for parts and services.
INTEGRATION OF PRODUCTS AND TECHNOLOGY. Three of Marion's five
equipment models and its best technology will be integrated into the
Company's existing product lines. Marion manufactured two basic models of
electric mining shovels. The smaller model, which represented six of
Marion's nine electric mining shovels sold during the past two years and
has been particularly popular in India, will be incorporated into the
Company's product line. The larger model is similar to the Company's most
popular electric shovel model and will therefore be discontinued. Two of
Marion's smaller special purpose dragline models will be incorporated into
the Company's product line to complement the larger models currently
offered by the Company.
COSTS AND EXPENSES ASSOCIATED WITH THE MARION ACQUISITION. The Company
expects to incur one-time costs and expenses of approximately $6.2 million
in connection with the Marion Acquisition and the integration of Marion's
business into the Company's operations. These costs primarily relate to
moving certain equipment from Marion, Ohio, to the Company's existing
facilities, relocating personnel, and consolidating offices and warehouses.
Under the terms of the purchase agreement, Global retained ownership of
Marion's manufacturing facility in Marion, Ohio, and is responsible for all
severance costs, pension expenses, and postretirement medical and other
benefits associated with the closing of Marion's manufacturing operations.
The Company's existing facilities and equipment are anticipated to be
adequate to fulfill expected sales with little need for additional capital
expenditures other than previously planned modernization of specific
equipment; however, there can be no assurance that this will be the case.
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INDUSTRY OVERVIEW
The large-scale surface mining equipment manufactured and serviced by the
Company is used primarily in coal, copper, and iron ore mines worldwide. Growth
in demand for these commodities is a function of population growth and
continuing improvements in standards of living in many areas of the world. The
market for new surface mining equipment is somewhat cyclical in nature due to
market fluctuations for these commodities; however, the aftermarket for parts
and services is more stable because these expensive, complex machines are
typically kept in continuous operation for 15 to 30 years and require regular
maintenance and repair throughout their productive lives.
Although total industry sales of new equipment have varied substantially
from year to year, management estimates that since 1987 total worldwide sales of
rotary blast hole drills, electric mining shovels and draglines have averaged
approximately $285 million annually. The largest markets for this mining
equipment have been in Australia, Canada, China, India, Russia, South Africa,
South America, and the United States. Together, these markets typically account
for approximately 90% of all new machines sold, although in any given year,
markets in other countries may assume greater importance. See "Risk Factors --
Cyclical Nature of Industry; Potential Fluctuations in Operating Results," and
"-- Competition."
MARKETS SERVED
While the Company's products are used in a variety of different types of
mining operations, including gold, phosphate, bauxite, and oil sands, as well as
for land reclamation, the Company manufactures surface mining equipment
primarily for large companies and quasi-governmental entities engaged in the
mining of coal, iron ore, and copper throughout the world. Until the late 1980s,
coal mining accounted for the largest percentage of industry demand for the
Company's machines, and it continues to be one of the largest users of
replacement parts and services. In recent years, however, copper and iron ore
mining operations have accounted for an increasingly greater share of new
machine sales. During the past five years, approximately 55% of the Company's
new equipment orders have gone to customers who mine copper, 32% to iron ore
mining customers, and 13% to coal mining customers. Nevertheless, while the
copper and iron ore mining industries have accounted for the majority of new
machine sales in recent years, the increasing worldwide demand for coal is
expected to continue and the Company expects that coal mining will account for
an increasing percentage of new machine sales over the next several years.
COPPER. From 1995 to 1996, copper consumption increased by 2.5% in the
United States, with European countries such as France, Germany, Italy and
Britain experiencing similar growth. This growth in demand is attributable
to both general economic growth, as well as increased use of copper in
high-tech industrial production. Unusual trading activity led to a sharp
decline in copper prices in mid-1996 from historically high levels; since
then, copper prices have recovered, and as a result, several new copper
projects have been put back on line and existing mines expanded in
Argentina, Chile, Indonesia, Mexico, and Sweden. These initiatives have
resulted in increased demand for the Company's excavation equipment in
these markets. In spite of the fluctuations during 1996, copper prices are
expected to remain relatively firm through 1997. According to Metal
Bulletin Research, an industry periodical, copper consumption is expected
to grow at approximately 2.3% in 1997.
IRON ORE. Although iron ore demand decreased with the worldwide
recession of 1992 and 1993, and Japanese and European iron ore buyers
lowered ore contract prices significantly in 1992 and again in 1993, there
was an increase in iron ore production in late 1994 that was sustained
through 1995 when global consumption increased, creating additional demand
for steel. In 1995, iron ore was the most widely traded non-energy
commodity in both value and volume, and the iron ore market passed the one
billion tons level, setting a new record for the worldwide industry. Prices
for iron ore began to recover slightly in 1995 and 1996, climbing back
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to 1992 levels. AME Mineral Economic analysts predict that iron ore
production will rise 10% by the year 2000.
COAL. The demand for steam coal, which represents approximately 85% of
total coal mining activity, is based largely on the demand for electric
power and the price and availability of competing sources of energy, such
as oil, natural gas, and nuclear power. Initially, the 1973 Arab oil
embargo resulted in an unprecedented increase in the demand for coal
production, reflecting expectations that oil prices would continue to rise.
Eventually the effects of a worldwide recession, escalating interest rates,
energy conservation efforts, and an increase in the world's supply of oil
resulted in a sharp drop in demand for coal. More recently, coal production
in the United States has been impacted by the Clean Air Act, causing higher
sulfur coal mines to be closed or to have outputs drastically curtailed.
Many machines have been shut down and a few have been relocated to lower
sulfur mines in eastern Appalachia and Wyoming's Powder River Basin where
excess production capacity and stagnant demand have driven coal prices
downward. Nevertheless, the increase in demand for coal in developing
countries with rapidly growing populations, such as India and China, has
stimulated coal mining production worldwide and is eventually expected to
increase both domestic and foreign demand for excavation equipment. The
Energy Information Administration is forecasting an increase in world
energy demand and an increase in world coal consumption.
The Company's excavation machines are used for land reclamation as well as
for mining, which has a positive effect on the demand for its products and
replacement parts and expands the Company's potential customer base. Current
federal and state legislation regulating surface mining and reclamation may
affect some of the Company's customers, principally with respect to the cost of
complying with, and delays resulting from, reclamation and environmental
requirements.
OEM PRODUCTS
The Company's line of original equipment manufactured ("OEM") products
includes a full range of rotary blast hole drills, electric mining shovels, and
draglines.
ROTARY BLAST HOLE DRILLS. Most surface mines require breakage or
blasting of rock, overburden, or ore by explosives. To accomplish this, it
is necessary to bore out a pattern of holes into which the explosives are
placed. Rotary blast hole drills are used to drill these holes, and are
usually described in terms of the diameter of the hole they bore. The
average life of a blast hole drill is 15 to 20 years.
The Company manufactures the world's top selling rotary blast hole
drills, having produced a majority of the estimated 69 drills sold in the
industry during 1995 and 1996. The Company offers a line of rotary blast
hole drills ranging in hole diameter size from 9.0 inches to 17.5 inches
and ranging in price from approximately $1.5 million to $2.8 million per
drill, depending on machine size and variable features.
In an effort to enhance drill sales and expand its market position,
during 1996 the Company introduced the Model 39R diesel hydraulic blast
hole drill, the Company's third drill model and first diesel hydraulic
blast hole drill. This innovative machine breaks new ground in
maneuverability and the ability to drill in difficult terrain, as well as
offering extraordinary drill productivity and functions unavailable in
other manufacturers' models.
ELECTRIC MINING SHOVELS. Mining shovels are primarily used to load
coal, copper ore, iron ore, other mineral-bearing materials, overburden, or
rock into trucks. There are two basic types of mining shovels, electric and
hydraulic. Electric mining shovels are able to handle larger shovels or
"dippers," allowing them to load greater volumes of rock and minerals,
while hydraulic shovels are smaller and more maneuverable. The Company
manufactures only electric mining shovels. The average life of an electric
mining shovel is 15 to 20 years.
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Shovels are characterized in terms of weight and dipper capacity. The
Company offers a full line of electric mining shovels, weighing from 400 to
1,000 tons and having dipper capacities from 12 to 80 cubic yards. Prices
range from approximately $3 million to approximately $9 million per shovel.
The Company's most popular electric mining shovel model is the Model 495B,
which is known for its reliability and productivity.
The Company's electric mining shovels continue to be extremely popular
in the surface mining industry. In the developing coal mining market of
China and in the rapidly growing Chilean copper mining market, Bucyrus
shovels have accounted for the majority of new electric mining shovels
purchased since 1988. Among the Company's business strategies is the
strategic placement of new electric mining shovels in high-profile North
American mining installations.
DRAGLINES. Draglines are primarily used to remove overburden, which is
the earth located over a coal or mineral deposit, by dragging a large
bucket through the overburden, carrying it away and depositing it in a
remote spoil pile. The Company's draglines weigh from 500 to 7,500 tons,
and are typically described in terms of their "bucket size," which can
range from nine to 220 cubic yards. The Company currently offers a full
line of models ranging in price from $10 million to over $60 million per
dragline. The average life of a dragline is 20 to 30 years.
Draglines are the industry's largest and most expensive type of
equipment, and while sales are sporadic, each dragline represents a
significant sales opportunity. Management therefore remains committed to
maintaining the Company's ability to produce these machines. In September
1997, the Company signed an agreement with an Australian mining company to
build the world's fourth largest dragline, which is scheduled for
completion by December 31, 1999. This is expected to generate net sales of
approximately $57.5 million over the next two and a half years.
AFTERMARKET PARTS AND SERVICES
The Company has a comprehensive aftermarket business that supplies
replacement parts and services for the surface mining industry. Although the
vast majority of the Company's sales of aftermarket parts and services has been
in support of the large installed equipment base of over 900 Bucyrus machines
worldwide, the Company also manufactures parts and provides services for other
manufacturers' installed equipment. The Company's aftermarket services include
maintenance and repair labor, technical advice, refurbishment, and relocation of
older, installed machines, particularly draglines. The Company also provides
engineering, manufacturing, and servicing for the consumable rigging products
that attach to dragline buckets (such as dragline teeth and adapters, shrouds,
dump blocks, and chains) and shovel dippers (such as dipper teeth, adapters, and
heel bands).
During 1996, the Company generated $156.4 million (59% of total net sales)
from its aftermarket business. In general, the Company realizes higher margins
on sales of parts and services than it does on sales of new machines. Moreover,
because the expected life of large, complex mining machines ranges from 15 to 30
years, the Company's aftermarket business is inherently more stable and
predictable than the fluctuating market for new products. Over the life of a
machine, net sales generated from aftermarket parts and services can exceed the
original purchase price.
Approximately 70% of the Company's aftermarket business relates to
providing parts and services to newer mining equipment operating in
international markets, while the remaining 30% of the aftermarket business
caters to equipment located in the United States, which is generally older. A
substantial portion of the Company's international repair and maintenance
services are provided through its global network of wholly-owned foreign
subsidiaries and overseas offices, operating in Australia, Brazil, Canada,
Chile, China, England, India, Mauritius, and South Africa. The Company's two
domestic subsidiaries, Minserco and BMSI, provide repair and maintenance
services
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throughout North America. Minserco, which maintains offices in Florida, Texas,
West Virginia, and Wyoming, provides comprehensive structural and mechanical
engineering, non-destructive testing, repairs and rebuilds of machine
components, product and component upgrades, contract maintenance, turnkey
erections, and machine moves. Minserco's services are provided almost
exclusively to maintenance and repair of Bucyrus machines operating in North
America. BMSI, located in Boonville, Indiana, builds replacement parts and
provides repair and rebuild services both for Bucyrus machines and other
manufacturers' equipment. The majority of BMSI's business is located in North
America.
To comply with the increasing aftermarket demands of larger mining
customers, the Company offers comprehensive maintenance and repair contracts.
Under these contracts, the Company provides all replacement parts, regular
maintenance services, and necessary repairs for the excavation equipment at a
particular mine with an on-site support team. In addition, two of these
contracts call for Company personnel to operate the equipment serviced. MARCs
are highly beneficial to the Company's mining customers because they promote
high levels of equipment reliability and performance, allowing the customer to
concentrate on mining production. MARCs typically have terms of three to five
years with standard termination and renewal provisions, although some contracts
allow termination by the customer for any cause. In recent years, the Company
has aggressively promoted its MARC program because it provides the Company with
a predictable, high margin form of business. New mines in areas such as Chile
and Argentina are the primary targets for MARCs because it is difficult and
expensive for mining companies to establish the necessary infrastructures for
ongoing maintenance and repair in underdeveloped or remote locations. The
Company currently operates eight MARCs and has plans to expand this program.
CUSTOMERS
The Company does not consider itself dependent upon any single customer or
group of customers; however, on an annual basis a single customer may account
for a large percentage of sales, particularly new machine sales. For example,
during fiscal 1996, sales to Compania Minera Dona Ines de Collahuasi, S.A., a
Chilean copper mining company, accounted for approximately 14% of the Company's
net sales. In fiscal 1994 and 1995, BHP Coal Pty. Ltd., an Australian mining
company, accounted for approximately 20% and 22%, respectively, of the Company's
net sales, and approximately 26% and 17%, respectively, of Marion's net sales.
See "Risk Factors -- Cyclical Nature of Industry; Potential Fluctuations in
Operating Results."
MARKETING, DISTRIBUTION AND SALES
In the United States, new mining machinery is primarily sold directly by
Company personnel, and to a lesser extent, through a northern Minnesota
distributor who supplies customers in the iron ore mining regions of the Upper
Midwest. Outside of the United States, new equipment is sold by Company
personnel, through independent distributors and through the Company's
subsidiaries and offices located in Australia, Brazil, Canada, Chile, China,
England, India, Mauritius, and South Africa. Aftermarket parts and services are
primarily sold directly through the Company's foreign subsidiaries and offices
and through the Company's domestic subsidiaries, Minserco and BMSI. The Company
believes that marketing through its own global network of subsidiaries and
offices offers better customer service and support by providing customers with
direct access to the Company's technological and engineering expertise.
With the exception of the MARC business, all the Company's sales are on a
project-by-project basis. Typical payment terms for new equipment require a down
payment, and invoicing is done on a percent of completion basis, such that a
substantial portion of the purchase price is received by the time shipment is
made to the customer. Sales contracts for machines are predominantly at fixed
prices, with escalation clauses in certain cases. Most sales of replacement
parts call for prices in effect at the time of order. During 1996, price
increases from inflation had a relatively minor impact on the Company's reported
net sales.
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FOREIGN OPERATIONS
A substantial portion of the Company's net sales and operating earnings is
attributable to operations located abroad. Over the past five years, 76% of the
Company's new machine sales have been in international markets. The Company's
foreign sales, consisting of exports from the United States and sales by
consolidated foreign subsidiaries, totaled $191.9 million in 1996, $169.1
million in 1995, and $131.8 million in 1994.
The Company's largest foreign markets are in Australia, Chile, China, and
South Africa. The Company also employs direct marketing strategies in developing
markets, such as Brazil, India, Indonesia, Jordan, Morocco, and Russia. In
recent years, Australia and South Africa have emerged as strong producers of
metallurgical coal, while Chile and South Africa have continued to be leading
producers of other minerals, primarily copper and gold, respectively. The
Company expects that India and Russia will become major coal producing regions
in the future. In India, the world's second most populous country, the demand
for coal as a major source of energy is expected to increase over the next
several decades.
New machine sales in foreign markets are supported by the Company's
established network of foreign subsidiaries and overseas offices that directly
market the Company's products and provide ongoing services and replacement parts
for equipment installed abroad. The availability and convenience of the services
provided through this worldwide network not only promotes high margin
aftermarket sales of parts and services, but also gives the Company an advantage
in securing new machine orders.
Bucyrus and its U.S. subsidiaries normally price their products, including
direct sales of new equipment to foreign customers, in U.S. dollars. Foreign
subsidiaries normally procure and price aftermarket replacement parts and repair
services in the local currency. Approximately 70% of the Company's net sales are
priced in U.S. dollars. The value, in U.S. dollars, of the Company's investments
in its foreign subsidiaries and of dividends paid to the Company by those
subsidiaries will be affected by changes in exchange rates. The Company does not
normally enter into currency hedges, although it may do so with regard to
certain individual contracts. See "Risk Factors -- Foreign Operations."
COMPETITION
There are a limited number of manufacturers of new surface mining
equipment. The Company is one of two manufacturers of electric mining shovels
and draglines. The Company's only competitor in electric mining shovels and
draglines is Harnischfeger Corporation, although electric mining shovels also
compete against hydraulic shovels of which there are at least six other
manufacturers. In rotary blast hole drills, the Company competes with at least
three other manufacturers, including Harnischfeger Corporation. Methods of
competition are diverse and include product design and performance, service,
delivery, application engineering, pricing, financing terms, and other
commercial factors. See "Risk Factors -- Competition."
For most owners of the Company's machines, the Company is the primary
replacement source for large, heavily engineered, integral components; however,
the Company encounters intense competition for sales of smaller, less
sophisticated, consumable replacement parts and repair services in certain
markets. The Company's competition in parts sales consists primarily of smaller,
independent firms called "will-fitters," that produce copies of the parts
manufactured by the Company and other original equipment manufacturers. These
copies are generally sold at lower prices than genuine parts produced by the
manufacturer. Management estimates that there are over 90 will-fitters competing
with the Company in the aftermarket business, almost exclusively in North
America, and that they accounted for an estimated 75% of North American sales in
the aftermarket parts and service business in 1996. Outside North America,
customers mainly rely upon the Company's subsidiaries to provide aftermarket
parts and services.
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The Company has a variety of programs to attract large volume customers for
its replacement parts. Although will-fitters engage in significant price
competition in parts sales, the Company possesses clear non-price advantages
over will-fitters. The Company's engineering and manufacturing technology and
marketing expertise exceed that of its will-fit competitors, who are in many
cases unable to duplicate the exact specifications of genuine Bucyrus parts.
Moreover, use of parts not manufactured by the Company can void the warranty on
a new Bucyrus machine, which generally runs for one year on new equipment, with
certain components being warranted for longer periods.
RAW MATERIALS AND SUPPLIES
The Company purchases from outside vendors the semi- and fully-processed
materials (principally structural steel, castings, and forgings) required for
its manufacturing operations, and other items, such as electrical equipment,
that are incorporated directly into the end product. The Company's foreign
subsidiaries purchase components and manufacturing services both from local
subcontractors and from Bucyrus. Certain additional components are sometimes
purchased from subcontractors, either to expedite delivery schedules in times of
high demand or to reduce costs. Moreover, in countries where local content
preferences or requirements exist, local subcontractors are used to manufacture
a substantial portion of the components required in the Company's foreign
manufacturing operations. Although the Company is not dependent upon any single
supplier, there can be no assurance that the Company will continue to have an
adequate supply of raw materials or components necessary to enable it to meet
the demand for its products. Competitors are believed to be subject to similar
conditions.
MANUFACTURING
A substantial portion of the design, engineering, and manufacturing of
Bucyrus machines is done at the Company's South Milwaukee plant. The size and
weight of these mining machines dictates that the machines be shipped to the job
site in sub-assembled units where they are assembled for operation with the
assistance of Company technicians. Planning and on-site coordination of machine
assembly is a critical component of the Company's service to its customers.
Moreover, to reduce lead time and assure that customer delivery requirements are
met, the Company maintains an inventory of sub-assembled units for frequently
utilized components of various types of equipment.
The Company manufactures and sells replacement parts and components and
provides comprehensive aftermarket service for its entire line of mining
machinery. The Company's large installed base of surface mining machinery
provides a steady stream of parts sales due to the long useful life of the
Company's machines, averaging 20 to 30 years for draglines and 15 to 20 years
for electric mining shovels and blast hole drills. Parts sales and aftermarket
services comprise a substantial portion of the Company's net sales. The Company
also provides aftermarket service for certain equipment of other original
equipment manufacturers through BMSI.
Although a majority of the Company's operating profits are derived from
sales of parts and services, the long-term prospects of the Company depend upon
maintaining a large installed equipment base worldwide. Therefore, the Company
remains committed to improving the design and engineering of its existing line
of machines, as well as developing new products. In 1996, a three year machine
shop modernization program began in the Company's South Milwaukee manufacturing
facility that involves a $20 million investment in the latest technology in the
machine tool industry. The program is aimed at reduced lead times, quicker
turnaround, reduced in-process inventory, and overall cost reduction. See "--
Business Strategy -- Plant and Equipment Modernization."
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PROPERTIES
The Company's principal manufacturing plant in the United States is located
in South Milwaukee, Wisconsin, and is owned by the Company. This plant comprises
approximately 1,038,000 square feet of floor space. A portion of this facility
houses the Company's corporate offices. The major buildings at this facility are
constructed principally of structural steel, concrete, and brick and have
sprinkler systems and other devices for protection against fire. The buildings
and equipment therein, which include machine tools and equipment for fabrication
and assembly of the Company's mining machinery, including draglines, electric
mining shovels, and blast hole drills, are well-maintained, in good condition,
and in regular use.
The Company leases a facility in Memphis, Tennessee, which has
approximately 110,000 square feet of floor space and is used as a central parts
warehouse. The current lease is for five years commencing in July 1996 and
contains an option to renew for an additional five years.
BMSI leases a facility in Boonville, Indiana which has approximately 60,000
square feet of floor space on a 5.84 acre parcel of land. The facility has the
manufacturing capability of large machining, gear cutting, heavy fabricating,
rebuilding, and stress relieving. The major manufacturing buildings are
constructed principally of structural steel with metal siding.
The Company also has administrative and sales offices and, in some
instances, repair facilities and parts warehouses, at certain of its foreign
locations, including Australia, Brazil, Canada, Chile, China, India, and South
Africa. The Company plans to do business out of Marion's offices in Australia,
and close down the Company's existing leased offices there.
EMPLOYEES
As of July 31, 1997, the Company had approximately 1,413 full-time
employees, approximately 892 of whom were working primarily in the United
States. In addition, from time to time the Company employs part-time employees
to handle peak loads. Of the 797 employees at the Company's South Milwaukee
facility, 418 are represented by the United Steelworkers of America. In May
1997, the union ratified a new four year agreement with the Company that expires
on April 30, 2001. See "Risk Factors -- Labor Relations."
LEGAL PROCEEDINGS
JOINT PROSECUTION. The Company and its former affiliate Jackson National
Life Insurance Company ("JNL") entered into a joint prosecution agreement (the
"Joint Prosecution Agreement") dated as of August 21, 1997 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 10% 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 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
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an amount sufficient to result in the Company receiving any portion thereof
under the formula described above.
Consistent with the Joint Prosecution Agreement, on September 25, 1997, the
Company and JNL commenced an action against Milbank (the "Milwaukee Action") in
the Milwaukee County Circuit Court. The Company seeks damages against Milbank
arising out of Milbank's alleged malpractice, breach of fiduciary duty, common
law fraud, breach of contract, unjust enrichment and breach of the obligation of
good faith and fair dealing. JNL seeks damages against Milbank arising out of
Milbank's alleged tortious interference with contractual relations, abuse of
process and common law fraud. The Company and JNL seek to recover actual and
punitive damages from Milbank. On October 1, 1997, Milbank removed the Milwaukee
Action to the United States District Court for the Eastern District of Wisconsin
(the "Milwaukee Federal Court"). On October 7, 1997, the Company and JNL moved
to remand the proceeding to the Milwaukee County Circuit Court, which motion is
currently pending before the Milwaukee Federal Court. Milbank's response to the
complaint in the Milwaukee Action is due by December 1, 1997. The Milwaukee
Action 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.
On September 23, 1997, Minserco, Inc., one of the Guarantors, was found
liable to BR West Enterprises, Inc. d/b/a West Machine and Tool Works ("West")
in litigation pending in the United States District Court for the Eastern
District of Texas (the "Texas Court"), for damages claimed with regard to an
alleged joint venture agreement (the "Minserco Litigation"). On October 29,
1997, a final judgment was entered in the amount of $4.3 million, including
attorney's fees and costs. Minserco strongly disputes the Findings of Fact and
Conclusions of Law entered by the Texas Court and intends to seek a new trial
and, if not successful to vigorously appeal the case to the United States Court
of Appeals for the Fifth Circuit. On November 5, 1997, Bucyrus was sued by West
in the Texas Court on substantially similar grounds asserted in the Minserco
Litigation in an apparent attempt to hold Bucyrus liable for the damages awarded
to West in the Minserco Litigation. The new complaint also seeks punitive
damages in an unspecified amount. It is the view of management that the
Company's ultimate liability, if any, in these actions is not expected to have a
material effect on the Company's financial position or results of operations,
although no assurance to that effect can be given.
The Company is normally subject to numerous product liability claims, many
of which relate to products no longer manufactured by Bucyrus or its
subsidiaries, and other claims arising in the ordinary course of business. The
Company has insurance covering most of said claims, subject to varying
deductibles ranging from $0.3 million to $3.0 million, and has various limits of
liability depending on the insurance policy year in question. It is the view of
management that the final resolution of said claims and other similar claims
which are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position or results
of operations, although no assurance to that effect can be given.
The Company is involved in various other litigation arising in the normal
course of business. It is the view of management that the Company's recovery or
liability, if any, under pending litigation is not expected to have a material
effect on the Company's financial position or results of operations, although no
assurance to that effect can be given.
ENVIRONMENTAL AND RELATED MATTERS
The Company's operations and properties are subject to a broad range of
federal, state, local and foreign laws and regulations relating to environmental
matters, including laws and regulations governing discharges into the air and
water, the handling and disposal of solid and hazardous substances and wastes,
and the remediation of contamination associated with releases of hazardous
substances at Company facilities and at off-site disposal locations. These laws
are complex,
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change frequently and have tended to become more stringent over time. Future
events, such as compliance with more stringent laws or regulations, or more
vigorous enforcement policies of regulatory agencies or stricter or different
interpretations of existing laws, could require additional expenditures by the
Company, which may be material. See "Risk Factors -- Environmental and Related
Matters."
Certain environmental laws, such as CERCLA, provide for strict, joint and
several liability for investigation and remediation of spills and other releases
of hazardous substances. Such laws may apply to conditions at properties
presently or formerly owned or operated by an entity or its predecessors, as
well as to conditions at properties at which wastes or other contamination
attributable to an entity or its predecessors come to be located.
The Company was one of 53 entities named by the U.S. Environmental
Protection Agency ("EPA") as potentially responsible parties ("PRPs") with
regard to the Millcreek dumpsite, located in Erie County, Pennsylvania, which is
on the National Priorities List of sites for cleanup under CERCLA. The Company
was named as a result of allegations that it disposed of foundry sand at the
site in the 1970's. Both the United States government and the Commonwealth of
Pennsylvania initiated actions to recover cleanup costs; the Company has settled
with both with respect to its liability for past costs. In addition 37 PRPs,
including the Company, have received Administrative Orders issued by the EPA
pursuant to Section 106(a) of CERCLA to perform site capping and flood control
remediation at the Millcreek site. The Company is one of 18 parties responsible
for a share of the estimated $7.0 million in costs, which share is presently
proposed as per capita but may be subject to reallocation before the conclusion
of the case.
In December 1990, the Wisconsin Department of Natural Resources ("DNR")
conducted a pre-remedial screening site inspection on property owned by the
Company located at 1100 Milwaukee Avenue, in South Milwaukee, Wisconsin.
Approximately 35 acres of this site were allegedly used as a landfill by the
Company until approximately 1983. The Company disposed of certain manufacturing
wastes at the site, primarily foundry sand. DNR's Final Site Screening Report,
dated April 16, 1993, summarized the results of additional investigation. A DNR
Decision Memo, dated July 21, 1991, which was based upon the testing results
contained in the Final Site Screening Report, recommended additional
groundwater, surface water, sediment and soil sampling. To date, the Company is
not aware of any initiative by the DNR to require any further action with
respect to this site. Consequently, the Company has not regarded and does not
regard, this site as presenting a material contingent liability. There can be no
assurance, however, that additional investigation by the DNR will not be
conducted with respect to this site at some later date or that this site will
not in the future require removal or remedial actions to be performed by the
Company, the costs of which could, depending on the circumstances, be material.
Prior to 1985, a wholly owned indirect subsidiary of Bucyrus provided
comprehensive general liability insurance coverage for affiliate corporations.
The subsidiary issued such policies for occurrences during the years 1974 to
1984, which policies could involve material liability. Claims have been made
under certain of these policies for certain potential CERCLA liabilities of
former Bucyrus subsidiaries. It is possible that other claims could be asserted
in the future with respect to such policies. While the Company does not believe
that liability under such policies will result in material costs, this cannot be
guaranteed.
Along with multiple other parties, the Company or its subsidiaries are
currently PRPs under CERCLA and analogous state laws at three additional sites
at which Bucyrus and/or its subsidiaries (including the above referenced
insurance subsidiary by insurance claim) may incur future costs. While CERCLA
imposes joint and several liability on responsible parties, liability for each
site is likely to be apportioned among the parties. The Company does not believe
that its potential liability in connection with these sites or any other
discussed above, either individually or in the aggregate, will have a material
adverse effect on the Company's business, financial condition or results of
operations. However, the Company cannot guarantee that it will not incur cleanup
liability in the
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future with respect to sites formerly or presently owned or operated by the
Company, or with respect to off-site locations, the costs of which could be
material.
The Company has also been named as a defendant in seven pending premises
liability asbestos cases, which are proceeding both in the state courts of
Indiana and federal court. In all these cases, insurance carriers have accepted
the defense of such cases. These cases are in preliminary stages and while the
Company does not believe that costs associated with these matters will be
material, it cannot guarantee that this will be the case.
While no assurance can be given, the Company believes that expenditures for
compliance and remediation will not have a material effect on its capital
expenditures, earnings or competitive position.
PATENTS, LICENSES AND FRANCHISES
The Company has a number of United States and foreign patents, patent
applications and patent licensing agreements. It does not consider its business
to be materially dependent upon any patent, patent application, or patent
license agreement.
CHAPTER 11 REORGANIZATION
On February 4, 1988, the Company was acquired in a leveraged buyout by
former members of management and a group of investors led by Goldman, Sachs &
Co. and Broad Street Investment Fund (the "LBO"). The Company was acquired for
approximately $300 million of which only $2.0 million was equity.
Although the Company's strong aftermarket parts business covered most of
its cash flow requirements, it was insufficient to service the LBO debt and
simultaneously provide the working capital necessary to build new machines.
Moreover, the Company's former management employed a strategy of selling new
machines below cost in order to maintain market share and to compensate its
customers for the long lead times that resulted from the lack of sufficient
working capital to stock the components required to match the lead times of its
competitors.
While the Company experienced increasing net sales from 1988 to 1991, the
Company continued to increase its use of leverage. Additionally, in 1990 the
Company settled tax disputes for the years 1977 to 1982 that required an
additional $22 million of borrowings. Subsequently, in January 1993, in the
midst of a cyclical downturn in the mining industry, the Company's interest
expense obligations increased dramatically as the interest rates on several
issues of the Company's debt obligations reset resulting in the majority of the
Company's debt obligations accruing interest at effective rates ranging from 15%
to in excess of 20%. The Company subsequently announced its intention not to pay
interest on a large majority of its debt obligations, and in February 1994, the
Company filed a prepackaged plan of reorganization under Chapter 11 of the U.S.
Bankruptcy Code. In December 1994, the Company's plan of reorganization was
confirmed.
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MANAGEMENT
DIRECTORS
Directors of Bucyrus are elected annually and hold office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. The executive officers of Bucyrus serve at the discretion of Bucyrus'
Board of Directors (the "Board").
The following table sets forth, for each of the six directors of Bucyrus,
information as of the date of this Prospectus regarding their names, ages,
principal occupations, and other directorships in certain companies held by
them. Each director currently on the Board is a designee of AIPAC. Each of the
directors took office either at the time of or after the AIP Merger. Mr.
Hildebrand previously served on the Board from March 11, 1996 until the
effective date of the AIP Merger. 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 above 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>
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., Day International Group, Inc. and Easco
Corporation. He formerly served on the boards of Avis,
Inc., ITT Life Insurance Corporation and Valero Energy
Corporation.
Willard R. Hildebrand................ 58 Mr. Hildebrand has been the President and Chief
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.
Kim A. Marvin........................ 35 Mr. Marvin is a Director, the Secretary and a Vice
President of 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.
</TABLE>
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<TABLE>
<S> <C> <C>
Robert L. Purdum.................... 62 Mr. Purdum is a Director and a Managing Director of American
Industrial Partners Corporation. Mr. Purdum was elected as the
Chairman of the Company's Board on November 5, 1997. Mr. Purdum
retired as Chairman of Armco Inc. 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., Day
International Group, Inc. and GMI Engineering & Management Institute,
Inc.
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 American
Industrial Partners and has been a director and officer of the firm
since 1989. He is currently a director of Easco Corporation,
Sweetheart Holdings, Inc. and Derby International.
Lawrence W. Ward, Jr. .............. 44 Mr. Ward is a Director and the President of 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 Corporation, Day International Group, Inc. and RBX
Corporation.
</TABLE>
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<PAGE> 75
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 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. 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. See "-- Employment
Agreements; Change in Control" below.
<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. 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. Mr. Hildebrand was a director of
the Company from March 11, 1996 until the effective
date of the AIP Merger, and was again elected to
the Board on November 5, 1997.
Craig R. Mackus................... Mr. Mackus, age 45, has served as Secretary since 1974
May 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>
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<PAGE> 76
COMPENSATION OF DIRECTORS
Directors of Bucyrus are not compensated for their service as directors,
except Mr. Purdum who is paid $12,500 per month, regardless of whether meetings
are held or the number of meetings held. Directors are reimbursed for
out-of-pocket expenses.
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 Bucyrus' 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
ANNUAL -----------------------
COMPENSATION(1) AWARDS
------------------- -----------------------
RESTRICTED
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 1995 (4) -- -- -- --
and Chief Executive
Officer
CRAIG R. MACKUS................... 1996 $123,000 $ 26,975 -- -- $ 4,090
Secretary and 1995 114,900 10,000 -- -- 3,732
Controller 1994 105,030 -- -- -- 3,447
MICHAEL G. ONSAGER................ 1996 $101,672 $ 22,666 -- -- $ 3,336
Vice President -- 1995 80,361 -- -- -- 2,617
Engineering 1994 70,255 -- -- -- 2,291
THOMAS B. PHILLIPS................ 1996 $119,168 $ 26,976 -- -- $ 4,299
Vice President -- 1995 104,202 10,000 -- -- 3,833
Materials 1994 97,096 -- -- -- 3,397
TIMOTHY W. SULLIVAN............... 1996 $128,004 $ 34,644 -- -- $ 4,260
Vice President -- 1995 114,932 10,000 -- -- 4,124
Marketing 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 Common Stock
granted under the 1996 Employees' Stock Incentive Plan (the "Employees'
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 restricted stock holdings of the named individual were 300,000 and
$2,625,000, respectively. All of the restrictions on the restricted stock
lapsed in connection with the AIP Tender Offer and such shares were tendered
and purchased therein.
(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
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<PAGE> 77
($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.
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 is described
below.
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 shares of
restricted stock and options for 200,000 shares of Common Stock at 55% of its
grant date market price, all of which were tendered and purchased (in the case
of restricted stock) or cancelled and redeemed (in the case of stock options) in
connection with the AIP Merger. Mr. Hildebrand 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. 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 of Common
Stock, as well as stock appreciation rights to
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<PAGE> 78
50,000 shares, all of which were cancelled and redeemed in connection with the
AIP Merger. 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.
Mr. Sullivan, Mr. Mackus, Mr. Phillips, and Mr. 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AIP TENDER OFFER AND AIP MERGER
Upon the effective date of the AIP Merger, all issued and outstanding stock
options and SARs were cancelled, and regardless of whether such stock options or
SARs had then vested or were exercisable, each holder of stock options or SARs
received cash per share equal to $18.00 less the "strike price" of such stock
options or SARs. The aggregate value of this treatment of stock options and SARs
was approximately $12.3 million.
The Company's directors and executive officers received an aggregate of
approximately $10.3 million in the AIP Tender Offer and the AIP Merger in
consideration for their shares of Common Stock, stock options and SARs. Of such
$10.3 million, Mr. Hildebrand received approximately $8.0 million.
MANAGEMENT SERVICES AGREEMENT
AIP expects to provide substantial ongoing financial and management
services to the Company utilizing the extensive operating and financial
experience of AIP's principals. AIP will receive an annual fee of $1.5 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 Notes, and will be reimbursed for out-of-pocket
expenses. The fees will be paid to AIP pursuant to a management services
agreement among AIP, Bucyrus and the Guarantors and will be subordinated in
right of payment to the Notes.
AIP TRANSACTION FEE
At the close of the AIP Merger, AIP was paid a fee of $4.0 million and
reimbursed for out-of-pocket expenses in connection with the negotiation of the
AIP Agreement and for providing certain investment banking services to the
Company including the arrangement and negotiation of the terms of Notes and for
other financial advisory and management consulting services.
FUTURE AGREEMENTS WITH EXECUTIVE OFFICERS
Although no specific arrangements are in place, AIP presently intends to
offer the Company's executive officers the opportunity to own up to 10% of the
Company's equity through a combination of direct investments and option
programs.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Von's has, pursuant to its Bylaws, established a policy indemnifying
officers and directors, to the fullest extent allowed by law, for liabilities
and expenses arising out of their actions in their capacities as officers and
directors. This provision does not exclude indemnification for liability on the
part of officers and directors under the Securities Act arising out of material
misrepresentations
72
<PAGE> 79
or omissions contained in a registration statement filed under the Securities
Act. Although the Certificates of Incorporation and Bylaws of Bucyrus, Minserco,
and Boonville contain no such provisions, such indemnification is nevertheless
authorized by the Delaware General Corporation Law. However, insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons pursuant to the
foregoing provisions, the Issuers have been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
PRINCIPAL SHAREHOLDERS
As a result of the AIP Merger, Bucyrus has a single shareholder, AIPAC,
whose business address is One Maritime Plaza, Suite 2525, San Francisco,
California, 94111. See "Acquisition of the Company by AIP."
73
<PAGE> 80
REVOLVING CREDIT FACILITY
In connection with the Private Offering, Bucyrus has entered into a new
senior bank credit agreement (the "Revolving Credit Facility") with Bank One,
Wisconsin ("Bank One"). Bank One has provided working capital and other
financing, including a letter of credit facility, to Bucyrus since 1988.
Pursuant to the Revolving Credit Facility, Bucyrus replaced its former $15
million letter of credit and revolving loan facility with the $75 million
Revolving Credit Facility. The Revolving Credit Facility is expected to be used
in the future for general working capital purposes and capital expenditures. As
of June 30, 1997, on a pro forma basis after giving effect to the Transactions,
approximately $23.3 million would have been outstanding under the Revolving
Credit Facility. See "Capitalization." Borrowings under the Revolving Credit
Facility bear interest at variable rates and are subject to a borrowing base
formula, which at June 30, 1997, would have permitted borrowings and letters of
credit of approximately $68.7 million (including the reserve referred to in (B)
in the following paragraph).
The $75 million Revolving Credit Facility includes a $25 million sublimit
for standby letters of credit. The issuance of standby letters of credit will
reduce the amount available for direct borrowings under the Revolving Credit
Facility. Availability under the Revolving Credit Facility is limited to a
borrowing base which is defined as (A) the sum of (i) 80% of North American
accounts receivable; (ii) 50% of domestic finished goods and raw materials;
(iii) a declining percentage (initially 30%) of domestic work-in-process; (iv)
80% of the estimated orderly liquidation value (as determined by a formula) of
Bucyrus and domestic subsidiaries machinery and equipment; and (v) 30% of
qualified domestic net unbilled progress billing receivables minus (B) a reserve
equal to one semi-annual interest payment on the Notes. The obligations of
Bucyrus under the Revolving Credit Facility are guaranteed by certain
subsidiaries, and the Revolving Credit Facility is secured by substantially all
of the assets of the Company, other than real property and assets of foreign
subsidiaries. Pricing on the Revolving Credit Facility is, at the option of
Bucyrus, (i) Bank One's base rate or Federal Funds Rate plus 0.5% per annum plus
an applicable margin ranging from 0% to 0.5% dependent on the ratio of adjusted
funded debt to EBITDA (as defined), or (ii) LIBOR plus an applicable margin
ranging from 1.5% to 2.75% dependent on the ratio of adjusted funded debt to
EBITDA (as defined). Letters of credit will be priced at 50% of the applicable
LIBOR interest rate margin for non-financial letters of credit and 100% of the
applicable LIBOR interest rate margin in the case of financial letters of
credit. The initial LIBOR margin is 2.75%.
The Revolving Credit Facility contains certain restrictive covenants that
impose limitations upon, among other things, the ability of Bucyrus and the
guarantors to incur liens; merge, consolidate or dispose of assets; make loans
and investments; incur indebtedness; engage in certain transactions with
affiliates; incur contingent obligations; enter into joint ventures; enter into
lease agreements; pay dividends and make other distributions; change its
business; redeem the Notes; and make capital expenditures.
The Revolving Credit Facility also contains covenants requiring Bucyrus (A)
to maintain certain financial ratios as follows: (i) ratio of adjusted funded
debt to EBITDA (as defined); (ii) fixed charge coverage ratio; and (iii)
interest coverage ratio; and (B) to maintain a minimum net worth.
All extensions of credit under the Revolving Credit Facility are subject to
customary documentation and the continued accuracy of all representations and
warranties as well as the absence of any Material Adverse Effect or Default or
Event of Default. Capitalized terms not defined herein have the meanings set
forth in the Revolving Credit Facility.
The Revolving Credit Facility may be Refinanced (as defined in the
Indenture) from time to time in accordance with the terms of the Indenture. See
"Description of the Notes -- Certain Covenants -- Limitation on Incurrence of
Indebtedness" and "-- Certain Definitions."
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<PAGE> 81
DESCRIPTION OF THE NOTES
GENERAL
The Existing Notes were, and the Exchange Notes will be, issued pursuant to
an Indenture dated as of September 24, 1997 ("Indenture") among Bucyrus, the
Guarantors, and Harris Trust and Savings Bank, as Trustee ("Trustee"). The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 as in effect on the
date the Indenture is qualified thereunder (the "Trust Indenture Act" provided,
however that in the event that the Trust Indenture Act is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended). The Notes are subject to all
such terms, and holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement of those terms.
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Note is available upon request
to Bucyrus at the address set forth under "Available Information." The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture, including the definitions of certain terms therein,
and those terms made a part thereof by the Trust Indenture Act. Capitalized
terms used herein and not otherwise defined have the meanings set forth under
"-- Certain Definitions."
Principal of and interest on the Notes will be payable, and the Notes may
be exchanged or transferred, at the office or agency of Bucyrus in the Borough
of Manhattan, City of New York, which, unless otherwise provided by Bucyrus,
will be the offices of the Trustee. At the option of Bucyrus, payment of
interest may be made by check mailed to the addresses of holders as such
addresses appear in the Note register.
The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000.
TERMS OF THE NOTES
The Existing Notes are, and the Exchange Notes will be, general unsecured
obligations of Bucyrus, limited to $150 million aggregate principal amount, and
will mature on September 15, 2007. The Notes bear interest at the rate per annum
shown on the cover page hereof from the Issue Date, or from the most recent date
to which interest has been paid or provided for, payable semi-annually on March
15 and September 15 of each year, commencing March 15, 1998, to holders of
record at the close of business on the immediately preceding March 1 and
September 1, respectively. Bucyrus will pay interest on overdue principal at 1%
per annum in excess of such rate, and it will pay interest on overdue
installments of interest at such higher rate to the extent lawful. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
GUARANTEES
Each of the existing and future Restricted Subsidiaries other than any
Foreign Subsidiary (the "Guarantors") has irrevocably and unconditionally
Guaranteed (the "Guarantees"), as primary obligors and not merely as sureties,
on an unsecured senior basis the performance and punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all obligations of
Bucyrus under the Indenture and the Notes, whether for payment of principal of
or interest on the Notes, expenses, indemnification or otherwise (all such
obligations guaranteed by the Guarantors being herein called the "Guaranteed
Obligations"). The Guarantors agreed to pay, in addition to the amount stated
above, any and all expenses (including reasonable counsel fees and expenses)
incurred by the Trustee or the Holders in enforcing any rights under the
Guarantees. Each Guarantee is limited in amount to an amount not to exceed the
maximum amount that can be Guaranteed by the applicable Guarantor without
rendering such Guarantee voidable under applicable
75
<PAGE> 82
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. See "Risk Factors -- Fraudulent
Conveyance Considerations."
Each Guarantee is a continuing guarantee and shall (a) remain in full force
and effect until payment in full of all the Guaranteed Obligations, (b) be
binding upon each Guarantor, and (c) inure to the benefit of and be enforceable
by the Trustee, the holders and their successors, transferees and assigns. A
Guarantee will be released upon the sale (including by merger, consolidation,
combination or otherwise) of all the Capital Stock, or all or substantially all
of the assets, of the applicable Guarantor if such sale is made in compliance
with the Indenture.
RANKING
The Existing Notes are, and the Exchange Notes will be general unsecured
obligations of Bucyrus and rank senior in right of payment to all future
Indebtedness of Bucyrus that is, by its terms, expressly subordinated in right
of payment to the Notes and pari passu in right of payment with all existing and
future unsecured obligations of Bucyrus that are not so subordinated. The
Existing Notes are, and the Exchange Notes will be fully and unconditionally
guaranteed by each domestic Restricted Subsidiary. Each Guarantee is a general
unsecured obligation of the Guarantor thereof and ranks senior in right of
payment to all future Indebtedness of such Guarantor that is, by its terms,
expressly subordinated in right of payment to such Guarantee and pari passu in
right of payment with all existing and future unsecured obligations of such
Guarantor that are not so subordinated.
The Existing Notes and each Guarantee are, and the Exchange Notes will be,
effectively subordinated to secured Indebtedness of Bucyrus and the applicable
Guarantor, respectively to the extent of the assets securing such Indebtedness.
The Bank Credit Facility is secured by substantially all assets of Bucyrus and
certain of its Subsidiaries (including machinery and equipment, inventory and
receivables, other intangibles, and 65% of the stock of Bucyrus' foreign
subsidiaries) other than real property.
The Existing Notes are, and the Exchange Notes will be, effectively
subordinated to all existing and future liabilities, including Indebtedness, of
Bucyrus' foreign subsidiaries. Claims of creditors of such subsidiaries,
including trade creditors, will generally have priority as to the assets of such
subsidiaries over the claims of Bucyrus and the holders of Bucyrus'
Indebtedness, including the Notes.
As of June 30, 1997, on a pro forma basis after giving effect to the
Transactions (as defined) the Company would have had approximately $36.0 million
aggregate principal amount of secured indebtedness, $6.1 million of outstanding
letters of credit, and $47.0 million of undrawn borrowings under the Revolving
Credit Facility. Although the Indenture contains limitations on the amount of
additional Indebtedness that Bucyrus and the Restricted Subsidiaries may incur,
under certain circumstances the amount of such Indebtedness could be
substantial. See "-- Certain Covenants -- Limitation on Incurrence of
Indebtedness."
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of Bucyrus prior to September 15, 2002. Thereafter, the
Notes will be redeemable, at Bucyrus' option, in whole or in part, at any time
or from time to time, upon not less than 30 nor more than 60 days' prior notice
mailed by first-class mail to each holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date that is on or prior to the date fixed
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<PAGE> 83
for redemption), if redeemed during the 12-month period commencing on September
15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2002........................................................ 104.875%
2003........................................................ 103.250
2004........................................................ 101.625
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time or from time to time on or prior to September 15,
2000, Bucyrus may redeem Notes with the net cash proceeds of one or more Public
Equity Offerings following which there is a Public Market, at a redemption price
equal to 109.75% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on an interest
payment date that is on or prior to the date fixed for redemption); provided,
however, that at least 66% of the original aggregate principal amount of the
Notes must remain outstanding immediately after each such redemption (other than
any Notes owned by Bucyrus or any of its Subsidiaries) and such redemption shall
be effected within 60 days of the consummation of the latest Public Equity
Offering.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder shall have the
right to require Bucyrus to purchase all or a portion of such holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of holders of record on the relevant record date to receive interest due
on an interest payment date that is on or prior to the date fixed for
redemption), in accordance with the provisions of the next paragraph.
Within 30 days following any Change of Control, Bucyrus shall mail a notice
to each holder with a copy to the Trustee stating: (1) that a Change of Control
has occurred and that such holder has the right to require Bucyrus to purchase
such holder's Notes at the purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on the relevant record date to
receive interest on an interest payment date that is on or prior to the date
fixed for purchase); (2) the circumstances and relevant facts and relevant
financial information regarding such Change of Control; (3) the purchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); and (4) the instructions as determined by Bucyrus,
consistent with the covenant described hereunder, that a holder must follow in
order to have its Notes purchased.
Bucyrus shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
Bucyrus shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
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<PAGE> 84
The occurrence of a Change of Control would constitute a default under the
Revolving Credit Facility. In addition, Bucyrus' ability to pay cash to the
holders upon a repurchase may be limited by Bucyrus' then existing financial
resources. There can be no assurance that sufficient funds will be available
when necessary to make any repurchases required in connection with a Change of
Control. Bucyrus' failure to purchase the Notes in connection with a Change in
Control would result in a default under the Indenture which would, in turn,
constitute a default under the Revolving Credit Facility.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Existing Notes were and the
Exchange Notes will be issued in the form of one or more global notes
(collectively, the "Global Notes"). The Global Notes is deposited with, or on
behalf of, The Depository Trust Company (the "Depository") and registered in the
name of the Depository or its nominee. Except as set forth below, the Global
Notes may be transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. Investors may hold their beneficial interests
in the Global Notes directly through the Depository if they have an account with
the Depository or indirectly through organizations which have accounts with the
Depository.
Notes that are issued as described below under "-- Certificated Notes" will
be issued in definitive form. Upon the transfer of a Note in definitive form,
such Note will, unless the Global Notes have previously been exchanged for Notes
in definitive form, be exchanged for an interest in the Global Notes
representing the principal amount of Notes being transferred.
The Depository has advised Bucyrus as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Notes, the Depository credited, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Notes to the accounts of participants. The accounts
to be credited have been designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Notes is limited to participants
or persons that may hold interests through participants. Ownership of beneficial
interests in the Global Notes is shown on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depository
(with respect to participants' interest) and such participants (with respect to
the owners of beneficial interests in the Global Notes other than participants).
The laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial interests in the
Global Notes.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Notes, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Notes will not be entitled to have the Notes
represented by the Global Notes registered in their names, will not receive or
be entitled to receive
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physical delivery of certificated Notes in definitive form and will not be
considered to be the owners or holders of any Notes under the Global Notes.
Bucyrus understands that under existing industry practice, in the event an owner
of a beneficial interest in the Global Notes desires to take any action that the
Depository, as the holder of the Global Notes, is entitled to take, the
Depository would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Notes registered in the name of and held by the Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Notes.
Bucyrus expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of the Depository or its nominee. Bucyrus also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practices and will be the responsibility of such participants. Bucyrus
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Notes for any Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depository and its participants or the
relationship between such participants and the owners of beneficial interests in
the Global Notes owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Notes may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor Bucyrus will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by the Global Notes are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of U.S.
$1,000 and integral multiples thereof if (i) the Depository notifies Bucyrus
that it is unwilling or unable to continue as Depository for the Global Notes or
if at any time the Depository ceases to be a clearing agency registered under
the Exchange Act, (ii) Bucyrus in its discretion at any time determines not to
have all of the Notes represented by the Global Notes or (iii) a default
entitling holders of Notes to accelerate the maturity thereof has occurred and
is continuing. Any Note that is exchangeable pursuant to the preceding sentence
is exchangeable for certificated Notes issuable in authorized denominations and
registered in such names as the Depository shall direct. Subject to the
foregoing, the Global Notes are not exchangeable, except for Global Notes of the
same aggregate denomination to be registered in the name of the Depository or
its nominee. In addition, certificates representing Existing Notes bear a legend
as provided in the Private Offering (unless Bucyrus determines otherwise in
accordance with applicable law) subject, with respect to such Notes, to the
provisions of such legend. Holders of certificated Notes may only transfer their
Notes (i) to Bucyrus, or (ii) to a QIB; provided, however, that the agreement of
such holder is subject to any requirement of law that the disposition of such
holder's property shall at all times be and remain within its control.
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CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Incurrence of Indebtedness.
(a) Bucyrus shall not, and shall not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Indebtedness except that Bucyrus or
any Guarantor may Incur Indebtedness if, immediately after giving effect to
such Incurrence, the Consolidated Coverage Ratio exceeds 2.0 to 1.0.
(b) The foregoing paragraph (a) will not prohibit Incurrence of the
following Indebtedness (collectively, "Permitted Indebtedness"):
(1) Indebtedness of Bucyrus or any Restricted Subsidiary Incurred
pursuant to the Bank Credit Facility; provided, however, that, after
giving effect to any such Incurrence, the aggregate principal amount of
such Indebtedness then outstanding does not exceed the greater of (i)
$75.0 million or (ii) the sum of (x) 60% of the net book value of the
inventory of Bucyrus and the Restricted Subsidiaries and (y) 85% of the
net book value of the accounts receivable of Bucyrus and the Restricted
Subsidiaries, in each case determined on a consolidated basis in
accordance with GAAP;
(2) Indebtedness represented by the Notes (and the Guarantees
thereof), and Refinancing Indebtedness thereof;
(3) Indebtedness to the extent outstanding on the Issue Date (other
than Indebtedness described in clause (1) of this paragraph or the AIP
Bridge Loan), and Refinancing Indebtedness thereof;
(4) Indebtedness of Bucyrus owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Wholly Owned Subsidiary owed to and held
by Bucyrus or another Wholly Owned Subsidiary; provided, however, that
an Incurrence of Indebtedness that is not permitted by this clause (4)
shall be deemed to have occurred upon (a) the transfer or other
disposition of any such Indebtedness to a Person other than Bucyrus or a
Wholly Owned Subsidiary, (b) the sale, lease, transfer or other
disposition of shares of Capital Stock (including by consolidation or
merger) of any Wholly Owned Subsidiary that holds Indebtedness of
Bucyrus or any other Wholly Owned Subsidiary to a Person other than
Bucyrus or another Wholly Owned Subsidiary, or (c) the designation of a
Wholly Owned Subsidiary that holds Indebtedness of Bucyrus or any other
Wholly Owned Subsidiary as an Unrestricted Subsidiary;
(5) Indebtedness of Bucyrus owed to and held by any Guarantor or
Indebtedness of a Guarantor owed to and held by Bucyrus or another
Guarantor; provided, however, that an Incurrence of Indebtedness that is
not permitted by this clause (5) shall be deemed to have occurred upon
(a) the transfer or other disposition of any Indebtedness to a Person
other than Bucyrus or a Guarantor or (b) such Guarantor's ceasing to be
a Guarantor;
(6) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements entered into in the ordinary course of business and
not for the purpose of speculation; provided, however, that, in the case
of Currency Agreements and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements do not increase the Indebtedness
of Bucyrus outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder;
(7) Purchase Money Indebtedness and Capital Lease Obligations
Incurred to finance the acquisition or improvement by Bucyrus or a
Restricted Subsidiary of any assets
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(including capital expenditures), and Refinancing Indebtedness thereof,
in an aggregate principal amount not to exceed $10.0 million at any time
outstanding;
(8) Indebtedness of any Foreign Subsidiary Incurred for the working
capital purposes of such Foreign Subsidiary, and Refinancing
Indebtedness thereof, in an aggregate principal amount not to exceed
$15.0 million at any time outstanding;
(9) Indebtedness of Bucyrus or any Restricted Subsidiary
constituting lease payments or guarantees of lease payments or similar
obligations of a customer of Bucyrus or a Restricted Subsidiary in
connection with a Leasing Program, and Refinancing Indebtedness thereof,
in an aggregate principal amount not to exceed $10.0 million at any time
outstanding; and
(10) Indebtedness of Bucyrus or any Restricted Subsidiary in
addition to that described in clauses (1) through (9) above, so long as
the aggregate principal amount of all such Indebtedness incurred
pursuant to this clause (10) does not exceed $10.0 million at any time
outstanding.
(c) Notwithstanding the foregoing, Bucyrus shall not, and shall not
permit any Guarantor to, Incur any Indebtedness that purports to be by its
terms (or by the terms of any agreement or instrument governing such
Indebtedness) subordinated to any other Indebtedness of Bucyrus or of such
Guarantor, as the case may be, unless such Indebtedness is also by its
terms (or by the terms of the agreement or instrument governing such
Indebtedness) made expressly subordinated to the Notes or the Guarantee of
such Guarantor, as applicable, to at least the same extent as such
Indebtedness is subordinated to such other Indebtedness of Bucyrus or such
Guarantor, as applicable.
Limitation on Restricted Payments.
(a) Bucyrus shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to declare or make a Restricted Payment if:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) immediately after giving effect to the proposed Restricted
Payment, Bucyrus is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Incurrence of Indebtedness" above; or
(3) the aggregate amount of such Restricted Payment together with
all other Restricted Payments (the amount of any payments made in
property other than cash to be valued at the fair market value of such
property, as determined in good faith by the Board of Directors)
declared or made since the Issue Date (other than any Restricted Payment
described in clause (ii), (iii) or (iv) of paragraph (b) below) would
exceed the sum (the "Basket") of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Notes are originally issued to the end of the most recent fiscal
quarter prior to the date of such Restricted Payment for which
financial statements are available (or, in case such Consolidated Net
Income accrued during such period (treated as one accounting period)
shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by Bucyrus from the
issuance or sale (other than to a Subsidiary of Bucyrus) of Qualified
Stock subsequent to the Issue Date;
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(C) the principal amount (or accreted value, if less) by which
Indebtedness of Bucyrus or any Restricted Subsidiary is reduced on
Bucyrus' balance sheet upon the conversion or exchange (other than by
a Subsidiary of Bucyrus) subsequent to the Issue Date into Qualified
Stock (less the amount of any cash, or the fair value of any other
property, distributed by Bucyrus or any Restricted Subsidiary upon
such conversion or exchange); and
(D) to the extent not included in the calculation of the
Consolidated Net Income referred to in (A), an amount equal to the
sum of (i) the net reduction in Investments in Unrestricted
Subsidiaries resulting from dividends, repayments of loans or
advances or other transfers of assets subsequent to the Issue Date,
in each case to Bucyrus or any Restricted Subsidiary from
Unrestricted Subsidiaries, and (ii) the portion (proportionate to
Bucyrus' equity interest in such Subsidiary) of the fair market value
of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is redesignated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by Bucyrus or
any Restricted Subsidiary in such Unrestricted Subsidiary;
provided, however, that the AIP Equity Contribution shall not increase the
Basket.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
the following actions: (i) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
been permitted under the Indenture; (ii) any repurchase, redemption,
retirement or other acquisition of Capital Stock or Subordinated
Obligations of Bucyrus made in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary of Bucyrus) of,
Qualified Stock or, with respect to any such Subordinated Obligations, in
exchange for or out of the proceeds of the substantially concurrent sale
(other than to a Subsidiary of Bucyrus) of other Subordinated Obligations
of Bucyrus; provided, however, that such exchange or sale shall not
increase the Basket; (iii) any repurchase, redemption, retirement or other
acquisition of Capital Stock of Bucyrus held by officers, directors and
employees of Bucyrus or any Restricted Subsidiary upon such persons' death,
retirement or other termination of employment or directorship, as the case
may be; provided, however, that the aggregate amount of Restricted Payments
pursuant to this clause (iii) shall not exceed $5.0 million; and (iv)
Restricted Payments not to exceed $5.0 million in the aggregate since the
Issue Date; provided, however, that in the case of clauses (ii), (iii) and
(iv), no Default shall have occurred and be continuing or would arise
therefrom.
Limitation on Liens. Bucyrus shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur or permit to exist any Lien (other
than Permitted Liens) of any nature whatsoever on any property of Bucyrus or any
Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary),
whether owned at the Issue Date or thereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, unless the
Notes and the Guarantees are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no longer secured
by a Lien (and if the obligations so secured are subordinated to the Notes and
the Guarantees, the Lien securing such obligations are also so subordinated at
least to the same extent).
Limitation on Transactions with Affiliates.
(a) Bucyrus shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into or permit to exist any transaction
or series of related transactions (including, without limitation, the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate of Bucyrus
(an "Affiliate Transaction") unless the terms thereof (1) are no less
favorable to Bucyrus or such
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Restricted Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an
Affiliate, (2) if such Affiliate Transaction involves aggregate value in
excess of $1.0 million in any one year, (i) are set forth in writing, (ii)
comply with clause (1), and (iii) have been approved by a majority of the
Independent Directors, and (3) if such Affiliate Transaction involves
aggregate value in excess of $5.0 million in any one year, (i) comply with
clause (2), and (ii) have been determined by a nationally recognized
investment banking, appraisal, valuation or accounting firm to be fair,
from a financial standpoint, to Bucyrus and the Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be made pursuant to the covenant
described under "-- Limitation on Restricted Payments," (ii) any issuance
of securities or other payments, awards or grants in cash, securities or
otherwise, pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans in the ordinary course of business (as
determined in good faith by the Board of Directors) and approved by the
Board of Directors, (iii) the grant of stock options or similar rights to
employees and directors of Bucyrus in the ordinary course of business (as
determined in good faith by the Board of Directors) and pursuant to plans
approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business of Bucyrus and the Restricted Subsidiaries,
(v) fees, compensation or employee benefit arrangements paid to and
indemnity provided for the benefit of directors, officers or employees of
Bucyrus or any Subsidiary in the ordinary course of business, (vi) any
transaction solely between or among Bucyrus and/or one or more Guarantors
and/or Wholly Owned Subsidiaries, (vii) performance or discharge by Bucyrus
of its obligations under agreements as in effect on the Issue Date, (viii)
repayment of the AIP Bridge Loan upon consummation of the AIP Merger or
(ix) payment of $4.0 million to AIP in connection with the AIP Merger or
payment of fees to AIP pursuant to the Management Agreement in an amount
not to exceed $1.5 million per year.
Limitation on Sales of Assets and Subsidiary Stock. Bucyrus shall not, and
shall not permit any Restricted Subsidiary to, consummate any Asset Disposition
unless (i) Bucyrus or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the assets or other
property subject to such Asset Disposition, and (ii) at least 75% of the
consideration therefor received by Bucyrus or such Restricted Subsidiary is in
the form of cash or Temporary Cash Investments. For the purposes of this
covenant, the following are deemed to be cash: (x) amount of any liabilities
(other than liabilities that are subordinated to any other Indebtedness of
Bucyrus or such Restricted Subsidiary, as the case may be) of Bucyrus or such
Restricted Subsidiary (as shown on Bucyrus' or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) that are assumed by the transferee
of any such assets or other property in such Asset Disposition, but only to the
extent that such assumption is effected on a basis under which there is no
further recourse to Bucyrus or any Restricted Subsidiary with respect to such
liabilities and (y) securities received by Bucyrus or any Restricted Subsidiary
from the transferee that are immediately converted by Bucyrus or such Restricted
Subsidiary into cash.
With respect to any Asset Disposition occurring on or after the Issue Date
from which Bucyrus or any Restricted Subsidiary receives Net Available Cash,
Bucyrus or such Restricted Subsidiary may within 270 days after the date such
Net Available Cash is received: (i) apply an amount equal to such Net Available
Cash to permanently prepay, repay or purchase Indebtedness under the Bank Credit
Facility; or (ii) invest an equal amount, or the amount not so applied pursuant
to clause (i), in Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash received by
Bucyrus or another Restricted Subsidiary). The amount of Net Available Cash not
applied pursuant to clause (ii) above shall constitute "Excess
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Proceeds." Pending application of Net Available Cash pursuant to this provision,
such Net Available Cash shall be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $5.0
million, Bucyrus shall, not later than 10 business days after the end of the
period during which Bucyrus is required to apply such Excess Proceeds pursuant
to clause (i) of the immediately preceding paragraph (or, if Bucyrus so elects,
at any time within such period), make an offer (an "Excess Proceeds Offer") to
purchase from the holders of Notes and Other Qualified Notes (determined on a
pro rata basis according to the accreted value or principal amount, as the case
may be, of the Notes and the Other Qualified Notes) that may be purchased out of
the Excess Proceeds (rounded down to the nearest multiple of $1,000) on such
date, at a purchase price (x) in the case of the Notes, equal to 100% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to the
date of purchase and (y) in the case of each issue of Other Qualified Notes,
based on the terms set forth in the indenture related to such issue. Upon
completion of an Excess Proceeds Offer the amount of Excess Proceeds remaining
after application pursuant to such Excess Proceeds Offer (including payment of
the purchase price for Notes and Other Qualified Notes duly tendered) may be
used by Bucyrus for any corporate purpose (to the extent not otherwise
prohibited by the Indenture).
Bucyrus shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
thereunder in the event that such Excess Proceeds are received by Bucyrus under
the covenant described hereunder and Bucyrus is required to repurchase Notes as
described above. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
Bucyrus shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
Limitation on Dividend and Other Restrictions Affecting Restricted
Subsidiaries. Bucyrus shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary (i) to pay dividends or make any other
distributions on its Capital Stock to Bucyrus or any other Restricted Subsidiary
or pay any Indebtedness owed to Bucyrus or any other Restricted Subsidiary, (ii)
to make any loans or advances to, or guarantee any Indebtedness of, Bucyrus or
any other Restricted Subsidiary, or (iii) transfer any of its property or assets
to Bucyrus or any other Restricted Subsidiary, except: (A) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date (including, without limitation, the Bank Credit Facility), as such
encumbrance or restriction is in effect on the Issue Date; (B) any encumbrance
or restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary which was
entered into on or prior to the date on which such Restricted Subsidiary was
acquired by Bucyrus (other than as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by Bucyrus) and outstanding on
such date; (C) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in
clause (A) or (B) of this covenant (or effecting a Refinancing of such
Refinancing Indebtedness pursuant to this clause (C)) or contained in any
amendment to an agreement referred to in clause (A) or (B) of this covenant or
this clause (C); provided, however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no more restrictive in any material respect than the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements; (D) any such encumbrance or restriction consisting
of customary non-assignment provisions in leases governing leasehold interests
to the extent such provisions restrict the transfer of the lease or the property
leased thereunder; (E) restrictions contained in security agreements or
mortgages on property acquired in the ordinary
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course of business to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; (F) any restriction
with respect to a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of the Capital Stock or assets of such
Restricted Subsidiary; provided, however, that such restriction is applicable
only to such Capital Stock or assets, as applicable, and such sale or
disposition otherwise is permitted under the covenant described under "--
Limitation on Sales of Assets and Subsidiary Stock" and (G) any restriction
imposed by applicable law.
Limitation on the Issuance or Sale of Capital Stock of Wholly Owned
Subsidiaries. Bucyrus (i) will not, and will not permit any Wholly Owned
Subsidiary (other than any Guarantor) to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary (other
than any Guarantor) to any Person (other than Bucyrus or another Wholly Owned
Subsidiary), unless (a) such transfer, conveyance, sale, lease or other
disposition consists of all of the Capital Stock of such Wholly Owned Subsidiary
and (b) the net cash proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described above
under "Limitation on Sales of Assets and Subsidiary Stock," and (ii) will not
permit any Wholly Owned Subsidiary to issue any Capital Stock (other than, if
necessary, shares constituting directors' qualifying shares) to any Person other
than to Bucyrus or another Wholly Owned Subsidiary.
Limitation on Sale and Leaseback Transactions. Bucyrus will not, and will
not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction; provided, however, that Bucyrus may enter into a Sale and Leaseback
Transaction if (i) Bucyrus could have (a) Incurred Indebtedness in an amount
equal to the Attributable Debt relating to such Sale and Leaseback Transaction
pursuant to the covenant described under "-- Limitation on Incurrence of
Indebtedness," and (b) Incurred a Lien to secure such Indebtedness pursuant to
the covenant described under "-- Limitation on Liens," (ii) the gross cash
proceeds of such Sale and Leaseback Transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such Sale and Leaseback Transaction and (iii) the transfer of
assets in such Sale and Leaseback Transaction is permitted by, and Bucyrus
applies the proceeds of such transaction in compliance with, the covenant
described under "-- Limitation on Sales of Assets and Subsidiary Stock."
Merger, Consolidation and Sale of Assets. Bucyrus shall not consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
a series of transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company"), whether or not Bucyrus, shall be a Person organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia and the Successor Company (if not Bucyrus) shall expressly
assume, by an indenture supplemental thereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of Bucyrus
under the Notes, the Indenture and the Registration Agreement; (ii) immediately
after giving effect to such transaction (and treating any Indebtedness which
becomes an obligation of the Successor Company or any Subsidiary as a result of
such transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default shall have occurred and
be continuing; (iii) except in the case of a merger the sole purpose of which is
to change Bucyrus' jurisdiction of incorporation, immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-- Limitation on Incurrence of Indebtedness" (treating the
Successor Company as Bucyrus); (iv) immediately after giving effect to such
transaction, the Successor Company shall have Consolidated Net Worth in an
amount that is not less than the Consolidated Net Worth of Bucyrus immediately
prior to such transaction; and (v) Bucyrus shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
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Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to Bucyrus.
The Successor Company shall be the successor to Bucyrus and shall succeed
to, and be substituted for, and may exercise every right and power of, Bucyrus
under the Indenture, but the predecessor Company in the case of a conveyance,
transfer or lease shall not be released from the obligation to pay the principal
of and interest on the Notes.
SEC Reports. Whether or not Bucyrus is then subject to Section 13(a) or
15(d) of the Exchange Act, Bucyrus shall file with the Commission, so long as
the Notes are outstanding, the annual reports, quarterly reports and other
periodic reports that Bucyrus would be required to file with the Commission
pursuant to Section 13(a) or 15(d) if Bucyrus were so subject, and such
documents shall be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which Bucyrus would be required so to file such
documents if Bucyrus were so subject, unless, in any case, such filing is not
then permitted by the Commission. Bucyrus will also in any event (i) within 15
days of each Required Filing Date, (a) transmit by mail to holders of Notes, as
their names and addresses appear in the Note register, without cost to such
holders, and (b) file with the Trustees copies of the annual reports, quarterly
reports and other periodic reports that Bucyrus would be required to file with
the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if Bucyrus
were subject to such Section 13(a) or 15(d), and (ii) if such filing with
Commission is not then permitted by the Commission promptly upon written
request, supply copies of such documents to any prospective holder at Bucyrus'
cost.
EVENTS OF DEFAULT
Any of the following shall constitute an Event of Default:
(i) default for 30 days in the payment when due of interest on any
Note;
(ii) default in the payment when due of principal on any Note, whether
upon maturity, acceleration, optional redemption, required repurchase or
otherwise;
(iii) failure to perform or comply with any covenant, agreement or
warranty in the Indenture (other than any specified in clause (i) or (ii)
above) which failure continues for 30 days after written notice thereof has
been given to Bucyrus by the Trustee or to Bucyrus and the Trustee by the
holders of at least 25% in aggregate principal amount of the then
outstanding Notes;
(iv) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Bucyrus or any Restricted Subsidiary
whether such Indebtedness now exists, or is created after the Issue Date,
which default (x)(a) is caused by a failure to pay such Indebtedness at
Stated Maturity (giving effect to any grace period related thereto) (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its stated maturity and (y) in each case, the principal amount of
any such Indebtedness as to which a Payment Default or acceleration shall
have occurred, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more;
(v) one or more judgments, orders or decrees for the payment of money
of $10.0 million or more, individually or in the aggregate, shall be
entered against Bucyrus or any Restricted Subsidiary or any of their
respective properties and which judgments, orders or decrees are not paid,
discharged, bonded or stayed within 60 days after their entry;
(vi) certain events of bankruptcy, dissolution, insolvency,
reorganization, administration or similar proceedings with respect to
Bucyrus, any Significant Restricted Subsidiary or any group of Restricted
Subsidiaries that together would constitute a Significant Restricted
Subsidiary; or
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(vii) any Guarantee ceases to be in full force and effect (other than
in accordance with its terms or the Indenture) or any Guarantor denies or
disaffirms its obligations under its Guarantee.
If an Event of Default occurs and is continuing (other than an Event of
Default described in clause (vi) above with respect to Bucyrus), the Trustee or
the holders of at least 25% in principal amount of the outstanding Notes may
declare the principal of and accrued but unpaid interest on all the Notes to be
due and payable. Upon such a declaration, such principal and interest shall be
due and payable immediately. If an Event of Default described in clause (vi)
above occurs with respect to Bucyrus, the principal of and interest on all the
Notes will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders of the Notes.
Under certain circumstances, the Holders of a majority in principal amount of
the outstanding Notes may rescind any such acceleration with respect to the
Notes and its consequences.
Except to enforce the right to receive payment of principal or interest
when due, no holder may pursue any remedy with respect to the Indenture or the
Notes unless (i) such holder has previously given the Trustee notice that an
Event of Default is continuing, (ii) holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee to pursue the remedy, (iii)
such holders have offered the Trustee reasonable security or indemnity against
any loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt thereof and the offer of security or
indemnity and (v) the holders of a majority in principal amount of the
outstanding Notes have not given the Trustee a direction inconsistent with such
request within such 60-day period. Subject to certain restrictions, the holders
of a majority in principal amount of the outstanding Notes are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other holder or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Notwithstanding the foregoing, except in the
case of a Default in the payment of principal of or interest on any Note, the
Trustee may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is in the interest of the holders. In
addition, Bucyrus is required to deliver to the Trustee, within 120 days after
the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. Bucyrus also
is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action Bucyrus is taking or proposes to take in respect
thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the principal amount of Notes whose holders must consent to
an amendment, supplement or waiver; (ii) reduce the principal of or change the
fixed maturity of any Note, or alter the provisions with respect to the
redemption or repurchase provisions of any Note or the Indenture in a manner
adverse to the holders of the Notes (other than the provisions of the Indenture
relating to any offer to purchase required under the covenants described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" or
"-- Change of Control"); (iii) reduce the rate of or change the time for payment
of interest on any Note; (iv) waive a Default in the payment of principal or
interest on, the Notes
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(except that holders of at least a majority in aggregate principal amount of the
then outstanding Notes may (x) rescind an acceleration of the Notes that
resulted from a non-payment default and (y) waive the payment default that
resulted from such acceleration); (v) make any Note payable in money other than
that stated in the Notes; (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of holders of Notes
to receive payments of principal of or interest on, the Notes; (vii) waive a
redemption payment with respect to any Note; (viii) release any Guarantor from
its Guarantee except in compliance with the Indenture or (ix) make any change in
the foregoing amendment and waiver provisions; provided, further, however, that
no such modification or amendment may, without the consent of the holders of
two-thirds of the aggregate principal amount of Notes affected thereby, modify
any of the provisions (including the definitions thereto) relating to the
covenant described under "-- Change of Control" in a manner materially adverse
to the holders.
Without the consent of any holder, Bucyrus and Trustee may amend the
Indenture to cure any ambiguity, defect or inconsistency, to provide for the
assumption by a successor corporation of the obligations of Bucyrus under the
Indenture in the event of any transaction in compliance with the covenant
described under "-- Certain Covenants -- Merger, Consolidation and Sale of
Assets" in which Bucyrus is not the Surviving Person, to provide for
uncertificated Notes in addition to or in place of certificated Notes (provided
that the uncertificated Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated Notes
are as described in Section 163(f)(2)(B) of the Code), to add Guarantees with
respect to the Notes, to release Guarantors when permitted by the Indenture, to
secure the Notes, to add to the covenants of Bucyrus for the benefit of the
holders or to surrender any right or power conferred upon Bucyrus, to make any
change that does not adversely affect the rights of any holder or to comply with
any requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, Bucyrus is
required to mail to holders a notice briefly describing such amendment. However,
the failure to give such notice to all holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
Notes are issued in registered form and are transferable only upon the
surrender of the Notes being transferred for registration of transfer. No
service charge will be made for any registration of transfer or exchange of
Notes, but Bucyrus may require payment of a sum sufficient to cover any transfer
tax or other similar governmental charge payable in connection therewith.
DISCHARGE OF INDENTURE AND DEFEASANCE
When (i) Bucyrus delivers to the Trustee all outstanding Notes (other than
Notes replaced because of mutilation, loss, destruction or wrongful taking) for
cancellation or (ii) all outstanding Notes have become due and payable, whether
at maturity or as a result of the mailing of a notice of redemption as described
above, and Bucyrus irrevocably deposits with the Trustee funds sufficient to pay
at maturity or upon redemption all outstanding Notes, including interest
thereon, and if in either case Bucyrus pays all other sums payable hereunder by
Bucyrus, then the Indenture shall, subject to certain surviving provisions,
cease to be of further effect. The Trustee shall acknowledge satisfaction and
discharge of the Indenture on demand of Bucyrus accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of Bucyrus.
Subject to the conditions to defeasance described below and in the
Indenture and the survival of certain provisions, Bucyrus at any time may
terminate (i) all its obligations under the Notes and the
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Indenture ("legal defeasance option") or (ii) its obligations under certain
restrictive covenants and the related Events of Default ("covenant defeasance
option"). Bucyrus may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option.
If Bucyrus exercises its legal defeasance option, payment of the Notes may
not be accelerated because of an Event of Default. If Bucyrus exercises its
covenant defeasance option, payment of the Notes may not be accelerated because
of an Event of Default referred to in clause (ii) of the immediately preceding
paragraph.
In order to exercise either defeasance option, Bucyrus must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
Harris Trust and Savings Bank is the Trustee under the Indenture and has
been appointed by Bucyrus as Registrar and Paying Agent with regard to the
Notes.
The holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent person in the conduct of such person's own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are to be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
(including by merger, consolidation, combination or otherwise) of such Capital
Stock by Bucyrus or another Restricted Subsidiary; provided, however, that any
such Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Certain Covenants -- Limitation
on Restricted Payments," "-- Certain Covenants --
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Limitation on Affiliate Transactions" and "-- Certain Covenants -- Limitations
on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of Bucyrus or of rights or
warrants to purchase such Capital Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"AIP Bridge Loan" means the loan to BAC from AIP the proceeds of which were
used by BAC to purchase shares of Common Stock of Bucyrus in the AIP Tender
Offer.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by Bucyrus or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders), (ii) all or substantially all the assets of any division,
business segment or comparable line of business of Bucyrus or any Restricted
Subsidiary or (iii) any other assets of Bucyrus or any Restricted Subsidiary
outside of the ordinary course of business of Bucyrus or such Restricted
Subsidiary. Notwithstanding the foregoing, the term "Asset Disposition" shall
not include (x) a disposition by a Restricted Subsidiary to Bucyrus or by
Bucyrus or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for
purposes of the covenant described under "-- Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock," a disposition (a) that constitutes a
Permitted Investment or a Restricted Payment permitted by the covenant described
under "-- Certain Covenants -- Limitation on Restricted Payments" or (b)
consummated in compliance with "-- Certain Covenants -- Merger, Consolidation
and Sale of Assets" and (z) a disposition of assets having a fair market value
and a sale price of less than $500,000.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale and Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Facility" means the Credit Agreement dated as of September 24,
1997 among Bucyrus, Bank One, Wisconsin, and the other lenders named therein, as
the same may be amended, supplemented, amended and restated, extended or
Refinanced from time to time, including pursuant to term loan and revolving
credit facilities (except to the extent that any such amendment, supplement,
amendment and restatement, extension or Refinancing would be prohibited by the
terms of the Indenture), including (i) any related notes, letters of credit,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as refinanced from time to time, and (ii)
any notes, guarantees, collateral documents, instruments and agreements executed
in connection with any such refinancing.
"Basket" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Board of Directors" means the Board of Directors of Bucyrus or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
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"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP. The amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) prior to a Public Equity Offering after the Issue Date after which
there is a Public Market, the Permitted Holders cease to own, or to have
the power to vote or direct the voting of, Voting Stock representing a
majority of the voting power of the total outstanding Voting Stock of
Bucyrus;
(ii) following a Public Equity Offering after the Issue Date after
which there is a Public Market, any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of
this clause such person or group shall be deemed to have "beneficial
ownership" of all securities that any such person or group has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of Voting Stock representing more
than 35% of the voting power of the total outstanding Voting Stock of
Bucyrus; provided, however, that such event shall not be deemed to be a
Change of Control so long as the Permitted Holders own Voting Stock
representing in the aggregate a greater percentage of the total voting
power of the Voting Stock of Bucyrus than such other person or group;
(iii) following a Public Equity Offering after the Issue Date after
which there is a Public Market, during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election to such Board of
Directors or whose nomination for election by the shareholders of Bucyrus
was approved by a vote of 66 2/3% of the directors of Bucyrus then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office; or
(iv) the merger or consolidation of Bucyrus with or into another
Person or the merger of another Person with or into Bucyrus, or the sale of
all or substantially all the assets of Bucyrus and the Restricted
Subsidiaries, taken as a whole, to another Person (other than a Person that
is controlled by the Permitted Holders), and, in the case of any such
merger or consolidation, the securities of Bucyrus that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate voting power of the Voting Stock of Bucyrus are changed into or
exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving corporation that
represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" or "SEC" means the Securities and Exchange Commission.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for
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which financial statements are available to (ii) Consolidated Fixed Charges for
such four fiscal quarters; provided, however, that (1) if Bucyrus or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Fixed Charges
for such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period (except that, in
the case of Indebtedness used to finance working capital needs incurred under a
revolving credit or similar arrangement, the amount thereof shall be deemed to
be the average daily balance of such Indebtedness during such
four-fiscal-quarter period), (2) if since the beginning of such period Bucyrus
or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period, and Consolidated Fixed
Charges for such period shall be reduced by an amount equal to the Consolidated
Fixed Charges directly attributable to any Indebtedness of Bucyrus or any
Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person
(to the extent Bucyrus and its Restricted Subsidiaries are no longer liable for
such Indebtedness) or otherwise discharged with respect to Bucyrus and its
continuing Restricted Subsidiaries in connection with such Asset Disposition for
such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Fixed Charges for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent Bucyrus and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period Bucyrus shall have
consummated a Public Equity Offering following which there is a Public Market,
Consolidated Fixed Charges for such period shall be reduced by an amount equal
to the Consolidated Fixed Charges directly attributable to any Indebtedness of
Bucyrus or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to Bucyrus and its Restricted Subsidiaries in connection
with such Public Equity Offering for such period, (4) if since the beginning of
such period Bucyrus or any Restricted Subsidiary (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any Person which
becomes a Restricted Subsidiary) or an acquisition of assets, which acquisition
constitutes all or substantially all of an operating unit of a business,
including any such Investment or acquisition occurring in connection with a
transaction requiring a calculation to be made hereunder, EBITDA and
Consolidated Fixed Charges for such period shall be calculated after giving pro
forma effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (5) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into Bucyrus or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (3) or (4) above if made by Bucyrus or a
Restricted Subsidiary during such period, EBITDA and Consolidated Fixed Charges
for such period shall be calculated after giving pro forma effect thereto as if
such Asset Disposition, Investment or acquisition occurred on the first day of
such period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income, earnings or expense
relating thereto and the amount of Consolidated Fixed Charges associated with
any Indebtedness Incurred in connection therewith, the pro forma calculations
shall be prepared in accordance with Article II of Regulation S-X promulgated by
the Commission as determined in good faith by a responsible financial or
accounting Officer of Bucyrus. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest of such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months).
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"Consolidated Fixed Charges" means, with respect to any period, the sum
(without duplication) of (i) the interest expense of Bucyrus and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP consistently applied, including, without limitation, (a) amortization
of debt discount, (b) the net payments, if any, under interest rate contracts
(including amortization of discounts), (c) the interest portion of any deferred
payment obligation and (d) accrued interest, plus (ii) the interest component of
the Capital Lease Obligations paid or accrued during such period, plus (iii) all
interest capitalized during such period, plus (iv) all dividends on Preferred
Stock (other than to Bucyrus or a Wholly Owned Subsidiary) paid, accrued,
declared or accumulated during such period.
"Consolidated Net Income (Loss)" means, for any period, the net income (or
loss) of Bucyrus and the Restricted Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP consistently applied; provided,
however, that there shall not be included in such Consolidated Net Income: (i)
any extraordinary gains (but not, other than for purposes of calculating the
Basket, losses) (less all fees and expenses relating thereto); (ii) any net
income or loss of any Person if such Person is not a Restricted Subsidiary,
except that, subject to the exclusion contained in clause (iv) below, the equity
of Bucyrus or any Restricted Subsidiary in the net income of any such Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such period
to Bucyrus or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (iv) below); (iii) any net
income (or loss) of any Person acquired by Bucyrus or a Subsidiary in a pooling
of interests transaction for any period prior to the date of such acquisition;
(iv) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income to Bucyrus is not at the time permitted, directly or indirectly,
without prior approval (that has not been obtained), pursuant to the terms of
its charter or any agreement, instrument and governmental regulation applicable
to such Restricted Subsidiary or its stockholders; (v) gain (but not loss) (less
all fees and expenses relating thereto) realized upon the sale or other
disposition of (x) any assets (including pursuant to Sale and Leaseback
Transactions) which is not sold or otherwise disposed of in the ordinary course
of business or (y) any Capital Stock of any Person; and (vi) the cumulative
effect of a change in accounting principles.
"Consolidated Net Worth" means with respect to any Person on any date, the
equity of the common and preferred stockholders of such Person and its
Restricted Subsidiaries as of such date, determined on a consolidated basis in
accordance with GAAP consistently applied, less any amount attributable to
Unrestricted Subsidiaries.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
or (ii) is redeemable at the option of the holder thereof, in whole or in part,
in each case on or prior to the date that is one year after the Maturity Date.
"EBITDA" for any period means the sum of Consolidated Net Income for such
period plus, without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (i) Consolidated Fixed Charges, (ii)
all income tax expense of Bucyrus, (iii) depreciation expense, (iv) amortization
expense, (v) all other non-cash items reducing such Consolidated Net Income
(excluding (x) any non-cash item to the extent it represents an accrual of, or
reserve for, cash disbursements to be made in any subsequent period and (y) the
amount attributable to
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minority interests) less all non-cash items increasing Consolidated Net Income,
and (vi) payments to purchase, redeem or otherwise acquire or retire for value
Capital Stock of Bucyrus in connection with the AIP Merger pursuant to the AIP
Agreement, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of Bucyrus shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the date of
determination to be dividended or otherwise distributed to Bucyrus by such
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments and governmental
regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in
a jurisdiction other than the United States or a state thereof or the District
of Columbia and with respect to which more than 80% of any of its sales,
earnings or assets (determined on a consolidated basis in accordance with GAAP)
are located in, generated from or derived from operations located in territories
outside the United States of America and jurisdictions outside the United States
of America.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board and (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "guarantee" used as a verb has a
corresponding meaning. The term "guarantor" shall mean any Person guaranteeing
any obligation.
"Guarantor" means each Restricted Subsidiary designated as such on the
signature pages of the Indenture and any other Restricted Subsidiary that has
issued a guarantee of the Notes, in each case, until such Restricted Subsidiary
is released from its Guarantee.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, create, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary; provided, further, however, that
in the case of a discount security, neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness. The term "Incurrence" when used as a noun shall have a correlative
meaning.
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"Indebtedness" means, with respect to any Person, without duplication, and
whether or not contingent, (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services or which is
evidenced by a note, bond, debenture or similar instrument, to the extent it
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, (ii) all Capital Lease Obligations of such Person, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptances issued or created for the account of such Person, (iv) all
obligations of such Person under Interest Rate Agreements or Currency
Agreements, (v) all Disqualified Stock issued by such Person and all preferred
stock issued by any Subsidiary of such Person, in each case, valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends thereon, and (vi) to the extent not otherwise
included, any Guarantee by such Person of any other Person's indebtedness or
other obligations described in clauses (i) through (vi) above. "Indebtedness" of
Bucyrus and the Restricted Subsidiaries shall not include current trade payables
incurred in the ordinary course of business and payable in accordance with
customary practices, and non-interest bearing installment obligations and
accrued liabilities incurred in the ordinary course of business. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Stock which
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Stock as if such Disqualified Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by the
fair market value of, such Disqualified Stock, such fair market value is to be
determined in good faith by the board of directors of the issuer of such
Disqualified Stock. The amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations as
described above at such date; provided, however, that the amount outstanding at
any time of any Indebtedness issued with original issue discount shall be deemed
to be the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"Independent Director" means a director of Bucyrus other than a director
(i) who (apart from being a director of Bucyrus or any Subsidiary) is an
employee, associate or Affiliate of Bucyrus or a Subsidiary or has held any such
position during the previous five years, or (ii) who has, or is a director,
employee, associate or Affiliate of another party who has, a material direct or
indirect pecuniary interest in the transaction in question.
"interest" means, with respect to the Notes, the sum of any interest and
any Liquidated Damages on the Notes.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect Bucyrus or any Restricted Subsidiary against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extensions of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to Bucyrus'
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of Bucyrus at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, Bucyrus shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount
(if positive) equal to (x) Bucyrus' "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion
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(proportionate to Bucyrus' equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer; and (iii) an "Investment" shall be deemed to be made at the time that
the ownership or voting power of Bucyrus and the Restricted Subsidiaries in any
Restricted Subsidiary is reduced to below majority (but greater than zero) in an
amount equal to the fair market value of such former Restricted Subsidiary at
such time multiplied by the percentage ownership or voting power (whichever is
less) of Bucyrus and the Restricted Subsidiaries in such former Restricted
Subsidiary; provided, however, that in each case fair market value shall be
determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Existing Notes were originally
issued, namely September 24, 1997.
"Leasing Program" means arrangements in existence from time to time
pursuant to which Bucyrus or a Restricted Subsidiary sells or leases (including
pursuant to Sale and Leaseback Transactions) equipment used in large-scale
surface mining operations manufactured and distributed by Bucyrus or a
Restricted Subsidiary in the ordinary course of its business.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or equivalent statutes) of any
jurisdiction other than to evidence a lease.
"Liquidated Damages" has the meaning set forth in the Registration
Agreement.
"Management Agreement" means the Management Agreement between Bucyrus and
AIP, as such agreement may be amended or supplemented from time to time;
provided, however, that all obligations of Bucyrus and its Subsidiaries under
the Management Agreement shall be subordinated to their obligations under the
Indenture, the Notes and the Guarantees.
"Net Available Cash" from an Asset Disposition means the aggregate cash
proceeds received by such Person and/or its Affiliates in respect of such Asset
Disposition, which amount is equal to the excess, if any, of (i) the cash
received by such Person and/or its Affiliates (including any cash payments
received by way of deferred payment pursuant to, or monetization of, a note or
installment receivable or otherwise, but only as and when received) in
connection with such Asset Disposition, over (ii) the sum of (a) the amount of
any Indebtedness that is secured by such asset and which is required to be
repaid by such person in connection with such Asset Disposition, plus (b) all
fees, commissions, and other expenses incurred by such Person in connection with
such Asset Disposition, plus (c) provision for taxes, including income taxes,
attributable to the Asset Disposition or attributable to required prepayments or
repayments of Indebtedness with the proceeds of such Asset Disposition, plus (d)
a reasonable reserve for the after-tax cost of any indemnification payments
(fixed or contingent) attributable to seller's indemnities to purchaser in
respect of such Asset Disposition undertaken by Bucyrus or any of its Restricted
Subsidiaries in connection with such Asset Disposition, plus (e) if such Person
is a Restricted Subsidiary, any dividends or distributions payable to holders of
minority interests in such Restricted Subsidiary from the proceeds of such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
direct result thereof.
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"Other Qualified Notes" means any outstanding senior indebtedness of
Bucyrus issued pursuant to an indenture having a provision substantially similar
to the Excess Proceeds Offer provision contained in the Indenture.
"Permitted Holders" means American Industrial Partners Capital Fund II,
L.P. or any Affiliate thereof.
"Permitted Investment" means an Investment by Bucyrus or any Restricted
Subsidiary in (i) a Guarantor or a Person that will, upon the making of such
Investment, become a Guarantor; provided, however, that the primary business of
such Guarantor is a Related Business; (ii) Temporary Cash Investments; (iii)
receivables owing to Bucyrus or any Restricted Subsidiary if created or acquired
in the ordinary course of business and payable or dischargeable in accordance
with customary trade terms; (iv) loans or advances to employees of Bucyrus or
any Restricted Subsidiary that are made in the ordinary course of business
consistent with past practices of Bucyrus or such Restricted Subsidiary in an
aggregate amount not to exceed $2.5 million outstanding at any time; (v) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under "-- Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock"; (vi) Investments in Foreign Subsidiaries in an aggregate
amount not to exceed $15.0 million outstanding at any time; (vii) Investments in
Foreign Subsidiaries Incurred to effect the Marion Acquisition; (viii)
Investments in Foreign Subsidiaries for the purposes of financing inventory or
accounts receivable at such Foreign Subsidiaries in the ordinary course of
business; and (ix) customers of Bucyrus or any Restricted Subsidiary made in the
form of loans pursuant to the Leasing Program, to the extent permitted under
clause (9) of paragraph (b) under "-- Certain Covenants -- Limitation on
Incurrence of Indebtedness."
"Permitted Liens" means (i) Liens securing Indebtedness Incurred under
clause (1), (7), (8), (9) or (10) of paragraph (b) under "-- Certain Covenants
- -- Limitation on Incurrence of Indebtedness" on property or assets of Bucyrus
and the Restricted Subsidiaries (other than for purposes of clause (1) only, any
Liens on real property); (ii) Liens in favor of Bucyrus or any Guarantor; (iii)
pledges or deposits by such Person under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of cash or United
States government bonds to secure surety or appeal bonds to which such Person is
a party, or deposits as security for contested taxes or import duties or for the
payment of rent or deposits as security for the payment of insurance-related
obligations (including, but not limited to, in respect of deductibles,
self-insured retention amounts and premiums and adjustments thereto), in each
case incurred in the ordinary course of business; (iv) Liens imposed by law,
such as carriers', warehousemen's, mechanics', landlords', materialmen's,
employees', laborers', employers', suppliers', banks', repairmen's and other
like Liens, in each case for sums not yet due or being contested in good faith
by appropriate proceedings, or other Liens arising out of any judgment, award,
decree or order of any court or other governmental authority against such Person
with respect to which such Person shall then be prosecuting an appeal or other
proceedings for review or the period within which such proceedings may be
instituted shall not have expired; (v) Liens for taxes not yet due or payable or
subject to penalties for non-payment and that are being contested in good faith
by appropriate proceedings; (vi) Liens in favor of issuers of surety,
performance, judgment, appeal and like bonds or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; (vii) Liens existing on the Issue Date; (viii) Liens on
property or shares of stock of a Person at the time such Person becomes a
Subsidiary of Bucyrus; provided, however, that such Lien was not incurred in
anticipation of or in connection with the transaction or series of related
transactions pursuant to which such Person became a Subsidiary; (ix) Liens
securing Purchase Money Indebtedness; (x) Liens securing an Interest Rate
Agreement or Currency Agreement so long as the related Indebtedness is permitted
to
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be Incurred under the Indenture; (xi) zoning restrictions, easements,
rights-of-way, restrictions on the use of property, other similar encumbrances
incurred in the ordinary course of business and minor irregularities of title
that do not materially interfere with the ordinary conduct of the business of
Bucyrus and its Restricted Subsidiaries taken as a whole; (xii) pledges of or
Liens on raw materials or on manufactured products as security for any drafts or
bills of exchange drawn in connection with the importation of such raw materials
or manufactured products; (xiii) Liens on property or assets of the Company and
the Restricted Subsidiaries securing obligations of the Company or a Restricted
Subsidiary under operating leases so long as the lessor is a financial
institution party to the Bank Credit Facility, or an Affiliate of such financial
institution, and the aggregate amount so secured, together with the principal
amount of Indebtedness outstanding under the Bank Credit Facility, does not
exceed the limit set forth in the proviso to clause (1) of paragraph (b) under
"-- Certain Covenants -- Limitation on Incurrence of Indebtedness" and (xiv)
Liens securing Refinancing Indebtedness permitted to be Incurred under the
Indenture; provided, however, that such Liens extend only to the assets securing
the Indebtedness being Refinanced.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of Bucyrus pursuant to an effective registration statement under
the Securities Act (other than any registration statement filed on Form S-8 or
similar form).
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 10% of the total issued and outstanding common
stock of Bucyrus has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Purchase Money Indebtedness" mean Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds or similar Indebtedness, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) Incurred to
finance the acquisition by Bucyrus or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; provided,
further, however, that such Indebtedness is Incurred within 90 days after such
acquisition of such asset by Bucyrus or Restricted Subsidiary.
"Qualified Stock" means any Capital Stock of Bucyrus other than
Disqualified Stock.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
increase, replace, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
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"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Bucyrus or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with the Indenture; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced, (iii) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if Incurred
with original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced, and (iv) in the case of any
Indebtedness that is subordinated to the Notes, such Refinancing Indebtedness is
subordinated to at least the same extent; provided, further, however, that
Refinancing Indebtedness shall not include Indebtedness of a Subsidiary that
Refinances Indebtedness of Bucyrus.
"Related Business" means the manufacture, distribution and sale of
excavation equipment, or components for such equipment, used in large-scale
surface mining operations and activities reasonably related thereto, including,
without limitation, aftermarket parts sales and services, and such other
businesses as the Board of Directors determines in good faith are reasonably
related to the foregoing.
"Restricted Payment" means (i) any dividend or other distribution declared
or paid on any Capital Stock of Bucyrus or any Restricted Subsidiary (other than
dividends or distributions payable solely in Qualified Stock or dividends or
distributions payable to Bucyrus or any Wholly Owned Subsidiary); (ii) any
payment to purchase, redeem or otherwise acquire or retire for value (other than
in connection with the AIP Tender Offer and the AIP Merger pursuant to the AIP
Agreement) any Capital Stock of Bucyrus or any Restricted Subsidiary or other
Affiliate of Bucyrus (other than any Capital Stock owned by Bucyrus or any
Wholly Owned Subsidiary); provided, however, that payments to purchase, redeem
or otherwise acquire or retire for value Capital Stock of Bucyrus in connection
with the AIP Merger pursuant to the AIP Agreement shall not be deemed a
Restricted Payment so long as such payments in excess of $54.0 million are paid
with cash existing at BAC prior to the AIP Merger; (iii) any payment to
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated in right of payment to the Notes or the
Guarantees other than a purchase, redemption, defeasance or other acquisition or
retirement for value that is paid for with the proceeds of Refinancing
Indebtedness that is permitted under the covenant described under "-- Certain
Covenants -- Limitations on Incurrence of Indebtedness" above; (iv) the making
of an Investment (other than a Permitted Investment), including any Investment
in an Unrestricted Subsidiary (including by the designation of a Subsidiary of
Bucyrus as an Unrestricted Subsidiary); or (v) payment of any interest accrued
on the AIP Bridge Loan.
"Restricted Subsidiary" means any Subsidiary of Bucyrus that is not an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby Bucyrus or a Restricted Subsidiary
transfers such property to a Person and Bucyrus or a Restricted Subsidiary
leases it from such Person.
"Significant Restricted Subsidiary" means (i) any Restricted Subsidiary
that would be a "Significant Subsidiary" of Bucyrus within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC or (ii) any group of Restricted
Subsidiaries that together would constitute a Significant Restricted Subsidiary.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the
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repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of Bucyrus (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. "Subordinated Obligation" of any Guarantor has a correlative meaning.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of Bucyrus)
organized and in existence under the laws of the United States of America, any
State thereof or the District of Columbia or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Unrestricted Subsidiary" means (i) any Subsidiary of Bucyrus that at the
time of determination shall have been designated an Unrestricted Subsidiary by
the Board of Directors and (ii) any Subsidiary of an Unrestricted Subsidiary.
Western Gear Machinery Co. and BWC Gear, Inc. have been designated Unrestricted
Subsidiaries as of the Issue Date.
The Board of Directors may designate any Subsidiary of Bucyrus (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, Bucyrus or any other
Subsidiary of Bucyrus that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that (i) no Default shall have occurred and be
continuing, (ii) Bucyrus could incur $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under "-- Certain Covenants --
Limitation on Incurrence of Indebtedness" and (iii) either (x) the Subsidiary to
be so designated has total assets of $1,000 or less or (y) if such Subsidiary
has assets greater than $1,000, such designation would be permitted under the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments" (treating the fair market value of Bucyrus' proportionate interest in
the net worth of such Subsidiary on such date calculated in accordance with GAAP
as the amount of the Investment).
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The Board of Directors may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that (i) no Default shall have
occurred and be continuing and (ii) Indebtedness of such Unrestricted Subsidiary
and all Liens on any asset of such Unrestricted Subsidiary outstanding
immediately following such redesignation would, if Incurred at such time, be
permitted to be Incurred under the Indenture.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by Bucyrus
and/or one or more Wholly Owned Subsidiaries.
EXCHANGE OFFER; REGISTRATION RIGHTS
REGISTRATION RIGHTS
Bucyrus and the Guarantors (together, the "Issuers") have entered into a
registration rights agreement with the Initial Purchasers dated as of September
24, 1997 (the "Registration Agreement"), pursuant to which Issuers agree, for
the benefit of the holders of the Existing Notes, at the Issuers' cost, to (i)
file a registration statement (the "Exchange Offer Registration Statement")
within 60 days after the Issue Date with the Commission with respect to a
registered offer to exchange the Existing Notes for the Exchange Notes that will
be issued under the Indenture in the same aggregate principal amount as and with
terms that will be identical in all respects to the Existing Notes (except that
the Exchange Notes will not contain terms with respect to the liquidated damages
provision and transfer restrictions); (ii) use their best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the Issue Date; and (iii) use their best
efforts to consummate the Exchange Offer within 180 days after the Issue Date.
Promptly after the Exchange Offer Registration Statement being declared
effective, the Issuers will offer the Exchange Notes in exchange for surrender
of the Notes (the "Exchange Offer"). The Issuers will keep the Exchange Offer
open for not less than 30 days (or longer if required by applicable law) after
the date notice of the Exchange Offer is mailed to the Noteholders. For each
Existing Note tendered to the Issuers pursuant to the Exchange Offer and not
validly withdrawn by the holder thereof, the holder of such Existing Note will
receive an Exchange Note having a principal amount equal to the principal amount
of such surrendered Existing Note.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Issuers believe that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any purchaser of Existing Notes who is an "affiliate" (within the
meaning of the Securities Act) of any of the Issuers or who intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes, a broker-dealer (within the meaning of the Securities Act) that acquired
Existing Notes in a transaction other than as part of its market-making or other
trading activities and who has arranged or has an understanding with any person
to participate in the distribution of the Exchange Notes: (i) will not be able
to rely on the interpretation by the staff of the Commission set forth in the
above-mentioned no-action letters; (ii) will not be able to tender its Existing
Notes in the Exchange Offer; and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of Existing Notes unless such sale or transfer is made pursuant
to an exemption from such requirements.
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Each holder of Existing Notes (other than certain specified holders) who
wishes to exchange Existing Notes for Exchange Notes in the Exchange Offer will
be required to represent that (i) it is not an affiliate of any of the Issuers;
(ii) any Exchange Notes to be received by it were acquired in the ordinary
course of its business; and (iii) at the time of commencement of the Exchange
Offer, it has no arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of the Exchange
Notes. In addition, in connection with any resales of Exchange Notes, any
broker-dealer (an "Exchanging Dealer") who acquired Existing Notes for its own
account as a result of market-making activities or other trading activities must
deliver a prospectus meeting the requirements of the Securities Act. The
Commission has taken the position that Exchanging Dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Existing Notes)
with the prospectus contained in the Exchange Offer Registration Statement.
Under the Registration Agreement, the Issuers are required to allow Exchanging
Dealers to use the prospectus contained in the Exchange Offer Registration
Statement in connection with the resale of such Exchange Notes for a period of
one year following the Issue Date.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Issuers to effect the Exchange Offer,
or if for any reason the Exchange Offer Registration Statement is not declared
effective within 150 days following the Issue Date, the Issuers will, in lieu
of, or upon the request of an Initial Purchaser under certain circumstances, in
addition to, effecting the registration of the Exchange Notes pursuant to the
Exchange Offer Registration Statement and at their cost: (i) as promptly as
practicable, file with the Commission a shelf registration statement (the "Shelf
Registration Statement") covering resales of the Existing Notes; (ii) use their
best efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act by the 180th day after the Issue Date (or promptly in
the event of a request by an Initial Purchaser); and (iii) keep effective the
Shelf Registration Statement until two years after its effective date (or until
one year after its effective date if such Shelf Registration Statement is filed
at the request of an Initial Purchaser). The Issuers will, in the event of the
filing of a Shelf Registration Statement, provide to each holder covered by the
Shelf Registration Statement copies of the prospectus that is a part of the
Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Existing Notes has become effective, and take
certain other actions as are required to permit unrestricted resales of Existing
Notes. A holder that sells such Existing Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to the
purchaser, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement that are applicable to such holder
(including certain indemnification obligations). In addition, each holder will
be required to deliver information to be used in connection with the Shelf
Registration Statement and to benefit from the provisions regarding Special
Interest set forth in the following paragraph.
If (i) within 60 days after the Issue Date, neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed with
the Commission; (ii) within 150 days after the Issue Date, the Exchange Offer
Registration Statement has not been declared effective; (iii) within 180 days
after the Issue Date, neither the Exchange Offer has been consummated nor the
Shelf Registration Statement has been declared effective; or (iv) after either
the Exchange Offer Registration Statement or the Shelf Registration Statement
has been declared effective, such Registration Statement thereafter ceases to be
effective or usable (subject to certain exceptions) in connection with resales
of Existing Notes or Exchange Notes in accordance with and during the periods
specified in the Registration Agreement (each such event referred to in clauses
(i) through (iv), a "Registration Default"), liquidated damages ("Liquidated
Damages") will accrue on the Existing Notes and the Exchange Notes from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured.
Liquidated Damages will accrue at a rate of $0.05 per week per $1,000 principal
amount of the Existing Notes during the 90-day period immediately following the
occurrence of any Registration Default and shall increase $0.05 per
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week per $1,000 principal amount of the Existing Notes at the end of each
subsequent 90-day period, but in no event shall such Liquidated Damages exceed
$0.25 per week per $1,000 principal amount of Existing Notes.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is available upon request to Bucyrus as provided under "Available
Information."
CERTAIN FEDERAL TAX CONSIDERATIONS
Following is a general discussion of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the Notes
to initial investors who are United States holders (that is, a holder that is,
for United States federal income tax purposes, (i) a citizen or resident of the
United States; (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof; (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source; (iv) a trust if (X) a
U.S. court is able to exercise primary supervision over the administration of
the trust, and (Y) one or more U.S. persons have the authority to control all
substantial decisions of the trust; or (v) any other person whose income or gain
in respect of a Note is effectively connected with the conduct of a U.S. trade
or business).
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended, existing and proposed U.S. Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date hereof and all
of which are subject to change, possibly with retroactive effect, or different
interpretations (the "Code"). This discussion does not address the tax
consequences to subsequent purchasers of Notes, and is limited to investors who
hold the Notes as capital assets. Moreover, the discussion is for general
information only, and does not address all of the tax consequences that may be
relevant to particular investors in light of their personal circumstances, or to
certain types of investors (such as certain financial institutions, insurance
companies, tax exempt entities, dealers in securities or foreign currencies or
persons who hold the Notes as a position in a straddle or as part of a
"conversion transaction" or who have hedged the interest rate on the Notes).
In general, interest paid or payable on a Note will be taxable to a United
States holder as ordinary interest income at the time it is received or accrued,
in accordance with such holder's method of accounting for federal income tax
purposes. In addition, under certain circumstances the Code may require that a
holder accrue and include as ordinary (interest) income each year a portion of
any "original issue discount" attributable to the Note in advance of the cash
payments attributable to such income, regardless of such holder's regular method
of tax accounting. Assuming that the original issue discount on the Note is not
greater than or equal to a de minimis amount (equal to 0.25% of its stated
principal amount multiplied by the number of complete years to its maturity),
any such original issue discount will be deemed to be zero, and a holder will
not be required to accrue a portion of such discount as income in each taxable
year.
Holders of so-called "contingent payment debt instruments" are required to
accrue all payments thereon (including de minimis original issue discount and
projected contingent payments) on a constant yield basis, to treat gain
recognized on the disposition of the debt instrument as interest income and in
certain circumstances to include market discount in income sooner than otherwise
required. It is not clear under applicable Regulations whether the Liquidated
Damages payable on the Notes in certain circumstances described above under
"Registration Rights" would result in the Notes being treated as contingent
payment debt instruments. The Regulations provide that a payment under a debt
instrument that is payable on the occurrence of a remote or incidental
contingency will not be treated as a contingent payment, but the Regulations do
not provide definitive guidance on whether a contingency such as that which
governs the payment of the Liquidated Damages under the Notes will be regarded
as remote or incidental. Investors should
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consult their tax advisors as to the tax considerations relating to the
Liquidated Damages and the possibility that the Notes may be characterized as
contingent payment debt instruments under the Regulations.
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a Note, a United States holder will generally recognize taxable
gain or loss equal to the difference between the sum of the cash plus the fair
market value of all other property received on such disposition and such
holder's adjusted tax basis in the Note (except to the extent such cash or
property is attributable to accrued interest, which will be taxable as ordinary
income).
In the case of Notes held as capital assets, gain or loss recognized on the
disposition of a Note generally will be capital gain or loss (except to the
extent the gain is attributable to accrued market discount, as described below)
and will be long-term capital gain or loss subject to a maximum rate of 20%, in
the case of individuals, if, at the time of such disposition, the United States
holder's holding period for the Note is more than 18 months. In addition, an
individual will be taxed on his or her net capital gain at a maximum rate of (i)
28%, for property held for 18 months or less but more than one year, and (ii)
18%, for property (X) acquired after December 31, 2000 and (Y) held for more
than five years. Special rules (and generally lower maximum rates) apply for
individuals in lower tax brackets. However, if under the Regulations the Notes
are treated as contingent payment debt instruments, as discussed above, then any
gain realized on such sale, exchange, redemption or retirement will be taxable
as ordinary (interest) income, while any loss realized will be an ordinary loss
to the extent of any amounts previously treated as ordinary (interest) income
under the Regulations.
The exchange of an Existing Note for an Exchange Note should not constitute
a taxable exchange of the Existing Note if the interest rate on the Exchange
Note is equal to the interest rate on the Existing Note. Although there is no
definitive guidance on the issue, even if the interest rate on the Exchange Note
is not equal to the interest rate on the Existing Note because Liquidated
Damages are payable on the Existing Note but not on the Exchange Note, the
exchange should not constitute a taxable exchange of the Existing Note.
An investor who acquires a Note at a cost in excess of its principal amount
will be considered to have purchased the Note at a premium, and may make an
election, applicable to all Notes held by such holder, to amortize such premium,
using a constant yield method, over the remaining term of the Note (or, if a
smaller amortization allowance would result, by computing such allowance with
reference to the amount payable on an earlier call date, and by amortizing such
allowances over the shorter period to such call date).
Although the market discount provisions of the Code generally do not apply
to initial investors in Notes, those provisions may apply to initial investors
who acquire Notes for an amount less than the issue price of the Notes.
Generally, these rules require the holder of a "market discount bond" (as
defined in the Code) to treat any gain realized upon its disposition as interest
income to the extent of the market discount that accrued during the period such
holder held it. A holder may also be required to recognize as ordinary income
any principal payments with respect to a Note to the extent such payments do not
exceed the accrued market discount on the Note. For these purposes, market
discount generally equals the excess (if any) of the stated redemption price of
the Note at its maturity over the basis of the Note in the hands of the holder
immediately after its acquisition. However, market discount is deemed not to
exist if the market discount is less than a statutorily defined de minimis
amount equal to 0.25% of the Note's contract redemption price at maturity
multiplied by the number of complete years to the Note's maturity after the
holder acquired the Note.
The market discount rules also provide that any holder of Notes that were
acquired at a market discount may be required to defer the deduction of a
portion of the interest expense on any indebtedness incurred or maintained to
acquire or carry the Notes, until the Notes are disposed of. A holder of a Note
acquired at market discount may elect to include market discount in income as
the discount accrues. In such a case, the foregoing rules with respect to the
recognition of ordinary
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income on dispositions and with respect to the deferral of interest deductions
on indebtedness related to such Note would not apply.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR GIFT TAX LAWS
OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND
ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS. IN ADDITION, INDIVIDUAL
NOTEHOLDERS WHO ARE NOT CITIZENS OF THE UNITED STATES SHOULD CONSULT THEIR TAX
ADVISORS AS TO WHETHER THEY WILL OR WILL NOT BE DEEMED TO BE "RESIDENTS" OF THE
UNITED STATES FOR PURPOSES OF THE CODE.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer in exchange for Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge and agree that it will
deliver a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
for a period of one year after the Expiration Date by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Existing
Notes where such Existing Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business one year after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through broker-dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any person that participates in the
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging and agreeing that it will deliver and
by delivering this Prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
By acceptance of this Exchange Offer, each broker-dealer agrees that, upon
receipt of notice from the Company of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires the
making of any changes in the Prospectus in order to make the statements therein
not misleading, such broker-dealer will suspend use of the Prospectus until (i)
the Company has amended or supplemented the Prospectus to correct such
misstatement or omission and (ii) either the Company has furnished copies of the
amended or supplemented Prospectus to such broker-dealer or, if the Company has
not otherwise agreed to furnish such copies and declines to do so after such
broker-dealer so requests, such broker-dealer has obtained a copy of such
amended or supplemented Prospectus as filed with the Commission. The Company has
agreed to deliver such notice and such amended or supplemented Prospectus
promptly to any Participating Broker-Dealer that has so notified the Company.
Pursuant to the Registration Agreement, the Company and the Guarantors have
jointly and severally agreed to indemnify the Initial Purchasers against certain
liabilities, including certain liabilities incurred in connection with the
offering of the Existing Notes, and contribute to payments the Initial
Purchasers may be required to make in respect thereof.
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LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
Exchange Notes offered hereby will be passed upon for the Company by Whyte
Hirschboeck Dudek S.C., 111 East Wisconsin Avenue, Suite 2100, Milwaukee,
Wisconsin, 53202.
INDEPENDENT AUDITORS
The consolidated financial statements of Bucyrus International, Inc. as of
December 31, 1996 and 1995, and for each of the two years in the period ended
December 31, 1996, included in this Prospectus, have been audited by Arthur
Andersen LLP, Milwaukee, Wisconsin, independent accountants, as stated in their
reports appearing herein.
The consolidated financial statements of Bucyrus International, Inc. for
the period from December 14, 1994 to December 31, 1994, and the consolidated
financial statements of the Predecessor Company as of and for the period from
January 1, 1994 to December 13, 1994, included in this Prospectus, have been
audited by Deloitte & Touche LLP, Milwaukee, Wisconsin, as stated in their
report appearing herein.
The combined financial statements of the Surface Mining and Equipment
Business of Global Industrial Technologies, Inc. as of October 31, 1996, and for
the year then ended, included in this Prospectus, have been audited by Arthur
Andersen LLP, Milwaukee, Wisconsin, independent accountants, as stated in their
report appearing herein.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act for the registration of the Exchange Notes offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
and certain information contained in the Registration Statement has been
omitted, as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Exchange Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and financial statements, notes and schedules thereto filed as a part thereof or
incorporated by reference therein. This Prospectus contains summaries of
material terms and provisions of certain documents, including the Registration
Agreement and the Indenture. With respect to each such document filed with the
Commission as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved. The Registration
Statement and the exhibits and schedules thereto may be inspected without charge
and copied at prescribed rates at the Public Reference Section maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661-2511. The Commission maintains a Web Site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents or reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in
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any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
and superseded, to constitute a part of this Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE, OR A SOLICITATION OF
AN OFFER TO EXCHANGE, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO EXCHANGE OR A SOLICITATION OF AN OFFER TO EXCHANGE SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
The Indenture provides that Bucyrus shall each file with the Trustee and
provide holders of Notes, within 15 days after they file them with the
Commission, copies of their annual reports and the information, documents and
other reports that they are required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. To the extent permitted by the Exchange
Act, Bucyrus shall continue to file with the Commission and provide the Trustee
and holders with the annual reports and the information, documents and other
reports that are specified in Sections 13 and 15(d) of the Exchange Act. In the
event that Bucyrus is not permitted to file such reports, documents and
information with the Commission or Bucyrus has subsidiaries that individually or
in the aggregate would be deemed to be "substantial subsidiaries" (as defined in
Rule 1-02 of Regulation S-X, as in effect at the Issue Date), Bucyrus will
provide substantially similar information with respect to itself and its
subsidiaries to the Trustee, holders and prospective holders (upon written
request) as if Bucyrus were subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act. Bucyrus and the Subsidiaries shall also comply
with the other provisions of Trust Indenture Act Section 314(a).
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INDEX TO FINANCIAL STATEMENTS
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
AUDITED AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following audited and unaudited consolidated financial statements of
Bucyrus International, Inc. and Subsidiaries are presented herein on the pages
indicated below:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................. F-2
Independent Auditors' Report.............................. F-3
Consolidated Balance Sheets at December 31, 1996 and
1995................................................... F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1996 and 1995 and Periods Ended December
31, 1994 and December 13, 1994......................... F-5
Consolidated Statements of Common Shareholders' Investment
(Deficiency in Assets) for the Years Ended December 31,
1996 and 1995 and Periods Ended December 31, 1994 and
December 13, 1994...................................... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 and Periods Ended December
31, 1994 and December 13, 1994......................... F-7
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1996 and 1995 and Periods Ended
December 31, 1994 and December 13, 1994................ F-9
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Condensed Balance Sheets at June 30, 1997 and
December 31, 1996...................................... F-36
Consolidated Condensed Statements of Earnings for the Six
Months Ended June 30, 1997 and 1996.................... F-37
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996........................... F-38
Notes to Consolidated Condensed Financial Statements...... F-39
</TABLE>
THE SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES,
INC.
AUDITED AND UNAUDITED FINANCIAL STATEMENTS
The following audited and unaudited combined financial statements of the
Surface Mining and Equipment Business of Global Industrial Technologies, Inc.
are presented herein on the pages indicated below:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................. F-45
Combined Balance Sheet at October 31, 1996................ F-46
Combined Statement of Operations for the Year Ended
October 31, 1996....................................... F-47
Combined Statement of Equity for the Year Ended October
31, 1996............................................... F-48
Combined Statement of Cash Flows for the Year Ended
October 31, 1996....................................... F-49
Notes to Combined Financial Statements.................... F-50
UNAUDITED FINANCIAL STATEMENTS:
Combined Balance Sheets at June 30, 1997 and October 31,
1996................................................... F-58
Combined Statements of Operations for the Eight Months
Ended June 30, 1997 and 1996........................... F-59
Combined Statements of Cash Flows for the Eight Months
Ended June 30, 1997 and 1996........................... F-60
Notes to Combined Financial Statements.................... F-61
</TABLE>
F-1
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Bucyrus International, Inc.:
We have audited the accompanying balance sheets of Bucyrus International,
Inc. (Delaware Corporation) as of December 31, 1996 and 1995 and the related
statements of operations, common shareholders' investment and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bucyrus International, Inc.
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 31, 1997
F-2
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Bucyrus International, Inc.:
We have audited the accompanying consolidated statements of operations,
common shareholders' investment (deficiency in assets) and cash flows of Bucyrus
International, Inc. (formerly Bucyrus-Erie Company) and subsidiaries (the
"Company") for the period from December 14, 1994 to December 31, 1994 and the
period from January 1, 1994 to December 13, 1994 (Predecessor Company
operations). These financial statements are the responsibility of Company
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note B to the consolidated financial statements, on
December 1, 1994, the Bankruptcy Court entered an order confirming an Amended
Joint Plan of Reorganization which became effective on December 14, 1994.
Accordingly, the accompanying consolidated financial statements have been
prepared in conformity with AICPA Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code," for the
Company as a new entity with assets, liabilities, and a capital structure having
carrying values not comparable with prior periods as discussed in Note B to the
consolidated financial statements. Under the Amended Joint Plan of
Reorganization, the Company's parent, B-E Holdings, Inc., was merged with and
into the Company as of the effective date. The consolidated financial statements
for the period prior to December 14, 1994 includes the operating results of the
merged entities (Predecessor Company).
In our opinion, the Company's consolidated financial statements present
fairly, in all material respects, the results of operations and cash flows of
Bucyrus International, Inc. and subsidiaries for the period December 14, 1994 to
December 31, 1994 in conformity with generally accepted accounting principles.
Further, in our opinion, the Predecessor Company consolidated financial
statements referred to above present fairly, in all material respects, the
results of operations and cash flows of the Predecessor Company for the period
January 1, 1994 to December 13, 1994 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
April 10, 1995
F-3
<PAGE> 118
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents... $ 15,763 $ 11,150
Receivables................. 32,085 35,603
Inventories................. 70,889 73,566
Prepaid expenses and other
current assets............ 2,504 1,414
-------- --------
Total Current Assets........ 121,241 121,733
OTHER ASSETS:
Restricted funds on
deposit................... 1,079 2,877
Intangible assets........... 8,545 9,021
Other assets................ 6,003 4,760
-------- --------
15,627 16,658
PROPERTY, PLANT AND
EQUIPMENT:
Land........................ 2,752 1,507
Buildings and
improvements.............. 6,698 5,630
Machinery and equipment..... 33,959 32,250
Less accumulated
depreciation.............. (7,382) (3,740)
-------- --------
36,027 35,647
-------- --------
$172,895 $174,038
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................. $ 33,765 $ 37,487
Liabilities to customers on
uncompleted contracts and
warranties................ 3,579 8,222
Income taxes................ 1,469 3,463
Short-term obligations...... 3,186 5,573
Current maturities of
long-term debt............ 428 1,658
-------- --------
Total Current Liabilities... 42,427 56,403
LONG-TERM LIABILITIES:
Deferred income taxes....... 148 183
Liabilities to customers on
uncompleted contracts and
warranties................ 3,277 3,127
Postretirement benefits..... 11,064 11,527
Deferred expenses and
other..................... 11,891 10,097
-------- --------
26,380 24,934
LONG-TERM DEBT, less current
maturities................ 66,627 58,021
COMMON SHAREHOLDERS'
INVESTMENT:
Common stock -- par value
$.01 per share, authorized
20,000,000 shares, issued
and outstanding 10,534,574
and 10,234,574 shares,
respectively.............. 105 102
Additional paid-in
capital................... 57,739 54,259
Unearned stock
compensation.............. (2,815) --
Accumulated deficit......... (16,446) (19,324)
Cumulative translation
adjustment................ (1,122) (357)
-------- --------
37,461 34,680
-------- --------
$172,895 $174,038
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 119
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
------------
YEARS ENDED DECEMBER 31, DECEMBER 14 - JANUARY 1 -
------------------------- DECEMBER 31, DECEMBER 13,
1996 1995 1994 1994
---- ---- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales................................... $263,786 $231,921 $7,810 $186,174
Other income................................ 1,003 1,295 79 2,976
-------- -------- ------ --------
264,789 233,216 7,889 189,150
-------- -------- ------ --------
COSTS AND EXPENSES:
Cost of products sold....................... 215,126 205,552 6,933 157,181
Product development, selling, administrative
and miscellaneous expenses................ 36,470 34,172 1,099 30,158
Interest expense (Predecessor Company
contractual interest not recognized in
1994 $20,250)............................. 8,557 6,254 284 13,911
Restructuring expenses...................... -- 2,577 -- --
Reorganization items........................ -- 919 -- 9,338
-------- -------- ------ --------
260,153 249,474 8,316 210,588
-------- -------- ------ --------
Earnings (loss) before income taxes and
extraordinary gain.......................... 4,636 (16,258) (427) (21,438)
Income taxes.................................. 1,758 2,514 125 1,395
-------- -------- ------ --------
Earnings (loss) before extraordinary gain..... 2,878 (18,772) (552) (22,833)
Extraordinary gain............................ -- -- -- 142,480
-------- -------- ------ --------
Net earnings (loss)........................... 2,878 (18,772) (552) 119,647
Redeemable preferred stock dividends.......... -- -- -- (40)
Preferred stock accretion..................... -- -- -- (106)
Reorganization item -- preferred stock........ -- -- -- (40,555)
-------- -------- ------ --------
Net earnings (loss) attributable to common
shareholders................................ $ 2,878 $(18,772) $ (552) $ 78,946
======== ======== ====== ========
Net earnings (loss) per share of common stock:
Earnings (loss) before extraordinary gain..... $ 0.28 $ (1.84) $(0.05) $ (2.46)
Extraordinary gain............................ -- -- -- 15.37
-------- -------- ------ --------
Net earnings (loss)........................... 0.28 (1.84) (0.05) 12.91
Preferred stock dividends, accretion and
reorganization item......................... -- -- -- (4.39)
-------- -------- ------ --------
Net earnings (loss) per share attributable to
common shareholders......................... $ 0.28 $ (1.84) $(0.05) $ 8.52
======== ======== ====== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 120
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS'
INVESTMENT (DEFICIENCY IN ASSETS)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------- ADDITIONAL CUMULATIVE
COMMON PAID-IN ACCUMULATED TRANSLATION
CLASS C CLASS D STOCK WARRANTS CAPITAL DEFICIT ADJUSTMENT
------- ------- ------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor Company
Balance at January 1, 1994....... $ 92 $ 1 $ -- $ 1 $ -- $(138,994) $(4,209)
Exercise of warrants
(6,392 shares)................. -- -- -- (1) 1 -- --
Net earnings..................... -- -- -- -- -- 119,647 --
Preferred stock accretion........ -- -- -- -- -- (106) --
Preferred stock dividends........ -- -- -- -- -- (129) --
Reorganization item --
preferred stock................ -- -- -- -- -- (40,555) --
Translation adjustments.......... -- -- -- -- -- -- 991
Cancellation of former equity and
elimination of accumulated
deficit and cumulative foreign
currency translation
adjustments.................... (92) (1) -- -- (1) 60,137 3,218
Issuance of new common stock
(10,170,417 shares)............ -- -- 102 -- 53,898 -- --
---- --- ---- --- ------- --------- -------
Balance at December 13, 1994..... $ -- $-- $102 $-- $53,898 $ -- $ --
==== === ==== === ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL UNEARNED CUMULATIVE
COMMON PAID-IN STOCK ACCUMULATED TRANSLATION
STOCK CAPITAL COMPENSATION DEFICIT ADJUSTMENT
------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 14, 1994.............. $102 $53,898 $ -- $ -- $ --
Net loss -- December 14 to December 31,
1994.................................... -- -- -- (552) --
Translation adjustments -- December 14 to
December 31, 1994....................... -- -- -- -- 169
---- ------- ------- -------- -------
Balance at December 31, 1994.............. 102 53,898 -- (552) 169
Issuance of common stock
(64,157 shares)......................... -- 361 -- -- --
Net loss.................................. -- -- -- (18,772) --
Translation adjustments................... -- -- -- -- (526)
---- ------- ------- -------- -------
Balance at December 31, 1995.............. 102 54,259 -- (19,324) (357)
Grants under stock compensation plans..... 3 3,480 (3,483) -- --
Amortization of unearned stock
compensation............................ -- -- 668 -- --
Net earnings.............................. -- -- -- 2,878 --
Translation adjustments................... -- -- -- -- (765)
---- ------- ------- -------- -------
Balance at December 31, 1996.............. $105 $57,739 $(2,815) $(16,446) $(1,122)
==== ======= ======= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 121
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
YEARS ENDED ------------
DECEMBER 31, DECEMBER 14 - JANUARY 1 -
------------------- DECEMBER 31, DECEMBER 13,
1996 1995 1994 1994
---- ---- ------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)................................ $ 2,878 $(18,772) $ (552) $ 119,647
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Inventory obsolescence provision (see Note
E).......................................... -- 4,416 -- --
Depreciation................................... 3,882 3,671 145 7,356
Amortization................................... 1,142 1,194 23 3,679
Stock compensation expense..................... 668 -- -- --
Deferred rent (interest) on sale and leaseback
financing arrangement....................... -- -- -- 7,287
In kind interest on the Secured Notes due
December 14, 1999........................... 7,783 5,691 258 --
Amortization of debt discount.................. -- -- -- 71
(Gain) loss on sale of property, plant and
equipment................................... 362 (166) 5 37
Non-cash reorganization items.................. -- -- -- 1,680
Extraordinary gain............................. -- -- -- (142,480)
Changes in assets and liabilities:
Receivables................................. 3,021 (9,651) 4,318 (4,616)
Inventories................................. 2,026 3,769 (61) (7,539)
Other current assets........................ (1,114) 564 (73) 125
Other assets................................ (1,145) (578) (12) (13)
Current liabilities other than income taxes,
short-term obligations and current
maturities of long-term debt.............. (5,332) 8,073 (5,197) 17,326
Income taxes................................ (1,991) 740 302 543
Long-term liabilities other than deferred
income taxes.............................. (2,093) (1,035) (93) (1,372)
------- -------- ------- ---------
Net cash provided by (used in) operating
activities......................................... 10,087 (2,084) (937) 1,731
------- -------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted funds on deposit............ 1,798 798 -- 2,863
Purchases of property, plant and equipment......... (4,996) (3,006) (190) (2,616)
Proceeds from sale of property, plant and
equipment........................................ 1,058 263 -- 125
------- -------- ------- ---------
Net cash (used in) provided by investing
activities......................................... (2,140) (1,945) (190) 372
------- -------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project financing
obligations...................................... 5,402 6,012 1,620 7,891
Reduction of project financing obligations......... (8,104) (7,117) -- (6,933)
Net (decrease) increase in other bank borrowings... (1,350) 304 -- (1,210)
Proceeds from issuance of long-term debt........... 849 -- -- --
------- -------- ------- ---------
Net cash (used in) provided by financing
activities......................................... (3,203) (801) 1,620 (252)
------- -------- ------- ---------
Effect of exchange rate changes on cash.............. (131) (229) (5) 174
------- -------- ------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ 4,613 (5,059) 488 2,025
Cash and cash equivalents at beginning of period..... 11,150 16,209 15,721 13,696
------- -------- ------- ---------
Cash and cash equivalents at end of period........... $15,763 $ 11,150 $16,209 $ 15,721
======= ======== ======= =========
Cash paid (received) during the period for:
Interest........................................... $ 491 $ 289 $ 20 $ 345
Income taxes(1).................................... 3,246 1,270 12 (259)
</TABLE>
- -------------------------
(1) These amounts are net of federal and state income tax refunds of $1 in
1996, $416 in 1995 and $908 (including $907 for the Predecessor Company) in
1994.
F-7
<PAGE> 122
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
(A) On June 27, 1995, the Company issued 64,157 shares of common stock as
payment in full of $361 of liabilities for certain legal and professional
fees incurred in connection with the Company's reorganization under Chapter
11 of the Bankruptcy Code.
(B) In 1994, the Predecessor Company increased the carrying amount of the Series
A redeemable preferred stock by $129, which represented the estimated fair
value of the pre-petition dividends not declared or paid, but were payable
under mandatory redemption features. The Predecessor Company also recorded
preferred stock discount accretion of $106 in 1994 on these securities. As
of the Petition Date (see Note B), the Predecessor Company increased the
carrying amount of the Series A redeemable preferred stock by $40,555 to the
amount of the allowed claim in the Amended Plan.
(C) Pursuant to the Amended Plan, the Company issued shares of Common Stock in
exchange for the unsecured debt securities of Holdings and the Company and
the equity securities of Holdings.
See Notes to Consolidated Financial Statements.
F-8
<PAGE> 123
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF ACCOUNTING POLICIES
NATURE OF OPERATIONS
Bucyrus International, Inc. (the "Company"), formerly known as Bucyrus-Erie
Company, is a Delaware corporation and a leading manufacturer of surface mining
equipment, principally walking draglines, electric mining shovels and blast hole
drills, and related replacement parts. Major markets for the surface mining
industry are coal mining, copper and iron ore mining and phosphate production.
BASIS OF PRESENTATION
As discussed in Note B, the Company accounted for the reorganization under
Chapter 11 of the Bankruptcy Code effective December 14, 1994 (the "Effective
Date") using the principles of fresh start reporting as required by AICPA
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"). Accordingly, the consolidated financial
statements of the Company are not comparable to the consolidated financial
statements of periods prior to the Effective Date. The Predecessor Company
consolidated financial statements are those of B-E Holdings, Inc. ("Holdings"),
the former parent of the Company, which include the accounts and operating
results of the Company.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany transactions, profits and accounts
have been eliminated.
CASH EQUIVALENTS
All highly liquid investments with maturities of three months or less when
purchased are considered to be cash equivalents. The carrying amount of these
investments approximates fair value.
RESTRICTED FUNDS ON DEPOSIT
Restricted funds on deposit represent cash and temporary investments used
to support the issuance of standby letters of credit and other obligations. The
carrying amount of these funds approximates fair value.
INVENTORIES
Inventories are stated at lower of cost (first-in, first-out method) or
market (replacement cost or estimated net realizable value). Advances from
customers are netted against inventories to the extent of related accumulated
costs. Advances in excess of related costs and earnings on uncompleted contracts
are classified as a liability to customers.
INTANGIBLES
As of the Effective Date, intangible assets were recorded at estimated fair
value to the extent of available reorganization value and accumulated
amortization was eliminated in accordance with the
F-9
<PAGE> 124
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
principles of fresh start reporting. Intangible assets consist of engineering
drawings and bill-of-material listings which are being amortized on a
straight-line basis over 20 years (30 years for the Predecessor Company). At
December 31, 1996 and 1995, accumulated amortization for intangible assets was
$975,000 and $499,000, respectively.
PROPERTY, PLANT AND EQUIPMENT
As of the Effective Date, property, plant and equipment was recorded at
estimated fair value to the extent of available reorganization value and
accumulated depreciation was eliminated in accordance with the principles of
fresh start reporting. Additions made subsequent to the Effective Date are
recorded at cost. Depreciation is provided over the estimated useful lives of
respective assets using the straight-line method for financial reporting and
accelerated methods for income tax purposes. Estimated useful lives used for
financial reporting purposes range from ten to forty years for buildings and
improvements and three to seventeen years for machinery and equipment.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign subsidiaries are generally translated
into U.S. dollars using year-end exchange rates. Revenues and expenses are
translated at average rates during the year. Adjustments resulting from this
translation, except for one foreign subsidiary which operates in a highly
inflationary economy, are deferred and reflected as a separate component of
Common Shareholders' Investment. For the one subsidiary operating in a highly
inflationary economy, adjustments resulting from the translation of financial
statements are reflected in the Consolidated Statements of Operations.
REVENUE RECOGNITION
Revenue from long-term sales contracts is recognized using the
percentage-of-completion method. At the time a loss on a contract becomes known,
the amount of the estimated loss is recognized in the consolidated financial
statements. Included in the current portion of liabilities to customers on
uncompleted contracts and warranties are advances in excess of related costs and
earnings on uncompleted contracts of $575,000 and $790,000 at December 31, 1996
and 1995, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment when certain events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company adopted SFAS 121 in 1996. Upon completion of a
review of all long-lived assets and intangibles, management determined that no
adjustment to the carrying value of these assets is necessary.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 consolidated
financial statements to present them on a basis consistent with the current
year.
F-10
<PAGE> 125
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- FINANCIAL REPORTING RELATING TO REORGANIZATION PROCEEDINGS
On February 18, 1994 (the "Petition Date"), Holdings and the Company, which
at such time was a wholly-owned subsidiary of Holdings, commenced voluntary
petitions under Chapter 11 of the Bankruptcy Code and filed a prepackaged joint
plan of reorganization in the United States Bankruptcy Court, Eastern District
of Wisconsin (the "Bankruptcy Court"). No other subsidiaries of Holdings or the
Company were included in the filing. On December 1, 1994, the Bankruptcy Court
entered an order confirming the Second Amended Joint Plan of Reorganization of
Holdings and the Company as modified on December 1, 1994 (the "Amended Plan").
The Amended Plan became effective on December 14, 1994.
On December 14, 1994, Holdings merged with and into the Company pursuant to
the Amended Plan and the Agreement and Plan of Merger dated as of December 14,
1994 between Holdings and the Company (the "Merger Agreement"). Pursuant to the
Amended Plan and the Merger Agreement, the Company issued 10,170,417 shares of
its common stock, par value $.01 per share (the "Common Stock"), which included
10,000,004 shares of Common Stock issued to holders of Holdings' and the
Company's unsecured debt securities and Holdings' equity securities (including
preferred stock) in exchange for such securities. The Company also issued
170,413 shares of Common Stock and paid $350,000 in cash to Bell Helicopter
Textron, Inc. ("Bell Helicopter") in settlement of Bell Helicopter's claims
against the Company and an inactive subsidiary of the Company asserted in a
civil action.
Also on the Effective Date pursuant to the Amended Plan, the Company issued
an aggregate principal amount of $52,072,000 of Secured Notes due December 14,
1999 (the "Secured Notes") in exchange for the outstanding Series A 10.65%
Senior Secured Notes due July 1, 1995 of the Company, the outstanding Series B
16.5% Senior Secured Notes due January 1, 1996 of the Company, the obligations
of the Company under its sale and leaseback financing arrangement and accrued
interest, the sum of said items being $54,571,000.
As a result of these transactions pursuant to the Amended Plan, an
extraordinary gain on debt discharge of $142,480,000 was recognized, which
consists of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Carrying value of unsecured debt securities of Holdings
and the Company........................................ $158,350
Accrued interest on unsecured debt securities of Holdings
and the Company........................................ 31,663
Concession on Series A and B Senior Secured Notes and
obligation under sale and leaseback financing
arrangement............................................ 2,499
Settlement of Bell Helicopter claim...................... 3,000
Write-off of previously recorded capitalized financing
costs.................................................. (309)
--------
195,203
Estimated fair value of Common Stock issued for unsecured
debt securities and Bell Helicopter claim.............. 52,723
--------
Total Extraordinary Gain................................. $142,480
========
</TABLE>
For financial statement purposes, there was no income tax expense
recognized.
Reorganization items included in the Consolidated Statements of Operations
represent the expenses incurred as a result of the Company's efforts to
reorganize under Chapter 11 of the
F-11
<PAGE> 126
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Bankruptcy Code. In 1995, reorganization items consist entirely of legal and
professional fees. Reorganization items in 1994 consist of $8,023,000 of legal
and professional fees, $41,122,000 to adjust debt and redeemable preferred stock
to the amount of the allowed claims in the Amended Plan and a $1,113,000
write-off of capitalized financing costs. These expenses were partially offset
by $365,000 of interest income earned from the Petition Date through December
13, 1994 on accumulated cash balances of Holdings and the Company.
The Company accounted for the reorganization by using the principles of
fresh start reporting as required by SOP 90-7. Under the principles of fresh
start reporting, total assets were recorded at their assumed reorganization
value, with the reorganization value allocated to identifiable tangible and
intangible assets on the basis of their estimated fair value, and liabilities
were adjusted to the present values of amounts to be paid where appropriate. The
consolidated financial statements for periods subsequent to the Effective Date
include the related amortization charges associated with the fair value
adjustments.
NOTE C -- RESTRUCTURING EXPENSES
Restructuring expenses of $2,577,000 for the year ended December 31, 1995
consist of employee severance expenses recorded to reflect the cost of reduced
employment and the severance costs related to the resignation of three officers
of the Company.
NOTE D -- RECEIVABLES
Receivables at December 31, 1996 and 1995 include $6,830,000 and
$6,994,000, respectively, of revenues from long-term contracts which were not
billable at that date. Billings on long-term contracts are made in accordance
with the payment terms as defined in the individual contracts.
Current receivables are reduced by an allowance for losses of $539,000 and
$667,000 at December 31, 1996 and 1995, respectively.
NOTE E -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials and parts................................. $10,628 $12,138
Costs relating to uncompleted contracts................. 4,183 5,861
Customers' advances offset against costs incurred on
uncompleted contracts................................. (1,816) (2,440)
Work in process......................................... 13,746 13,511
Finished products (primarily replacement parts)......... 44,148 44,496
------- -------
$70,889 $73,566
======= =======
</TABLE>
Inventory was recorded at estimated fair value as of the Effective Date in
accordance with the principles of fresh start reporting. The remaining estimated
fair value adjustment of $10,065,000 was charged to cost of products sold in
1995 as the inventory was sold.
During 1995, the Company completed an evaluation of its inventory and
recorded a charge of $4,416,000 to cost of products sold for the scrapping and
disposal of excess inventory which related to certain older and discontinued
machine models.
F-12
<PAGE> 127
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Trade accounts payable.................................. $14,270 $16,703
Wages and salaries...................................... 5,495 4,005
Service and erection.................................... 2,138 1,802
Reorganization items.................................... 1,071 1,602
Excess refund from Internal Revenue Service............. 373 2,700
Other................................................... 10,418 10,675
------- -------
$33,765 $37,487
======= =======
</TABLE>
In 1996, the Company reached an agreement with the Internal Revenue Service
to repay the excess refund in semi-annual payments over five years at 8%
interest commencing September 15, 1996. Accordingly, a portion of the liability
has been included in long-term liabilities in the Consolidated Balance Sheet at
December 31, 1996.
NOTE G -- LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Secured Notes due December 14, 1999..................... $65,785 $58,021
Bridge Loan Account at Bucyrus Europe at floating
interest rate (8.625% at December 31, 1996 and 1995),
due 1997.............................................. 428 1,600
Construction Loan at Bucyrus Chile, Ltda................ 842 58
------- -------
67,055 59,679
Less current maturities of long-term debt............... (428) (1,658)
------- -------
Long-term debt.......................................... $66,627 $58,021
======= =======
</TABLE>
Interest on the Secured Notes accrued at a rate of 10.5% per annum until
December 14, 1995. Thereafter, interest accrues at a rate of 10.5% per annum, if
paid in cash, or 13.0% per annum, if paid in kind. The Credit Agreement (as
defined below) required accrued interest on the Secured Notes to be paid in kind
prior to January 1, 1996, and thereafter restricts the cash payment of principal
and interest on the Secured Notes unless certain ratios and conditions are met.
Otherwise, interest on the Secured Notes is payable in kind at the discretion of
the Company during the term of the Secured Notes. All interest through June 30,
1996 was accrued at 13% since the Company paid this interest in kind. For the
quarter ended September 30, 1996, interest was accrued at 10.5% since at that
time it was the Company's intention to pay the December 31, 1996 interest
payment in cash. During the fourth quarter of 1996, the Company decided to pay
the December 31, 1996 interest payment in kind. As a result, interest expense of
$386,000 related to the third quarter of 1996 was recorded during the fourth
quarter of 1996.
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 (collectively, the "Pledged Shares"). The Secured Notes are
subordinated to the security interest in favor of Bank One,
F-13
<PAGE> 128
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Milwaukee, National Association ("Bank One") up to $16,000,000 in indebtedness
and other amounts owing under the Credit Agreement (as defined below).
During 1996, there were two trades of the Secured Notes, which are
privately held. In February, 1996, 97.2% of the Secured Notes were purportedly
sold for 94.67% of face value. In March, 1996, the remaining 2.8% of the Secured
Notes were purportedly sold for 98% of face value. Based on these trades,
management believes that the carrying value of the Secured Notes approximates
fair value.
The Construction Loan outstanding at Bucyrus Chile, Ltda. at December 31,
1996 bears interest at 9.24% and is due in February, 1997. However, this loan
will be refinanced with a new $2,000,000 construction loan which will be payable
commencing in 1999. Therefore, the amount outstanding at December 31, 1996 is
classified as long-term debt and the maturities below reflect the refinancing.
Maturities of long-term debt are the following for each of the next five
years:
<TABLE>
<S> <C>
1997............................................. $ 428,000
1998............................................. --
1999............................................. 66,356,000
2000............................................. 271,000
2001............................................. --
</TABLE>
The Company has a Credit Agreement dated as of December 14, 1994 (the
"Credit Agreement"), with Bank One. The Credit Agreement, as amended, contains a
credit facility for working capital and general corporate purposes (the "Loan
Facility"), a letter of credit facility (the "L/C Facility") and a project
financing loan facility (the "Project Financing Facility"). Under the Loan
Facility, the Company may borrow up to $2,500,000, provided that it meets
certain earnings before interest, taxes, depreciation and amortization tests, as
defined. Borrowings under the Loan Facility mature on April 30, 1998 and
interest is payable at the Company's option either at a rate equal to Bank One's
reference rate plus 0.75% per annum or an adjusted LIBOR rate plus 2.75% per
annum. Under the L/C Facility, Bank One has agreed to issue letters of credit
through April 30, 1998 in an aggregate amount not in excess of $15,000,000 minus
the then outstanding aggregate borrowings by the Company under the Loan
Facility, provided that no letter of credit may expire after April 30, 1999.
Under the Project Financing Facility, Bank One may make project financing loans
to the Company from time to time. Borrowings under the Project Financing
Facility bear interest at the Company's option either at a rate equal to Bank
One's reference rate or an adjusted LIBOR rate plus a variable margin.
Borrowings under the Credit Agreement are secured by a security interest on
substantially all of the Company's property (other than land and buildings),
including the Pledged Shares. At December 31, 1996 and 1995, the Company had
borrowings outstanding under the Loan Facility of $357,000 and $269,000,
respectively. At December 31, 1996 and 1995, $7,316,000 and $3,419,000,
respectively, of the L/C Facility was being used. Under the Project Financing
Facility, the Company has a line of credit for $14,000,000 to support one
current order. Bank One has participated a portion of the Project Financing
Facility to The Bank of Nova Scotia. Availability is based on the amount of
inventory being financed and any accounts receivable relating to such project.
Availability at December 31, 1996 was approximately $3,300,000. There were no
borrowings under the Project Financing Facility at December 31, 1996 and 1995.
The Credit Agreement prohibits the Company from making any dividends or
other distributions upon the Common Stock, other than dividends payable solely
in Common Stock or other equity securities of the Company. The Indenture
relating to the Secured Notes prohibits the Company from declaring or paying any
dividend or making any distribution in respect of the Common Stock (other than
dividends or distributions payable solely in shares of Common Stock or in
options, warrants or
F-14
<PAGE> 129
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
other rights to acquire Common Stock), if at the time thereof an Event of
Default (as defined in such Indenture) or an event that with the lapse of time
or the giving of notice, or both, would constitute an Event of Default (as
defined in such Indenture) shall have occurred and be continuing.
The agreements relating to the Secured Notes and the Credit Agreement
permit additional project financing from other lenders to manufacture mining
machinery or other products pursuant to binding purchase contracts. Project
financing borrowings are secured by the inventory being financed and any
accounts receivable relating to such project. Project financing borrowings
mature not later than the date of the final payment by the customer under the
applicable purchase contract. At December 31, 1996 and 1995, the Company had
$2,431,000 and $5,132,000, respectively, of outstanding project financing
borrowings not related to the Project Financing Facility. The outstanding
project financing borrowings at December 31, 1996 and 1995 bear interest at
8.25% and 7.75%, respectively, and are included in Short-Term Obligations in the
Consolidated Balance Sheets.
As required under various agreements, Equipment Assurance Limited, an
off-shore insurance subsidiary of the Company, has pledged $1,056,000 and
$2,856,000 of its cash to secure its reimbursement obligations for outstanding
letters of credit at December 31, 1996 and 1995, respectively. Bucyrus Chile
Ltda. has pledged $23,000 and $21,000 of its cash for a bank guarantee at
December 31, 1996 and 1995, respectively. These collateral amounts are
classified as Restricted Funds on Deposit in the Consolidated Balance Sheets.
NOTE H -- COMMON SHAREHOLDERS' INVESTMENT
In 1995, the Company's Board of Directors adopted the Bucyrus
International, Inc. Non-Employee Directors' Stock Option Plan (the "Directors'
Stock Option Plan"). The Directors' Stock Option Plan provides for the automatic
grant of non-qualified stock options to non-employee members of the Board of
Directors for up to 60,000 shares of Common Stock at an exercise price based on
the last sale price of the Common Stock on the date of grant. Options granted
vest and are exercisable immediately on the date of grant and terminate on the
earlier of ten years after the date of grant, six months after the non-employee
director ceases to be a director of the Company by reason of death, or three
months after the non-employee director ceases to be a director of the Company
for any reason other than death. The following summary shows activity and
outstanding balances of options exercisable for shares of Common Stock under the
Directors' Stock Option Plan:
<TABLE>
<CAPTION>
OUTSTANDING AVAILABLE FOR
OPTIONS FUTURE GRANTS
----------- -------------
<S> <C> <C>
At plan inception.................................... -- 60,000
Granted on February 16, 1995 ($6.00 per share)....... 8,000 (8,000)
------ ------
Balances at December 31, 1995........................ 8,000 52,000
Granted on February 8, 1996 ($9.25 per share)........ 8,000 (8,000)
Granted on March 11, 1996 ($9.00 per share).......... 4,000 (4,000)
------ ------
Balances at December 31, 1996 ($6.00-$9.25 per
share)............................................. 20,000 40,000
====== ======
</TABLE>
At December 31, 1996, all of the options outstanding were exercisable at a
weighted average exercise price of $7.90 per share and have a weighted average
remaining contractual life of 8.7 years. The weighted average exercise price of
options granted in 1996 was $9.17 per share.
In 1996, the Company's Board of Directors adopted the Bucyrus
International, Inc. 1996 Employees' Stock Incentive Plan (the "1996 Employees'
Plan"). The 1996 Employees' Plan
F-15
<PAGE> 130
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
authorizes the granting to key employees of: (a) stock options, which may be
either incentive stock options or non-qualified stock options, at an exercise
price per share not less than 55% of the fair market value of the Common Stock
on the date of grant; (b) stock appreciation rights at a grant price of not less
than 100% of the fair market value of the Common Stock on the date of grant; (c)
restricted stock; and (d) performance shares. The 1996 Employees' Plan provides
that up to a total of 1,000,000 shares of Common Stock, subject to adjustment
under plan provisions, will be available for the granting of awards thereunder.
The following summary shows activity and outstanding balances of grants
under the 1996 Employees' Plan:
<TABLE>
<CAPTION>
AVAILABLE FOR
GRANTED FUTURE GRANTS
------- -------------
<S> <C> <C>
At plan inception...................................... -- 1,000,000
Non-qualified stock options granted on March 11, 1996
($5.0875 per share).................................. 200,000 (200,000)
Restricted stock granted on March 11, 1996............. 300,000 (300,000)
Non-qualified stock options granted on November 7, 1996
($8.75 per share).................................... 30,000 (30,000)
Stock appreciation rights granted on November 7, 1996
($8.75 per share).................................... 50,000 (50,000)
------- ---------
Balances at December 31, 1996.......................... 580,000 420,000
======= =========
</TABLE>
At December 31, 1996, options for 200,000 shares were exercisable at an
exercise price of $5.0875 per share. The weighted average exercise price of the
options granted in 1996 was $5.57 per share. The weighted average remaining
contractual life of the options at December 31, 1996 was 9.3 years.
The restricted stock vests in installments over a period of time as
determined in each individual grant and is subject to restrictions imposed by
the Board of Directors. The stock appreciation rights may be settled in cash,
Common Stock or other consideration as determined in each individual grant. The
remaining contractual life of the stock appreciation rights at December 31, 1996
was 9.8 years.
Certain grants under the 1996 Employees' Plan result in additional
compensation expense to the Company. Compensation related to future periods is
reported as an offset within Common Shareholders' Investment in the Consolidated
Balance Sheet. Stock compensation expense recognized for the year ended December
31, 1996 was $668,000.
The Company accounts for the Directors' Stock Option Plan and the 1996
Employees' Plan in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," as allowed by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). Had compensation expense for these plans been
F-16
<PAGE> 131
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined consistent with SFAS 123, the Company's net earnings (loss) and net
earnings (loss) per share would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
1996 1995
------- ---------
(DOLLARS IN THOUSANDS;
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net Earnings (Loss) As Reported......................... $2,878 $(18,772)
Pro Forma............................................. 2,688 (18,808)
Net Earnings (Loss) Per Share As Reported............... $ 0.28 $ (1.84)
Pro Forma............................................. 0.26 (1.84)
</TABLE>
The weighted average grant-date fair value of stock options granted in 1996
and 1995 under the Directors' Stock Option Plan was $4.93 and $4.44 per option,
respectively. The weighted average grant-date fair value of stock options
granted under the 1996 Employees' Plan whose exercise price was less than market
price of the Common Stock on the date of grant was $6.55 per option. The
weighted average grant-date fair value of stock options granted under the 1996
Employees' Plan whose exercise price was equal to the market price of the Common
Stock on the date of grant was $6.00 per option. The grant-date fair value of
the restricted stock was $9.00 per share. The grant-date fair value of the stock
appreciation rights was $6.00 per right. The fair value of grants is estimated
on the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1996
DIRECTORS' EMPLOYEES'
STOCK OPTION PLAN PLAN
--------------------- ----------
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate..................... 6.48% 6.41% 6.34%
Expected dividend yield..................... 0% 0% 0%
Expected life............................... 7 years 7 years 5.6 years
Calculated volatility....................... 67.07% 73.92% 66.10%
</TABLE>
NOTE I -- INCOME TAXES
Deferred taxes are provided to reflect temporary differences between the
financial and tax basis of assets and liabilities using presently enacted tax
rates and laws. A valuation allowance is recognized if it is more likely than
not that some or all of the deferred tax assets will not be realized.
Earnings (loss) before income taxes and extraordinary gain consists of the
following:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
YEARS ENDED ------------
DECEMBER 31, DECEMBER 14 - JANUARY 1 -
----------------- DECEMBER 31, DECEMBER 13,
1996 1995 1994 1994
---- ---- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States................... $ 232 $(22,749) $(199) $(23,972)
Foreign......................... 4,404 6,491 (228) 2,534
------ -------- ----- --------
Total...................... $4,636 $(16,258) $(427) $(21,438)
====== ======== ===== ========
</TABLE>
F-17
<PAGE> 132
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
YEARS ENDED ------------
DECEMBER 31, DECEMBER 14 - JANUARY 1 -
---------------- DECEMBER 31, DECEMBER 13,
1996 1995 1994 1994
---- ---- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Foreign income taxes:
Current......................... $1,902 $ 4,080 $ 90 $ 956
Deferred........................ (430) (1,717) -- 259
------ ------- ---- ------
Total...................... 1,472 2,363 90 1,215
Other (state and local taxes):
Current......................... 274 163 35 180
Deferred........................ 12 (12) -- --
------ ------- ---- ------
Total...................... 286 151 35 180
------ ------- ---- ------
Total income tax expense.......... $1,758 $ 2,514 $125 $1,395
====== ======= ==== ======
</TABLE>
Total income tax expense differs from amounts expected by applying the
Federal statutory income tax rate to earnings (loss) before income taxes and
extraordinary gain as set forth in the following table:
<TABLE>
<CAPTION>
PREDECESSOR
YEARS ENDED DECEMBER 31, COMPANY
--------------------------------------------- ---------------------
DECEMBER 14 - JANUARY 1 -
1996 1995 DECEMBER 31, 1994 DECEMBER 13, 1994
--------------------- --------------------- --------------------- ---------------------
TAX EXPENSE TAX EXPENSE TAX EXPENSE TAX EXPENSE
(BENEFIT) PERCENT (BENEFIT) PERCENT (BENEFIT) PERCENT (BENEFIT) PERCENT
----------- ------- ----------- ------- ----------- ------- ----------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax benefit at Federal
statutory rate.............. $1,622 35.0% $(5,690) (35.0)% $(150) (35.0)% $(7,503) (35.0)%
Valuation allowance
adjustments................. (81) (1.7) 7,189 44.2 92 21.5 5,310 24.8
Impact of foreign subsidiary
income, tax rates and tax
credits..................... 7 0.2 419 2.6 179 41.9 187 0.9
State income taxes net of
Federal income tax
benefit..................... 136 2.9 27 0.2 (7) (1.6) 66 0.3
Nondeductible reorganization
expenses.................... -- -- 322 2.0 -- -- 3,268 15.2
Bell Helicopter settlement.... -- -- -- -- -- -- (439) (2.0)
Other items................... 74 1.5 247 1.5 11 2.5 506 2.3
------ ---- ------- ----- ----- ----- ------- -----
Total income tax expense...... $1,758 37.9% $ 2,514 15.5% $ 125 29.3% $ 1,395 6.5%
====== ==== ======= ===== ===== ===== ======= =====
</TABLE>
F-18
<PAGE> 133
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred tax assets and deferred tax liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Postretirement benefits............................... $ 4,777 $ 4,905
Inventory valuation provisions........................ 3,978 4,687
Accrued and other liabilities......................... 7,286 9,003
Research and development expenditures................. 8,711 6,239
Tax loss carryforward................................. 27,644 27,788
Tax credit carryforward............................... 479 479
Other items........................................... 524 450
-------- --------
Total deferred tax assets............................... 53,399 53,551
-------- --------
Deferred tax liabilities:
Excess of book basis over tax basis of property, plant
and equipment and intangible assets................ (9,008) (9,966)
Valuation allowance................................... (41,637) (41,249)
-------- --------
Net deferred tax asset recognized in the Consolidated
Balance Sheets..................................... $ 2,754 $ 2,336
======== ========
</TABLE>
Due to the recent history of net operating losses, a valuation allowance
has been used to reduce the net deferred tax assets (after giving effect to
deferred tax liabilities) for domestic operations to an amount that is more
likely than not to be realized. For the year ended December 31, 1996, the
valuation allowance was increased by $388,000 to offset an increase in net
deferred tax assets for which no tax benefit was recognized.
Because the consummation of the Amended Plan on the Effective Date resulted
in an "ownership change" within the meaning of Section 382 of the Internal
Revenue Code, the net operating loss carryforwards ("NOL") available to the
Company as of the Effective Date were limited to $53,460,000, the annual use of
which is limited to $3,564,000 plus any unused annual NOL limitation amounts
from years subsequent to the Effective Date. NOL incurred subsequent to the
Effective Date is not subject to the annual Section 382 limitation. At December
31, 1996, the Company has available approximately $69,109,000 of federal NOL,
expiring in years 2003 through 2011, to offset against future taxable income.
The total federal NOL available for 1997, including the 1997 annual NOL
limitation amount, is approximately $26,341,000.
Additionally, the Company has available for federal income tax purposes
approximately $479,000 of alternative minimum tax credit carryforward which
carries forward indefinitely. However, because the credit arose prior to the
Effective Date, it will be subject to the annual limitations discussed above and
will not be usable until the year 2010.
The Company also has a significant amount of state NOL's (which expire in
the years 1997 through 2011) available to offset future state taxable income in
states where it has significant operations. Since the majority of states in
which the Company files its state returns follow rules similar to federal rules,
it is expected that the usage of state NOL's will be limited to approximately
$61,000,000.
Cumulative undistributed earnings of foreign subsidiaries that are
considered to be permanently reinvested, and on which U.S. income taxes have not
been provided by the Company, amounted to approximately $19,000,000 at December
31, 1996. It is not practicable to estimate the amount of
F-19
<PAGE> 134
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional tax which would be payable upon repatriation of such earnings;
however, due to foreign tax credit limitations, higher effective U.S. income tax
rates and foreign withholding taxes, additional taxes could be incurred.
NOTE J -- PENSION AND RETIREMENT PLANS
The Company has several pension and retirement plans covering substantially
all employees. The plan covering domestic salaried and certain non-union hourly
employees provides pension benefits that are based on final average pay
formulas. The funding policy for that plan is to contribute amounts at least
equal to the minimum annual amount required by applicable regulations. Plans
covering hourly and certain union members generally provide benefits of stated
amounts for each year of service. Contributions to these plans are funded based
on normal cost plus amortization of unfunded past service cost over 30 to 40
years. In addition, the Company has certain unfunded supplemental retirement
plans for which benefits are payable out of the general funds of the Company.
The following tables set forth the domestic plans' funded status and
amounts recognized in the consolidated financial statements at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
STATUS OF ALL PLANS
--------------------------------------------------------------------
1996 1995
-------------------------------- --------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- --------------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation:
Vested........................ $(54,487) $(362) $(47,057) $(186)
Non-vested.................... (4,357) -- (5,052) --
-------- ----- -------- -----
Total accumulated benefit
obligation.................... $(58,844) $(362) $(52,109) $(186)
======== ===== ======== =====
Projected benefit obligation for
services rendered to date..... $(66,760) $(478) $(58,458) $(769)
Plan assets at fair value,
primarily listed stocks and
corporate and U.S. government
bonds............................ 63,718 -- 59,589 --
-------- ----- -------- -----
Projected benefit obligation less
than (in excess of) plan
assets........................... (3,042) (478) 1,131 (769)
Unrecognized net (gain) loss....... 2,219 14 (2,635) 84
-------- ----- -------- -----
Net pension liability recognized in
the Consolidated Balance
Sheets........................... $ (823) $(464) $ (1,504) $(685)
======== ===== ======== =====
</TABLE>
The weighted average discount rate, rate of increase in future compensation
levels, and expected long-term rate of return on assets used to develop the
projected benefit obligation at December 31, 1996 were 7.5%, 4.5% and 9%,
respectively. The corresponding rates used at December 31, 1995 were 7.75%, 5%
and 9%, respectively. Mortality assumptions were also updated in 1996. The
changes in the various assumptions resulted in a $6,581,000 increase in the
projected benefit obligation.
F-20
<PAGE> 135
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The foreign subsidiaries do not have a material pension liability at
December 31, 1996 and 1995.
Net domestic periodic pension cost includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED PREDECESSOR
DECEMBER 31, COMPANY
------------------- -------------
DECEMBER 14 - JANUARY 1 -
DECEMBER 31, DECEMBER 13,
1996 1995 1994 1994
---- ---- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost................................ $ 1,554 $ 1,308 $ 79 $ 1,591
Interest cost............................... 4,431 4,259 186 3,714
Actual return on plan assets................ (7,697) (10,483) (27) (533)
Net amortization and deferral............... 2,527 6,219 (194) (4,231)
------- -------- ----- -------
Net periodic pension cost................... $ 815 $ 1,303 $ 44 $ 541
======= ======== ===== =======
</TABLE>
The Company has 401(k) Savings Plans available to substantially all United
States employees. Matching employer contributions are made in accordance with
plan provisions subject to certain limitations. Matching employer contributions
made were $801,000 in 1996, $611,000 in 1995 and $655,000 (including $622,000
for the Predecessor Company) in 1994.
NOTE K -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care benefits to age 65 and life
insurance benefits for certain eligible retired United States employees.
Substantially all current employees may become eligible for those benefits if
they reach early retirement age while working for the Company. The majority of
the costs of such benefits are funded as they are incurred.
The following table sets forth the plan's status and amounts recognized in
the consolidated financial statements at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................. $ (8,165) $ (7,511)
Fully eligible active plan participants............... (746) (792)
Other active plan participants........................ (5,958) (5,506)
-------- --------
(14,869) (13,809)
Unrecognized net loss................................... 2,280 873
-------- --------
Accrued postretirement benefit cost recognized in the
Consolidated Balance Sheets........................... $(12,589) $(12,936)
======== ========
</TABLE>
F-21
<PAGE> 136
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED PREDECESSOR
DECEMBER 31, COMPANY
---------------- -------------
DECEMBER 14 - JANUARY 1 -
DECEMBER 31, DECEMBER 13,
1996 1995 1994 1994
---- ---- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost..................... $ 323 $ 266 $15 $ 303
Interest cost.................... 1,039 1,064 51 1,003
------ ------ --- ------
Net periodic post-retirement
benefit cost................... $1,362 $1,330 $66 $1,306
====== ====== === ======
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 1996 and 1995 was 7.5% and
7.75%, respectively. The decrease in the discount rate resulted in a $271,000
increase in the accumulated postretirement benefit obligation. The assumed
health care cost trend rate used in measuring the accumulated postretirement
benefit obligation was 10% at December 31, 1996, declining 1% each year
thereafter, to 5% in the year 2002 and beyond. A 1% increase in the assumed
health care cost trend rate for each year would increase the accumulated
postretirement benefit obligation at December 31, 1996 by $972,000 and would
increase the net periodic postretirement benefit cost for 1996 by $109,000.
NOTE L -- RESEARCH AND DEVELOPMENT
Expenditures for design and development of new products and improvements of
existing mining machinery products, including overhead, aggregated $6,930,000 in
1996, $5,739,000 in 1995 and $4,181,000 (including $3,945,000 for the
Predecessor Company) in 1994. All engineering and product development costs are
charged to product development expense as incurred.
NOTE M -- CALCULATION OF NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
1996 net earnings per share of common stock is based on the weighted
average number of common and common equivalent shares outstanding during the
year. Restricted common stock (see Note H) is considered to be issued and
outstanding and is included in the net earnings per share calculation using the
treasury stock method. Previous years' net earnings (loss) per share of common
stock are based on the weighted average number of common shares outstanding
since common stock equivalents were not significant. Stock options outstanding
in 1994 under the B-E Holdings, Inc. 1988 Stock Option Plan were not included in
the per share calculations because they were anti-dilutive. The weighted average
number of common and common equivalent shares outstanding for the years ended
December 31, 1996 and 1995, the period December 14, 1994 to December 31, 1994
and the period January 1, 1994 to December 13, 1994, were 10,258,604,
10,203,462, 10,170,417 and 9,268,627, respectively.
Net earnings attributable to common shareholders for the Predecessor
Company includes redeemable preferred stock dividends declared and paid as well
as dividends earned but not declared.
NOTE N -- FOREIGN OPERATIONS, EXPORT SALES AND SIGNIFICANT CUSTOMERS
The Company designs, manufactures and sells products in a single industry
segment, Energy and Industrial Products. Operations are conducted in the United
States and through subsidiaries located throughout the world.
F-22
<PAGE> 137
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial information by geographical area is summarized in the following
table. Each geographic area represents the origin of the financial information
presented. Transfers between geographic areas represent intercompany export
sales of goods produced in the United States and are accounted for based on
established sales prices between the related companies. In computing operating
earnings for non-United States subsidiaries, no allocations of interest or
income taxes have been made. Eliminations for operating earnings (loss) include
elimination of general corporate expenses. Identifiable assets of subsidiaries
are those related to the operations of those subsidiaries. United States assets
consist of all other operating assets.
<TABLE>
<CAPTION>
TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC TOTAL NET EARNINGS IDENTIFIABLE
CUSTOMERS AREAS SALES (LOSS) ASSETS
------------ ---------- --------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
United States.............................. $175,675 $ 24,451 $200,126 $ 7,830 $118,375
South America.............................. 27,602 -- 27,602 2,270 19,358
Australia, Far East and South Africa....... 40,896 134 41,030 4,190 22,135
Other Foreign.............................. 19,613 (14) 19,599 1,126 15,556
Eliminations............................... -- (24,571) (24,571) (2,223) (2,529)
-------- -------- -------- -------- --------
$263,786 $ -- $263,786 $ 13,193 $172,895
======== ======== ======== ======== ========
1995
United States.............................. $132,320 $ 29,847 $162,167 $(17,689) $119,791
South America.............................. 29,954 -- 29,954 3,326 18,775
Australia, Far East and South Africa....... 46,923 -- 46,923 4,151 18,127
Other Foreign.............................. 22,724 289 23,013 2,208 20,342
Eliminations............................... -- (30,136) (30,136) (2,000) (2,997)
-------- -------- -------- -------- --------
$231,921 $ -- $231,921 $(10,004) $174,038
======== ======== ======== ======== ========
1994
United States.............................. $122,765 $ 23,019 $145,784 $(11,709) $132,430
South America.............................. 17,016 7 17,023 1,859 15,700
Australia, Far East and South Africa....... 36,179 23 36,202 2,890 19,674
Other Foreign.............................. 18,024 234 18,258 1,129 14,818
Eliminations............................... -- (23,283) (23,283) (1,839) (2,749)
-------- -------- -------- -------- --------
$193,984 $ -- $193,984 $ (7,670) $179,873
======== ======== ======== ======== ========
</TABLE>
Export sales from United States operations, excluding sales to affiliates,
amounted to $103,777,000 in 1996, $69,476,000 in 1995 and $60,627,000 (including
$57,898,000 for the Predecessor Company) in 1994.
In 1996, one customer received approximately 14% of the Company's
consolidated net sales. In 1995 and 1994, a different customer received
approximately 22% and 20%, respectively, of the Company's consolidated net
sales. The Company is not dependent upon any one customer.
NOTE O -- COMMITMENTS, CONTINGENCIES AND CREDIT RISKS
Jackson National Life Insurance Company ("JNL"), the holder of
approximately 40.14% of the outstanding Common Stock and 97.2% of the Secured
Notes, has filed a claim (the "JNL 503(b) Claim") against the Company for
reimbursement of approximately $3,300,000 of professional fees and disbursements
incurred in connection with the Company's Chapter 11 proceedings pursuant to
Section 503(b) of the Bankruptcy Code. Pursuant to a settlement agreement dated
May 23, 1995,
F-23
<PAGE> 138
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JNL agreed that, in the event that the JNL 503(b) Claim is allowed in whole or
in part by the Bankruptcy Court, in lieu of requiring payment of any award in
cash, JNL will accept payment in Common Stock at a price equal to $5.6375 per
share. By order dated June 3, 1996, the Bankruptcy Court ruled that JNL would be
awarded the sum of $500. JNL has appealed the decision. The Company has been
advised by its reorganization counsel that in said counsel's opinion the JNL
503(b) Claim is without merit; however, the ultimate outcome of this matter
cannot presently be determined. Accordingly, no provision for any loss that may
result upon resolution of this matter has been made in the consolidated
financial statements.
Concurrently with the trial of the JNL 503(b) Claim, the Bankruptcy Court
considered the final fee application of the law firm of Milbank, Tweed, Hadley &
McCloy ("Milbank"), who rendered services as reorganization counsel for the
Company in connection with the Chapter 11 proceedings. The Milbank fee
application was for approximately $2,330,000, of which 80% had previously been
paid by the Company on an interim basis. By order dated June 3, 1996, the
Bankruptcy Court ruled that Milbank would receive 80% of the claimed amount as
full and final compensation, thereby resulting in no further payments being due
and owing to Milbank on the claim. JNL appealed the decision of the Bankruptcy
Court not to order disgorgement of amounts already paid to Milbank. Milbank has
not appealed the decision.
The Company's wholly-owned subsidiary, Boonville Mining Services, Inc.
("BMSI"), was a defendant in an amended complaint filed on September 24, 1992 by
Dresser Industries, Inc. and Global Industrial Technologies, Inc. (the
"Plaintiffs"), alleging that BMSI's purchase of drawings and other assets of C&M
of Indiana, a division of Construction and Mining Services, Inc., and BMSI's use
of these and other drawings allegedly acquired subsequently, constituted a
misappropriation of the Plaintiffs' trade secrets relating to Marion Power
Shovel Company, a division of Global Industrial Technologies, Inc. BMSI had
denied these claims. On June 17, 1996, BMSI settled the litigation which
resulted in an immaterial effect on earnings.
The Company is involved in various other litigation arising in the normal
course of business. It is the view of management that the Company's recovery or
liability, if any, under pending litigation is not expected to have a material
effect on the Company's financial position or results of operations, although no
assurance to that effect can be given.
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
which do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments indicate that remedial
efforts are probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing technology and
presently enacted laws and regulations. These liabilities are included in the
Consolidated Balance Sheets at their undiscounted amounts. Recoveries are
evaluated separately from the liability and, if appropriate, are recorded
separately from the associated liability in the Consolidated Balance Sheets.
The Company is normally subject to numerous product liability claims, many
of which relate to products no longer manufactured by the Company or its
subsidiaries, and other claims arising in the ordinary course of business. The
Company has insurance covering most of said claims, subject to varying
deductibles ranging from $0.3 million to $3.0 million, and has various limits of
liability depending on the insurance policy year in question. It is the view of
management that the final resolution of said claims and other similar claims
which are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position or results
of operations, although no assurance to that effect can be given.
The Company has obligations under various operating leases and rental and
service agreements. The expense relating to these agreements was $5,658,000 in
1996, $5,351,000 in 1995 and
F-24
<PAGE> 139
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$4,720,000 (including $4,525,000 for the Predecessor Company) in 1994. Future
minimum annual payments under noncancellable agreements are as follows:
<TABLE>
<S> <C>
1997............................................. $ 5,248,000
1998............................................. 4,256,000
1999............................................. 1,938,000
2000............................................. 1,418,000
2001............................................. 1,063,000
After 2001....................................... 1,187,000
-----------
$15,110,000
===========
</TABLE>
At December 31, 1996, the Company is also committed to acquire
approximately $1,550,000 of equipment. The Company expects to lease the
equipment.
A significant portion of the Company's consolidated net sales are to
customers whose activities are related to the coal, copper and iron ore mining
industries, including some who are located in foreign countries. The Company
generally extends credit to these customers and, therefore, collection of
receivables may be affected by the mining industry economy and the economic
conditions in the countries where the customers are located. However, the
Company closely monitors extension of credit and has not experienced significant
credit losses. Also, most foreign sales are made to large, well-established
companies. The Company generally requires collateral or guarantees on foreign
sales to smaller companies.
NOTE P -- QUARTERLY RESULTS -- UNAUDITED
Quarterly results are as follows:
<TABLE>
<CAPTION>
QUARTERS ENDED AT END OF
-------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
------- ------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales:
1996.......................................... $61,456 $69,364 $ 68,077 $64,889
1995.......................................... 56,873 55,709 61,408 57,931
Gross profit:
1996.......................................... $11,793 $12,004 $ 12,785 $12,078
1995.......................................... 7,179 7,927 2,782 8,481
Net earnings (loss):
1996(1)....................................... $ 298 $ 612 $ 1,495 $ 473
1995(2)....................................... (2,059) (2,985) (12,051) (1,677)
Net earnings (loss) per share:
1996.......................................... $ 0.03 $ 0.06 $ 0.14 $ 0.05
1995.......................................... (0.20) (0.29) (1.18) (0.16)
Weighted average shares used in calculation (in
thousands):
1996.......................................... 10,235 10,235 10,235 10,273
1995.......................................... 10,170 10,173 10,235 10,235
</TABLE>
- -------------------------
(1) Interest expense on the Secured Notes of $386,000 related to the quarter
ended September 30, 1996 was recorded during the quarter ended December 31,
1996. See Note G.
(2) Included in the net loss for the quarter ended September 30, 1995 were
inventory obsolescence adjustments of $4,416,000, a $1,018,000 charge for
the reestimation of certain customer warranty reserves, and restructuring
expenses of $2,577,000.
F-25
<PAGE> 140
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE Q -- SUPPLEMENTAL CONSOLIDATING CONDENSED FINANCIAL INFORMATION
The Company's payment obligations under the proposed Notes are to be
guaranteed by certain of the Company's wholly-owned subsidiaries (the "Guarantor
Subsidiaries"). Such guarantees are full, unconditional and joint and several.
Separate financial statements of the Guarantor Subsidiaries are not presented
because the Company's management has determined that they would not be material
to investors. The following supplemental financial information sets forth, on an
unconsolidated basis, statement of operations, balance sheet, and statement of
cash flow information for the Company ("Parent Company"), for the Guarantor
Subsidiaries and for the Company's non-guarantor subsidiaries (the "Other
Subsidiaries"). The supplemental financial information reflects the investments
of the Company in the Guarantor and Other Subsidiaries using the equity method
of accounting. Parent Company amounts for net earnings and common shareholders'
investment differ from consolidated amounts as intercompany profit in subsidiary
inventory has not been eliminated in the Parent Company statement but has been
eliminated in the Consolidated Totals.
Consolidating Condensed Statements of Operations for the Year Ended December 31,
1996
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales....................... $174,677 $32,235 $88,232 $(31,358) $263,786
Other income.................... 1,424 1 582 (1,004) 1,003
-------- ------- ------- -------- --------
176,101 32,236 88,814 (32,362) 264,789
-------- ------- ------- -------- --------
Cost and Expenses:
Cost of products sold........... 149,383 27,308 70,133 (31,698) 215,126
Product development, selling,
administrative and
miscellaneous expenses....... 21,220 1,967 13,266 17 36,470
Interest expense................ 8,277 433 851 (1,004) 8,557
-------- ------- ------- -------- --------
178,880 29,708 84,250 (32,685) 260,153
-------- ------- ------- -------- --------
Earnings (loss) before income
taxes and equity in net income
of consolidated subsidiaries.... (2,779) 2,528 4,564 323 4,636
Income taxes...................... (401) 985 1,174 1,758
-------- ------- ------- -------- --------
Earnings (loss) before equity in
net income of consolidated
subsidiaries.................... (2,378) 1,543 3,390 323 2,878
Equity in net income of
consolidated subsidiaries....... 4,933 (4,933) --
-------- ------- ------- -------- --------
Net earnings...................... $ 2,555 $ 1,543 $ 3,390 $ (4,610) $ 2,878
======== ======= ======= ======== ========
</TABLE>
F-26
<PAGE> 141
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Operations for the Year Ended December 31,
1995
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $145,661 $20,809 $ 99,890 $(34,439) $231,921
Other income...................... 1,396 23 836 (960) 1,295
-------- ------- -------- -------- --------
147,057 20,832 100,726 (35,399) 233,216
-------- ------- -------- -------- --------
Cost and Expenses:
Cost of products sold............. 140,666 18,980 79,986 (34,080) 205,552
Product development, selling,
administrative and miscellaneous
expenses........................ 18,536 2,757 12,809 70 34,172
Interest expense.................. 5,957 405 852 (960) 6,254
Restructuring expenses............ 2,440 96 41 2,577
Reorganization items.............. 919 919
-------- ------- -------- -------- --------
168,518 22,238 93,688 (34,970) 249,474
-------- ------- -------- -------- --------
Earnings (loss) before income taxes
and equity in net income of
consolidated subsidiaries......... (21,461) (1,406) 7,038 (429) (16,258)
Income taxes........................ 999 (550) 2,065 2,514
-------- ------- -------- -------- --------
Earnings (loss) before equity in net
income of consolidated
subsidiaries...................... (22,460) (856) 4,973 (429) (18,772)
Equity in net income of consolidated
subsidiaries...................... 4,117 (4,117) --
-------- ------- -------- -------- --------
Net earnings (loss)................. $(18,343) $ (856) $ 4,973 $ (4,546) $(18,772)
======== ======= ======== ======== ========
</TABLE>
Consolidating Condensed Statements of Operations
for the Period December 14, 1994 to December 31, 1994
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $5,373 $1,039 $2,839 $(1,441) $7,810
Other income...................... 116 4 54 (95) 79
------ ------ ------ ------- ------
5,489 1,043 2,893 (1,536) 7,889
------ ------ ------ ------- ------
Cost and expenses:
Cost of products sold............. 4,892 914 2,306 (1,179) 6,933
Product development, selling,
administrative and miscellaneous
expenses........................ 873 (5) 215 16 1,099
Interest expense.................. 322 19 38 (95) 284
------ ------ ------ ------- ------
6,087 928 2,559 (1,258) 8,316
------ ------ ------ ------- ------
Earnings (loss) before income taxes
and equity in net income of
consolidated subsidiaries......... (598) 115 334 (278) (427)
Income taxes........................ 24 30 71 125
------ ------ ------ ------- ------
Earnings (loss) before equity in net
income of consolidated
subsidiaries...................... (622) 85 263 (278) (552)
Equity in net income of consolidated
subsidiaries...................... 348 (348) --
------ ------ ------ ------- ------
Net earnings (loss)................. $ (274) $ 85 $ 263 $ (626) $ (552)
====== ====== ====== ======= ======
</TABLE>
F-27
<PAGE> 142
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Operations for the Period January 1, 1994
to December 13, 1994 (Predecessor Company)
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales...................... $118,029 $24,542 $68,643 $(25,040) $186,174
Other income................... 3,064 11 905 (1,004) 2,976
-------- ------- ------- -------- --------
121,093 24,553 69,548 (26,044) 189,150
-------- ------- ------- -------- --------
Cost and Expenses:
Cost of products sold.......... 105,258 21,515 54,606 (24,198) 157,181
Product development, selling,
administrative and
miscellaneous expenses...... 17,030 2,468 10,645 15 30,158
Interest expense............... 13,961 175 779 (1,004) 13,911
Reorganization items........... 9,338 9,338
-------- ------- ------- -------- --------
145,587 24,158 66,030 (25,187) 210,588
-------- ------- ------- -------- --------
Earnings (loss) before income
taxes and extraordinary gain... (24,494) 395 3,518 (857) (21,438)
Income taxes..................... 287 54 1,076 (22) 1,395
-------- ------- ------- -------- --------
Earnings (loss) before
extraordinary gain............. (24,781) 341 2,442 (835) (22,833)
Extraordinary gain............... 142,480 142,480
-------- ------- ------- -------- --------
Earnings before equity in net
income of consolidated
subsidiaries................... 117,699 341 2,442 (835) 119,647
Equity in net income of
consolidated subsidiaries...... 2,783 (2,783) --
-------- ------- ------- -------- --------
120,482 341 2,442 (3,618) 119,647
Redeemable preferred stock
dividends...................... (40) (40)
Preferred stock accretion........ (106) (106)
Reorganization item - preferred
stock.......................... (40,555) (40,555)
-------- ------- ------- -------- --------
Net earnings attributable to
common shareholders............ $ 79,781 $ 341 $ 2,442 $ (3,618) $ 78,946
======== ======= ======= ======== ========
</TABLE>
F-28
<PAGE> 143
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Balance Sheets at December 31, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...... $ 9,072 $ 149 $ 6,542 $ 15,763
Receivables.................... 15,028 4,941 12,116 32,085
Intercompany receivables....... 20,886 623 1,969 $(23,478) --
Inventories.................... 43,343 1,438 28,554 (2,446) 70,889
Prepaid expenses and other
current assets.............. 366 144 1,994 2,504
-------- ------ ------- -------- --------
Total Current Assets...... 88,695 7,295 51,175 (25,924) 121,241
OTHER ASSETS:
Restricted funds on deposit.... 1,079 1,079
Intangible assets.............. 8,545 8,545
Other assets................... 3,845 2,158 6,003
Investment in subsidiaries..... 30,769 (30,769) --
-------- ------ ------- -------- --------
43,159 3,237 (30,769) 15,627
PROPERTY, PLANT AND EQUIPMENT --
NET............................ 27,226 954 7,847 36,027
-------- ------ ------- -------- --------
$159,080 $8,249 $62,259 $(56,693) $172,895
======== ====== ======= ======== ========
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................... $ 22,219 $2,205 $ 9,361 $ (20) $ 33,765
Intercompany payables.......... 785 5,579 16,141 (22,505) --
Liabilities to customers on
uncompleted contracts and
warranties.................. 2,101 197 1,281 3,579
Income taxes................... 357 63 1,049 1,469
Short-term obligations......... 2,788 398 3,186
Current maturities of long-term
debt........................ 428 428
-------- ------ ------- -------- --------
Total Current
Liabilities............ 28,250 8,044 28,658 (22,525) 42,427
LONG-TERM LIABILITIES:
Deferred income taxes.......... 148 148
Liabilities to customers on
uncompleted contracts and
warranties.................. 2,638 639 3,277
Postretirement benefits........ 10,610 454 11,064
Deferred expenses and other.... 10,937 233 721 11,891
-------- ------ ------- -------- --------
24,185 233 1,962 26,380
LONG-TERM DEBT, less current
maturities..................... 65,785 842 66,627
COMMON SHAREHOLDERS'
INVESTMENT..................... 40,860 (28) 30,797 (34,168) 37,461
-------- ------ ------- -------- --------
$159,080 $8,249 $62,259 $(56,693) $172,895
======== ====== ======= ======== ========
</TABLE>
F-29
<PAGE> 144
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Balance Sheets at December 31, 1995
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...... $ 5,462 $ 355 $ 5,333 $ 11,150
Receivables.................... 16,724 2,602 16,277 35,603
Intercompany receivables....... 20,848 446 1,036 $(22,330) --
Inventories.................... 45,074 1,947 29,373 (2,828) 73,566
Prepaid expenses and other
current assets.............. 569 82 763 1,414
-------- ------ ------- -------- --------
Total Current Assets...... 88,677 5,432 52,782 (25,158) 121,733
OTHER ASSETS:
Restricted funds on deposit.... 2,877 2,877
Intangible assets.............. 9,021 9,021
Other assets................... 2,764 1,996 4,760
Investment in subsidiaries..... 28,740 (28,740) --
-------- ------ ------- -------- --------
40,525 4,873 (28,740) 16,658
PROPERTY, PLANT AND EQUIPMENT --
NET............................ 29,193 1,016 5,438 35,647
-------- ------ ------- -------- --------
$158,395 $6,448 $63,093 $(53,898) $174,038
======== ====== ======= ======== ========
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................... $ 27,326 $1,723 $ 8,906 $ (468) $ 37,487
Intercompany payables.......... 1,024 4,702 15,242 (20,968) --
Liabilities to customers on
uncompleted contracts and
warranties.................. 5,314 3 2,905 8,222
Income taxes................... 386 24 3,053 3,463
Short-term obligations......... 5,493 80 5,573
Current maturities of long-term
debt........................ 1,658 1,658
-------- ------ ------- -------- --------
Total Current
Liabilities............ 39,543 6,452 31,844 (21,436) 56,403
LONG-TERM LIABILITIES:
Deferred income taxes.......... 183 183
Liabilities to customers on
uncompleted contracts and
warranties.................. 2,319 808 3,127
Postretirement benefits........ 11,058 469 11,527
Deferred expenses and other.... 9,052 317 728 10,097
-------- ------ ------- -------- --------
22,429 317 2,188 24,934
LONG-TERM DEBT, less current
maturities..................... 58,021 58,021
COMMON SHAREHOLDERS'
INVESTMENT..................... 38,402 (321) 29,061 (32,462) 34,680
-------- ------ ------- -------- --------
$158,395 $6,448 $63,093 $(53,898) $174,038
======== ====== ======= ======== ========
</TABLE>
F-30
<PAGE> 145
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Cash Flows for the Year Ended December 31,
1996
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings................................ $2,555 $ 1,543 $ 3,390 $(4,610) $ 2,878
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities:
Depreciation.............................. 2,691 150 1,041 -- 3,882
Amortization.............................. 1,142 -- -- -- 1,142
Stock compensation expense................ 668 -- -- -- 668
In kind interest on the Secured Notes due
December 14, 1999....................... 7,783 -- -- -- 7,783
Loss on sale of property, plant and
equipment............................... 350 8 4 -- 362
Equity in net income of consolidated
subsidiaries............................ (4,933) -- -- 4,933 --
Changes in assets and liabilities:
Intercompany accounts................... 316 700 (627) (389) --
Receivables............................. 1,696 (2,339) 3,664 -- 3,021
Inventories............................. 1,729 509 170 (382) 2,026
Other current assets.................... 203 (62) (1,255) -- (1,114)
Other assets............................ (1,001) -- (144) -- (1,145)
Current liabilities other than income
taxes, short-term obligations and
current maturities of long-term
debt................................. (5,930) 676 (526) 448 (5,332)
Income taxes............................ (29) 39 (2,001) -- (1,991)
Long-term liabilities other than
deferred income taxes................ (1,401) (84) (608) -- (2,093)
------- ------- ------- ------- -------
Net cash provided by operating activities... 5,839 1,140 3,108 -- 10,087
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted funds on deposit..... -- -- 1,798 -- 1,798
Purchases of property, plant and equipment.. (1,929) (96) (2,971) -- (4,996)
Proceeds from sale of property, plant and
equipment................................. 855 -- 203 -- 1,058
Dividends paid to parent.................... 1,550 (1,250) (300) -- --
------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities................................ 476 (1,346) (1,270) -- (2,140)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project financing
obligations............................... 5,402 -- -- -- 5,402
Reduction of project financing
obligations............................... (8,104) -- -- -- (8,104)
Net decrease in other bank borrowings....... (3) -- (1,347) -- (1,350)
Proceeds from issuance of long-term debt.... -- -- 849 -- 849
------- ------- ------- ------- -------
Net cash used in financing activities....... (2,705) -- (498) -- (3,203)
------- ------- ------- ------- -------
Effect of exchange rate changes on cash..... -- -- (131) -- (131)
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................... 3,610 (206) 1,209 -- 4,613
Cash and cash equivalents at beginning of
period.................................... 5,462 355 5,333 -- 11,150
------- ------- ------- ------- -------
Cash and cash equivalents at end of
period.................................... $9,072 $ 149 $ 6,542 $ -- $15,763
======= ======= ======= ======= =======
</TABLE>
F-31
<PAGE> 146
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Cash Flows for the Year Ended December 31,
1995
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)...................... $(18,343) $ (856) $ 4,973 $(4,546) $(18,772)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities:
Inventory obsolescence provision....... 4,416 -- -- -- 4,416
Depreciation........................... 2,491 240 940 -- 3,671
Amortization........................... 1,194 -- -- -- 1,194
In kind interest on the Secured Notes
due December 14, 1999.............. 5,691 -- -- -- 5,691
(Gain) loss on sale of property, plant
and equipment........................ (2) 7 (171) -- (166)
Equity in net income of consolidated
subsidiaries......................... (4,117) -- -- 4,117 --
Changes in assets and liabilities:
Intercompany accounts.............. (211) (437) 254 394 --
Receivables........................ (1,572) 359 (8,501) 63 (9,651)
Inventories........................ 4,550 (487) (538) 244 3,769
Other current assets............... (77) (29) 670 -- 564
Other assets....................... (193) -- (385) -- (578)
Current liabilities other than
income taxes, short-term
obligations and current
maturities of long-term debt.... 5,779 132 2,434 (272) 8,073
Income taxes....................... 10 (2) 732 -- 740
Long-term liabilities other than
deferred income taxes........... (545) (11) (479) -- (1,035)
-------- ------- ------- ------- --------
Net cash used in operating activities.... (929) (1,084) (71) -- (2,084)
-------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted funds on
deposit................................ -- -- 798 -- 798
Purchases of property, plant and
equipment.............................. (1,919) (258) (829) -- (3,006)
Proceeds from sale of property, plant and
equipment.............................. 45 -- 218 -- 263
Dividends paid to parent................. 1,171 -- (1,171) -- --
-------- ------- ------- ------- --------
Net cash used in investing activities.... (703) (258) (984) -- (1,945)
-------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project
financing obligations.................. 6,012 -- -- -- 6,012
Reduction of project financing
obligations............................ (7,117) -- -- -- (7,117)
Net increase (decrease) in other bank
borrowings............................. 361 -- (57) -- 304
-------- ------- ------- ------- --------
Net cash used in financing activities.... (744) -- (57) -- (801)
-------- ------- ------- ------- --------
Effect of exchange rate changes on
cash................................... -- -- (229) -- (229)
-------- ------- ------- ------- --------
Net decrease in cash and cash
equivalents............................ (2,376) (1,342) (1,341) -- (5,059)
Cash and cash equivalents at beginning of
period................................. 7,838 1,697 6,674 -- 16,209
-------- ------- ------- ------- --------
Cash and cash equivalents at end of
period................................. $ 5,462 $ 355 $ 5,333 $ -- $ 11,150
======== ======= ======= ======= ========
</TABLE>
F-32
<PAGE> 147
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Cash Flows for
the Period December 14, 1994 to December 31, 1994
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net earnings (loss)................ $ (274) $ 85 $ 263 $(626) $ (552)
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:
Depreciation..................... 95 37 13 -- 145
Amortization..................... 23 -- -- -- 23
In kind interest on the Secured
Notes due December 14, 1999... 258 -- -- -- 258
(Gain) loss on sale of property,
plant and equipment........... -- -- -- -- --
Equity in net income of
consolidated subsidiaries..... (348) -- -- 348 --
Changes in assets and
liabilities:
Intercompany accounts......... 442 (1,209) 1,117 (350) --
Receivables................... 2,232 792 1,294 -- 4,318
Inventories................... (167) (89) (496) 691 (61)
Other current assets.......... 3 66 132 (274) (73)
Other assets.................. -- -- (35) 23 (12)
Current liabilities other than
income taxes, short-term
obligations and current
maturities of long-term
debt........................ (4,695) (158) (255) (89) (5,197)
Income taxes.................. -- 11 14 277 302
Long-term liabilities other
than deferred income
taxes....................... 1,518 (25) (1,586) -- (93)
------- ------- ------- ----- -------
Net cash provided by (used in)
operating activities............. (913) (490) 466 -- (937)
------- ------- ------- ----- -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property, plant and
equipment........................ (167) -- (23) -- (190)
------- ------- ------- ----- -------
Net cash used in investing
activities....................... (167) -- (23) -- (190)
------- ------- ------- ----- -------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of project
financing obligations............ 1,620 -- -- -- 1,620
------- ------- ------- ----- -------
Net cash provided by financing
activities....................... 1,620 -- -- -- 1,620
------- ------- ------- ----- -------
Effect of exchange rate changes on
cash............................. -- -- (5) -- (5)
------- ------- ------- ----- -------
Net increase (decrease) in cash and
cash equivalents................. 540 (490) 438 -- 488
Cash and cash equivalents at
beginning of period.............. 7,298 2,187 6,236 -- 15,721
------- ------- ------- ----- -------
Cash and cash equivalents at end of
period........................... $ 7,838 $ 1,697 $ 6,674 $ -- $16,209
======= ======= ======= ===== =======
</TABLE>
F-33
<PAGE> 148
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Cash Flows
for the Period January 1, 1994 to December 13, 1994 (Predecessor Company)
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)................. $ 120,482 $ 341 $ 2,442 $(3,618) $119,647
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:
Depreciation...................... 5,869 291 1,196 -- 7,356
Amortization...................... 3,679 -- -- -- 3,679
In kind interest on the Secured
Notes due December 14, 1999.... 7,287 -- -- -- 7,287
Amortization of debt discount..... 71 -- -- -- 71
(Gain) loss on sale of property,
plant and equipment............ 69 16 (48) -- 37
Non-cash reorganization items..... 1,680 -- -- -- 1,680
Extraordinary gain................ (142,480) -- -- -- (142,480)
Equity in net income of consolidated
subsidiaries...................... (2,783) -- -- 2,783 --
Changes in assets and liabilities:
Intercompany accounts............. (4,971) 2,838 1,064 1,069 --
Receivables....................... (2,071) (1,226) (1,256) (63) (4,616)
Inventories....................... (4,046) (651) (2,727) (115) (7,539)
Other current assets.............. (234) (63) 148 274 125
Other assets...................... 167 -- (157) (23) (13)
Current liabilities other than
income taxes, short-term
obligations and current
maturities of long-term debt... 16,581 (142) 917 (30) 17,326
Income taxes...................... (175) (20) 1,015 (277) 543
Long-term liabilities other than
deferred income taxes.......... (1,786) 200 214 -- (1,372)
--------- ------- ------- ------- --------
Net cash provided by (used in)
operating activities.............. (2,661) 1,584 2,808 -- 1,731
--------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted funds on
deposit........................... 2,340 -- 523 -- 2,863
Purchases of property, plant and
equipment......................... (1,606) (506) (504) -- (2,616)
Proceeds from sale of property,
plant and equipment............... 19 -- 106 -- 125
--------- ------- ------- ------- --------
Net cash provided by (used in)
investing activities.............. 753 (506) 125 -- 372
--------- ------- ------- ------- --------
</TABLE>
F-34
<PAGE> 149
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project
financing obligations............. 7,891 -- -- -- 7,891
Reduction of project financing
obligations....................... (6,933) -- -- -- (6,933)
Net decrease in other bank
borrowings........................ -- -- (1,210) -- (1,210)
--------- ------- ------- ------- --------
Net cash provided by (used in)
financing activities.............. 958 -- (1,210) -- (252)
--------- ------- ------- ------- --------
Effect of exchange rate changes on
cash.............................. -- -- 174 -- 174
--------- ------- ------- ------- --------
Net increase (decrease) in cash and
cash equivalents.................. (950) 1,078 1,897 -- 2,025
Cash and cash equivalents at
beginning of period............... 8,248 1,109 4,339 -- 13,696
--------- ------- ------- ------- --------
Cash and cash equivalents at end of
period............................ $ 7,298 $ 2,187 $ 6,236 $ -- $ 15,721
========= ======= ======= ======= ========
</TABLE>
* * * *
F-35
<PAGE> 150
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..... $ 11,350 $ 15,763
Receivables................... 54,271 32,085
Inventories................... 74,587 70,889
Prepaid expenses and other
current assets.............. 5,091 2,504
-------- --------
Total Current Assets.......... 145,299 121,241
OTHER ASSETS:
Restricted funds on deposit... 1,079 1,079
Intangible assets -- net...... 8,101 8,545
Other assets.................. 6,395 6,003
-------- --------
15,575 15,627
PROPERTY, PLANT AND EQUIPMENT:
Cost.......................... 47,060 43,409
Less accumulated
depreciation................ (9,421) (7,382)
-------- --------
37,639 36,027
-------- --------
$198,513 $172,895
======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................... $ 41,712 $ 33,765
Liabilities to customers on
uncompleted contracts and
warranties.................. 7,170 3,579
Income taxes.................. 2,042 1,469
Short-term obligations........ 11,438 3,186
Current maturities of
long-term debt.............. 416 428
-------- --------
Total Current Liabilities..... 62,778 42,427
LONG-TERM LIABILITIES:
Deferred income taxes......... 138 148
Liabilities to customers on
uncompleted contracts and
warranties.................. 3,239 3,277
Postretirement benefits....... 10,800 11,064
Deferred expenses and other... 12,152 11,891
-------- --------
26,329 26,380
LONG-TERM DEBT, less current
maturities.................. 68,339 66,627
COMMON SHAREHOLDERS'
INVESTMENT:
Common stock -- par value $.01
per share, authorized
20,000,000 shares, issued
and outstanding 10,534,574
shares...................... 105 105
Additional paid-in capital.... 57,739 57,739
Unearned stock compensation... (2,395) (2,815)
Accumulated deficit........... (13,023) (16,446)
Cumulative translation
adjustment.................. (1,359) (1,122)
-------- --------
41,067 37,461
-------- --------
$198,513 $172,895
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
F-36
<PAGE> 151
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Net sales................................................. $ 143,762 $ 130,820
Other income.............................................. 615 464
---------- ----------
144,377 131,284
---------- ----------
COSTS AND EXPENSES:
Cost of products sold..................................... 116,261 107,023
Product development, selling, administrative and
miscellaneous expenses................................. 18,345 17,854
Interest expense.......................................... 3,956 4,173
---------- ----------
138,562 129,050
---------- ----------
Earnings before income taxes................................ 5,815 2,234
Income taxes................................................ 2,392 1,324
---------- ----------
Net earnings................................................ $ 3,423 $ 910
========== ==========
Weighted average number of common and common equivalent
shares outstanding........................................ 10,345,443 10,234,574
========== ==========
Net earnings per share of common stock...................... $ 0.33 $ 0.09
========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
F-37
<PAGE> 152
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings................................................ $ 3,423 $ 910
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation.............................................. 2,179 1,980
Amortization.............................................. 534 584
Stock compensation expense................................ 420 116
In kind interest on the Secured Notes due December 14,
1999................................................... -- 3,767
(Gain) loss on sale of property, plant and equipment...... (4) 246
Changes in assets and liabilities:
Receivables............................................ (22,176) (8,319)
Inventories............................................ (3,807) 2,727
Other current assets................................... (2,541) (524)
Other assets........................................... 148 (275)
Current liabilities other than income taxes, short-term
obligations and current maturities of long-term
debt.................................................. 11,395 (2,017)
Income taxes........................................... 564 (1,007)
Long-term liabilities other than deferred income
taxes................................................. (651) (1,432)
------- -------
Net cash used in operating activities............. (10,516) (3,244)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted funds on deposit..................... -- 1,800
Purchases of property, plant and equipment.................. (2,433) (1,305)
Proceeds from sale of property, plant and equipment......... 34 806
Purchase of Von's Welding, Inc., net of cash acquired....... (818) --
------- -------
Net cash (used in) provided by investing
activities....................................... (3,217) 1,301
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project financing obligations..... 5,672 2,971
Reduction of project financing obligations.................. -- (2,701)
Net increase (decrease) in other bank borrowings............ 1,961 (878)
Proceeds from issuance of long-term debt.................... 1,712 --
------- -------
Net cash provided by (used in) financing
activities....................................... 9,345 (608)
------- -------
Effect of exchange rate changes on cash..................... (25) (113)
------- -------
Net (decrease) increase in cash and cash equivalents........ (4,413) (2,664)
Cash and cash equivalents at beginning of period............ 15,763 11,150
------- -------
Cash and cash equivalents at end of period.................. $11,350 $ 8,486
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................... $ 334 $ 122
Income taxes -- net of refunds.............................. 839 1,401
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
The Company purchased all of the common stock of Von's
Welding, Inc. In conjunction with the acquisition,
liabilities were assumed as follows:...................... $ 1,956
Purchase of common stock.................................... (885)
-------
Liabilities assumed......................................... $ 1,071
=======
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
F-38
<PAGE> 153
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of Bucyrus International, Inc. (the "Company"), the
consolidated condensed financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial results for the interim periods. Certain items are included in
these statements based on estimates for the entire year.
2. Certain notes and other information have been condensed or omitted from these
interim consolidated condensed financial statements. Therefore, these
statements should be read in conjunction with the Company's 1996 annual
report on Form 10-K filed with the Securities and Exchange Commission on
March 20, 1997.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials and parts................................ $10,201 $10,628
Costs relating to uncompleted contracts................ 5,881 4,183
Customers' advances offset against costs incurred on
uncompleted contracts................................ (2,704) (1,816)
Work in process........................................ 13,115 13,746
Finished products (primarily replacement parts)........ 48,094 44,148
------- -------
$74,587 $70,889
======= =======
</TABLE>
4. Net earnings per share of common stock for the six months ended June 30, 1997
is based on the weighted average number of common and common equivalent
shares outstanding during the period. Restricted common stock is considered
to be issued and outstanding and is included in the net earnings per share
calculation using the treasury stock method. Net earnings per share of common
stock for the six months ended June 30, 1996 is based on the weighted average
number of common shares outstanding since common stock equivalents were not
significant.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". The Company will adopt
this statement for the year ending December 31, 1997 and will restate prior
period earnings per share as required. Adoption of this statement will not
have an impact on the Company's reported earnings per share for the six months
ended June 30, 1997 and 1996.
5. The Company's payment obligations under the proposed Notes are to be
guaranteed by certain of the Company's wholly-owned subsidiaries (the
"Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint
and several. Separate financial statements of the Guarantor Subsidiaries are
not presented because the Company's management has determined that they would
not be material to investors. The following supplemental financial
information sets forth, on an unconsolidated basis, statement of operations,
balance sheet, and statement of cash flow information for the Company
("Parent Company"), for the Guarantor Subsidiaries and for the Company's
non-guarantor subsidiaries (the "Other Subsidiaries"). The supplemental
financial information reflects the investments of the Company in the
Guarantor and Other Subsidiaries using the equity method of accounting.
Parent Company amounts for net earnings and common shareholders' investment
differ from consolidated amounts as intercompany profit in subsidiary
inventory has not been eliminated in the Parent Company statement but has
been eliminated in the Consolidated Totals.
F-39
<PAGE> 154
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Operations for the Six Months Ended June
30, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales........................ $87,590 $16,591 $55,812 $(16,231) $143,762
Other income..................... 922 1 168 (476) 615
------- ------- ------- -------- --------
88,512 16,592 55,980 (16,707) 144,377
------- ------- ------- -------- --------
Cost and Expenses:
Cost of products sold............ 74,144 14,004 44,269 (16,156) 116,261
Product development, selling,
administrative and
miscellaneous expenses........ 10,302 1,312 6,709 22 18,345
Interest expense................. 3,775 159 498 (476) 3,956
------- ------- ------- -------- --------
88,221 15,475 51,476 (16,610) 138,562
------- ------- ------- -------- --------
Earnings before income taxes and
equity in net income of
consolidated subsidiaries........ 291 1,117 4,504 (97) 5,815
Income taxes....................... 363 435 1,594 2,392
------- ------- ------- -------- --------
Earnings (loss) before equity in
net income of consolidated
subsidiaries..................... (72) 682 2,910 (97) 3,423
Equity in net income of
consolidated subsidiaries........ 3,592 (3,592) --
------- ------- ------- -------- --------
Net earnings....................... $ 3,520 $ 682 $ 2,910 $ (3,689) $ 3,423
======= ======= ======= ======== ========
</TABLE>
Consolidating Condensed Statements of Operations for the Six Months Ended June
30, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales........................ $84,096 $16,939 $44,750 $(14,965) $130,820
Other income..................... 680 1 253 (470) 464
------- ------- ------- -------- --------
84,776 16,940 45,003 (15,435) 131,284
------- ------- ------- -------- --------
Cost and Expenses:
Cost of products sold............ 72,910 14,210 35,293 (15,390) 107,023
Product development, selling,
administrative and
miscellaneous expenses........ 10,831 965 6,051 7 17,854
Interest expense................. 4,017 208 418 (470) 4,173
------- ------- ------- -------- --------
87,758 15,383 41,762 (15,853) 129,050
------- ------- ------- -------- --------
Earnings (loss) before income taxes
and equity in net income of
consolidated subsidiaries........ (2,982) 1,557 3,241 418 2,234
Income taxes....................... (310) 607 1,027 1,324
------- ------- ------- -------- --------
Earnings (loss) before equity in
net income of consolidated
subsidiaries..................... (2,672) 950 2,214 418 910
Equity in net income of
consolidated subsidiaries........ 3,164 (3,164) --
------- ------- ------- -------- --------
Net earnings....................... $ 492 $ 950 $ 2,214 $ (2,746) $ 910
======= ======= ======= ======== ========
</TABLE>
F-40
<PAGE> 155
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Balance Sheets at June 30, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...... $ 4,781 $ 379 $ 6,190 $ 11,350
Receivables.................... 28,839 4,716 20,716 54,271
Intercompany receivables....... 21,435 792 2,080 $(24,307) --
Inventories.................... 46,251 1,359 29,261 (2,284) 74,587
Prepaid expenses and other
current assets.............. 2,331 263 2,497 5,091
-------- ------- ------- -------- --------
Total Current Assets........ 103,637 7,509 60,744 (26,591) 145,299
OTHER ASSETS:
Restricted funds on deposit.... 1,079 1,079
Intangible assets.............. 7,801 300 8,101
Other assets................... 4,126 34 2,235 6,395
Investment in subsidiaries..... 35,440 (35,440) --
-------- ------- ------- -------- --------
47,367 334 3,314 (35,440) 15,575
PROPERTY, PLANT AND EQUIPMENT --
NET............................ 26,296 2,336 9,007 37,639
-------- ------- ------- -------- --------
$177,300 $10,179 $73,065 $(62,031) $198,513
======== ======= ======= ======== ========
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................... $ 26,581 $ 2,935 $12,237 $ (41) $ 41,712
Intercompany payables.......... 515 4,446 18,093 (23,054) --
Liabilities to customers on
uncompleted contracts and
warranties.................. 6,402 102 666 7,170
Income taxes................... 208 77 1,757 2,042
Short-term obligations......... 9,253 650 1,535 11,438
Current maturities of long-term
debt........................ 416 416
-------- ------- ------- -------- --------
Total Current Liabilities... 42,959 8,210 34,704 (23,095) 62,778
LONG-TERM LIABILITIES:
Deferred income taxes.......... 138 138
Liabilities to customers on
uncompleted contracts and
warranties.................. 2,599 640 3,239
Postretirement benefits........ 10,359 441 10,800
Deferred expenses and other.... 11,035 430 687 12,152
-------- ------- ------- -------- --------
23,993 430 1,906 26,329
LONG-TERM DEBT, less current
maturities..................... 65,785 2,554 68,339
COMMON SHAREHOLDERS'
INVESTMENT..................... 44,563 1,539 33,901 (38,936) 41,067
-------- ------- ------- -------- --------
$177,300 $10,179 $73,065 $(62,031) $198,513
======== ======= ======= ======== ========
</TABLE>
F-41
<PAGE> 156
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Balance Sheets at December 31, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...... $ 9,072 $ 149 $ 6,542 $ 15,763
Receivables.................... 15,028 4,941 12,116 32,085
Intercompany receivables....... 20,886 623 1,969 $(23,478) --
Inventories.................... 43,343 1,438 28,554 (2,446) 70,889
Prepaid expenses and other
current assets.............. 366 144 1,994 2,504
-------- ------ ------- -------- --------
Total Current Assets........ 88,695 7,295 51,175 (25,924) 121,241
OTHER ASSETS:
Restricted funds on deposit.... 1,079 1,079
Intangible assets.............. 8,545 8,545
Other assets................... 3,845 2,158 6,003
Investment in subsidiaries..... 30,769 (30,769) --
-------- ------ ------- -------- --------
43,159 3,237 (30,769) 15,627
PROPERTY, PLANT AND EQUIPMENT --
NET............................ 27,226 954 7,847 36,027
-------- ------ ------- -------- --------
$159,080 $8,249 $62,259 $(56,693) $172,895
======== ====== ======= ======== ========
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................... $ 22,219 $2,205 $ 9,361 $ (20) $ 33,765
Intercompany payables.......... 785 5,579 16,141 (22,505) --
Liabilities to customers on
uncompleted contracts and
warranties.................. 2,101 197 1,281 3,579
Income taxes................... 357 63 1,049 1,469
Short-term obligations......... 2,788 398 3,186
Current maturities of long-term
debt........................ 428 428
-------- ------ ------- -------- --------
Total Current Liabilities...... 28,250 8,044 28,658 (22,525) 42,427
LONG-TERM LIABILITIES:
Deferred income taxes.......... 148 148
Liabilities to customers on
uncompleted contracts and
warranties.................. 2,638 639 3,277
Postretirement benefits........ 10,610 454 11,064
Deferred expenses and other.... 10,937 233 721 11,891
-------- ------ ------- -------- --------
24,185 233 1,962 26,380
LONG TERM DEBT, less current
maturities..................... 65,785 842 66,627
COMMON SHAREHOLDERS'
INVESTMENT..................... 40,860 (28) 30,797 (34,168) 37,461
-------- ------ ------- -------- --------
$159,080 $8,249 $62,259 $(56,693) $172,895
======== ====== ======= ======== ========
</TABLE>
F-42
<PAGE> 157
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Cash Flows for the Six Months Ended June
30, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings............................. $ 3,520 $ 682 $ 2,910 $(3,689) $ 3,423
Adjustments to reconcile net earnings to
net cash provided by (used in)
operating activities:
Depreciation........................... 1,472 8 699 -- 2,179
Amortization........................... 534 -- -- -- 534
Stock compensation expense............. 420 -- -- -- 420
(Gain) loss on sale of property, plant
and equipment........................ 13 -- (17) -- (4)
Equity in net income of consolidated
subsidiaries......................... (3,592) -- -- 3,592 --
Changes in assets and liabilities:
Intercompany accounts................ (1,318) (1,234) 2,272 280 --
Receivables.......................... (13,810) 352 (8,718) -- (22,176)
Inventories.......................... (2,907) 212 (950) (162) (3,807)
Other current assets................. (1,965) (88) (488) -- (2,541)
Other assets......................... 226 -- (78) -- 148
Current liabilities other than income
taxes, short-term obligations and
current maturities of long-term
debt.............................. 8,660 363 2,393 (21) 11,395
Income taxes........................... (149) 14 699 -- 564
Long-term liabilities other than
deferred income taxes................ (488) 47 (210) -- (651)
-------- ------ ------- ------- --------
Net cash provided by (used in) operating
activities............................. (9,384) 356 (1,488) -- (10,516)
-------- ------ ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and
equipment.............................. (560) (126) (1,747) -- (2,433)
Proceeds from sale of property, plant and
equipment.............................. 5 -- 29 -- 34
Purchase of Von's Welding, Inc. ......... (818) -- -- -- (818)
-------- ------ ------- ------- --------
Net cash used in investing activities.... (1,373) (126) (1,718) -- (3,217)
-------- ------ ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project
financing obligations.................. 5,672 -- -- -- 5,672
Net increase in other bank borrowings.... 794 -- 1,167 -- 1,961
Proceeds from issuance of long-term
debt................................... -- -- 1,712 -- 1,712
-------- ------ ------- ------- --------
Net cash provided by financing
activities............................. 6,466 -- 2,879 -- 9,345
-------- ------ ------- ------- --------
Effect of exchange rate changes on
cash................................... -- -- (25) -- (25)
-------- ------ ------- ------- --------
Net increase (decrease) in cash and cash
equivalents............................ (4,291) 230 (352) -- (4,413)
Cash and cash equivalents at beginning of
period................................. 9,072 149 6,542 -- 15,763
-------- ------ ------- ------- --------
Cash and cash equivalents at end of
period................................. $ 4,781 $ 379 $ 6,190 $ -- $ 11,350
======== ====== ======= ======= ========
</TABLE>
F-43
<PAGE> 158
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating Condensed Statements of Cash Flows for the Six Months Ended June
30, 1996
<TABLE>
<CAPTION>
PARENT GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss).......................... $ 492 $ 950 $ 2,214 $(2,746) $ 910
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:
Depreciation............................... 1,356 58 566 -- 1,980
Amortization............................... 584 -- -- -- 584
Stock compensation expense................. 116 -- -- -- 116
In kind interest on the Secured Notes due
December 14, 1998........................ 3,767 -- -- -- 3,767
(Gain) loss on sale of property, plant and
equipment................................ 256 -- (10) -- 246
Equity in net income of consolidated
subsidiaries............................. (3,164) -- -- 3,164 --
Changes in assets and liabilities:
Intercompany accounts...................... 4,817 (998) (5,539) 1,720 --
Receivables................................ (10,015) (1,961) 3,657 -- (8,319)
Inventories................................ 933 538 3,313 (2,057) 2,727
Other current assets....................... (324) (33) (167) -- (524)
Other assets............................... (208) -- (67) -- (275)
Current liabilities other than income
taxes, short-term obligations and current
maturities of long-term debt............. (368) 823 (2,391) (81) (2,017)
Income taxes............................... (186) 61 (882) -- (1,007)
Long-term liabilities other than deferred
income taxes............................. (1,167) (116) (149) -- (1,432)
-------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities................................. (3,111) (678) 545 -- (3,244)
-------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted funds on deposit...... -- -- 1,800 -- 1,800
Purchases of property, plant and equipment... (867) (57) (381) -- (1,305)
Proceeds from sale of property, plant and
equipment.................................. 745 -- 61 -- 806
Dividend paid to parent...................... 200 (200) --
-------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities................................. 78 (57) 1,280 -- 1,301
-------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of project financing
obligations................................ 2,971 -- -- -- 2,971
Reduction of project financing obligations... (2,701) -- -- -- (2,701)
Net decrease in other bank borrowings........ (68) -- (810) -- (878)
-------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities................................. 202 -- (810) -- (608)
-------- ------- ------- ------- -------
Effect of exchange rate changes on cash...... -- -- (113) -- (113)
-------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents................................ (2,831) (735) 902 -- (2,664)
Cash and cash equivalents at beginning of
period..................................... 5,462 355 5,333 -- 11,150
-------- ------- ------- ------- -------
Cash and cash equivalents at end of period... $ 2,631 $ (380) $ 6,235 $ -- $ 8,486
======== ======= ======= ======= =======
</TABLE>
F-44
<PAGE> 159
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Global Industrial Technologies, Inc.:
We have audited the accompanying combined balance sheet of the Surface
Mining and Equipment Business of Global Industrial Technologies, Inc. (the
"Company") as of October 31, 1996, and the related combined statements of
operations, equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Surface Mining and
Equipment Business of Global Industrial Technologies, Inc., as of October 31,
1996 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
June 27, 1997
F-45
<PAGE> 160
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED BALANCE SHEET
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.............................. $ 910
Trade receivables................. 17,032
Receivable from affiliated
entity.......................... 41
Inventories....................... 37,438
Prepaid expenses and other current
assets.......................... 228
-------
Total Current Assets......... 55,649
OTHER ASSETS:
Intangible assets................. 1,372
Other assets...................... 940
-------
2,312
PROPERTY, PLANT AND EQUIPMENT:
Land.............................. 625
Buildings and improvements........ 12,040
Machinery and equipment........... 45,021
Less accumulated depreciation..... (49,098)
-------
8,588
-------
$66,549
=======
LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses........................ $12,132
Payable to affiliated entity...... 684
Liabilities to customers on
uncompleted contracts and
warranties...................... 4,310
-------
Total Current Liabilities.... 17,126
LONG-TERM LIABILITIES:
Postretirement benefits........... 6,725
Deferred expenses and other....... 4,343
-------
11,068
COMBINED EQUITY................... 38,355
=======
$66,549
=======
</TABLE>
See notes to combined financial statements.
F-46
<PAGE> 161
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Net sales................................................. $ 109,625
Other income.............................................. 555
---------
110,180
---------
COSTS AND EXPENSES:
Cost of products sold..................................... 93,026
Product development, selling, administrative and
miscellaneous expenses................................. 16,514
Allocated administrative expenses......................... 2,200
Allocated interest expense................................ 228
---------
111,968
---------
LOSS BEFORE INCOME TAXES.................................... (1,788)
ALLOCATED INCOME TAX BENEFIT................................ (662)
---------
NET LOSS.................................................... $ (1,126)
=========
</TABLE>
See notes to combined financial statements.
F-47
<PAGE> 162
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED STATEMENT OF EQUITY
YEAR ENDED OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INVESTMENT CUMULATIVE PENSION TOTAL
BY TRANSLATION LIABILITY COMBINED
GLOBAL ADJUSTMENT ADJUSTMENT EQUITY
---------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Balance at November 1, 1995...................... $25,850 $(3,889) $(2,413) $19,548
Net loss....................................... (1,126) -- -- (1,126)
Capital contribution from Global............... 19,601 -- -- 19,601
Translation adjustments........................ -- (287) -- (287)
Additional minimum liability................... -- -- 619 619
------- ------- ------- -------
Balance at October 31, 1996...................... $44,325 $(4,176) $(1,794) $38,355
======= ======= ======= =======
</TABLE>
See notes to combined financial statements.
F-48
<PAGE> 163
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (1,126)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 2,028
Gain on sale of property, plant and equipment............. (34)
Changes in assets and liabilities:
Trade receivables...................................... (2,316)
Receivable from affiliated entity...................... (41)
Inventories............................................ (4,149)
Other current assets................................... 5,327
Other assets........................................... 131
Current liabilities.................................... (18,002)
Payable to affiliated entity........................... 684
--------
Net cash used in operating activities............. (17,498)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment................ (1,761)
Proceeds from sale of property, plant and equipment....... 69
--------
Net cash used in investing activities............. (1,692)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions from Global......................... 19,601
--------
Effect of exchange rate changes on cash................... (287)
--------
Net increase in cash........................................ 124
Cash at beginning of year................................... 786
--------
Cash at end of year......................................... $ 910
========
</TABLE>
See notes to combined financial statements.
F-49
<PAGE> 164
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF ACCOUNTING POLICIES
NATURE OF OPERATIONS
The accompanying combined financial statements include all of the
operations, assets and liabilities of the surface mining and equipment business
(the "Marion Business") of Global Industrial Technologies, Inc. ("Global"). The
Marion Business consists principally of walking draglines and electric mining
shovels and related replacement parts. Major markets for the surface mining
industry are coal mining, copper and iron ore mining and phosphate production.
USE OF ESTIMATES
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.
PRINCIPLES OF COMBINATION AND PRESENTATION
These financial statements combine subsidiaries, branches or divisions of
Global that operate in the surface mining and equipment business as if they were
organized under one business unit. Such statements include the following:
- The Marion Power Shovel Company
- Marion Power Shovel Pty. Ltd.
- The South Africa Branch of INTOOL International B.V.
- The Canadian mining division of Global-GIX Canada, Inc.
The historical equity of these operations as well as permanent advances
from Global have been reported as "Combined Equity" in the Combined Balance
Sheet. Within Combined Equity, the Investment by Global account represents the
net assets invested in the Marion Business by Global including the advances that
will not be repaid.
INVENTORIES
Inventories are stated at lower of cost (last-in, first-out method) or
market (market or estimated net realizable value). The excess of replacement
cost over the carrying value of inventories determined on a last-in, first-out
basis was $10,939,000. Advances from customers are netted against inventories to
the extent of related accumulated costs.
PROPERTY, PLANT AND EQUIPMENT
Fixed assets are recorded at cost. Depreciation is provided over the
estimated useful lives of respective assets using the straight-line method for
financial reporting and accelerated methods for income tax purposes. Estimated
useful lives used for financial reporting purposes range from ten to forty years
for buildings and improvements and five to fifteen years for machinery and
equipment.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign operations are translated into U.S.
dollars using year-end exchange rates. Revenues and expenses are translated at
the average rates during the year. Adjustments resulting from this translation
are deferred and reflected as a separate component of Combined Equity.
F-50
<PAGE> 165
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
Revenue from dragline contracts is recognized using the
percentage-of-completion method. Revenue from shovel contracts and all other
sales is recognized at time of shipment. At the time a loss on a contract
becomes known, the amount of the estimated loss is recognized in the combined
financial statements. Included in current liabilities as liabilities to
customers on uncompleted contracts are advances collected under shovel contracts
of $1,041,000.
IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment when certain events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. This pronouncement is required to be adopted by the Marion
Business for the fiscal year beginning November 1, 1996. As of November 1, 1996,
adoption did not have a significant effect on the financial position or results
of operations of the Marion Business. See Note L.
NOTE B -- TRADE RECEIVABLES
Trade receivables include the excess of revenues over advances of $426,000
related to a dragline contract. Billings on long-term contracts are made in
accordance with the payment terms as defined in the individual contracts.
Trade receivables are reduced by an allowance for losses of $213,000.
NOTE C -- INVENTORIES
Inventories at cost include material, labor and overhead and consist of the
following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Raw materials and parts.................................. $ 5,254
Work in process.......................................... 8,799
Finished products (primarily replacement parts).......... 34,324
--------
48,377
LIFO and other reserves.................................. (10,939)
--------
$ 37,438
========
</TABLE>
NOTE D -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Trade accounts payable................................... $ 6,492
Wages and salaries....................................... 2,411
Insurance reserves....................................... 1,410
Other.................................................... 1,819
-------
$12,132
=======
</TABLE>
F-51
<PAGE> 166
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- INCOME TAXES
The income and expenses of the Marion Business are included in the
consolidated local tax returns of various Global entities.The tax benefit or
liability incurred by Global for such inclusion in its consolidated tax returns
is to be reimbursed to or paid by the Marion Business. For purposes of the
combined financial statements, current taxes payable or receivable as well as
net deferred tax assets are recorded as part of the Investment by Global account
in Combined Equity.
Loss before income taxes consists of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
United States............................................ $(4,406)
Foreign.................................................. 2,618
-------
Total.................................................... $(1,788)
=======
</TABLE>
The allocated income tax benefit consists of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Foreign income taxes:
Current................................................ $ 921
Deferred............................................... 72
-------
Total.................................................. 993
-------
U.S. and state income taxes:
Current................................................ (1,307)
Deferred............................................... (348)
-------
Total.................................................. (1,655)
-------
Total allocated income tax benefit....................... $ (662)
=======
</TABLE>
The total allocated income tax benefit differs from amounts expected by
applying the Federal statutory income tax rate to loss before income taxes as
set forth in the following table:
<TABLE>
<CAPTION>
TAX
EXPENSE
(BENEFIT) PERCENT
--------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tax benefit at Federal statutory rate.................... $(626) (35.0)%
State income taxes net of Federal income tax benefit..... (48) (2.7)
Other items.............................................. 12 0.7
----- ------
Total income tax benefit................................. $(662) (37.0)%
===== ======
</TABLE>
F-52
<PAGE> 167
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of net deferred tax assets which are included in the
Investment by Global account in Combined Equity are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Deferred tax assets:
Accrued and other liabilities............................. $3,524
Postretirement benefits................................... 2,435
Inventory valuation provisions............................ 2,319
Other items............................................... 63
--------
Total deferred tax assets................................... 8,341
Deferred tax liabilities -- Excess of book basis over tax
basis of property, plant and equipment.................... (503)
--------
Net deferred tax asset recognized in the Combined Balance
Sheet as a reduction of the Investment by Global account
in Combined Equity........................................ $7,838
========
</TABLE>
Cumulative undistributed earnings of foreign operations that are considered
to be permanently reinvested, and on which U.S. income taxes have not been
provided by the Marion Business, amounted to approximately $23,700,000 at
October 31, 1996. It is not practicable to estimate the amount of additional tax
which would be payable upon repatriation of such earnings; however, due to
foreign tax credit limitations, higher effective U.S. income tax rates and
foreign withholding taxes, additional taxes could be incurred.
NOTE F -- PENSION AND RETIREMENT PLANS
The Marion Business has two defined benefit pension plans which cover
substantially all hourly bargaining and nonbargaining unit employees in the
United States. Plan benefits are based primarily on years of service. In
addition, the Marion Business' salaried employees participate in the Global
Industrial Technologies, Inc. RIP Plan, which benefits are based primarily on
years of service and employees' qualifying compensation during the final years
of employment. All plans are funded in accordance with applicable laws and
regulations. Substantially all plan assets are invested in cash, short-term
investments, equity securities and fixed-income instruments. The remaining plan
assets are primarily invested in real estate.
F-53
<PAGE> 168
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the domestic plans' funded status as of the
August 1, 1996 measurement date:
<TABLE>
<CAPTION>
GLOBAL MARION BUSINESS
SALARIED PLAN HOURLY PLANS
------------- ---------------
ASSETS
EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED
BENEFITS(1) ASSETS(2)
----------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested........................................... $(36,474) $(23,673)
Non-vested....................................... (1,547) (573)
-------- --------
Total accumulated benefit obligation............. $(38,021) $(24,246)
======== ========
Projected benefit obligation for services rendered
to date.......................................... $(54,300) $(24,246)
Plan assets at fair value.......................... 39,556 19,903
-------- --------
Projected benefit obligation in excess of plan
assets........................................... (14,744) (4,343)
Unrecognized prior service cost.................... (76) 1,371
Unrecognized net loss.............................. 16,020 3,121
Unrecognized transition asset...................... (402) (310)
Adjustment for minimum liability................... -- (4,182)
-------- --------
Prepaid (accrued) pension cost..................... $ 798 $ (4,343)
======== ========
</TABLE>
- -------------------------
(1) Consists of the Global Industrial Technologies, Inc. RIP Plan. The Marion
Business' portion of the accumulated benefit obligation of this plan is
estimated to be $7,839,000. The Marion Business' year end accrual is
included in the Investment by Global account in Combined Equity.
(2) Consists of the two defined benefit plans for hourly employees. Included in
the Combined Balance Sheet is an intangible asset and a reduction of
Combined Equity of $1,372,000 (net of tax) and $1,794,000 (net of tax),
respectively, to reflect the additional minimum liability.
The weighted average discount rate, rate of increase in future compensation
levels, and expected long-term rate of return on assets used to develop the
projected benefit obligation were 8%, 4.5% and 9%, respectively.
Net domestic periodic pension cost for the two hourly defined benefit plans
includes the following components:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Service cost............................................... $ 218
Interest cost.............................................. 1,864
Actual return on plan assets............................... (1,879)
Net amortization and deferral.............................. 35
-------
Net periodic pension cost.................................. $ 238
=======
</TABLE>
The Marion Business' portion of the net periodic pension cost for the
Global Industrial Technologies, Inc. RIP Plan was $532,000 for 1996.
The Marion Business participates in Global's 401(k) savings plan. The
Marion Business' expense for 1996 was $227,000 for its portion of the matching
contribution.
F-54
<PAGE> 169
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Marion Business provides certain health care and life insurance
benefits for substantially all retired United States bargaining and
nonbargaining unit employees meeting eligibility requirements. The Marion
Business' policy is to fund these benefits as claims and premiums are paid.
The following table sets forth the Plan's status and amounts recognized in
the combined financial statements:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $(4,612)
Fully eligible active plan participants.................. (1,450)
Other active plan participants........................... (994)
-------
(7,056)
Unrecognized prior service cost............................ (1,036)
Unrecognized net loss...................................... 875
-------
Accrued postretirement benefit cost recognized in the
Combined Balance Sheet................................... $(7,217)
=======
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Service cost............................................... $ 107
Interest cost.............................................. 503
Amortization of prior service cost......................... (120)
--------
Net periodic postretirement benefit cost................... $ 490
========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The assumed health care cost trend
rate used in measuring the accumulated postretirement benefit obligation was 11%
at October 31, 1996, declining .5% each year thereafter, to 5% in the year 2008
and beyond. A 1% increase in the assumed health care cost trend rate for each
year would increase the accumulated postretirement benefit obligation by
$270,000 and would increase the net periodic postretirement benefit cost for
1996 by $13,000.
NOTE H -- RESEARCH AND DEVELOPMENT
Expenditures for design and development of new products and improvements of
existing mining machinery products, including overhead, are charged to product
development expense as incurred and aggregated $5,713,000 in 1996.
NOTE I -- FOREIGN OPERATIONS, EXPORT SALES AND SIGNIFICANT CUSTOMERS
The Marion Business designs, manufactures and sells products in a single
industry segment, surface mining and equipment. Operations are conducted
primarily in the United States, Australia, Canada and South Africa.
Financial information by geographical area is summarized in the following
table. Each geographic area represents the origin of the financial information
presented. Transfers between geographic areas represent intercompany export
sales of goods produced in the United States and are accounted for based on
established sales prices between the related entities. Eliminations for
operating earnings (loss) include elimination of intercompany profit in
inventory and general
F-55
<PAGE> 170
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
corporate expenses. Identifiable assets of each entity are those related to the
operations of those entities. United States assets consist of all other
operating assets.
<TABLE>
<CAPTION>
TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC TOTAL EARNINGS IDENTIFIABLE
CUSTOMERS AREAS NET SALES (LOSS) ASSETS
------------ ---------- --------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
United States.......................... $ 66,081 $ 27,984 $ 94,065 $(4,076) $42,983
Australia.............................. 27,191 -- 27,191 1,682 19,922
South Africa........................... 14,448 -- 14,448 887 5,218
Other Foreign.......................... 1,905 651 2,556 157 6,238
Eliminations........................... -- (28,635) (28,635) (210) (7,812)
-------- -------- -------- ------- -------
10$9,625... $ -- $109,625 $(1,560) $66,549
======== ======== ======== ======= =======
</TABLE>
Export sales from United States operations, excluding sales to affiliates,
amounted to $44,164,000 in 1996.
Two customers accounted for approximately 42% of the Marion Business' net
sales in 1996. The Marion Business is not dependent upon any one customer.
NOTE J -- TRANSACTIONS WITH GLOBAL
The Marion Business has historically depended on Global for substantial
support, particularly financial. Global also performs certain services such as
insurance claim processing, data processing, and legal and tax support. Total
costs allocated to the Marion Business and included in the combined financial
statements are the following:
(a) Administrative costs of $2,200,000 allocated based on the Marion
Business' percentage of Global's total working capital, gross property,
plant and equipment and goodwill.
(b) Interest expense of $228,000 allocated on the same basis as (a) above.
(c) Pension expense for salaried employees as discussed in Note F.
(d) Income taxes as discussed in Note E.
Global provides financing to the Marion Business through a non-interest
bearing intercompany account. This intercompany account has been classified with
the Investment by Global account in Combined Equity.
NOTE K -- COMMITMENTS, CONTINGENCIES AND CREDIT RISKS
The Marion Business is involved in various litigation arising in the normal
course of business. It is the view of management that the Marion Business'
recovery or liability, if any, under pending litigation is not expected to have
a material effect on the Marion Business' financial position or results of
operations, although no assurance to that effect can be given.
The Marion Business has product liability insurance subject to a deductible
of $1,000,000 per occurrence and has various limits of liability depending on
the insurance policy year in question. It is the view of management that the
final resolution of said claims and other similar claims which are likely to
arise in the future will not individually or in the aggregate have a material
effect on the Marion Business' financial position or results of operations,
although no assurance to that effect can be given.
F-56
<PAGE> 171
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Marion Business has obligations under various operating leases and
rental and service agreements. The expense relating to these agreements was
$639,000 in 1996. Future minimum annual payments under noncancellable agreements
are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1997......................................... $405
1998......................................... 273
1999......................................... 159
2000......................................... 24
2001......................................... --
After 2001................................... --
----
$861
====
</TABLE>
A significant portion of the Marion Business' combined net sales are to
customers whose activities are related to the coal, copper and iron ore mining
industries, including some who are located in foreign countries. The Marion
Business generally extends credit to these customers and, therefore, collection
of receivables may be affected by the mining industry economy and the economic
conditions in the countries where the customers are located. However, the Marion
Business closely monitors extension of credit and has not experienced
significant credit losses. Also, most foreign sales are made to large,
well-established companies. The Marion Business generally requires collateral or
guarantees on foreign sales to smaller companies.
NOTE L -- DIVESTITURE
In January, 1997, Global announced its strategic decision to divest itself
of the surface mining equipment business (i.e. the Marion Business). See
"Business -- The Marion Acquisition" included elsewhere in this Prospectus.
F-57
<PAGE> 172
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, OCTOBER 31,
1997 1996
-------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................... $ 240 $ 910
Receivables.............. 9,679 17,032
Receivable from
affiliated entity...... -- 41
Inventories.............. 37,427 37,438
Prepaid expenses and
other current assets... 91 228
-------- --------
Total Current
Assets............. 47,437 55,649
OTHER ASSETS:
Intangible assets........ 1,372 1,372
Other assets............. 361 940
-------- --------
1,733 2,312
PROPERTY, PLANT AND
EQUIPMENT:
Land..................... 625 625
Buildings and
improvements........... 12,040 12,040
Machinery and
equipment.............. 46,103 45,021
Less accumulated
depreciation........... (49,622) (49,098)
-------- --------
9,146 8,588
-------- --------
$ 58,316 $ 66,549
======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, OCTOBER 31,
1997 1996
-------- -----------
<S> <C> <C>
LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses........ $ 9,401 $12,132
Payable to affiliated
entity.................. 839 684
Liabilities to customers
on uncompleted contracts
and warranties.......... 4,011 4,310
------- -------
Total Current
Liabilities......... 14,251 17,126
LONG-TERM LIABILITIES:
Postretirement benefits... 6,725 6,725
Deferred expenses and
other................... 4,344 4,343
------- -------
11,069 11,068
COMBINED EQUITY........... 32,996 38,355
------- -------
$58,316 $66,549
======= =======
</TABLE>
See notes to combined financial statements.
F-58
<PAGE> 173
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Net sales................................................. $41,032 $65,019
Other income.............................................. 37 131
------- -------
41,069 65,150
------- -------
COSTS AND EXPENSES:
Cost of products sold..................................... 37,082 55,177
Product development, selling, administrative
and miscellaneous expenses................................ 10,122 10,886
Allocated administrative expenses......................... 1,622 1,406
Allocated interest expense................................ 1,040 152
------- -------
49,866 67,621
------- -------
LOSS BEFORE INCOME TAXES.................................... (8,797) (2,471)
ALLOCATED INCOME TAX BENEFIT................................ (3,373) (966)
------- -------
NET LOSS.................................................... $(5,424) $(1,505)
======= =======
</TABLE>
See notes to combined financial statements.
F-59
<PAGE> 174
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(5,424) $(1,505)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................... 1,024 1,255
Changes in assets and liabilities:
Trade receivables......................................... 7,353 663
Receivable from affiliated entity......................... 41 --
Inventories............................................... 11 (11,264)
Other current assets...................................... 137 4,780
Other assets.............................................. 80 51
Current liabilities....................................... (3,030) (14,067)
Payable to affiliated entity.............................. 155 463
------- -------
Net cash provided by (used in) operating activities......... 347 (19,624)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (1,082) (846)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions from Global........................... 448 19,264
------- -------
Effect of exchange rate changes on cash..................... (383) 420
------- -------
Net decrease in cash........................................ (670) (786)
Cash at beginning of period................................. 910 786
------- -------
Cash at end of period....................................... $ 240 $ --
======= =======
</TABLE>
See notes to combined financial statements.
F-60
<PAGE> 175
SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited combined financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Adjustments consisted of only normal recurring accruals.
Operating results for the eight months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending October 31,
1997.
NOTE B -- DIVESTITURE
In January, 1997, Global Industrial Technologies, Inc. announced its
strategic decision to divest itself of the surface mining equipment business.
See "Business -- The Marion Acquisition" included elsewhere in this Prospectus.
NOTE C -- INVENTORIES
Inventories at cost include material, labor and overhead and consist of the
following:
<TABLE>
<CAPTION>
JUNE 30, OCTOBER 31,
1997 1996
-------- -----------
<S> <C> <C>
Raw materials and parts................................. $ 5,919 $ 5,254
Work-in-process......................................... 10,183 8,799
Finished products (primarily replacement parts)......... 32,264 34,324
-------- --------
48,366 48,377
LIFO and other reserves................................. (10,939) (10,939)
======== ========
$ 37,427 $ 37,438
======== ========
</TABLE>
F-61
<PAGE> 176
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE INITIAL PURCHASERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN
THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary................................ 1
Risk Factors........................... 13
The Exchange Offer..................... 19
Acquisition of the Company by AIP...... 29
Capitalization......................... 30
Unaudited Pro Forma Combined Condensed
Financial Statements................. 31
Selected Historical Consolidated
Financial Information................ 42
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 44
Business............................... 51
Management............................. 67
Certain Relationships and Related
Transactions......................... 72
Principal Shareholders................. 73
Revolving Credit Facility.............. 74
Description of the Notes............... 75
Exchange Offer; Registration Rights.... 101
Plan of Distribution................... 106
Legal Matters.......................... 107
Independent Auditors................... 107
Available Information.................. 107
Incorporation of Certain Documents by
Reference............................ 107
Index to Financial Statements.......... F-1
</TABLE>
$150,000,000
BUCYRUS
INTERNATIONAL, INC.
9 3/4% SENIOR NOTES
DUE 2007
LOGO
PROSPECTUS
DATED NOVEMBER 12, 1997
<PAGE> 177
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended, provides
in regards to indemnification of directors and officers as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsections (a) and (b). Such determination shall be
made (1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
II-1
<PAGE> 178
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this Section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnity him against
such liability under the provisions of this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
Section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Subarticle E of Article 8 of the Wyoming Business Corporation Act, as
amended, provides in regards to indemnification of directors and officers as
follows:
sec. 17-16-850 Subarticle definitions.
(a) In this subarticle:
(i) "Corporation" includes any domestic or foreign predecessor entity
of a corporation in a merger;
II-2
<PAGE> 179
(ii) "Director" or "officer" means an individual who is or was a
director or officer, respectively, of a corporation or who, while a
director or officer of the corporation, is or was serving at the
corporation's request as a director, officer, partner, trustee, employee or
agent of another domestic or foreign corporation, partnership, joint
venture, trust, employee benefit plan or other entity. A director or
officer is considered to be serving an employee benefit plan at the
corporation's request if his duties to the corporation also impose duties
on, or otherwise involve services by, him to the plan or to participants in
or beneficiaries of the plan. "Director" or "officer" includes, unless the
context requires otherwise, the estate or personal representative of a
director or officer;
(iii) "Disinterested director" means a director who, at the time of a
vote referred to in W.S. 17-16-853 (c) or a vote or selection referred to
in W.S. 17-16-855(b) or (c), is not: (A) A party to the proceeding; or (B)
An individual having a familial, financial, professional or employment
relationship with the director whose indemnification or advance for
expenses is the subject of the decision being made, which relationship
would, in the circumstances, reasonably be expected to exert an influence
on the director's judgment when voting on the decision being made.
(iv) "Expenses" includes counsel fees;
(v) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a
proceeding;
(vi) "Party" means an individual who was, is or is threatened to be
made, a defendant or respondent in a proceeding;
(vii) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal.
sec. 17-16-851 Authority to indemnify.
(a) Except as otherwise provided in this section, a corporation may
indemnify an individual who is a party to a proceeding because he is a director
against liability incurred in the proceeding if: (i) He conducted himself in
good faith; and (ii) He reasonably believed that his conduct was in or at least
not opposed to the corporation's best interests; and (iii) In the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful; or (iv) He engaged in conduct for which broader indemnification has
been made permissible or obligatory under a provision of the articles of
incorporation, as authorized by W.S. 17-16-202(b)(v).
(b) A director's conduct with respect to an employee benefit plan for a
purpose he reasonably believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of paragraph
(a)(ii) of this section.
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(d) Unless ordered by a court under W.S. 17-16-854(a)(iii) a corporation
may not indemnify a director under this section: (i) In connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
has met the standard of conduct under subsection (a) of this section; or (ii) In
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that he received a financial benefit to which he was not
entitled.
(e) Repealed by Laws 1997, ch. 190, s 3.
II-3
<PAGE> 180
sec. 17-16-852 Mandatory indemnification.
A corporation shall indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he was a party
because he was a director of the corporation against reasonable expenses
incurred by him in connection with the proceeding.
sec. 17-16-853 Advance for expenses.
(a) A corporation may, before final disposition of a proceeding, advance
funds to pay for or reimburse the reasonable expenses incurred by a director who
is a party to a proceeding because he is a director if he delivers to the
corporation: (i) A written affirmation of his good faith belief that he has met
the standard of conduct described in W.S. 17-16-851 or that the proceeding
involves conduct for which liability has been eliminated under a provision of
the articles of incorporation as authorized by W.S. 17-16-202(b)(iv); and
(ii) His written undertaking to repay any funds advanced if he is not entitled
to mandatory indemnification under W.S. 17-16-852 and it is ultimately
determined that he has not met the standard of conduct described in W.S.
17-16-851. (iii) Repealed by Laws 1997, ch. 190, s 3.
(b) The undertaking required by paragraph (a)(ii) of this section shall be
an unlimited general obligation of the director but need not be secured and may
be accepted without reference to the financial ability of the director to make
repayment.
(c) Authorizations under this section shall be made: (i) By the board of
directors: (A) If there are two (2) or more disinterested directors, by a
majority vote of all the disinterested directors (a majority of whom shall for
such purpose constitute a quorum) or by a majority of the members of a committee
of two (2) or more disinterested directors appointed by such a vote; or (B) If
there are fewer than two (2) disinterested directors, by the vote necessary for
action by the board in accordance with W.S. 17-16-824(c), in which authorization
directors who do not qualify as disinterested directors may participate; or (ii)
By the shareholders, but shares owned by or voted under the control of a
director who at the time does not qualify as a disinterested director may not be
voted on the authorization.
sec. 17-16-854 Court-ordered indemnification and advance for expenses.
(a) A director who is a party to a proceeding because he is a director may
apply for indemnification or an advance for expenses to the court conducting the
proceeding or to another court of competent jurisdiction. After receipt of an
application and after giving any notice it considers necessary, the court shall:
(i) Order indemnification if the court determines that the director is entitled
to mandatory indemnification under W.S. 17-16-852; (ii) Order indemnification or
advance for expenses if the court determines that the director is entitled to
indemnification or advance for expenses pursuant to a provision authorized by
W.S. 17-16-858(a); or (iii) Order indemnification or advance for expenses if the
court determines, in view of all the relevant circumstances, that it is fair and
reasonable: (A) To indemnify the director; or (B) To advance expenses to the
director, even if he has not met the standard of conduct set forth in W.S.
17-16-851(a), failed to comply with W.S. 17-16-853 or was adjudged liable in a
proceeding referred to in W.S. 17-16-851(d)(i) or (ii), but if he was adjudged
so liable his indemnification shall be limited to reasonable expenses incurred
in connection with the proceeding.
(b) If the court determines that the director is entitled to
indemnification under paragraph (a)(i) of this section or to indemnification or
advance for expenses under paragraph (a)(ii) of this section, it shall also
order the corporation to pay the director's reasonable expenses incurred in
connection with obtaining court-ordered indemnification or advance for expenses.
If the court determines that the director is entitled to indemnification or
advance for expenses under paragraph (a)(iii) of this section, it may also order
the corporation to pay the director's reasonable expenses to obtain
court-ordered indemnification or advance for expenses.
II-4
<PAGE> 181
sec. 17-16-855 Determination and authorization of indemnification.
(a) A corporation may not indemnify a director under W.S. 17-16-851 unless
authorized for a specific proceeding after a determination has been made that
indemnification of the director is permissible because he has met the standard
of conduct set forth in W.S. 17-16-851.
(b) The determination shall be made: (i) If there are two (2) or more
disinterested directors, by the board of directors by majority vote of all the
disinterested directors (a majority of whom shall for such purpose constitute a
quorum), or by a majority of the members of a committee of two (2) or more
disinterested directors appointed by such a vote; (ii) Repealed by Laws 1997,
ch. 190, s 3. (iii) By special legal counsel: (A) Selected in the manner
prescribed in paragraph (i) of this subsection; or (B) If there are fewer than
two (2) disinterested directors, selected by the board of directors (in which
selection directors who do not qualify as disinterested directors may
participate); or (iv) By the shareholders, but shares owned by or voted under
the control of a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
(c) Authorization of indemnification shall be made in the same manner as
the determination that indemnification is permissible, except that if there are
fewer than two (2) disinterested directors, authorization of indemnification
shall be made by those entitled under paragraph (b)(iii) of this section to
select special legal counsel.
sec. 17-16-856 Officers.
(a) A corporation may indemnify and advance expenses under this subarticle
to an officer of the corporation who is a party to a proceeding because he is an
officer of the corporation: (i) To the same extent as a director; and (ii) If he
is an officer but not a director, to such further extent as may be provided by
the articles of incorporation, the bylaws, a resolution of the board of
directors or contract, except for: (A) Liability in connection with a proceeding
by or in the right of the corporation other than for reasonable expenses
incurred in connection with the proceeding; or (B) Liability arising out of
conduct that constitutes: (I) Receipt by him of a financial benefit to which he
is not entitled; (II) An intentional infliction of harm on the corporation or
the shareholders; or (III) An intentional violation of criminal law. (iii) A
corporation may also indemnify and advance expenses to a current or former
officer, employee or agent who is not a director to the extent, consistent with
public policy, that may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors or contract.
(b) The provisions of paragraph (a)(ii) of this section shall apply to an
officer who is also a director if the basis on which he is made a party to the
proceeding is an act or omission solely as an officer.
(c) An officer of a corporation who is not a director is entitled to
mandatory indemnification under W.S. 17-16-852, and may apply to a court under
W.S. 17-16-854 for indemnification or an advance for expenses, in each case to
the same extent to which a director may be entitled to indemnification or
advance for expenses under those provisions.
sec. 17-16-857 Insurance.
A corporation may purchase and maintain insurance on behalf of an
individual who is a director or officer of the corporation, or who, while a
director or officer of the corporation, serves at the corporation's request as a
director, officer, partner, trustee, employee or agent of another domestic or
foreign corporation, partnership, joint venture, trust, employee benefit plan,
or other entity, against liability asserted against or incurred by him in that
capacity or arising from his status as a director or officer whether or not the
corporation would have power to indemnify or advance expenses to him against the
same liability under this subarticle.
II-5
<PAGE> 182
sec. 17-16-858 Variation by corporate action; application of subarticle.
(a) A corporation may, by a provision in its articles of incorporation or
bylaws or in a resolution adopted or a contract approved by its board of
directors or shareholders, obligate itself in advance of the act or omission
giving rise to a proceeding to provide indemnification in accordance with W.S.
17-16-851 or advance funds to pay for or reimburse expenses in accordance with
W.S. 17-16-853. Any such obligatory provision shall be deemed to satisfy the
requirements for authorization referred to in W.S. 17-16-853(c) and 17-16-
855(c). Any provision that obligates the corporation to provide indemnification
to the fullest extent permitted by law shall be deemed to obligate the
corporation to advance funds to pay for or reimburse expenses in accordance with
W.S. 17-16-853 to the fullest extent permitted by law, unless the provision
specifically provides otherwise.
(b) Any provision pursuant to subsection (a) of this section shall not
obligate the corporation to indemnify or advance expenses to a director of a
predecessor of the corporation, pertaining to conduct with respect to the
predecessor, unless otherwise specifically provided. Any provision for
indemnification or advance for expenses in the articles of incorporation,
bylaws, or a resolution of the board of directors or shareholders of a
predecessor of the corporation in a merger or in a contract to which the
predecessor is a party, existing at the time the merger takes effect, shall be
governed by W.S. 17-16-1106(a)(iii).
(c) A corporation may, by provision in its articles of incorporation, limit
any of the rights to indemnification or advance for expenses created by or
pursuant to this subarticle.
(d) This subarticle does not limit a corporation's power to pay or
reimburse expenses incurred by a director or officer in connection with his
appearance as a witness in a proceeding at a time when he is not a party.
(e) This subarticle does not limit a corporation's power to indemnify,
advance expenses to or provide or maintain insurance on behalf of an employee or
agent.
sec. 17-16-859 Exclusivity of subarticle.
A corporation may provide indemnification or advance expenses to a director
or an officer only as permitted by this subarticle.
Section(b)(iv) and (v) of Article 2 of the Wyoming Business Corporation
Act, as amended, provides in regard to indemnification and the limitation of
liability of directors and officers as follows:
(b) The articles of incorporation may set forth:
****
(iv) A provision eliminating or limiting the liability of a director to the
corporation or its shareholders for money damages for any action taken, or any
failure to take any action, as a director, except liability for: (A) The amount
of financial benefit received by a director to which he is not entitled; (B) An
intentional infliction of harm on the corporation or shareholders; (C) A
violation of W.S. 17-16-833; or (D) An intentional violation of criminal law;
and
(v) A provision permitting or making obligatory indemnification of a
director for liability (as defined in W.S. 17-16-850(a)(v)) to any person for
any action taken, or failure to take any action, as a director, except liability
for: (A) Receipt of a financial benefit to which he is not entitled; (B) An
intentional infliction of harm on the corporation or shareholders; (C) A
violation of W.S. 17-16-833; or (D) An intentional violation of criminal law.
Article VII of Von's By-laws provide in regard to indemnification of
directors, officers and employees as follows:
Any person made a party to any civil or criminal action, suit or proceeding
by reason of the fact that he, his testator or interstate, is or was a director,
officer or employee of his corporation or of any
II-6
<PAGE> 183
corporation which he served as such at the request of this corporation, shall be
indemnified by the corporation against the reasonable expenses, including
without limitation, attorney's fees and amounts paid to the corporation by him,
actually and necessarily incurred by or imposed upon him in connection with, or
resulting from the defense of such civil, criminal actions, suit or proceedings
that such officer, director or employee is liable for negligence or misconduct,
in the performance of his duties. In the case of a criminal action suit or
proceedings, a conviction (whether based on a plea of guilty or nolo contenders
or its equivalent, or after trial) shall not of itself be deemed an adjudication
that such officer, director or employee is liable for negligence or misconduct
in the performance of his duties. Any amount payable pursuant to this article
may be determined and paid, at the option of the person to be indemnified,
pursuant to procedure set forth from time to time in the by-laws or by any of
the following procedures: (a) order of the court having jurisdiction of any such
civil or criminal action, suit or proceedings, (b) resolution adopted by a
majority of a quorum of the board of directors of the corporation without
counting in such majority or quorum any interested directors, (c) resolution
adopted by the holders of record or a majority of the outstanding shares of
capital stock of the corporation having powers, or (d) order of any court having
jurisdiction over the corporation. Such right of indemnification shall not be
exclusive of any other right of the corporation, and the other persons
above-mentioned, may have or hereafter acquire, and without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any charter provisions, by-laws, agreements, vote of
stockholders, provisions of law or otherwise as their rights under this article.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
provides in regard to the limitation of liability of directors and officers as
follows --
(b) In addition to the matters required to be set forth in the certificate
of incorporation by subsection (a) of this section, the certificate of
incorporation may also contain any or all of the following matters:
* * * *
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director, (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of this title, or (iv) for any
transaction from which the director derived an improper personal benefit. No
such provision shall eliminate or limit the liability of a director for any act
or omission occurring prior to the date when such provision becomes effective.
All references to this Paragraph to a director shall also be deemed to refer (x)
to a member of the governing body of a corporation which is not authorized to
issue capital stock, and (y) to such other person or persons, if any, who,
pursuant to a provision of the certificate of incorporation in accordance with
subsection (a) of sec.141 of this title, exercise or perform any of the powers
or duties otherwise conferred or imposed upon the board of directors by this
title.
Article FIFTH of Bucyrus' Certificate of Incorporation, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:
(4) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involved intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article FIFTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of
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<PAGE> 184
the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
Provisions in the Certificate of Incorporation of Boonville relating to
liability of its officers and directors are similar to those of Bucyrus in all
material respects. The Certificate of Incorporation of Minserco does not contain
any similar provisions.
Section (b)(iv) of Article 2 of the Wyoming Business Corporation Act, as
amended, provides in regard to indemnification and the limitation of liability
of directors and officers as follows:
(b) The articles of incorporation may set forth:
* * * *
(iv) A provision eliminating or limiting the liability of a
director to the corporation or its shareholders for money damages for
any action taken, or any failure to take any action, as a director,
except liability for: (A) The amount of financial benefit received by a
director to which he is not entitled; (B) An intentional infliction of
harm on the corporation or shareholders; (C) A violation of W.S.
17-16-833; or (D) An intentional violation of criminal law; and
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The Exhibit Index attached hereto following the Signature Pages is
incorporated herein by reference.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrants' annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities and Exchange Act of 1934)that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and persons controlling the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-8
<PAGE> 185
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, BUCYRUS
INTERNATIONAL, INC. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION
STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF SOUTH MILWAUKEE, STATE OF WISCONSIN, ON THIS
11TH DAY OF NOVEMBER, 1997.
By: /s/ WILLARD R. HILDEBRAND
--------------------------------------
Name: Willard R. Hildebrand
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below hereby constitutes and appoints Daniel J. Smoke or Craig
R. Mackus, or either of them, as his or her attorney in fact, to sign and to
file any amendments, including post effective amendments, to this Registration
Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER
/s/ WILLARD R. HILDEBRAND President and Chief Executive November 10, 1997
- --------------------------------------------- Officer
Willard R. Hildebrand
PRINCIPAL FINANCIAL OFFICER
/s/ DANIEL J. SMOKE Vice President and Chief November 7, 1997
- --------------------------------------------- Financial Officer
Daniel J. Smoke
PRINCIPAL ACCOUNTING OFFICER
/s/ CRAIG R. MACKUS Secretary and Controller November 7, 1997
- ---------------------------------------------
Craig R. Mackus
BOARD OF DIRECTORS OF BUCYRUS
INTERNATIONAL, INC.
/s/ W. RICHARD BINGHAM Director November 10, 1997
- ---------------------------------------------
W. Richard Bingham
/s/ WILLARD R. HILDEBRAND Director November 10, 1997
- ---------------------------------------------
Willard R. Hildebrand
/s/ KIM A. MARVIN Director November 11, 1997
- ---------------------------------------------
Kim A. Marvin
/s/ ROBERT L. PURDUM Chairman of the Board, Director November 12, 1997
- ---------------------------------------------
Robert L. Purdum
/s/ THEODORE C. ROGERS Director November 7, 1997
- ---------------------------------------------
Theodore C. Rogers
/s/ LAWRENCE W. WARD, JR. Director November 11, 1997
- ---------------------------------------------
Lawrence W. Ward, Jr.
</TABLE>
II-9
<PAGE> 186
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, BOONVILLE
MINING SERVICES, INC. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION
STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF SOUTH MILWAUKEE, STATE OF WISCONSIN, ON THIS 7TH
DAY OF NOVEMBER, 1997.
By: /s/ TIMOTHY W. SULLIVAN
--------------------------------------
Name: Timothy W. Sullivan
Title: Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below hereby constitutes and appoints Daniel J. Smoke or Craig
R. Mackus, or either of them, as his or her attorney in fact, to sign and to
file any amendments, including post effective amendments, to this Registration
Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER
/s/ TIMOTHY W. SULLIVAN Chief Executive Officer and November 7, 1997
- --------------------------------------------- President
Timothy W. Sullivan
PRINCIPAL FINANCIAL OFFICER
/s/ CRAIG R. MACKUS Vice President - Finance, November 7, 1997
- --------------------------------------------- Treasurer and Assistant Secretary
Craig R. Mackus
PRINCIPAL ACCOUNTING OFFICER
/s/ TRACY E. GORE Controller November 7, 1997
- ---------------------------------------------
Tracy E. Gore
BOARD OF DIRECTORS OF BOONVILLE
MINING SERVICES, INC.
/s/ TIMOTHY W. SULLIVAN Chairman of the Board and November 7, 1997
- --------------------------------------------- Director
Timothy W. Sullivan
/s/ CRAIG R. MACKUS Director November 7, 1997
- ---------------------------------------------
Craig R. Mackus
/s/ RONALD H. BEHLENDORF Director November 7, 1997
- ---------------------------------------------
Ronald H. Behlendorf
</TABLE>
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<PAGE> 187
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, MINSERCO, INC.
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF SOUTH MILWAUKEE, STATE OF WISCONSIN, ON THIS 7TH DAY OF NOVEMBER, 1997.
By: /s/ TIMOTHY W. SULLIVAN
--------------------------------------
Name: Timothy W. Sullivan
Title: Chairman of the Board, Chief
Executive Officer, President and
General Manager
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below hereby constitutes and appoints Daniel J. Smoke or Craig
R. Mackus, or either of them, as his or her attorney in fact, to sign and to
file any amendments, including post effective amendments, to this Registration
Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER
/s/ TIMOTHY W. SULLIVAN Chief Executive Officer, November 7, 1997
- --------------------------------------------- President and General Manager
Timothy W. Sullivan
PRINCIPAL FINANCIAL OFFICER
/s/ CRAIG R. MACKUS Vice President - Finance, November 7, 1997
- --------------------------------------------- Treasurer, Assistant Secretary
Craig R. Mackus and Assistant Treasurer
PRINCIPAL ACCOUNTING OFFICER
/s/ RICHARD A. SIEBOLD Controller November 7, 1997
- ---------------------------------------------
Richard A. Siebold
BOARD OF DIRECTORS OF MINSERCO, INC.
/s/ TIMOTHY W. SULLIVAN Chairman of the Board and November 7, 1997
- --------------------------------------------- Director
Timothy W. Sullivan
/s/ CRAIG R. MACKUS Director November 7, 1997
- ---------------------------------------------
Craig R. Mackus
</TABLE>
II-11
<PAGE> 188
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, VON'S WELDING,
INC. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM S-4
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF SOUTH MILWAUKEE, STATE OF WISCONSIN, ON THIS 7TH DAY OF NOVEMBER, 1997.
By: /s/ TIMOTHY W. SULLIVAN
--------------------------------------
Name: Timothy W. Sullivan
Title: Chairman of the Board, Chief
Executive Officer, President and
General Manager
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below hereby constitutes and appoints Daniel J. Smoke or Craig
R. Mackus, or either of them, as his or her attorney in fact, to sign and to
file any amendments, including post effective amendments, to this Registration
Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER
/s/ TIMOTHY W. SULLIVAN Chief Executive Officer, November 7, 1997
- --------------------------------------------- President and General Manager
Timothy W. Sullivan
PRINCIPAL FINANCIAL OFFICER
/s/ CRAIG R. MACKUS Vice President - Finance, November 7, 1997
- --------------------------------------------- Treasurer, Assistant Secretary
Craig R. Mackus and Assistant Treasurer
PRINCIPAL ACCOUNTING OFFICER
/s/ RICHARD A. SIEBOLD Controller November 7, 1997
- ---------------------------------------------
Richard A. Siebold
BOARD OF DIRECTORS OF VON'S
WELDING, INC.
/s/ TIMOTHY W. SULLIVAN Chairman of the Board and November 7, 1997
- --------------------------------------------- Director
Timothy W. Sullivan
/s/ CRAIG R. MACKUS Director November 7, 1997
- ---------------------------------------------
Craig R. Mackus
</TABLE>
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<PAGE> 189
EXHIBIT INDEX
TO REGISTRATION STATEMENT ON FORM S-4
FOR
BUCYRUS INTERNATIONAL, INC.
BOONVILLE MINING SERVICES, INC.
MINSERCO, INC.
VON'S WELDING, INC.
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE FROM HEREWITH
------- ----------- ---------------------- --------
<C> <S> <C> <C>
2.1 Agreement and Plan of Merger dated August 21, Exhibit 1 to Bucyrus
1997, between Bucyrus International, Inc., International, Inc.'s
American Industrial Partners Acquisition Company, Tender Offer
LLC and Bucyrus Acquisition Corp. Solicitation/
Recommendation Statement
on Schedule 14D-9 filed
with the Commission on
August 26, 1997
2.2 Certificate of Merger dated September 26, 1997, Exhibit 2.2 to Bucyrus
issued by the Secretary of State of the State of International, Inc.'s
Delaware Current Report on Form
8-K filed with the
Commission on October 10,
1997
2.3 Asset Purchase Agreement dated July 21, 1997, by x
and among The Marion Power Shovel Company, Marion
Power Shovel Pty Ltd, Intool International B.V.,
Global-GIX Canada Inc., and Global Industrial
Technologies, Inc. (Sellers) and Bucyrus
International, Inc., Bucyrus (Australia)
Proprietary Ltd., Bucyrus (Africa) (Proprietary)
Limited, and Bucyrus Canada Limited (Buyers)
[OMITTED PROVISIONS SUBJECT TO CONFIDENTIAL
TREATMENT BY ORDER OF THE SECURITIES AND EXCHANGE
COMMISSION.]
2.4 Second Amended Joint Plan of Reorganization of Exhibit 2.1 to Bucyrus
B-E Holdings, Inc. And Bucyrus-Erie Company under International, Inc.'s
Chapter 11 of the Bankruptcy Code, as modified on Current Report on Form
December 1, 1994, including Exhibits 8-K filed with the
Commission and dated
December 1, 1994
2.5 Order dated December 1, 1994 of the U.S. Exhibit 2.2 to Bucyrus
Bankruptcy Court, Eastern District of Wisconsin International, Inc.'s
confirming the Second Amended Joint Plan of Current Report on Form
Reorganization of B-E Holdings, Inc. And Bucyrus- 8-K filed with the
Erie Company under Chapter 11 of the Bankruptcy Commission and dated
Code, as modified on December 1, 1994, including December 1, 1994
Exhibits
</TABLE>
EI-1
<PAGE> 190
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE FROM HEREWITH
------- ----------- ---------------------- --------
<C> <S> <C> <C>
3.1 Restated Certificate of Incorporation of Bucyrus Exhibit 3.1 to Bucyrus
International, Inc. International, Inc.'s
Current Report on Form
8-K filed with the
Commission on October 10,
1997
3.2 By-laws of Bucyrus International, Inc. Exhibit 3.2 to Bucyrus
International, Inc.'s
Current Report on Form
8-K filed with the
Commission on October 10,
1997
3.3 Certificate of Incorporation of Boonville Mining x *
Services, Inc.
3.4 By-laws of Boonville Mining Services, Inc. x *
3.5 Certificate of Incorporation of Minserco, Inc. x *
3.6 By-laws of Minserco, Inc. x *
3.7 Articles of Incorporation of Von's Welding, Inc. x *
3.8 By-laws of Von's Welding, Inc. x *
3.9 Amendment to By-laws of Bucyrus International, x
Inc. effective November 5, 1997
4.1 Indenture of Trust dated as of September 24, 1997 x *
among Bucyrus International, Inc., Boonville
Mining Services, Inc., Minserco, Inc., and Von's
Welding, Inc. and Harris Trust and Savings Bank,
Trustee
4.2 Form of Guarantee of Boonville Mining Services, x *
Inc., Minserco, Inc. and Von's Welding, Inc.
dated as of September 24, 1997 in favor of Harris
Trust and Savings Bank as Trustee under the
Indenture
[INCLUDED AS EXHIBIT E TO EXHIBIT 4.1 ABOVE]
4.3 Form of Bucyrus International, Inc.'s 9 3/4% x *
Senior Note due 2007 to be issued in the Exchange
Offer subject to this Registration Statement of
Form S-4
[INCLUDED AS EXHIBIT B TO EXHIBIT 4.1 ABOVE]
4.4 Form of Bucyrus International, Inc.'s 9 3/4% x *
Senior Note due 2007 issued as of September 24,
1997
[INCLUDED AS EXHIBIT A TO EXHIBIT 4.1 ABOVE]
5.1 Opinion of Whyte Hirschboeck Dudek S.C. as to x
legality of the 9 3/4% Senior Notes to be issued
in the Exchange Offer subject to this
Registration Statement on Form S-4
</TABLE>
EI-2
<PAGE> 191
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE FROM HEREWITH
------- ----------- ---------------------- --------
<C> <S> <C> <C>
10.1 Credit Agreement dated September 24, 1997 between Exhibit 3.2 to Bucyrus
Bank One, Wisconsin and Bucyrus International, International, Inc.'s
Inc. Current Report on Form
8-K filed with the
Commission on October 10,
1997
10.2 Management Services Agreement by and among x *
Bucyrus International, Inc., Boonville Mining
Services, Inc., Minserco, Inc. and Von's Welding,
Inc. and American Industrial Partners
10.3 Registration Agreement dated September 24, 1997 x *
by and among Bucyrus International, Inc.,
Boonville Mining Services, Inc., Minserco, Inc.
and Von's Welding, Inc. and Salomon Brothers,
Inc., Jefferies & Company, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation
10.4 Joint Prosecution Agreement dated as of August Exhibit 9 to Bucyrus
21, 1997 by and among Bucyrus International, Inc. International, Inc.'s
and Jackson National Life Insurance Company Tender Offer
Solicitation/
Recommendation Statement
on Schedule 14D-9 filed
with the Commission on
August 26, 1997
10.5 Employment Agreement between Bucyrus Exhibit 10.27 to Bucyrus
International, Inc. and W.R. Hildebrand dated as International, Inc.'s
of March 11, 1996 Annual Report on Form
10-K for the year ended
December 31, 1995
10.6 Employment Agreement between Bucyrus Exhibit 10.38 to Bucyrus
International, Inc. and D.J. Smoke dated as of International, Inc.'s
November 7, 1996 Annual Report on Form
10-K for the year ended
December 31, 1996
10.7 Employment Agreement between Bucyrus Exhibit 10.17 to Bucyrus
International, Inc. and C.R. Mackus dated as of International, Inc.'s
May 21, 1997 Quarterly Report on Form
10Q for the quarter ended
June 30, 1997
10.8 Employment Agreement between Bucyrus Exhibit 10.18 to Bucyrus
International, Inc. and M.G. Onsager dated as of International, Inc.'s
May 21, 1997 Quarterly Report on Form
10Q for the quarter ended
June 30, 1997
</TABLE>
EI-3
<PAGE> 192
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE FROM HEREWITH
------- ----------- ---------------------- --------
<C> <S> <C> <C>
10.9 Employment Agreement between Bucyrus Exhibit 10.19 to Bucyrus
International, Inc. and T.B. Phillips dated as of International, Inc.'s
May 21, 1997 Quarterly Report on Form
10Q for the quarter ended
June 30, 1997
10.10 Employment Agreement between Bucyrus Exhibit 10.20 to Bucyrus
International, Inc. and T.W. Sullivan dated as of International, Inc.'s
May 21, 1997 Quarterly Report on Form
10Q for the quarter ended
June 30, 1997
10.11 Annual Management Incentive Plan for 1996, Exhibit 10.41 to Bucyrus
adopted by Board of Directors February 29, 1996 International, Inc.'s
Annual Report on Form
10-K for the year ended
December 31, 1996
12.1 Statement Regarding Computation of Ratio of x
Earnings to Fixed Charges
21.1 Subsidiaries of Bucyrus International, Inc. x *
23.1 Consent of Deloitte & Touche LLP x *
23.2 Consent of Arthur Andersen LLP x *
23.3 Consent of Whyte Hirschboeck Dudek S.C. x
[INCLUDED IN EXHIBIT 5.1 ABOVE]
24.1 Powers of Attorney x
[INCLUDED AS PART OF THE SIGNATURE PAGES TO THIS
REGISTRATION STATEMENT ON FORM S-4]
25.1 Statement of Eligibility of Harris Trust and x *
Savings Bank as Trustee under the Indenture on
Form T-1 under the Trust Indenture Act of 1939,
as amended
27.1 Financial Data Schedule x *
99.1 Letter of Transmittal x
99.2 Instructions to Holders of Bucyrus International, x
Inc.'s Outstanding 9 3/4% Senior Notes Due 2007
99.3 Notice of Guaranteed Delivery x
</TABLE>
- -------------------------
* Exhibit previously filed as part of this Registration Statement.
EI-4
<PAGE> 1
EXHIBIT 2.3
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> 2
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> 3
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> 4
"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> 5
"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 directors of Sellers, Parent or Buyers, as the case may
be; and (ii) any fact or matter which
- 4 -
<PAGE> 6
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.
"Net Book Value" shall have the meaning set forth in Exhibit A hereto.
- 5 -
<PAGE> 7
"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.
"Planetary Swing Drive System" shall consist of each of the following
parts and components: (i) planetary gearcase drive system, including, but not
limited to: planetary gearcase, gearcase oil cooler systems, pinion carriers,
output pinion shafts and bearings, motors, and motor couplings; (ii) revolving
frame (with respect to fatigue cracking induced by swing unit forces, vibration
levels and unique access/mounting requirements); (iii) swing pinion carrier
support bracing; (iv) swing racks, rack support structure and attachment
system; and (v) solely with respect to the Walking Dragline (as defined in
Section 7.06 herein), Model 8750, sold to Fording Coal Company and located in
the Genesee mine, swing generators.
"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> 8
"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.
"Warranty Expense" shall mean: (a) with respect to parts manufactured
by Buyers or Affiliates of Buyers now or in the future, the direct cost of
labor, plus the cost of material, plus fifty (50%) percent of Buyers'
Manufacturing Burden, (b) with respect to items or services other than parts
manufactured by Buyers or Affiliates of Buyers now or in the future, the actual
cost incurred by such Buyer or Affiliate of Buyer to acquire such items or
services, or (c) with respect to parts manufactured or items or services
provided by a third party which is not an Affiliate of Buyers now or in the
future, the actual cost incurred by Buyer with respect thereto.
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.
- 7 -
<PAGE> 9
(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.
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
- 8 -
<PAGE> 10
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;
(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
- 9 -
<PAGE> 11
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.
(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 System 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
- 10 -
<PAGE> 12
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 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 dispute between the parties regarding the preparation of the Closing
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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 hereto (the "Bills of Sale"), (ii)
assignments with respect to any real or personal property leases
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<PAGE> 14
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 and perform the terms and provisions hereof and
thereof, certified by the corporate secretary of such
party;
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(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 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.
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<PAGE> 16
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.
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
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<PAGE> 17
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 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
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<PAGE> 18
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 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
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<PAGE> 19
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 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
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<PAGE> 20
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 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
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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 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
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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 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.
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(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.
(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
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<PAGE> 24
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;
(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.
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<PAGE> 25
(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 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
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<PAGE> 26
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:
(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;
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<PAGE> 27
(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 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
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<PAGE> 28
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 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,
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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):
(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;
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<PAGE> 30
(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,
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.
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<PAGE> 31
(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' 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
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<PAGE> 32
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 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
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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).
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
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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).
(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. [OMITTED
PROVISIONS SUBJECT TO CONFIDENTIAL TREATMENT BY ORDER OF THE SECURITIES
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) [OMITTED PROVISIONS SUBJECT TO CONFIDENTIAL TREATMENT BY ORDER OF
THE SECURITIES 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.
SECTION 7.06 PLANETARY SWING-DRIVE SYSTEM.
(a) [OMITTED PROVISIONS SUBJECT TO CONFIDENTIAL TREATMENT BY ORDER
OF THE SECURITIES AND EXCHANGE COMMISSION]
(b) [OMITTED PROVISIONS SUBJECT TO CONFIDENTIAL TREATMENT BY ORDER
OF THE SECURITIES AND EXCHANGE COMMISSION]
(c) SERVICES AND REPAIRS. Buyers shall not commence work, advise or
perform services for a customer with respect to an Issue unless and until
authorized in writing by a Seller or Parent, and Buyers agree to act
exclusively for Sellers and Parent with respect to such Issue. 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 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,
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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
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
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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.
(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.
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(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.
(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.
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(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:
(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
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(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 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
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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 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
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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.
(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
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<PAGE> 42
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 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
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<PAGE> 43
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.
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 Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate (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
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<PAGE> 44
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 [OMITTED PROVISIONS SUBJECT TO
CONFIDENTIAL TREATMENT BY ORDER OF THE SECURITIES AND EXCHANGE COMMISSION]
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
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<PAGE> 45
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 illegal, 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.
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
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<PAGE> 46
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
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
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<PAGE> 47
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 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,
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<PAGE> 48
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.
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
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<PAGE> 49
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]
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<PAGE> 50
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
- 49 -
<PAGE> 51
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
- 50 -
<PAGE> 52
EXHIBIT LIST
Exhibit A- Net Book Values on Adjusted Interim Balance Sheet
Exhibit B- Form of Bill of Sale
Exhibit C- Form of Lease Assignment
Exhibit D- Form of Patent and Trademark Assignment
Exhibit E- Form of Legal Opinion - Legal Opinion of General Counsel
Exhibit F- Form of Legal Opinion - Whyte Hirschboeck Dudek S.C.
Exhibit G- Form of Lease Agreement
Exhibit H- Collective Bargaining Agreement Addendum
Exhibit I- List of Officers and Directors of Sellers and Parent
Exhibit J- Draft of Management Representation Letter to Arthur Andersen
<PAGE> 53
BUCYRUS INTERNATIONAL, INC. - THE MARION POWER SHOVEL COMPANY
ASSET PURCHASE AGREEMENT
DISCLOSURE SCHEDULES TO THE ASSET PURCHASE AGREEMENT
1. Schedule 2.02(k) - Excluded Contracts
2. Schedule 2.02(q) - Claims Not Transferred to Buyers
3. Schedule 2.03 - Retained Assets
4. Schedule 2.05(a) - Liabilities Assumed by Bucyrus USA
5. Schedule 2.05(b) - Liabilities Assumed by Bucyrus Australia
6. Schedule 2.05(c) - Liabilities Assumed by Bucyrus South Africa
7. Schedule 2.05(d) - Liabilities Assumed by Bucyrus Canada
8. Schedule 2.05(e) - Assignment and Assumption Agreements
9. Schedule 3.07 - Allocation of Purchase Price
10. Schedule 4.01(c) - No Violation
11. Schedule 4.01(e)(ii) - Financial Statements Interim Balance Sheet
12. Schedule 4.01(f)(i) - Title to Property and Related Matters
13. Schedule 4.01(f)(ii) - Real Property Leases
14. Schedule 4.01(f)(iii) - Material Obsolete Tangible Personal Property
15. Schedule 4.01(f)(iv) - Personal Property Leases
16. Schedule 4.01(h) - Taxes
17. Schedule 4.01(i) - Contracts and Commitments
18. Schedule 4.01(j) - Intangible Assets
19. Schedule 4.01(k) - Litigation
<PAGE> 54
20. Schedule 4.01(l) - Permits and Licenses
21. Schedule 4.01(n) - No Material Adverse Change
22. Schedule 4.01(o) - Product Warranty and Product Liability
23. Schedule 4.01(p) - Accounts Receivable
24. Schedule 4.01(q) - Inventory
25. Schedule 4.01(r) - Transactions with Related Parties
26. Schedule 7.07 - Parent's Instruments
EXHIBITS TO THE ASSET PURCHASE AGREEMENT
1. Exhibit A - Net Book Values on Adjusted Interim Balance Sheet
2. Exhibit B - Form of Bill of Sale
3. Exhibit C - Form of Lease Assignment
4. Exhibit D - Form of Patent and Trademark Assignment
5. Exhibit E - Form of Legal Opinion - Sellers' Counsel
6. Exhibit F - Form of Legal Opinion - Buyers' Counsel
7. Exhibit G - Form of Lease Agreement
8. Exhibit H - Collective Bargaining Agreement Addendum
9. Exhibit I - List of Officers and Directors of Sellers and Parent
10. Exhibit J - Draft of Management Representation Letter to Arthur Andersen
Registrant hereby undertakes to furnish to the Commission copies of any of
the above-listed Schedules and Exhibits upon request.
<PAGE> 1
Exhibit 3.9
Amendment to the By-laws of Bucyrus
International, Inc. effective November 5, 1997
THE FOLLOWING RESOLUTION AMENDING THE BY-LAWS OF BUCYRUS INTERNATIONAL,
INC. WAS ADOPTED BY THE BOARD OF DIRECTORS, AND BECAME EFFECTIVE, ON
NOVEMBER 5, 1997
BE IT RESOLVED, that, pursuant to the authority granted to this Board
of Directors by Article IX, Section 1 of the Bylaws of the Company, Article
III, Section 1 of the Bylaws of the Company is hereby amended by striking the
first sentence thereof (which reads: "The Board of Directors shall consist of
the number of directors set forth or provided for in the Certificate of
Incorporation.") and substituting in its place the following sentence: "The
Board of Directors shall consist of six (6) directors or such other greater or
lesser number as shall be fixed from time to time by further resolution of
this Board of Directors."
<PAGE> 1
EXHIBIT 5.1
OPINION REGARDING LEGALITY
November 11, 1997
Bucyrus International, Inc.
1100 Milwaukee Avenue
P.O. Box 500
South Milwaukee, Wisconsin 53172
Jefferies & Company, Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
c/o Salomon Brothers Inc
Seven World Trade Center
New York, NY 10048
Re: Form S-4 Registration Statement for
Bucyrus International, Inc.
$150,000,000 9 3/4% Senior Notes Due 2007
Gentlemen:
We have acted as counsel to Bucyrus International, Inc., (the
"Company") and to Boonville Mining Services, Inc., Minserco, Inc., and Von's
Welding, Inc. (collectively, the "Guarantors") (the Company and the Guarantors
being collectively referred to herein as the "Registrants") in connection with
the preparation and filing of the above-referenced Registration Statement and
the proposed issuance by the Company of up to $150,000,000 of its 9 3/4% Senior
Notes Due 2007 (the "Exchange Notes") in an exchange offer for the Company's
existing 9 3/4% Senior Notes Due 2007 issued on September 24, 1997 (the
"Existing Notes"), and the proposed issuance by the Guarantors of their joint
and several guarantee of the Exchange Notes (the "Guarantee") (the Exchange
Notes and the Guarantee are collectively referred to as the "Securities"), to
which Securities the Registration Statement relates.
We have also examined the Articles of Incorporation or Certificates of
Incorporation and By-Laws of each of the Registrants, certain corporate
resolutions of the Registrants, and such other documents, records, certificates
and agreements, and have made such legal and factual investigations, as we have
deemed necessary to enable us to render the opinions expressed herein. As to
the various matters of a factual nature forming the basis for our opinions
herein, we have relied, to the extent we deemed appropriate, upon various
representations made and information furnished to us by various representatives
of the Registrants. We have assumed the authenticity of all documents and
instruments represented to us to be originals and the
<PAGE> 2
conformity to originals of all documents and instruments represented to us to
be copies of originals.
We are admitted to the Bar of the State of Wisconsin. In rendering
the opinions expressed herein, we have relied as to matters involving the
application of laws other than the federal laws of the United States or the
Delaware General Corporation Law, upon the opinions of other counsel for the
Company and have assumed, with respect to enforceability that the applicable
laws of the State of New York are substantially identical in all material
respects to the laws of the State of Wisconsin.
Based on the foregoing, it is our opinion that the Securities being
offered by the Registrants, when issued against payment of the consideration
therefor (consisting of the exchange of a like amount of Existing Notes) as
contemplated by the Registration Statement, will be legally issued, fully paid
and nonassessable, and will (i) in the case of the Exchange Notes, be the
valid, legal and binding obligations of the Company enforceable against the
Company in accordance with their terms; and (ii) in the case of the Guarantee,
be the valid, legal and binding obligation of the Guarantors enforceable
against the Company in accordance with their terms. Our opinion expressed
herein as to enforceability is subject to and limited in each case by the
effect of (1) bankruptcy, insolvency, reorganization, arrangement, moratorium,
and other laws affecting or relating to the rights of creditors generally; (2)
rules of law governing specific performance, injunctive relief, or other
equitable remedies and general principles of equity; (3) the discretion of the
court before which any proceeding may be brought; and (4) certain rules of law
which may render certain provisions of the documents evidencing the Securities
unenforceable in part, but the unenforceability of such provisions will not
preclude the practical realization of the principal benefits and/or security
intended to be provided thereby.
We consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and any amendments thereto (including
post-effective amendments) and to the reference to this firm and to this
opinion under the caption "LEGAL MATTERS" in the Prospectus which forms a part
of the Registration Statement.
Very truly yours,
WHYTE HIRSCHBOECK DUDEK S.C.
By: /s/ Andrew J. Guzikowski
-------------------------------
Andrew J. Guzikowski
<PAGE> 1
EXHIBIT 12.1
STATEMENT REGARDING COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
Bucyrus International, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended Six Months Ended June 30,
December 31, ----------------------------
1996 1996 1997
----------- ------- -------
<S> <C> <C> <C>
Net Earnings $ 2,878 $ 910 $ 3,423
Add:
Income taxes 1,758 1,324 2,392
Interest expense - debt 8,557 4,173 3,956
Portion of rentals
representative of
interest factor 792 396 396
Amortization of debt fees - - -
------- ------- -------
Earnings as defined $13,985 $ 6,803 $10,167
======= ======= =======
Interest expense - debt $ 8,557 $ 4,173 $ 3,956
Portion of rentals representative of
interest factor 792 396 396
Amortization of debt fees - - -
------- ------- -------
Fixed charges as defined $ 9,349 $ 4,569 $ 4,352
======= ======= =======
Ratio of Earnings to Fixed Charges 1.5X 1.5X 2.3X
======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
BUCYRUS INTERNATIONAL, INC.
OFFER TO EXCHANGE ITS
9 3/4% SENIOR NOTES DUE 2007
("Exchange Notes") that have been registered under the
Securities Act of 1933 for any and all of its outstanding
9 3/4% Senior Notes due 2007 ("Existing Notes")
Pursuant to the Prospectus dated November 12, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM., NEW YORK CITY TIME, ON DECEMBER 18,
1997 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.
TO: HARRIS TRUST AND SAVINGS BANK
Facsimile Transmission Number
--------------------------
(For Eligible Institutions Only)
(212) 701-7636
Confirm Receipt of
-------------------
Facsimile by Telephone:
---------------------------
(212) 701-7624
By Hand/Overnight Delivery:
--------------------------------
Harris Trust and Savings Bank
c/o Harris Trust Company
of New York
88 Pine Street
19th Floor
New York, NY 10005
By Registered or Certified Mail:
-----------------------------------
Harris Trust and Savings Bank
c/o Harris Trust Company
of New York
P.O. Box 1010
Wall Street Station
New York, NY 10268-1010
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OR INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
ANY BOX BELOW
------------------------
List below the Existing Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and principal
amount of Existing Notes should be listed on a separate signed schedule affixed
thereto.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF EXISTING NOTES (1) (2) (3) (4)
- ------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF EXISTING NOTES
PRINCIPAL AMOUNT TENDERED
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL OF EXISTING NOTES IN EXCHANGE FOR
REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF TENDERED, IF CERTIFICATED
(PLEASE FILL IN, IF BLANK) NUMBERS* EXISTING NOTES LESS THAN ALL** NEW NOTES***
- ------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Existing Notes. Partial
tenders of Existing Notes may be made only if (i) the principal amount
tendered is equal to $1,000 or an integral multiple thereof and (ii) the
remaining untendered portion is in a principal amount of $250,000 or any
integral multiple of $1,000 in excess thereof.
*** Unless otherwise indicated, the holder will be deemed to have tendered
Existing Notes in exchange for a beneficial interest in one or more fully
registered global certificates, which will be deposited with, or on behalf
of, The Depository Trust Company and registered in the name of Cede & Co.,
its nominee.
<PAGE> 2
The undersigned acknowledges that he, she or it has received and reviewed
the Prospectus, dated November 10, 1997 (the "Prospectus"), of Bucyrus
International, Inc., a Delaware corporation (the "Company" or "Bucyrus"), and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's offer (the "Exchange Offer") to exchange up to
$150,000,000 aggregate principal amount of its 9 3/4% Senior Notes Due 2007 (the
"Exchange Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its outstanding
9 3/4% Senior Notes Due 2007 (the "Existing Notes").
This Letter of Transmittal is to be used either if certificates for
Existing Notes are to be forwarded herewith or if delivery of Existing Notes is
to be made by book-entry transfer to an account maintained by the Exchange Agent
at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in
"The Exchange Offer -- How to Tender" and "The Exchange Offer -- Exchanging
Book-Entry Notes" in the Prospectus. Delivery of this Letter of Transmittal and
any other required documents should be made to the Exchange Agent. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Existing Notes are not immediately available or who cannot
deliver their Existing Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Existing
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer -- How to Tender." See Instruction 1.
The undersigned must complete the appropriate boxes above and below and
sign this Letter of Transmittal to indicate the action the undersigned desires
to take with respect to the Exchange Offer.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED TO THE EXCHANGE
AGENT IN EXCHANGE FOR CERTIFICATED EXCHANGE NOTES.
Unless the undersigned (i) has completed item (4) in the box entitled
"Description of Existing Notes" and (ii) has checked the box above, the
undersigned will be deemed to have tendered Existing Notes in exchange for a
beneficial interest in one or more fully registered global securities, which
will be deposited with, or on behalf of, DTC and registered in the name of Cede
& Co., its nominee. Beneficial interests in such registered global securities
will be shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Description of the Notes --
Book-Entry, Delivery and Form" as set forth in the Prospectus.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------------
[ ] The Depository Trust Company
Account Number
---------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------
<PAGE> 3
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
- ------------------------------------------------------------------------
Window Ticket Number (if any)
--------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
--------------------------------------------------
If delivered by book-entry transfer:
Account Number
-----------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO
THAT ARE DISTRIBUTED DURING THE ONE-YEAR PERIOD FOLLOWING THE EXPIRATION
DATE.
Name
-----------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------
Number of copies
-----------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Existing Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Existing Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Exchange Agent as
agent of the Company all right, title and interest in and to such Existing Notes
as are being tendered hereby, and irrevocably constitutes and appoints the
Exchange Agent as the agent and attorney in fact of the undersigned to cause the
Existing Notes to be transferred and exchanged.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Existing Notes tendered hereby and to acquire the Exchange Notes issuable upon
the exchange of such tendered Existing Notes, and that the Exchange Agent, as
agent of the Company, will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are accepted by the Exchange Agent, as agent of
the Company. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Company or the Exchange Agent to be necessary
or desirable to complete the sale, exchange, assignment and transfer of the
Existing Notes tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued in exchange for the Existing
<PAGE> 4
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or a broker-dealer tendering Existing Notes acquired directly from the
Company for its own account) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not engaged in and do not intend to engage in a distribution of
Exchange Notes and have no arrangement or understanding with any person to
participate in a distribution of Exchange Notes.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Existing Notes, it represents that the
Existing Notes to be exchanged were acquired as a result of market-making
activities or other trading activities and acknowledges that it will deliver a
Prospectus in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a Prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that, upon receipt of notice by the Company of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such broker-dealer.
The undersigned represents that (i) such holder is neither an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Company nor a
broker-dealer tendering Existing Notes acquired directly from the Company for
its account or, if such holder is an affiliate, that such holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable and (ii) the Exchange Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of such holder's
business.
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, personal
representatives, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in the instructions contained in this Letter of
Transmittal.
The undersigned understands that tenders of the Existing Notes pursuant to
any one of the procedures described under "The Exchange Offer -- How to Tender"
as set forth in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.
The undersigned understands that if its Existing Notes are accepted for
exchange, such holder will not receive accrued interest thereon on the date of
exchange. Instead, interest accruing from the most recent date on which interest
has been paid on the corresponding Existing Note, or, if no interest has been
paid, from September 24, 1997, will be payable on the Exchange Notes on the next
scheduled interest payment date.
The undersigned recognizes that unless the holder of Existing Notes (i)
completes item (4) of the Box entitled "Description of Existing Notes" above and
(ii) checks the box entitled "Check here if tendered Existing Notes are being
delivered to the Exchange Agent in exchange for certificated Exchange Notes"
above, such holder, when tendering such Existing Notes, will be deemed to have
<PAGE> 5
tendered such Existing Notes in exchange for a beneficial interest in one or
more fully registered global securities, which will be deposited with, or on
behalf of, DTC and registered in the name of Cede & Co., its nominee. Beneficial
interests in such registered global securities will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. See "Description of the Notes -- Book-Entry, Delivery and Form" in
the Prospectus.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus under "The Exchange Offer--Conditions," the Company may not be
required to accept for exchange any of the Existing Notes tendered. Existing
Notes not accepted for exchange or withdrawn will be returned to the undersigned
at the address set forth below unless otherwise indicated under "Special
Delivery Instructions" below.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF EXISTING
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
EXISTING NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE> 6
PLEASE SIGN HERE
- --------------------------------------------------------------------------------
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING INTERNAL REVENUE SERVICE FORM W-9)
X
--------------------------------------------------------------------------
X
--------------------------------------------------------------------------
Signature(s) of owner(s)
Dated:
--------------------------------------------------------------------------
Area Code and Telephone No.:
----------------------------------------------------------------------------
If a holder is tendering any Existing Notes, this Letter of
Transmittal must be signed by the registered holder(s) as the name(s)
appear(s) on the certificate(s) for the Existing Notes or by any person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title below. See
Instruction 3.
Name(s):
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(Please Type or Print)
Capacity:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
(Include Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------------------------------
Authorized Signature:
--------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
Dated:
--------------------------------------------------------------------------
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH,
THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER
OF SUCH EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED
BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURE
The Letter of Transmittal is to be used to forward, and must accompany, all
certificates representing Existing Notes tendered pursuant to the Exchange
Offer. Certificates representing the Existing Notes in proper form for transfer
(or a confirmation of book-entry transfer of such Existing Notes into the
Exchange Agent's account at DTC) as well as a properly completed and duly
executed copy of this Letter of Transmittal and all other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein on or before the Expiration Date. Existing Notes
tendered hereby must be in denominations of principal amount of maturity of
$1,000 and any integral multiple thereof. Partial tenders of Existing Notes may
be made only if (i) the principal amount tendered is equal to $1,000 or an
integral multiple thereof and (ii) the remaining untendered portion is in a
principal amount of $250,000 or any integral multiple of $1,000 in excess
thereof.
The method of delivery of this Letter of Transmittal, the Existing Notes
and all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If such delivery is by mail, it is recommended
that registered mail properly insured, with return receipt requested, be used.
In all cases, sufficient time should be allowed to permit timely delivery.
If a holder desires to tender Existing Notes and such holder's Existing
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, Existing Notes (or a confirmation of book-entry transfer of
Existing Notes into the Exchange Agent's account at DTC) or other required
documents to reach the Exchange Agent on or before the Expiration Date, such
holders may nevertheless tender Existing Notes, if:
(a) such tender is made by or through an Eligible Institution (as
defined below);
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, in substantially the form provided by the Company, is received by
the Exchange Agent as provided below on or prior to the Expiration Date;
and
(c) the Existing Notes, in proper form for transfer (or confirmation
of book-entry transfer of such Existing Notes into the Exchange Agent's
account at DTC as described above), together with a properly completed and
duly executed Letter of Transmittal and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within five New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery.
2. WITHDRAWALS
Any holder who had tendered Existing Notes may withdraw the tender by
delivering written notice of withdrawal to the Exchange Agent prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at its address set forth
herein. Any such notice of withdrawal must (i) specify the name of the person
having tendered the Existing Notes to be withdrawn (the "Depositor"), (ii) (a)
if the Existing Notes have been physically delivered to the Exchange Agent,
identify the Existing Notes to be withdrawn (including the serial number and the
principal amount), or (b) if the Existing Notes have been delivered pursuant to
book-entry procedures, identify the name and number of the holder's account at
DTC to be credited with such Existing Notes and (iii) be signed by the holder in
the same manner as the original signature on the Letter of Transmittal by which
such Existing Notes were tendered or as otherwise set forth in Instruction 3
below (including any required signature guarantees), or be accompanied by
documents of transfer sufficient to have the Trustee (as defined in the
Prospectus)
<PAGE> 8
register the transfer of such Existing Notes into the name of the person
withdrawing the tender. If Existing Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Existing
Notes or otherwise comply with DTC's procedures. See "The Exchange Offer --
Withdrawal Rights" in the Prospectus.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the registered holder of the
Existing Notes tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Existing Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any Existing Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should indicate when signing, and unless waived by the
Company, proper evidence satisfactory to the Company of their authority so to
act must be submitted.
The signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant hereto are tendered (i) by a registered holder of the Existing
Notes or (ii) for the account of an Eligible Institution. In the event that the
signatures in this Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively,
"Eligible Institutions"). If Existing Notes are registered in the name of a
person other than the signer of this Letter of Transmittal, the Existing Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by, the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. BACKUP FEDERAL INCOME TAX WITHHOLDING AND INTERNAL REVENUE SERVICE FORM W-9
Under the federal income tax laws, payments that may be made by the Company
on account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Internal Revenue
Service Form W-9 (the "IRS Form W-9") included with this Letter of Transmittal
and either (a) provide the correct taxpayer identification number ("TIN") and
certify, under penalties of perjury, that the TIN provided is correct and that
(i) the holder has not been notified by the Internal Revenue Service (the "IRS")
that the holder is subject to backup withholding as a result of failure to
report all interest or dividends or (ii) the IRS has notified the holder that
the holder is no longer subject to backup withholding; or (b) provide an
adequate basis for exemption. If the tendering holder has not been issued a TIN
and has applied for one, or intends to apply for one in the near future, such
holder should write "Applied For" in the space provided for the TIN in Part 1 of
the IRS Form W-9 and sign and date the IRS Form W-9. If "Applied For" is written
in Part 1, the Company (or the Paying Agent under the Indenture governing the
Exchange Notes) shall retain 31% of payments made to the tendering holder during
the sixty (60) day period following the date of the IRS Form W-9. If the holder
furnishes the Exchange Agent or the Company with its TIN within sixty (60) days
after the date of the IRS Form W-9, the Company (or the Paying Agent) shall
remit
<PAGE> 9
such amounts retained during the sixty (60) day period to the holder and no
further amounts shall be retained or withheld from payments made to the holder
thereafter. If, however, the holder has not provided the Exchange Agent or the
Company with its TIN within such sixty (60) day period, the Company (or the
Paying Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a holder is an individual, the taxpayer
identification number is the Social Security number of such individual. If the
Exchange Agent or the Company is not provided with the correct TIN, the holder
may be subject to a $50 penalty imposed by the IRS. Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, such holder must submit an IRS
Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. An IRS Form W-8 can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the IRS Form W-9 (including how to obtain a TIN if you do not have
one and how to complete the IRS Form W-9 if Existing Notes are registered in
more than one name), consult the enclosed instructions to the IRS Form W-9.
Failure to complete the IRS Form W-9 will not, by itself, cause Existing
Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Exchange Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
5. TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the transfer
of Existing Notes to it or its order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Existing Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Existing Notes tendered hereby, or if tendered
Existing Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Existing Notes to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes specified in this Letter
of Transmittal.
6. WAIVER OF CONDITIONS
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Existing Notes, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
their Existing Notes for exchange.
Neither the Company nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
<PAGE> 10
8. INADEQUATE SPACE
If the space provided herein is inadequate, the aggregate principal amount
of Existing Notes being tendered and the certificate number or numbers (if
available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
9. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES
Any holder whose Existing Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number indicated
above.
<PAGE> 11
REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER AND CERTIFICATION
Form W-9 GIVE FORM TO THE
(Rev. December 1996) REQUESTER. DO NOT
Department of the Treasury SEND TO THE IRS.
Internal Revenue Service
Please print or type
Name (If a joint account or you changed your name, see Specific Instructions on
page 2.)
________________________________________________________________________________
Business name, if different from above. (See Specific Instructions on page 2.)
________________________________________________________________________________
<TABLE>
<S><C>
Check appropriate box: [ ] Individual/Sole proprietor [ ] Corporation [ ] Partnership [ ] Other________________
Address (number, street, and apt. or suite no.) Requestor's name and address (optional)
______________________________________________________
City, state, and ZIP Code
_________________________________________________________________________________________________________________________________
Part I TAXPAYER IDENTIFICATION NUMBER (TIN) List account number(s) here (optional)
Enter your TIN in the appropriate box. For
individuals, this is your social security number Social security number
(SSN). However, if you are a resident alien OR a ______________________
sole proprietor, see the instructions on page 2. __________________________________________
For other entities, it is your employer PART II FOR PAYEES EXEMPT FROM BACKUP
identification number (EIN). If you do not have a OR WITHHOLDING (See the instructions
number, see How To Get a TIN on page 2. Employer identification number on page 2.)
NOTE: If the account is in more than one name, ______________________ __________________________________________
see the chart on page 2 for guidelines on whose
number to enter.
</TABLE>
Part III CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. --You must cross out Item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest and dividends on your tax return. For
real estate transactions, Item 2 does not apply. For mortgage interest paid,
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally,
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN. (See the instructions on
page 2.)
________________________________________________________________________________
SIGN
HERE SIGNATURE - DATE -
________________________________________________________________________________
PURPOSE OF FORM.--A person who is required to file an information return with
the IRS must get your correct taxpayer identification number (TIN) to report
for example, income paid to you, real estate transactions, mortgage interest
you paid, acquisition or abandonment of secured property, cancellation of
debt, or contributions you made to an IRA.
Use Form W-9 to give your correct TIN to the person requesting it (the
requester) and, when applicable, to:
1. Certify the TIN you are giving is correct (or you are waiting for a
number to be issued),
2. Certify you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are an exempt payee.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions.
This is called "backup withholding." Payments that may be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators.
Real estate transactions are not subject to backup withholding.
If you give the requester your correct TIN, make the proper
certifications, and report all your taxable interest and dividends on your tax
return, payments you receive will not be subject to backup withholding.
Payments you receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because
you did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts
opened after 1983 only), or
5. You do not certify your TIN when required. See the Part III
Instructions on page 2 for details.
Certain payees and payments are exempt from backup withholding. See the
Part II Instructions and the separate Instructions for the Requester of Form
W-9.
PENALTIES
FAILURE TO FURNISH TIN.--If you fail to furnish your correct TIN to a requester,
you are subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a
false statement with no reasonable basis that results in no backup withholding,
you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS.--If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
<PAGE> 12
SPECIFIC INSTRUCTIONS Page 2
NAME.-If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for
instance, due to marriage without informing the Social Security Administration
of the name change, enter your first name, the last name shown on your social
security card, and your new last name.
If the account is in joint names, list first and then circle the name
of the person or entity whose number you enter in Part I of the form.
Sole Proprietor.-You must enter your individual name as shown on your
social security card. You may enter your business, trade, or "doing business
as" name on the business name line.
Other Entities.-Enter the business name as shown on required Federal tax
documents. This name should match the name shown on the charter or other legal
document creating the entity. You may enter any business, trade, or "doing
business as" name on the business name line.
PART I-TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a resident alien
and you do not have and are not eligible to get an SSN, your TIN is your IRS
individual taxpayer identification number (ITIN). Enter it in the social
security number box. If you do not have an ITIN, see How To Get a TIN below.
If you are a sole proprietor and you have EIN, you may enter either
your SSN or EIN. However, using your EIN may result in unnecessary notices to
the requester.
NOTE: See the chart on this page for further clarification of name and TIN
combinations.
HOW TO GET A TIN.-If you do not have a TIN, apply for one immediately. To apply
for a SSN, get Form SS-5 from your local Social Security Administration office.
Get Form W-7 to apply for an ITIN or Form SS-4 to apply for an EIN. You can
get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676).
If you do not have a TIN, write "Applied For" in the space for the TIN,
sign and date the form, and give it to the requester. For interest and
dividend payments, and certain payments made with respect to readily tradable
instruments, you will generally have 60 days to get a TIN and give it to the
requester. Other payments are subject to backup withholding.
NOTE: Writing "Applied For" means that you have already applied for a TIN OR
that you intend to apply for one soon.
PART II-FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are not exempt from backup
withholding. Corporations are exempt from backup withholding for certain
payments, such as interest and dividends. For more information on exempt
payees, see the separate Instructions for the Requester of Form W-9.
If you are exempt from backup withholding, you should still complete
this form to avoid possible erroneous backup withholding. Enter your correct
TIN in Part I, write "Exempt" in Part II, and sign and date the form.
If you are a nonresident alien or a foreign entity not subject to
backup withholding, give the requester a completed Form W-8, Certificate of
Foreign Status.
PART III-CERTIFICATION
For a joint account, only the person whose TIN is shown in Part I should sign
(when required).
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984
AND BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct
TIN, but you do not have to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED
AFTER 1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign
the certification or backup withholding will apply. If you are subject to
backup withholding and you are merely providing your correct TIN to the
requester, you must cross out Item 2 in the certification before signing the
form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out Item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not
have to sign the certification unless you have been notified that you have
previously given an incorrect TIN. "Other payments" include payments made in
the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services
(including payments to corporations), payments to a nonemployee for services
(including attorney and accounting fees), and payments to certain fishing boat
crew members.
5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF
SECURED PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give
your correct TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 of the Internal Revenue Code requires you to give your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. The IRS may also
provide this information to the Department of Justice for civil and criminal
litigation and to cities, states, and the District of Columbia to carry out
their tax laws.
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
For this type of account: Give name and SSN of:
1. Individual The Individual
2. Two or more individuals The actual owner of the
(joint account) account, or, if combined
funds, the first individual
on the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual The grantor-trustee1
revocable savings
trust (grantor is
also trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid trust
under state law
5. Sole proprietorship The owner(3)
For this type of account: Give name and EIN of:
6. Sole proprietorship The owner(2)
7. A valid trust, estate, or Legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a state or local
government, school
district or prison) that
receives agricultural
program payments
(1)List first and circle the name of the person whose number you furnish.
If only one person on a joint account has an SSN, that person's number
must be furnished.
(2)Circle the minor's name and furnish the minor's SSN.
(3)You must show your individual name, but you may also enter your
business or "doing business as" name. You may use either your SSN or
EIN (if you have one).
(4)List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or
trustee unless the legal entity itself is not designated in the
account title).
NOTE: If no name is circled when more than one name is listed, the
number will be considered to be that of the first name listed.
<PAGE> 13
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
INSTRUCTIONS FOR THE REQUESTER OF
FORM W-9
(REV. DECEMBER 1996)
REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND
CERTIFICATION
Section references are to the Internal Revenue Code unless otherwise noted.
These instructions supplement the instructions on the Form W-9 for the
requester.
CHANGES TO NOTE
INDIVIDUAL TAXPAYER IDENTIFICATION NUMBER (ITIN). - FORM W-9 (or an acceptable
substitute) is used by persons required to file information returns
with the IRS to get the payee's correct TIN. For individuals, the TIN is
generally a social security number (SSN).
However, in some cases, individuals who become U.S. resident aliens for tax
purposes are not eligible to obtain an SSN. This includes certain resident
aliens who must receive information returns but who cannot obtain an SSN.
These individuals must apply for an ITIN on Form W-7, Application for IRS
Individual Taxpayer Identification Number, unless they have an application
pending for an SSN. Individuals who have an ITIN must provide it on Form W-9.
TIN APPLIED FOR (60-DAY RULE). - The instructions clarify that the 60-day
exemption from backup withholding upon presentation of an awaiting - TIN
certificate applies only to interest and dividend payments, and certain
payments made with respect to readily tradable instruments. Other payments are
subject to backup withholding.
SUBSTITUTE FORM W-9
You may develop and use your own Form W-9 (a substitute Form W-9) if its
content is substantially similar to the IRS's official Form W-9 and it
satisfies certain certification requirements.
You may incorporate a substitute Form W-9 into other business forms you
customarily use, such as account signature cards, provided the certifications
that (1) the payee's TIN is correct and (2) the payee is not subject to backup
withholding due to failure to report interest and dividend income, shown on the
official Form W-9, are clearly set forth.
YOU MAY NOT:
1. Use a substitute Form W-9 that requires the payee, by signing, to agree
to provisions unrelated to the required certifications; or
2. Imply that a payee may be subject to backup withholding unless the
payee agrees to provisions on the substitute form that are unrelated to the
required certifications.
A substitute Form W-9 that contains a separate signature line just for the
certifications satisfies the requirement that the certifications be clearly set
forth.
If a single signature line is used for the required certifications and
other provisions, the certifications must be highlighted, boxed, printed in
bold-face type, or presented in some other manner that causes the language to
stand out from all other information contained on the substitute form.
Additionally, the following statement must be presented in the same manner as in
the preceding sentence and must appear immediately above the single signature
line: "The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding."
Generally, the rules concerning the signature on the substitute Form W-9
apply to those completed after 1996. However, the effective date is extended to
July 1, 1997, if the payer:
- Must obtain the approval of a government authority for changes to the
format of its substitute Form W-9, and
- Applied for that approval by September 30, 1996, and
- Thereafter actively pursues that approval.
If you use a substitute form, the instructions do not have to be furnished
to the payee. The payee only needs to be instructed orally or in writing to
strike out the language of the certification that relates to payee
underreporting, if the payee is subject to backup withholding due to notified
payee underreporting. However, you are encouraged to provide instructions
relevant to the account, especially if the payee requests them.
TIN APPLIED FOR
If the payee returns a property completed Form W-9 with "Applied For"
written in Part I (i.e., an "awaiting TIN" certificate), the payee must give you
a TIN within 60 calendar days to avoid backup withholding. You may use one of
the following rules to backup withhold during this 60-day period on reportable
interest or dividend payments and certain payments with respect to readily
tradable instruments.
RESERVE RULE. -- If a payee withdraws more than $500 at one time during the
60-day period, you must backup withhold on any reportable payments made during
the period, unless the payee reserves 31% of all reportable payments made to
the account during the period.
ALTERNATIVE RULE (OPTION 1). -- You must backup withhold on any reportable
payments if the payee makes a withdrawal from the account after the close of 7
business days after you receive the awaiting-TIN certificate. Treat as
reportable payments all cash withdrawals in an amount up to the reportable
payments made from the day after you receive the awaiting-TIN certificate to the
day of withdrawal.
ALTERNATIVE RULE (OPTION 2). -- You must backup withhold on any reportable
payments made to the payee's account, regardless of whether the payee makes any
withdrawals. Backup withholding under this option must begin no later than 7
business days after you receive the awaiting-TIN certificate.
PAYEES EXEMPT FROM BACKUP
WITHHOLDING
You are not required to backup withhold on any payments you make if the payee
is:
1. An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 403(b)(7). If the account satisfies the
requirements of section 401(f)(2).
2. The United States or any of its agencies or instrumentalities.
3. A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
4. A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
5. An international organization or any of its agencies or
instrumentalities.
<PAGE> 14
Other payees that may be exempt from backup withholding include:
6. A corporation.
7. A foreign central bank of issue.
8. A dealer in securities or commodities required to register in the
United States, the District of Columbia, or a possession of the United States.
9. A futures commission merchant registered with the Commodity Futures
Trading Commission.
10. A real estate investment trust.
11. An entity registered at all times during the tax year under the
Investment Company Act of 1940.
12. A common trust fund operated by a bank under section 584(a).
13. A financial institution.
14. A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
15. A trust exempt from tax under section 664 or described in section
4947.
INTEREST AND DIVIDEND PAYMENTS.--All listed payees are exempt except the
payee in item (9).
BROKER TRANSACTIONS.--All payees listed in items (1) through (13) are exempt.
A person registered under the Investment Advisors Act of 1940 who regularly
acts as a broker is also exempt.
PAYMENTS SUBJECT TO REPORTING UNDER SECTIONS 6041 AND 6041A.--These payments
are generally exempt from backup withholding only if made to payees listed in
items (1) through (7). However, a corporation (except certain hospitals
described in Regulations section 1.6041-3(c)) that provides medical and health
care services, or bills and collects payments for such services, is not exempt
from backup withholding.
BARTER EXCHANGE TRANSACTIONS AND PATRONAGE DIVIDENDS.--Only payees listed in
items (1) through (5) are exempt from backup withholding on these payments.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payments that are not subject to information reporting also are not subject to
backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and their regulations.
DIVIDENDS AND PATRONAGE DIVIDENDS that generally are exempt from backup
withholding include:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
INTEREST PAYMENTS that generally are exempt from backup withholding include:
- Payments of interest on obligations issued by individuals. However, if
you pay $600 or more of interest in the course of your trade or business to a
payee, you must report the payment. Backup withholding applies to the
reportable payment if the payee has not provided a TIN or has provided an
incorrect TIN.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free convenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Other types of payments that generally are exempt from backup withholding
include:
- Wages.
- Distribution from a pension, annuity, profit-sharing or stock bonus plan,
or an IRA.
- Distributions from an owner-employee plan.
- Certain surrenders of life insurance contracts.
- Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
- Real estate transactions reportable under section 6045.
ADDITIONAL INFORMATION
For more information on backup withholding and your requirements, get Pub.
1679, A Guide to Backup Withholding, or Pub. 1281, Backup Withholding on
Missing and Incorrect TINs.
JOINT FOREIGN PAYEES
If the first payee listed on an account gives you FORM W-8, Certificate of
Foreign Status, or a similar statement signed under penalties of perjury,
backup withholding applies unless:
1. Every joint payee provides the statement regarding foreign status; or
2. Any one of the joint payees who has not established foreign status gives
you a TIN.
If any one of the joint payees who has not established foreign status gives
you a TIN, that number is the TIN that must be used for purposes of backup
withholding and information reporting.
NAMES AND TINS TO USE FOR INFORMATION REPORTING
Show the full name and address as provided on Form W-9 on the information
return filed with the IRS and on the copy furnished to the payee. If you made
payments to more than one payee or the account is in more than one name, enter
on the first name line ONLY the name of the payee whose TIN is shown on the
information return. Show the names of any other individual payees in the area
below the first name line, if desired.
SOLE PROPRIETORS.-You must show the individual's name on the first name line.
On the second name line, you may enter the business name or "doing business as
(DBA)" if provided. You may not enter only the business name. For the TIN,
you may enter either the individual's SSN or the employer identification number
(EIN) of the business. However, the IRS prefers that you show the SSN.
NOTICES FROM THE IRS
The IRS will send you a notice if the payee's name and TIN on the information
return you filed do not match the IRS's records. You may have to send a "B"
notice to the payee to solicit another TIN. See Pubs. 1679 and 1281 for copies
of the two types of "B" notices.
Page 2
<PAGE> 1
EXHIBIT 99.2
INSTRUCTION TO REGISTERED HOLDER AND/OR
PARTICIPANT OF THE DEPOSITORY TRUST COMPANY
FROM OWNER OF
BUCYRUS INTERNATIONAL, INC.'S
9 3/4% SENIOR NOTES DUE 2007 (THE "EXISTING NOTES")
To Registered Holder and/or Participant of The Depository Trust Company:
The undersigned hereby acknowledges receipt of the Prospectus dated
November 12, 1997 (the "Prospectus") of Bucyrus International, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's exchange offer
(the "Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Existing Notes held by you for the account of
the undersigned.
The aggregate face amount of the Existing Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$ __________ of the 9 3/4% Senior Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK THE APPROPRIATE BOX):
[ ] To TENDER the following Existing Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF EXISTING NOTES TO BE SO
TENDERED, IF ANY):
$ __________ of the 9 3/4% Senior Notes due 2007.
[ ] To TENDER the following Existing Notes held by you for the account of
the undersigned in exchange for certificated Exchange Notes (INSERT
PRINCIPAL AMOUNT OF EXISTING NOTES TO BE SO TENDERED, IF ANY):
$ __________ of the 9 3/4% Senior Notes due 2007.
[ ] NOT to TENDER any Existing Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Existing Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of ______________ (FILL IN
STATE), (ii) the undersigned is neither an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act"), nor a broker-dealer tendering Existing Notes acquired
directly from the Company for its own account, (iii) the undersigned is
acquiring the Exchange Notes in the undersigned's ordinary course of business,
(iv) the undersigned is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes, and has no arrangement or understanding with any
person to participate in a distribution of the Exchange Notes, and (v) the
undersigned acknowledges that any person participating in the Exchange Offer for
the purpose of distributing the Exchange Notes must comply with the registration
and prospectus delivery requirements of the Securities Act, in connection with a
secondary resale transaction of the Exchange Notes acquired by such person and
cannot rely on the interpretations of the staff of the Securities and Exchange
Commission as set forth in no-action letters issued to third parties; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other actions as may be necessary or desirable under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Existing Notes.
<PAGE> 2
PLEASE SIGN HERE
X
- --------------------------------------------------
X
- --------------------------------------------------
NAME OF BENEFICIAL OWNER(S):
NAME(S):
- ----------------------------------------
- ------------------------------------------------------
(PLEASE PRINT)
DATE:
- ---------------------------------------------
DATE:
- ---------------------------------------------
ADDRESS:
- ----------------------------------------
- ------------------------------------------------------
(INCLUDING ZIP CODE)
TELEPHONE NO.:
- -------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER:
- --------------------------------------
<PAGE> 1
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
BUCYRUS INTERNATIONAL, INC.
9 3/4% SENIOR NOTES DUE 2007
This form, or one substantially equivalent hereto, must be used by a holder
of the 9 3/4% Senior Notes Due 2007 (the "Existing Notes") of Bucyrus
International, Inc ("Bucyrus" or the "Company") who wishes to tender Existing
Notes to Harris Trust and Savings Bank, as Exchange Agent (the "Exchange Agent")
pursuant to the guaranteed delivery procedures described in "The Exchange Offer
- -- How to Tender" of the Prospectus, dated November 10, 1997 (the "Prospectus"),
relating to the offer by Bucyrus to exchange its 9 3/4% Senior Notes Due 2007
("Exchange Notes") that have been registered pursuant to the Securities Act of
1933 as amended (the "Securities Act") for Existing Notes and in Instruction 1
to the related Letter of Transmittal ("Letter of Transmittal"). Any holder who
wishes to tender Existing Notes pursuant to such guaranteed delivery procedures
must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery
prior to the Expiration Date of the Exchange Offer. Capitalized terms not
defined herein have the meanings ascribed to them in the Prospectus or the
Letter of Transmittal.
Facsimile Transmission Number
--------------------------
(For Eligible Institutions Only)
(212) 701-7636
Confirm Receipt of
-------------------
Facsimile by Telephone:
---------------------------
(212) 701-7624
By Hand/Overnight Delivery:
--------------------------------
Harris Trust and Savings Bank
c/o Harris Trust Company
of New York
88 Pine Street
19th Floor
New York, NY 10005
By Registered or Certified Mail:
-----------------------------------
Harris Trust and Savings Bank
c/o Harris Trust Company
of New York
P.O. Box 1010
Wall Street Station
New York, NY 10268-1010
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Bucyrus International, Inc., upon the
terms and subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal, receipt of which is hereby acknowledged, the principal
amount of Existing Notes specified below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 1 of the Letter of
Transmittal. The undersigned hereby tenders the Existing Notes listed below:
<TABLE>
<S> <C> <C>
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CERTIFICATE NUMBER(S) (IF
KNOWN)
OF EXISTING NOTES OR ACCOUNT PRINCIPAL AMOUNT OF EXISTING
NUMBER AT THE BOOK-ENTRY AGGREGATE PRINCIPAL NOTES TENDERED IF LESS THAN
FACILITY AMOUNT REPRESENTED ALL*
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</TABLE>
* Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Existing Notes. Partial
tenders of Existing Notes may be made only if (i) the principal amount
tendered is equal to $1,000 or an integral multiple thereof and (ii) the
remaining untendered portion is in a principal amount of $250,000 or any
integral multiple of $1,000 in excess thereof.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
<PAGE> 2
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SIGN HERE
NAME OF REGISTERED OR ACTING HOLDER:
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SIGNATURE(S):
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NAME(S) (PLEASE PRINT):
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ADDRESS:
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TELEPHONE NUMBER:
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DATE:
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GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an eligible guarantor institution which is a member of
The Securities Transfer Agents Medallion Program (STAMP), The New York Stock
Exchanges Medallion Signature Program (MSP) or The Stock Exchange Medallion
Program (SEMP), guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or a manually signed facsimile thereof), together with the
Existing Notes tendered hereby in proper form for transfer (or timely
confirmation of the book-entry transfer of such Existing Notes into the
Exchange Agent's account at the book-entry transfer facility described in the
Prospectus under the caption "The Exchange Offer -- How to Tender" and in the
Letter of Transmittal) and any other required documents, all by 5:00 p.m., New
York City time, within three (3) New York Stock Exchange, Inc. trading days
after the date of execution of this Notice of Guaranteed Delivery.
SIGN HERE
NAME OF FIRM:
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AUTHORIZED SIGNATURE:
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NAME (PLEASE PRINT):
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ADDRESS:
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TELEPHONE NUMBER:
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DATE:
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DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly
executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and risk of
the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. Instead of delivery by
mail, it is recommended that the holder use an overnight or hand delivery
service. In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedures, see
Instruction 1 of the Letter of Transmittal.
<PAGE> 3
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Existing
Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Existing Notes without alteration, enlargement, or
any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the book-entry transfer facility whose name appears on a
security position listing as the owner of Existing Notes, the signature must
correspond with the name shown on the security position listing as the owner
of the Existing Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Existing Notes listed or a participant of the
book-entry transfer facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Existing Notes or signed as the name of the
participant shown on the book-entry transfer facility's security position
listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should
so indicate when signing.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company
or other nominee for assistance concerning the Exchange Offer.
